Document:

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                                                                    Exhibit 10.1

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                                   EAC I INC.

                    (TO BE RENAMED JLC LEARNING CORPORATION)

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                                 NOTE AGREEMENT

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                            DATED AS OF JULY 13, 1999

         $19,000,000 13.375% SENIOR SUBORDINATED NOTES DUE JULY 13, 2007

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                                TABLE OF CONTENTS
                             (Not Part of Agreement)

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<S>   <C>      <C>                                                          <C>

1.    PAYMENTS...........................................................    1
      1.1      Interest Payments.........................................    1
      1.2      Required Principal Payments...............................    1
      1.3      OPTIONAL PRINCIPAL PAYMENTS...............................    1
      1.4      DELIVERY OF NOTES IN PAYMENT OF WARRANT PURCHASE PRICE....    3
      1.5      PAYMENTS AMONG NOTEHOLDERS................................    3
      1.6      OFFER TO PAY UPON CHANGE IN CONTROL.......................    3
      1.7      No Other Payments of Principal; Acquisition of Notes......    5
      1.8      Notation of Notes on Payment..............................    6
      1.9      MANNER OF PAYMENTS........................................    6

2.    REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES......................    7
      2.1      Registration of Notes.....................................    7
      2.2      Exchange of Notes.........................................    7
      2.3      REPLACEMENT OF NOTES......................................    7
      2.4      ISSUANCE TAXES............................................    8

3.    GENERAL COVENANTS..................................................    8
      3.1      PAYMENT OF TAXES AND CLAIMS...............................    8
      3.2      MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.......    8
      3.3      PAYMENT OF NOTES AND MAINTENANCE OF OFFICE................    9
      3.4      Pension Plans.............................................    9
      3.5      Private Offering..........................................   10
      3.6      Affiliate Guaranty........................................   10
      3.7      Year 2000 Compliance......................................   11
      3.8      Consummation of Merger....................................   11

4.    FINANCIAL COVENANTS................................................   11
      4.1      Incurrence of Debt........................................   11
      4.2      INTEREST COVERAGE RATIO...................................   12
      4.3      Consolidated Total Debt...................................   12
      4.4      RESTRICTED PAYMENTS.......................................   13
      4.5      LIENS.....................................................   14
      4.6      Mergers and Consolidations................................   16
      4.7      Disposition of Assets; Subsidiary Stock...................   17
      4.8      Transactions with Affiliates..............................   19
      4.9      AMENDMENTS TO ACCEPTABLE CREDIT FACILITIES................   19
      4.10     LINES OF BUSINESS.........................................   19
      4.11     Limitation on Dividend and Other Payment Restrictions
                 Affecting Subsidiaries..................................   19

5.    REPORTING COVENANTS................................................   20
      5.1      Financial and Business Information........................   20
      5.2      OFFICER'S CERTIFICATES....................................   23
      5.3      Accountants' Certificates.................................   24
      5.4      INSPECTION................................................   24

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<S>   <C>      <C>                                                          <C>

6.    EVENTS OF DEFAULT..................................................   24
      6.1      EVENTS OF DEFAULT.........................................   26
      6.2      Default Remedies..........................................   27
      6.3      ANNULMENT OF ACCELERATION OF NOTES........................   29

7.    SUBORDINATION OF SUBORDINATED DEBT.................................   29
      7.1      General...................................................   29
      7.2      Insolvency................................................   29
      7.3      Proofs of Claim...........................................   30
      7.4      PAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.................   30
      7.5      Nonpayment Default in Respect of Senior Debt..............   30
      7.6      EXERCISE OF REMEDIES......................................   31
      7.7      Turnover of Payments......................................   32
      7.8      SUBORDINATION UNAFFECTED BY CERTAIN EVENTS................   32
      7.9      Reinstatement of Subordination............................   33
      7.10     Obligations Not Impaired..................................   33
      7.11     Payment of Senior Debt; Subrogation.......................   33
      7.12     RELIANCE OF HOLDERS OF SENIOR DEBT; ACKNOWLEDGMENT........   34
      7.13     Identity of Holders of Senior Debt........................   34
      7.14     AMENDMENTS TO THIS AGREEMENT..............................   34
      7.15     AMENDMENTS TO SENIOR CREDIT FACILITY......................   34
      7.16     CERTIFICATION OF SUBORDINATION............................   35

8.    INTERPRETATION OF THIS AGREEMENT...................................   35
      8.1      TERMS DEFINED.............................................   35
      8.2      Accounting Principles.....................................   53
      8.3      Directly or Indirectly....................................   53
      8.4      Section Headings and Table of Contents and Construction...   54
      8.5      GOVERNING LAW.............................................   54
      8.6      General Interest Provisions...............................   54

9.    MISCELLANEOUS......................................................   55
      9.1      COMMUNICATIONS............................................   55
      9.2      REPRODUCTION OF DOCUMENTS.................................   56
      9.3      SURVIVAL..................................................   56
      9.4      SUCCESSORS AND ASSIGNS....................................   56
      9.5      AMENDMENT AND WAIVER......................................   57
      9.6      Expenses..................................................   58
      9.7      WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC........   59
      9.8      Indemnification of Each Holder............................   60
      9.9      Entire Agreement..........................................   60
      9.10     Execution in Counterpart..................................   61

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                                 NOTE AGREEMENT

     NOTE AGREEMENT, dated as of July 13, 1999, among EAC I INC., a Delaware
corporation (together with its successors and assigns, the "COMPANY"; to be
renamed "JLC LEARNING CORPORATION"). THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY, a Wisconsin corporation, and SGC PARTNERS II, LLC, a Delaware limited
liability company (together with their respective successors and assigns, the
"PURCHASERS").

                                    RECITALS

     WHEREAS, pursuant to the Securities Purchase Agreement, the Purchasers have
agreed to purchase from the Company, and the Company has agreed to sell to the
Purchasers, Nineteen Million Dollars ($19,000,000) in aggregate principal amount
of the Notes; and

     WHEREAS, the Company and the Purchasers wish to enter into this Agreement
to govern the terms of the Notes.

                                    AGREEMENT

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein. the parties to this Agreement hereby agree as follows:

1.   PAYMENTS

     1.1  INTEREST PAYMENTS.

     Interest on the Notes shall be computed and paid in the manner and on the
dates provided in the Notes.

     1.2  REQUIRED PRINCIPAL PAYMENTS.

     The Company shall pay, or cause to be paid, and there shall become due and
payable, Six Million Three Hundred Thirty-Three Thousand Three Hundred
Thirty-Three Dollars ($6,333,333) in principal amount of the Notes on each of
July 13, 2005 and July 13, 2006, and Six Million Three Hundred Thirty-Three
Thousand Three Hundred Thirty-Four Dollars ($6,333,334) in principal amount of
the Notes on July 13, 2007 (each, a "REQUIRED PRINCIPAL PAYMENT"). Each Required
Principal Payment shall be at one hundred percent (100%) of the principal amount
paid, together with interest accrued thereon to the date of payment. The entire
principal of the Notes remaining outstanding on July 13, 2007, together with
interest accrued thereon, shall become due and payable on such date.

     1.3  OPTIONAL PRINCIPAL PAYMENTS.

          (a) OPTIONAL PRINCIPAL PAYMENTS. The Company may pay a principal
     amount of the Notes at any time, in part, in an amount not less than One
     Million Dollars ($1,000,000) and integral multiples of One Hundred Thousand
     Dollars ($100,000), or in whole, in each case together with interest on
     such principal amount then being paid accrued to the payment date, and,
     subject to Section 1.3 (d), the Prepayment Compensation Amount determined
     with respect to the principal being so paid.

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          (b) NOTICE OF OPTIONAL PAYMENT. The Company will give notice of any
     optional payment of the Notes pursuant to this Section 1.3 to each holder
     of Notes not less than twenty (20) days nor more than sixty (60) days
     before the specified payment date, stating:

               (i) the specified payment date;

               (ii) that such payment is to be made pursuant to this Section
          1.3;

               (iii) the principal amount of each Note to be paid on such date;

               (iv) the interest to be paid on each such Note, accrued to the
          specified payment date; and

               (v) the Prepayment Compensation Amount due in connection with
          such payment or, if the Company claims that no Prepayment Compensation
          Amount is then due in respect of such payment by virtue of the
          provisions of Section 1.3(d). a statement to such effect, together
          with a detailed calculation of the Realizable IRR by the Company,
          calculated with respect to the specified payment date.

          (c) PREPAYMENT OF NOTES. Notice of payment having been so given, the
     aggregate principal amount of the Notes to be paid stated in such notice,
     together with interest thereon accrued to the specified payment date and,
     subject to Section 1.3(d), with the Prepayment Compensation Amount
     determined as of the specified payment date, if any, shall become due and
     payable on the specified payment date.

          (d) WAIVER OF PREPAYMENT COMPENSATION AMOUNT. Notwithstanding the
     foregoing provisions of this Section 1.3, no Prepayment Compensation Amount
     shall be payable in connection with any payment of the Notes pursuant to
     this Section 1.3 if, and only if, both:

               (i) the payment of Notes pursuant to this Section 1.3 is made in
          conjunction with a Liquidity Event; and

               (ii) the Realizable IRR as of the payment date is equal to or
          greater than the Target IRR as of such date.

          (e) DETERMINATION OF REALIZABLE IRR. In the event that any holder of
     Notes shall disagree with the calculation of the Realizable IRR set forth
     by the Company in the notice given pursuant to Section 1.3(b), such holder,
     by notice to the Company in writing given at least ten (10) days prior to
     the payment date specified in the notice given pursuant to Section 1.3(b),
     may demand that the Company obtain a calculation of the Realizable IRR by a
     Valuation Agent. In the event that any holder makes such a demand, the
     calculation of the Realizable IRR by the Valuation Agent shall be
     conclusive in the absence of manifest error.

          (f) EFFECT OF PARTIAL PAYMENTS ON REQUIRED PAYMENTS. Each partial
     payment of the principal of the Notes made pursuant to this Section 1.3
     shall be applied against and reduce ratably each of the then-remaining
     Required Principal Payments.

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     1.4  DELIVERY OF NOTES IN PAYMENT OF WARRANT PURCHASE PRICE.

     The Warrant Agreement provides that a holder of Warrants may tender Notes
in partial or complete payment of the purchase price for the Common Stock issued
upon exercise of the Warrants. Promptly following the receipt of any Note so
tendered, the Company shall promptly cancel and retire such surrendered Note
(and no such Note shall be reissued), and shall issue to the holder thereof a
new Note in the principal amount of such tendered Note remaining after deduction
of the principal amount thereof applied to payment of the purchase price for the
Common Stock. For purposes of Rule 144 under the Securities Act, 17 C.F.R.
Section 230.144. the Company and you agree that a tender of Notes in payment of
the exercise price in respect of the Warrants shall not be deemed a prepayment
of the Notes, but rather a conversion of such Notes. pursuant to the terms of
the Warrant Agreement and the Warrants, into Common Stock.

     1.5  PAYMENTS AMONG NOTEHOLDERS.

     If at the time any payment of the principal of the Notes made pursuant to
Section 1.2 or Section 1.3 is due there is more than one Note outstanding, the
aggregate principal amount of each such required or optional partial payment of
the Notes shall be allocated among the Notes at the time outstanding pro rata in
proportion to the respective unpaid principal amounts of all such outstanding
Notes.

     1.6  OFFER TO PAY UPON CHANGE IN CONTROL.

          (a) NOTICE OF CHANGE IN CONTROL NOTICE EVENT. In the event of the
     obtaining of knowledge of a Change in Control Notice Event by any Senior
     Officer (including, without limitation, via the receipt of notice of a
     Change in Control Notice Event from any holder of Notes), the Company will,
     within three (3) Business Days after the occurrence of such event, give
     notice of such Change in Control Notice Event to each holder of 'Notes.
     Each such notice shall:

               (i) be dated the date of the sending of such notice;

               (ii) be executed by a Senior Officer:

               (iii) refer to this Section 1.6; and

               (iv) specify, in reasonable detail, the nature and date of the
          Change in Control Notice Event.

          (b) OFFER IN RESPECT OF A CHANGE IN CONTROL. In the event of a Change
     in Control, the Company will, within three (3) Business Days after the
     occurrence of such event (or, in the case of any Change in Control the
     consummation or finalization of which would involve any action of the
     Company, at least thirty (30) days prior to such Change in Control), give
     notice of such Change in Control to each holder of Notes. Such notice shall
     contain an irrevocable separate offer to each holder of Notes to pay all,
     but not less than all, of the principal of, and interest on the Notes held
     by such holder on a date (the "CHANGE IN CONTROL PAYMENT DATE") specified
     in such notice that is not less than twenty (20) days and not more than
     thirty (30) days after the date of such notice. Each such notice shall:

               (i) be dated the date of the sending of such notice;

               (ii) be executed by a Senior Officer;

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               (iii) specify, in reasonable detail, the nature and date of the
          Change in Control;

               (iv) specify the Change in Control Payment Date;

               (v) specify the principal amount of each Note outstanding;

               (vi) specify the interest that would be due on each Note offered
          to be paid, accrued to the Change in Control Payment Date;

               (vii) specify the calculation of the Prepayment Compensation
          Amount, if any, due in connection with such payment or, if the Company
          claims that no Prepayment Compensation Amount is then due in respect
          of such payment by virtue of the provisions of Section 1.6(e), a
          statement to such effect, together with a detailed calculation of the
          Realized IRR by the Company, calculated with respect to the Change in
          Control Payment Date; and

               (viii) certify that the conditions of this Section 1.6 have been
          fulfilled.

If the Company shall not have received a written response to such notice from
any holder of Notes within ten days after the date of posting of such notice to
such holder of Notes, then the Company shall immediately send a second notice to
each such holder of Notes.

          (c) ACCEPTANCE, REJECTION. To accept such offered prepayment, a holder
     of Notes shall cause a notice of such acceptance to be delivered to the
     Company not later than thirty (30) days after the date of receipt by such
     holder of the written offer of such prepayment (it being understood that
     the failure by a holder to respond to such written offer of prepayment
     within such period of thirty (30) days or the delivery of a written notice
     of rejection of such offer within such period shall be deemed to constitute
     a rejection of such offer). If so accepted, such offered prepayment shall
     be due and payable on the Change in Control Payment Date. Such offered
     prepayment shall be made at 100% of the principal amount of such Notes as
     of the Change in Control Payment Date, together with interest thereon
     accrued to the Change in Control Payment Date and, subject to Section
     1.6(e), the Prepayment Compensation Amount, if any.

          (d) DEFERRAL OF OBLIGATION TO PURCHASE. The obligation of the Company
     to purchase Notes pursuant to the offers required by Section 1.6(b) and
     accepted in accordance with Section 1.6(c) is subject to the occurrence of
     the Change in Control in respect of which such offers and acceptances shall
     have been made. In the event that such Change in Control does not occur
     prior to the Change in Control Payment Date in respect thereof, such
     purchase shall be deferred until and shall be made on the date on which
     such Change in Control occurs or, if the Company determines that efforts to
     effect such Change in Control have ceased or have been abandoned, then such
     offer, acceptances and obligation to purchase shall be deemed to have been
     rescinded. The Company shall keep each holder of Notes reasonably and
     timely informed of:

               (i) any such deferral of the date of purchase;

               (ii) the date on which such Change in Control and the purchase
          are expected to occur; and

               (iii) any determination by the Company that efforts to effect
          such Change in Control have ceased or been abandoned.

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          (e) CIRCUMSTANCES PERMITTING REPURCHASE OF NOTES AT PAR UPON A CHANGE
     IN CONTROL. In the event that:

               (i) the Change in Control giving rise to the rights of the
          holders of the Notes under this Section 1.6 shall offer the holders of
          Notes the right to sell (entirely for cash), contemporaneously with
          such Change in Control, both:

                    (A) all Purchaser Shares outstanding; and

                    (B) all Purchaser Shares issuable upon the exercise of the
               Warrants at such time; and

               (ii) the Realized IRR in connection with such Change in Control
          is equal to or greater than the Target IRR in effect on the Change in
          Control Prepayment Date;

the Company shall offer to repurchase the Notes as otherwise provided in this
Section 1.6, except that the Company shall not be required to pay the Prepayment
Compensation Amount, if any, that would otherwise be payable in respect of such
repurchase of Notes pursuant to this Section 1.6.

          (f) DETERMINATION OF REALIZED IRR. In the event that any holder of
     Notes shall disagree with the calculation of the Realized IRR set forth by
     the Company in the notice given pursuant to Section 1.6(b), such holder, by
     notice to the Company in writing given at least ten (10) days prior to the
     payment date specified in the notice given pursuant to Section 1.6(b), may
     demand that the Company obtain a calculation of the Realized IRR by a
     Valuation Agent. In the event that any holder makes such a demand, the
     calculation of the Realized IRR by the Valuation Agent shall be conclusive
     in the absence of manifest error.

          (g) EFFECT OF PARTIAL REPURCHASES ON REQUIRED PAYMENT. At the time of
     the making of any partial repurchase of Notes pursuant to this Section 1.6,
     an amount equal to the principal amount of the Notes so repurchased shall
     be applied against and reduce each of the then remaining Required Principal
     Payments by a percentage equal to the quotient of:

               (i) the aggregate principal amount of the Notes so paid; divided
          by

               (ii) the aggregate principal amount of the Notes outstanding
          immediately prior to such payment.

     1.7  NO OTHER PAYMENTS OF PRINCIPAL; ACQUISITION OF NOTES.

     Except for payments of principal made in accordance with this Section 1,
the Company may not make any payment of principal in respect of the Notes. The
Company will not, and will not permit any Subsidiary or any Affiliate to,
directly or indirectly, acquire or make any offer to acquire any Notes.

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     1.8  NOTATION OF NOTES ON PAYMENT.

     Upon any partial payment of a Note, the holder of such Note may (but shall
not be required to), at its option:

          (a) surrender such Note to the Company pursuant to Section 2.2 in
     exchange for a new Note in a principal amount equal to the principal amount
     remaining unpaid on the surrendered Note;

          (b) make such Note available to the Company for notation thereon of
     the portion of the principal so paid; or

          (c) mark such Note with a notation thereon of the portion of the
     principal so paid.

In case the entire principal amount of any Note is paid, then promptly following
the written request of the Company, such Note shall be surrendered to the
Company for cancelation and shall not be reissued, and no Note shall be issued
in lieu of the paid principal amount of any Note.

     1.9  MANNER OF PAYMENTS.

          (a) MANNER OF PAYMENT. The Company shall pay or cause to be paid all
     amounts payable with respect to each Note (without any presentment of such
     Notes and without any notation of such payment being made thereon) by
     crediting, by federal funds bank wire transfer, the account of the holder
     thereof in any bank in the United States of America as may be designated in
     writing by such holder, or in such other manner as may be reasonably
     directed or to such other address in the United States of America as may be
     reasonably designated in writing by such holder. Annex I shall be deemed to
     constitute notice, direction or designation (as appropriate) by each
     Purchaser to the Company with respect to payments to be made to such
     Purchaser as aforesaid. In the absence of such written direction, all
     amounts payable with respect to each Note shall be paid by check mailed and
     addressed to the registered holder of such Note at the address shown in the
     register maintained by the Company pursuant to Section 2. 1.

          (b) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with respect
     to, any Note shall fall due on a day other than a Business Day, then such
     payment shall be made on the first Business Day following the day on which
     such payment shall have so fallen due; PROVIDED that if all or any portion
     of such payment shall consist of a payment of interest, for purposes of
     calculating such interest, such payment shall be deemed to have been
     originally due on such first following Business Day, such interest shall
     accrue and be payable to (but not including) the actual date of payment,
     and the amount of the next succeeding interest payment shall be adjusted
     accordingly.

          (c) PAYMENTS, WHEN RECEIVED. Any payment to be made to the holders of
     Notes hereunder or under the Notes shall be deemed to have been made on the
     Business Day such payment actually becomes available at such holder's bank
     prior to the close of business of such bank, PROVIDED that interest for one
     day at the non-default interest rate of the Notes shall be due on the
     amount of any such payment that actually becomes available to such holder
     at such holder's bank after 12:00 noon (local time of such bank).

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2.   REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES

     2.1  REGISTRATION OF NOTES.

     The Company will keep at its office, maintained pursuant to Section 3.3, a
register for the registration and transfer of Notes. The name and address of
each holder of one or more Notes, each transfer thereof made in accordance with
Section 2.2 and the name and address of each transferee of one or more Notes
shall be registered in such register. The Person in whose name any Note shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 2.2.

     2.2  EXCHANGE OF NOTES.

          (a) EXCHANGE OF NOTES. Upon surrender of any Note at the office of the
     Company maintained pursuant to Section 3.3, duly endorsed or accompanied by
     a written instrument of transfer duly executed by the registered holder of
     such Note or such holder's attorney duly authorized in writing, the Company
     will execute and deliver, at the Company's expense (except as provided in
     Section 2.2(b)), a new Note or Notes in exchange therefor, in an aggregate
     principal amount equal to the unpaid principal amount of the surrendered
     Note. Each such new Note shall be registered in the name of such Person as
     such holder may request and shall be substantially in the form of
     Attachment A. Each such new Note shall be dated and bear interest from the
     date to which interest shall have been paid on the surrendered Note or
     dated the date of the surrendered Note if no interest shall have been paid
     thereon. Each such new Note shall carry the same rights to unpaid interest
     and interest to accrue that were carried by the Note so exchanged or
     transferred. Notes shall not be transferred in denominations of less than
     One Million Dollars ($1,000,000), provided that a holder of Notes may
     transfer its entire holding of Notes regardless of the principal amount of
     such holder's Notes.

          (b) COSTS. The Company will pay the cost of delivering to or from such
     holder's home office or custodian bank from or to the Company, insured to
     the reasonable satisfaction of such holder, the surrendered Note and any
     Note issued in substitution or replacement for the surrendered Note. The
     Company may require payment of a sum sufficient to cover any stamp tax or
     governmental charge imposed in respect of any such transfer or Note.

     2.3  REPLACEMENT OF NOTES.

     Upon receipt of the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of an
institutional investor, notice from such institutional investor of such loss,
theft, destruction or mutilation), and:

          (a) in the case of loss, theft or destruction, of indemnity reasonably
     satisfactory to the Company; PROVIDED, HOWEVER, that if the holder of such
     Note is a Purchaser, an institutional investor or a nominee of either, the
     unsecured agreement of indemnity of such Purchaser or such institutional
     investor (but not of any nominee therefor) shall be deemed to be
     satisfactory; or

          (b) in the case of mutilation, upon surrender and cancelation thereof;

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the Company at its own expense will execute and, within ten (10) Business Days
after such receipt, deliver, in lieu thereof, a replacement Note, dated and
bearing interest from the date to which interest shall have been paid on such
lost, stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

     2.4  ISSUANCE TAXES.

     The Company will pay all taxes, if any, due (including, without limitation,
any stamp, documentary or similar taxes, but not, in any event, income,
corporate, franchise or branch profits taxes) in connection with and as the
result of the initial issuance and sale of the Notes or the execution and
delivery of any other Financing Document and in connection with any
modification, waiver or amendment of any Financing Document and shall save each
holder of Notes harmless without limitation as to time against any and all
liabilities with respect to all such taxes. The obligations of the Company under
this Section 2.4 shall survive the payment or prepayment of the Notes and the
termination hereof.

3.   GENERAL COVENANTS

     The Company covenants that on and after the Closing Date and so long as any
of the Notes shall be outstanding:

     3.1  PAYMENT OF TAXES AND CLAIMS.

     The Company will, and will cause each Subsidiary to, pay before they become
delinquent:

          (a) all taxes, assessments and governmental charges or levies imposed
     upon it or its Property; and

          (b) all claims or demands of materialmen, mechanics, carriers,
     warehousemen, vendors, landlords and other like Persons that, if unpaid,
     might result in the creation of a statutory, regulatory or common law Lien
     upon its Property;

PROVIDED, that items of the foregoing description need not be paid so long as
such items are being actively contested in good faith and by appropriate
proceedings, reasonable book reserves in accordance with GAAP have been
established and maintained with respect thereto, or such items, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

     3.2  MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.

     The Company will, and will cause each Subsidiary to:

          (a) PROPERTY - maintain its Property in good condition, ordinary wear
     and tear and obsolescence excepted, and make all necessary renewals,
     replacements, additions, betterments and improvements thereto; PROVIDED,
     HOWEVER, that this Section 3.2 shall not prevent the Company or any
     Subsidiary from discontinuing the operation and the maintenance of any of
     its Properties if such discontinuance is desirable in the conduct of its
     business and such discontinuance could not reasonably be expected to have a
     Material Adverse Effect:

          (b) INSURANCE - maintain, with financially sound and reputable
     insurers, insurance with respect to its Property and business against such
     casualties and contingencies, of such types and in

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     such amounts as is customary in the case of corporations of established
     reputations engaged in the same or a similar business and similarly
     situated;

          (c) FINANCIAL RECORDS - keep proper books of record and account, in
     which entries shall be made which fairly present all dealings and
     transactions of or in relation to the Properties and business thereof, and
     which will permit the production of financial statements in accordance with
     GAAP;

          (d) CORPORATE EXISTENCE AND RIGHTS - do or cause to be done all things
     necessary to preserve and keep in full force and effect its corporate
     existence, corporate rights (charter and statutory) and corporate
     franchises except as permitted by Section 4.6;

          (e) ENVIRONMENTAL PROTECTION LAWS - at all times comply in all
     material respects with all applicable Environmental Protection Laws and
     promptly take any and all necessary remedial actions in response to the
     presence, storage, use, disposal, transportation or Release of any
     Hazardous Materials on, under or about any real Property owned, or, to the
     extent permitted by the Property owner, leased or operated by the Company
     or any of its Subsidiaries, and, in the event that the Company or any
     Subsidiary undertakes any remedial action with respect to any Hazardous
     Material on, under or about any real Property, the Company or such
     Subsidiary shall conduct and complete such remedial action in compliance in
     all material respects with all applicable Environmental Protection Laws and
     in accordance with the policies, orders and directives of all federal,
     state and local Governmental Authorities, except when the Company's or such
     Subsidiary's liability for such presence, storage, use, disposal,
     transportation or Release of any Hazardous Material is being contested in
     good faith by the Company or such Subsidiary and appropriate reserves
     therefor have been established; and

          (f) COMPLIANCE WITH LAW - comply with all other laws, ordinances and
     governmental rules and regulations to which it is subject and obtain all
     licenses, certificates, permits, franchises and other governmental
     authorizations necessary to the ownership of its Properties and the conduct
     of its business except for such violations and failures to obtain that, in
     the aggregate, could not reasonably be expected to have a Material Adverse
     Effect.

     3.3  PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.

     The Company will punctually pay, or cause to be paid, the principal of and
interest (and Prepayment Compensation Amount, if any) on, the Notes, as and when
the same shall become due according to the terms hereof and of the Notes, and
will maintain an office at the address of the Company as provided in Section 9.1
where notices, presentations and demands in respect hereof or the Notes may be
made upon it. Such office will be maintained at such address until such time as
the Company notifies the holders of the Notes of any change of location of such
office, which will in any event be located within the United States of America.

     3.4  PENSION PLANS.

          (a) COMPLIANCE. The Company will, and will cause each ERISA Affiliate
     to, at all times with respect to each Plan, comply with all applicable
     provisions of ERISA and the IRC, except for such failures to comply that,
     in the aggregate, could not reasonably be expected to have a Material
     Adverse Effect.

                                       9
<PAGE>

          (b) PROHIBITED ACTIONS. The Company will not, and will not permit any
     ERISA Affiliate to:

               (i) engage in any "prohibited transaction" (as such term is
          defined in section 406 of ERISA or section 4975 of the IRC) or permit
          to occur or exist any "reportable event" (as such term is defined in
          section 4043 of ERISA) that could result in the imposition of a tax or
          penalty;

               (ii) incur with respect to any Plan any "accumulated funding
          deficiency" (as such term is defined in section 302 of ERISA), whether
          or not waived;

               (iii) terminate any Plan in a manner that could result in the
          imposition of a Lien on the Property of the Company or any Subsidiary
          pursuant to section 4068 of ERISA or the creation of any liability
          under section 4062 of ERISA;

               (iv) fail to make any payment required by section 515 of ERISA;

               (v) incur any withdrawal liability under Title IV of ERISA with
          respect to any Multiemployer Plan or any liability as a result of the
          termination of any Multiemployer Plan; or

               (vi) incur any liability or permit the existence of any Lien on
          the Property of the Company or any ERISA Affiliate, in either case
          pursuant to Title I or Title IV of ERISA or pursuant to the penalty or
          excise tax or security provisions of the IRC;

     if the aggregate amount of the taxes, penalties, funding deficiencies,
     interest, amounts secured by Liens, and other liabilities in respect of any
     of the foregoing at any time could reasonably be expected to have a
     Material Adverse Effect.

          (c) FOREIGN PENSION PLANS. The Company will, and will cause each
     Subsidiary to, at all times, comply in all material respects with all laws,
     regulations and orders applicable to the establishment, operation,
     administration and maintenance of any Foreign Pension Plans, and pay when
     due all premiums, contributions and any other amounts required by
     applicable Foreign Pension Plan documents or applicable laws, except where
     the failure to comply with such laws, regulations and orders, and to make
     such payments, in the aggregate for all such failures, could not reasonably
     be expected to have a Material Adverse Effect.

     3.5  PRIVATE OFFERING.

     The Company will not, and will not permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar securities for issue or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.

     3.6  AFFILIATE GUARANTY.

     The Company will cause each Subsidiary (other than an Excluded Foreign
Subsidiary) which at any time Incurs any Debt (including, without limitation,
any Guaranty of any Senior Debt) to become a Guarantor in respect of the
Affiliate Guaranty by executing and delivering to each holder of Notes a Joinder
Agreement

                                       10
<PAGE>

in the form attached to the Affiliate Guaranty. Each such Joinder Agreement
shall be accompanied by copies of the constitutive documents of such Subsidiary
and corporate resolutions (or equivalent) authorizing such transaction, in each
case certified as true and correct by an appropriate officer of such Subsidiary.

     3.7  YEAR 2000 COMPLIANCE.

     The Company and the Subsidiaries' internal computing systems, and, to the
extent the Company and the Subsidiaries would be materially and adversely
affected thereby, those of its customers and suppliers, will be Year 2000
Compliant in a timely manner, and the advent of the year 2000 and its impact on
such computer systems shall not have a Material Adverse Effect.

     3.8  CONSUMMATION OF MERGER.

     Within one (1) Business Day following the Closing Date, the Company will
(a) consummate the merger transaction as contemplated by the Merger Documents
and (b) deliver or cause to be delivered to the Purchasers copies of the Merger
Documents.

4.   FINANCIAL COVENANTS

     4.1  INCURRENCE OF DEBT.

     The Company will not, and will not permit any Subsidiary to, at any time
directly or indirectly Incur any Debt, except:

          (a) THE NOTES - Debt evidenced by the Notes and the Affiliate
     Guaranty;

          (b) SENIOR DEBT - Senior Debt of the Company; and, subject to
     compliance with Section 3.6, Guarantees thereof by Subsidiaries;

          (c) PURCHASE MONEY DEBT AND ASSUMED DEBT - any Debt, secured by any
     Lien permitted to be created and incurred pursuant to the provisions of
     Section 4.5(a)(iv) or Section 4.5(a)(v); and any Debt renewing, extending
     or refunding any such Debt permitted by this Section 4.1(c), so long as:

               (i) the principal amount of such Debt immediately prior to such
          extension, renewal or refunding is not increased or the maturity
          thereof reduced;

               (ii) such Debt is not incurred in connection with the purchase or
          acquisition of any other Property;

               (iii) no Lien securing any such Debt would extend to any other
          Property of the Company or any Subsidiary; and

               (iv) immediately prior to the incurrence of, and after giving
          effect to the incurrence of, all such Debt, no Default or Event of
          Default exists or would exist;

          (d) PARI PASSU DEBT - other Debt of the Company ranking PARI PASSU
     with the Notes; PROVIDED, HOWEVER, that the aggregate amount of such Debt
     outstanding at any time shall not exceed One Million Dollars ($1,000,000);

                                       11
<PAGE>

          (e) INTER-COMPANY DEBT - Debt of the Company to any other Obligor and
     of any Obligor to the Company or any other Obligor; and

          (f) INTER-COMPANY GUARANTIES - guaranties by any Obligor of the Debt
     of any other Obligor;

          (g) ADDITIONAL DEBT - other Debt of the Company not otherwise
     permitted by any of Section 4. 1 (a) through Section 4. 19(f) above,
     inclusive; PROVIDED, HOWEVER, that immediately after giving effect thereto:

               (i) the ratio of Consolidated EBITDA for the period of four (4)
          full consecutive fiscal quarters most recently ended as of the date of
          the Incurrence of such Debt to Pro Forma Interest Expense for such
          period shall not be less than 2.0 to 1.0;

               (ii) before and immediately after giving effect to the Incurrence
          of such Debt, no Default or Event of Default does or would exist; and

               (iii) the aggregate principal amount of Debt (other than
          Subordinated Debt) permitted by virtue of this Section 4. 1 (g) shall
          not at any time exceed Seven Million Dollars ($7,000,000).

     4.2  INTEREST COVERAGE RATIO.

     The Company will not, at any time, permit the Interest Coverage Ratio for
the period of four (4) full consecutive fiscal quarters of the Company most
recently ended at such time to be less than 1.5 to 1.0.

     4.3  CONSOLIDATED TOTAL DEBT.

     The Company will not permit the ratio, expressed as a percentage, of:

          (a) Consolidated Total Debt, as of the last day of the fiscal quarter
     then most recently ended; to

          (b) Consolidated EBITDA for the period of four (4) full consecutive
     fiscal quarters then most recently ended;

                                       12
<PAGE>

to exceed at any time the percentage set forth in the chart below for such time:

<TABLE>
<CAPTION>

======================================     +===================================

    IF THE DATE OF DETERMINATION FALLS     MAXIMUM RATIO OF CONSOLIDATED TOTAL
    DURING THE PERIOD SET FORTH BELOW:        DEBT TO CONSOLIDATED EBITDA:
    ----------------------------------        ----------------------------

<S>                                                      <C>
              Closing Date to                             600%
         March 31, 2000, inclusive

             April 1, 2000 to                             525%
         March 31, 2000, inclusive

             April 1, 2001 to                             475%
         March 31, 2002, inclusive

             April 1, 2002 and                            400%
                thereafter

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

</TABLE>

     4.4  RESTRICTED PAYMENTS.

          (a) BEFORE THE INITIAL PUBLIC OFFERING DATE. Prior to the Initial
     Public Offering Date, the Company will not, and will not permit any
     Subsidiary to, declare or make, or incur any liability to declare or make,
     any Restricted Payments except:

               (i) payments made to officers, employees and consultants of the
          Company who, in each case, are not Affiliates of the Company, to
          repurchase Capital Stock of the Company and Equity Equivalents of the
          Company held by such Persons in the cessation of the employment or
          consultation of such Person (by death, disability or otherwise),
          PROVIDED, HOWEVER, that the aggregate amount of any such payments in
          respect of such redemptions shall not in the aggregate exceed One
          Million Dollars ($1,000,000);

               (ii) payments made to any Person (including, without limitation,
          payments exceeding One Million Dollars ($1,000,000) in the aggregate
          which would otherwise be permitted pursuant to Section 4.4(a)(1)) to
          repurchase Capital Stock of the Company and Equity Equivalents of the
          Company held by such Person, but solely to the extent that such
          payment is made from the net proceeds from the substantially
          contemporaneous sale of additional Capital Stock or Equity Equivalents
          of the Company to other Persons; and

               (iii) Permitted Management Fee Payments;

     in each case, so long as, at the time of the making of such Restricted
     Payment, no Default or Event of Default shall be continuing.

          (b) ON OR AFTER THE INITIAL PUBLIC OFFERING DATE - on or after the
     Initial Public Offering Date, the Company will not, and will not permit any
     Subsidiary to, declare or make, or incur any liability to declare or make,
     any Restricted Pavments if:

               (i) at the time of the making of such Restricted Payment, or
          immediately after giving effect thereto, any Default or Event of
          Default shall be continuing; or

                                       13
<PAGE>

               (ii) immediately after giving effect to the making of such
          Restricted Payment, the aggregate amount of all Restricted Payments
          made during the period from, and including, the Initial Public
          Offering Date and to, and including, the date of making such
          Restricted Payment shall exceed fifty percent (50%) of Consolidated
          Net Income for the period commencing on the Initial Public Offering
          Date and ending on the last day of the full fiscal quarter ended
          immediately prior to the date of the making of such Restricted
          Payment.

          (c) TIME OF PAYMENT. The Company will not, and will not permit any
     Subsidiary to, authorize or declare any Restricted Payment which is not
     payable within sixty (60) days of its authorization or declaration.

     4.5  LIENS.

          (a) NEGATIVE PLEDGE. The Company will not, and will not permit any
     Subsidiary to, cause or permit, or agree or consent to cause or permit in
     the future (upon the happening of a contingency or otherwise), any of their
     Property, whether now owned or hereafter acquired, at any time to be
     subject to a Lien except:

               (i)  ORDINARY COURSE BUSINESS LIENS -

                    (A) PERFORMANCE BONDS - Liens incurred or deposits made in
               the ordinary course of business:

                         (I) in connection with workers' compensation,
                    unemployment insurance, social security and other like laws;
                    and

                         (II) to secure the performance of letters of credit,
                    bids, tenders, sales contracts, leases, statutory
                    obligations, surety and performance bonds (of a type other
                    than set forth in Section 4.5(a)(ii)) and other similar
                    obligations not incurred in connection with the borrowing of
                    money, the obtaining of advances or the payment of the
                    deferred purchase price of Property;

                    (B) REAL ESTATE - Liens in the nature of reservations,
               exceptions, encroachments, casements, rights-of-way, covenants,
               conditions, restrictions, leases and other similar title
               exceptions or encumbrances affecting real property, PROVIDED,
               HOWEVER, that such exceptions and encumbrances do not in the
               aggregate materially detract from the value of said Properties or
               materially interfere with the use of such Properties in the
               ordinary conduct of the business of the Company and the
               Subsidiaries; and

                    (C) TAXES, ETC. -- Liens securing taxes, assessments or
               governmental charges or levies or the claims or demands of
               materialmen, mechanics, carriers, warehousemen, vendors,
               landlords and other like Persons; PROVIDED, HOWEVER, that the
               payment thereof is not required by Section 3.1;

               (ii) JUDICIAL LIENS -- Liens arising from Judicial attachments
          and judgments, securing appeal bonds or supersedeas bonds, and arising
          in connection with court proceedings (including, without limitation,
          surety bonds and letters of credit or any other

                                       14
<PAGE>

          instrument serving a similar purpose); PROVIDED, HOWEVER, that the
          execution or other enforcement of such Liens is effectively stayed,
          that the claims secured thereby are being contested in good faith and
          by appropriate proceedings, that adequate reserves have been made
          against such claims and that the aggregate amount so secured will not
          at any time exceed One Million Dollars ($1,000,000);

               (iii) INTERGROUP LIENS -- Liens on Property of a Subsidiary;
          PROVIDED, HOWEVER, that such Liens secure only obligations owing to
          the Company or a Wholly-Owned Subsidiary;

               (iv) PURCHASE MONEY LIENS -- any Lien on Property acquired or
          owned by the Company or any Subsidiary, or leased by the Company or
          any Subsidiary, as lessee under any Capital Lease, which secures Debt
          (including Debt in respect of a Capital Lease) incurred to pay all or
          a portion of the related purchase price or costs of construction,
          extension or improvement of such Property, so long as:

                    (A) such purchase price or costs of construction, extension
               or improvement shall not exceed the Fair Market Value of such
               Property, extension or improvement, as the case may be,
               determined at the time of the creation of such Lien;

                    (B) such Lien is created contemporaneously with, or within
               one hundred eighty (180) days of, such acquisition, construction,
               extension or improvement;

                    (C) such Lien encumbers only Property so purchased,
               acquired, constructed, extended or improved after the Closing
               Date;

                    (D) such Lien is not, after the creation thereof, extended
               to any other Property; and

                    (E) immediately prior to the incurrence of, and after giving
               effect to the incurrence of, all Debt secured by the Liens
               referred to in this Section 4.5(a)(iv), no Default or Event of
               Default exists or would exist;

               (v) ACQUISITION LIENS -- any Lien (including, without limitation,
          any Lien arising out of a Capital Lease) existing on Property at the
          time of acquisition thereof by the Company or any Subsidiary (whether
          or not the Debt secured thereby is assumed by the Company or any
          Subsidiary), or existing on the Property of, the Debt of or the
          Capital Stock of any Person at the time such Person became a
          Subsidiary (whether by means of the acquisition of all or
          substantially all of the Property of such Person, or the Capital Stock
          thereof or otherwise) or merges or consolidates with the Company or
          any Subsidiary, so long as:

                    (A) the aggregate principal amount of Debt secured thereby
               does not exceed the acquisition cost of such Property, the
               consideration paid for the acquisition of such Person or the
               consideration paid in connection with such merger or
               consolidation, as the case may be, as determined at the date of
               the acquisition, merger or consolidation;

                    (B) such Lien shall not extend to or cover any Property
               other than the Property subject to such Lien at the time of any
               such acquisition; and

                                       15
<PAGE>

                    (C) immediately after, and after giving effect to, such
               acquisition, merger or consolidation, and the assumption of all
               such Liens, no Default or Event of Default exists or would exist;

               (vi) SENIOR DEBT LIENS -- Liens securing Senior Debt; and

               (vii) OTHER LIENS -- Liens not otherwise permitted under clauses
          (i) through (vi) above, inclusive, not exceeding, as to the Company
          and its Subsidiaries taken together, Five Hundred Thousand Dollars
          ($500,000) in aggregate amount at any time outstanding.

          (b) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any Property shall
     be subjected to a Lien in violation of Section 4.5(a), the Company will
     forthwith make or cause to be made, to the fullest extent permitted by
     applicable law, provision whereby the Notes will be secured equally and
     ratably as to such Property with all other obligations secured thereby
     pursuant to such agreements and instruments as shall be approved by the
     Required Holders, and the Company will promptly cause to be delivered to
     each holder of a Note an opinion of independent counsel satisfactory to the
     Required Holders to the effect that such agreements and instruments are
     enforceable in accordance with their term, and in any event the Notes shall
     have the benefit, to the full extent that, and with such priority as, the
     holders of Notes may be entitled under applicable law, of an equitable Lien
     on such Property (and any proceeds thereof) securing the Notes. Such
     violation of Section 4.5(a) will constitute an Event of Default hereunder,
     whether or not any such provision is made or any equitable Lien is created
     pursuant to this Section 4.5(b).

          (c) CONSTRUCTION. Nothing in this Section 4.5 shall be construed to
     permit the incurrence or existence of any Debt not othenvise permitted by
     this Agreement. Nothing in this Agreement that permits the incurrence or
     existence of any Debt shall be construed to permit the incurrence or
     existence of a Lien securing such Debt unless such Lien is permitted by
     Section 4.5(a).

     4.6  MERGERS AND CONSOLIDATIONS.

     The Company will not merge into, consolidate with, or Transfer all or
substantially all of its Property to, any other Person or permit any other
Person to consolidate with or merge into it; PROVIDED, HOWEVER, that the
foregoing restriction does not apply to the merger or consolidation of the
Company with, or the Transfer by the Company of all or substantially all of its
Property to, another corporation, so long as:

          (a) the Person (the "SUCCESSOR CORPORATION") that results from such
     merger or consolidation or that purchases, leases, or acquires all or
     substantially all of such Property is a corporation duly incorporated under
     the laws of the United States of America or a jurisdiction thereof;

          (b) if the Company is not the Successor Corporation;

               (i) the Successor Corporation shall expressly assume in writing,
          pursuant to such agreements and instruments as shall be reasonably
          satisfactory to the Required Holders, the due and punctual payment of
          the principal of and Prepayment Compensation Amount, if any, and
          interest on all of the Notes, according to their tenor, and the due
          and punctual performance and observance of all the covenants in the
          Notes, this Agreement and the other Financing Documents to be
          performed or observed by the Company; and

                                       16
<PAGE>

               (ii) the Successor Corporation shall cause to be delivered to
          each holder of Notes an opinion of independent counsel reasonably
          satisfactory to the Required Holders to the effect that such
          agreements and instruments are enforceable in accordance with their
          terms and the terms hereof; and

          (c) immediately before and immediately after and after giving effect
     to such transaction, no Default or Event of Default exists or would exist.

     4.7  DISPOSITION OF ASSETS; SUBSIDIARY STOCK.

          (a) DISPOSITION OF ASSETS. The Company will not, and will not permit
     any Subsidiary to Transfer any Property except:

               (i) Transfers of inventory and of current assets in the ordinary
          course of business of the Company or such Subsidiary;

               (ii) Transfers of other Property no longer necessary for the
          operation of, and that individually and in the aggregate are not
          material to, the business of the Company and the Subsidiaries, in the
          ordinary course of business of the Company or such Subsidiary;

               (iii) Transfers from the Company to a Wholly-Owned Subsidiary or
          any other Subsidiary that is an Obligor;

               (iv) Transfers from a Subsidiary to the Company or a Wholly-Owned
          Subsidiary or any other Subsidiary that is an Obligor;

               (v) Transfers of Property necessary to give effect to merger or
          consolidation transactions permitted by Section 4.6;

               (vi) the sale or discount without recourse of accounts receivable
          or notes receivable arising in the ordinary course of business, or the
          conversion or exchange of accounts receivable into or for notes
          receivable in connection with the compromise or collection thereof;

               (vii) the license of intellectual property in the ordinary course
          of business;

               (viii) leases or subleases not materially interfering with the
          ordinany course of conduct of the business of the Company and its
          Subsidiaries;

               (ix) Transfers of Property during any fiscal year, so long as the
          aggregate Fair Market Value or book value, whichever is greater, of
          all such Property is less than $500,000.

               (x) any other Transfer of Property; PROVIDED (l) that any such
          Transfer for more than $200,000 shall be for consideration at least
          50% of which consists of Acceptable Consideration and (2) the proceeds
          of such transfer which are in the form of Acceptable Consideration,
          net of reasonable and ordinary transaction costs (including, without
          limitation, attorneys' fees, accountants' fees, investment banking
          fees, survey costs, title insurance premiums, and related search and
          recording charges, transfer taxes, deed or mortgage recording taxes,
          amounts required to be applied to the repayment of Debt secured by a
          Lien

                                       17
<PAGE>

          on any asset which is the subject of such Transfer), taxes paid or
          reasonably estimated by the Company to be payable as a result thereof
          (including withholding taxes) and appropriate amounts to be provided
          by the Company or any Subsidiary, as the case may be, as a reserve
          required in accordance with GAAP against any liabilities associated
          with such Transfer and retained by the Company or any Subsidiary as
          the case may be, after such Transfer, are, within three hundred and
          sixty (360) days after such transfer, applied by the Company or any
          such Subsidiary either:

                    (A) to purchase productive tangible Property, similar in
               nature to that of the Property so Transferred, for use in the
               conduct of the business of the Company and the Subsidiaries;

                    (B) to the repayment or prepayment of a principal amount of
               Senior Debt (including, without limitation, payments in respect
               of a Revolving Credit Facility, resulting in a permanent
               reduction of the availability or commitments thereunder), but not
               including payments in respect of a Revolving Credit Facility
               which do not result in a permanent reduction of the availability
               or commitments thereunder; or

                    (C) to a prepayment of the principal amount of the Notes in
               accordance with Section 1.3;

          and, in each such case, immediately before and after the consummation
          of the Transfer, and after giving effect thereto, no Default or Event
          of Default would exist.

          (b) DISPOSITION OF SUBSIDIARY STOCK. The Company will not, and will
     not permit any Subsidiary to, sell or otherwise dispose of any shares of
     the Capital Stock or Equity Equivalents of a Subsidiary (such stock and
     Equity Equivalents herein called "SUBSIDIARY STOCK"), nor will any
     Subsidiary issue, sell or otherw ise dispose of any shares of, or Equity
     Equivalents to purchase shares of its own Subsidiary Stock; PROVIDED,
     HOWEVER, that the foregoing restrictions do not apply to:

               (i) Transfers by the Company or a Subsidiary of shares of
          Subsidiary Stock to the Company or a Wholly-Owned Subsidiary or any
          Subsidiary that is an Obligor;

               (ii) the issuance by a Subsidiary of shares of its own Subsidiary
          Stock to the Company or a Wholly-Owned Subsidiary or any Subsidiary,
          that is an Obligor;

               (iii) the issuance by a Subsidiary of director's qualifying
          shares of its own Subsidiary Stock, PROVIDED, HOWEVER, that at no time
          shall the total number of shares of such Subsidiary Stock issued to or
          held by such directors as a group (including shares underlying Equity
          Equivalents) exceed five percent (5%) of the total number of shares of
          such Subsidiary Stock outstanding following any such issuance; and

               (iv) the Transfer of all (but not less than all) of the
          Subsidiary Stock of a Subsidiary owned by the Company and its other
          Subsidiaries if:

                    (A) such Transfer satisfies the requirements of Section
               4.7(a)(v);

                    (B) in connection with such Transfer, the entire Investment
               (whether represented by stock, Debt, claims or otherwise) of the
               Company and its other

                                       18
<PAGE>

               Subsidiaries in such Subsidiary is Transferred to a Person other
               than the Company or a Subsidiary not being simultaneously
               disposed of; and

                    (C) the Subsidiary being disposed of has no continuing
               Investment in any other Subsidiary not being simultaneously
               disposed of or in the Company.

     For purposes of determining the book value of assets constituting
     Subsidiary Stock being Transferred as provided in this Section 4.7(b)(iv),
     such book value shall be deemed to be the aggregate book value of the net
     assets of the Subsidiary that shall have issued such Subsidiary Stock.

          (c) SUBSIDIARY MERGERS AND CONSOLIDATIONS. A merger or consolidation
     of a Subsidiary in which a Person other than the Company, a Wholly-Owned
     Subsidiary or any other Subsidiary, that is an Obligor shall be the
     Surviving Corporation shall be deemed to be a disposition of the Subsidiary
     Stock of such Subsidiary and shall be permitted only in compliance with
     Section 4.7(b).

     4.8  TRANSACTIONS WITH AFFILIATES.

     The Company will not, and will not permit any Subsidiary to, enter into
directly or indirectly any transaction or group of related transactions
(including, without limitation, the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company, a Wholly-Owned Subsidiary or any Subsidiary that is an
Obligor) or with any other portfolio investment company held by any Ripplewood
Affiliate, except in the ordinary course and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company of such Subsidiary than would
be obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.

     4.9  AMENDMENTS TO ACCEPTABLE CREDIT FACILITIES.

     The Company will not agree to any amendment or modification of the Senior
Credit Agreement or any successive loan or credit agreement replacing,
refinancing or refunding, in whole or in part, the Debt incurred under the
Senior Credit Agreement, if such amendment or modification would result in such
loan or credit agreement not being an Acceptable Credit Facility. The Company
will promptly del iver to each holder of Notes a copy of each amendment or other
modification to or waiver of any provision of each Acceptable Credit Facility
and each agreement or instrument evidencing any other Debt of the Company
entered into after the Closing Date.

     4.10 LINES OF BUSINESS.

     The Company will not, and will not permit any of its Subsidiaries to,
engage to any substantial extent in any business not substantially the same as
the businesses in which the Company and its Subsidiaries are engaged on the date
of this Agreement as described in the Memorandum.

     4.11 LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
          SUBSIDIARIES.

     The Company will not, and will not permit any Subsidiary to, directly or
indirectly, create or otherwise cause or permit to exist or become effective any
encumbrance or restriction on the ability of such Subsidiary to:

          (a) pay Dividends to, or pay any debt owed to, the Company;

                                       19
<PAGE>

          (b) make loans or advances to the Company;

          (c) transfer any of its Property to the Company (except such
     restrictions that are permitted to exist pursuant to Section 4.5); or

          (d) create, make or issue any Guaranty of any Debt of the Company
     (including, without limitation, the Affiliate Guaranty);

except, in each case, for such encumbrances or restrictions existing under or by
reason of applicable law.

5.   REPORTING COVENANTS

     5.1  FINANCIAL AND BUSINESS INFORMATION.

     The Company shall deliver to each holder of Notes:

          (a) QUARTERLY FINANCIAL STATEMENTS - as soon as practicable after the
     end of each quarterly fiscal period in each fiscal year of the Company
     (other than the last quarterly fiscal period of each such fiscal year), and
     in any event within sixty (60) days thereafter:

               (i) consolidated and consolidating balance sheets as at the end
          of such quarter;

          and

               (ii) consolidated and consolidating statements of operations and
          statements of cash flow for such quarter, and, in the case of the
          second and third fiscal quarters of the Company, the comparable
          information for the portion of the fiscal year ending with such
          quarter and a comparison to relevant budget amounts for such quarter;

for the Company and the Subsidiaries, setting forth in each case, in comparative
form, the financial statements for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and certified as
complete and correct in all material respects by a Senior Financial Officer, and
accompanied by the certificate required by Section 5.2; PROVIDED, that, should
the Company become subject to or agree with any Person to comply with the
provisions of section 13 of the Exchange Act, delivery of copies of the
Company's Quarterly Report on Form 10-Q filed with the SEC within the time
period specified above shall be deemed to satisfy the requirements of this
Section 5.1(a) so long as such Quarterly Report contains or is accompanied by
the information specified in this Section 5.1(a);

          (b) ANNUAL FINANCIAL STATEMENTS - as soon as practicable after the end
     of each fiscal year of the Company, and in any event within one hundred
     five (105) days thereafter:

               (i) consolidated and consolidating balance sheets as at the end
          of such year; and

               (ii) consolidated and consolidating statements of operations and
          statements of cash flows for such year;

                                       20
<PAGE>

for the Company and the Subsidiaries, setting forth in the case of each
consolidated financial statement, in comparative form, the financial statement
for the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by:

                    (A) in the case of such consolidated financial statements,
               an audit report thereon of independent certified public
               accountants of recognized national standing, which report shall
               state (without qualification related to the scope of the audit or
               the compliance of the audit with generally accepted auditing
               standards), that such financial statements have been prepared and
               are in conformity with GAAP;

                    (B) a certification by a Senior Financial Officer that such
               consolidated and consolidating statements are complete and
               correct in all material respects; and

                    (C) the certificates required by Section 5.2 and Section
               5.3;

PROVIDED, that, should the Company become subject to or agree with any Person to
comply with the provisions of section 13 of the Exchange Act, the delivery of
the Company's Annual Report on Form 10-K for such fiscal year filed with the SEC
within the time period specified above shall be deemed to satisfy the
requirements of this Section 5.1(b) so long as such Annual Report contains or is
accompanied by the reports and other information otherwise specified in this
Section 5.1(b);

          (c) SEC AND OTHER REPORTS - promptly upon their becoming available:

               (i) each financial statement, report, notice or proxy statement
          sent by the Company or any Subsidiary to stockholders generally;

               (ii) each regular or periodic report (including, without
          limitation, each Form 10-K, Form 1O-Q and Form 8-K), any registration
          statement which shall have become effective, and each final prospectus
          and all amendments thereto filed by the Company or any Subsidiary with
          the SEC or any securities exchange (including, without limitation, any
          electronic stock quotation system); and

               (iii) all press releases and other statements made available by
          the Company or any Subsidiary to the public concerning material
          developments in the business of the Company or the Subsidiaries;

          (d) NOTICE OF DEFAULT OR EVENT OF DEFAULT - within five (5) Business
     Days of becoming aware:

               (i) of the existence of any condition or event which constitutes
          a Default or an Event of Default; or

               (ii) that the holder of any Note, the Senior Agent or any holder
          of any Senior Debt or any holder of any other Debt, shall have given
          notice or taken any other action with respect to a claimed Default,
          Event of Default or default or event of default;

a notice specifying the nature of the claimed Default, Event of Default or
default or event of default and the notice given or action taken (if any) by
such holder and what action the Company is taking or proposes to take with
respect thereto;

                                       21
<PAGE>

          (e) ERISA -

               (i) within ten (10) Business Days of knowledge of the occurrence
          of any "reportable event" (as such term is defined in section 4043 of
          ERISA) for which notice thereof has not been waived pursuant to
          regulations of the DOL or "prohibited transaction" (as such term is
          defined in section 406 of ERISA or section 4975 of the IRC) in
          connection with any Plan or any trust created thereunder, a notice
          specifying the nature thereof, what action the Company is taking or
          proposes to take with respect thereto, and, when known, any action
          taken by the Internal Revenue Service, the DOL or the PBGC with
          respect thereto; and

               (ii) prompt notice of and, where applicable, a description of:

                    (A) any notice from the PBGC in respect of the commencement
               of any proceedings pursuant to section 4042 of ERISA to terminate
               any Plan or for the appointment of a trustee to administer any
               Plan, and any distress termination notice delivered to the PBGC
               under section 4041 of ERISA in respect of any Plan, and any
               determination of the PBGC in respect thereof;

                    (B) the placement of any Multiemployer Plan in
               reorganization status under Title IV of ERISA, any Multiemployer
               Plan becoming "insolvent" (as such term is defined in section
               4245 of ERISA) under Title IV of ERISA, or the whole or partial
               withdrawal of the Company or any ERISA Affiliate from any
               Multiemployer Plan and the withdrawal liability incurred in
               connection therewith; or

                    (C) the occurrence of any event, transaction or condition
               that could result in the incurrence of any liability of the
               Company or any ERISA Affiliate or the imposition of a Lien on the
               Property of the Company or any ERISA Affiliate, in either case
               pursuant to Title I or Title IV of ERISA or pursuant to the
               penalty or excise tax or security provisions of the IRC;

          PROVIDED, HOWEVER, that the Company shall not be required to deliver
          any such notice at any time when the aggregate amount of the actual or
          potential liability of the Company and the Subsidiaries in respect of
          all such events at such time could not reasonably be expected to have
          a Material Adverse Effect;

          (f) ENVIRONMENTAL NOTICES - upon the request of such holder made at
     any time during which there may be a material violation of any
     Environmental Protection Law by the Company or any of its Subsidiaries, or
     any material liability of the Company or any of its Subsidiaries arising
     thereunder or related to a Release of Hazardous Materials on any real
     property owned, leased or operated by the Company or any of its
     Subsidiaries, all such material reports, certificates, engineering studies
     and other written material or data relative to such alleged violation or
     Release as any holder of Notes may reasonably require;

          (g) AUDITOR'S REPORTS - each report or management letter submitted to
     the Company or any Subsidiary by independent accountants in connection with
     any annual, interim or special audit made of the books of the Company or
     any Subsidiary;

          (h) ACTIONS, PROCEEDINGS - promptly after any Senior Officer of the
     Company becomes aware of any action or proceeding relating to the Company
     or any Subsidiary in any court or before

                                       22
<PAGE>

     any governmental authority or arbitration board or tribunal as to which
     there is a reasonable possibility of an adverse determination and that, if
     adversely determined, is reasonably likely to have a Material Adverse
     Effect, a notice specifying the nature and period of existence thereof and
     what action the Company is taking or proposes to take with respect thereto;

          (i) MATERIAL ADVERSE EFFECT - promptly upon becoming aware of the
     occurrence of any event or circumstance that could reasonably be expected
     to have a Material Adverse Effect, a written notice specifying the nature
     thereof and what action the Company is taking or proposes to take with
     respect thereto;

          (j) ACCEPTABLE CREDIT FACILITIES - promptly after execution thereof a
     copy of each Acceptable Credit Facility entered into by the Company, any
     Subsidiary and the Senior Lenders or any other holder of Senior Debt and
     each amendment, modification or waiver entered into by the Company, any
     Subsidiary and the Senior Lenders or any other holder of Senior Debt with
     respect to any Acceptable Credit Facility;

          (k) OTHER CREDITORS - promptly upon the reasonable request of any
     holder of Notes, copies of any statement, report or certificate furnished
     to any holder of Debt to the extent that the information contained in such
     statement, report or certificate has not already been delivered to each
     holder of Notes;

          (1) RULE 144A - promptly upon the reasonable request of any holder of
     Notes, information required to permit the holder to comply with 17 C.F.R.
     Section 230.144A, as amended from time to time, in connection with a
     transfer of any Note; and

          (m) REQUESTED INFORMATION - with reasonable promptness, such
         other data and information as from time to time may be reasonably
         requested by any holder of Notes, including, without limitation, any
         information required to determine whether the Company and the
         Subsidiaries are or will be Year 2000 Compliant.

     5.2  OFFICER'S CERTIFICATES.

     Each set of financial statements delivered to each holder of Notes pursuant
to Section 5.1(a) or Section 5.1(b) shall be accompanied by a certificate of a
Senior Financial Officer, setting forth:

          (a) COVENANT COMPLIANCE - the financial information (including
     detailed calculations) required in order to establish whether the Company
     was in compliance with the requirements of Section 4 (in each case where
     such Section imposes numerical financial requirements) as of the end of the
     period covered by the financial statements then being furnished (including
     with respect to such Section, where applicable, the calculations of the
     maximum or minimum amount, ratio or percentage, as the case may be,
     permissible under the terms of such Section, and the calculation of the
     amount, ratio or percentage then in existence);

          (b) EVENT OF DEFAULT - a statement that the signer has reviewed the
     relevant terms hereof and has made, or caused to be made, under his or her
     supervision or authority, a review of the transactions and conditions of
     the Company and the Subsidiaries from the beginning of the accounting
     period covered by the statements of operations being delivered therewith to
     the date of the certificate and that such review shall not have disclosed
     the existence during such period of any condition or event that constitutes
     a Default or an Event of Default or, if any such condition or event

                                       23
<PAGE>

     existed or exists, specifying the nature and period of existence thereof
     and what action the Company shall have taken or proposes to take with
     respect thereto; and

          (c) MANAGEMENT DISCUSSION - a written discussion and analysis by
     management of the financial condition of, and results of operations for,
     the Company and the Subsidiaries for the accounting period covered by the
     income statements being delivered therewith, all in reasonable detail.

     5.3  ACCOUNTANTS' CERTIFICATES.

     Each set of annual financial statements delivered pursuant to Section
5.1(b) shall be accompanied by a certificate of the accountants who were engaged
to audit such financial statements, stating that they have reviewed this
Agreement and stating further whether, in making their audit, such accountants
have become aware of any condition or event that then constitutes a Default or
an Event of Default arising from a breach of Sections 4.1, 4.2, 4.3, or
4.7(a)(x), and, if such accountants are aware that any such condition or event
then exists, specifying the nature and period of existence thereof.

     5.4  INSPECTION.

     The Company will permit the representatives of each holder of Notes to
visit and inspect any of the Properties of the Company or any of the
Subsidiaries, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the finances and affairs of the Company
and the Subsidiaries) all at such reasonable times and as often as may be
reasonably requested. Expenses incurred by the holders of the Notes in
connection with this Section 5.4 shall be paid in accordance with Section 9.6.

6.   EVENTS OF DEFAULT

     6.1  EVENTS OF DEFAULT.

     An "EVENT OF DEFAULT" exists at any time if any of the following both
occurs and is continuing thereafter (and has not been waived as provided in
Section 7.14) for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):

          (a)  PAYMENTS ON NOTES -

               (i) PRINCIPAL OR PREPAYMENT COMPENSATION AMOUNT PAYMENTS - the
          Company fails to make any payment of principal or Prepayment
          Compensation Amount on any Note on or before the date such payment is
          due (whether at maturity or at a date fixed for payment or by
          acceleration or otherwise); or

               (ii) INTEREST PAYMENTS - the Company fails to make any payment of
          interest on any Note on or before five (5) Business Days after the
          date such payment is due;

                                       24
<PAGE>

          (b) OTHER DEFAULTS -

               (i) PARTICULAR COVENANT DEFAULTS - the Company shall fail to
          perform or observe any covenant contained in Section 4; or

               (ii) OTHER DEFAULTS - any Obligor or any Subsidiary, fails to
          comply with any other provision hereof or of any other Financing
          Document, and such failure continues for more than thirty (30) days
          after the earlier of receipt of notice of such failure by a Senior
          Officer or a Senior Officer becoming aware of such failure;

          (c) WARRANTIES OR REPRESENTATIONS -

               (i) any warranty, representation or other statement by or on
          behalf of any Obligor contained in the Securities Purchase Agreement
          or any other Financing Document, in any written amendment, supplement,
          modification or waiver with respect to any Financing Document or in
          any instrument furnished in compliance herewith or in reference
          hereto, shall have been false or misleading in any material respect
          when made; or

               (ii) any warranty, representation or other statement by or on
          behalf of any Obligor or any other Person contained in any Acquisition
          Document shall have been false or misleading in any material respect
          when made;

          (d) DEFAULT ON OR ACCELERATION OF MATERIAL OBLIGATIONS -

               (i) any Obligor falls to make, when due, at maturity, upon demand
          or otherwise, any payment or payments in respect of any Material
          Obligation beyond any applicable grace period therefor; or

               (ii) any event or condition occurs that results (beyond any
          applicable grace period therefor) in any Material Obligation becoming
          due prior to its scheduled maturity or that enables or permits the
          holder or holders of any Material Obligation, or any trustee or agent
          on its or their behalf, immediately to cause any Material Obligation
          to become due, or to require the prepayment, repurchase, redemption,
          or defeasance thereof, prior to its scheduled maturity; PROVIDED that
          this clause (ii) shall not apply to secured Debt that becomes due as a
          result of the voluntary sale or transfer of the property or assets
          securing such Debt;

          (e) INSOLVENCY -

               (i) INVOLUNTARY BANKRUPTCY PROCEEDINGS -

                    (A) a receiver, liquidator, custodian, trustee, conservator,
               sequestrator or similar official for any Obligor or Subsidiary,
               or of all or any substantial part of the Property of any of them,
               is appointed by court order and such appointment continues
               unstayed and in effect for a period of sixty (60) days, or an
               order for relief is entered with respect to any Obligor or
               Subsidiary, or any Obligor or Subsidiary is adjudicated a
               bankrupt or insolvent and such order or adjudication continues
               unstayed and in effect for a period of sixty (60) days;

                                       25
<PAGE>

                    (B) all or any substantial part of the Property of any
               Obligor or Subsidiary is sequestered by court order and such
               order continues unstayed and in effect for a period of sixty (60)
               days;

                    (C) an involuntary proceeding is commenced or a petition is
               filed against any Obligor or Subsidiary under any bankruptcy,
               reorganization, arrangement, insolvency, readjustment of debt,
               dissolution, receivership or liquidation law of any jurisdiction,
               whether now or hereafter in effect, and is not dismissed within
               sixty (60) days after such filing; or

                    (D) any Obligor or Subsidiary is wound-up or liquidated.

               (II) VOLUNTARY PETITIONS - any Obligor or Subsidiary (A) files a
          petition in voluntary bankruptcy or seeks relief under any provision
          of any bankruptcy, reorganization, arrangement, insolvency,
          readjustment of debt, dissolution, receivership or liquidation law of
          any jurisdiction, whether now or hereafter in effect. or consents to
          the filing of any petition against it under any such law, (B) consents
          to the institution of or the entry of an order for relief against it,
          or fails to contest in a timely and appropriate manner, any proceeding
          or the filing of any petition described in paragraph (vi) of this
          Section 6.l(e), (C) applies for or consents to the appointment of a
          receiver, trustee, custodian, sequestrator, conservator or similar
          official for any Obligor or any of their respective Subsidiaries, or
          for a substantial part of their Property or assets, (D) files an
          answer admitting the material allegations of a petition filed against
          it in any such proceeding, or (E) takes any action for the purpose of
          effecting any of the foregoing;

          (f) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. - any Obligor or
     Subsidiary makes an assignment for the benefit of its creditors, or admits
     in writing its inability, or fails, to pay its debts generally as they
     become due. or consents to the appointment of a receiver, liquidator or
     trustee of any Obligor or Subsidiary or of all or a substantial part of its
     Property;

          (g) UNDISCHARGED FINAL JUDGMENTS - a final, non-appealable judgment or
     final, non-appealable judgments for the payment of money aggregating in
     excess of One Million Dollars ($1,000,000) is or are outstanding against an
     Obligor or Subsidiary and any one of such judgments shall have been
     outstanding for more than thirty (30) days from the date of its entry and
     shall not have been discharged in full or stayed or any action shall be
     legally taken by a judgment creditor to levy upon assets or properties of
     the Obligors or any of their respective Subsidiaries to enforce any such
     judgment;

          (h) ERISA - (A) a "Reportable Event" as defined in section 4043(c) of
     ERISA shall occur with respect to any Plan, but excluding any such event as
     to which the provision for 30 days' notice to the Pension Benefit Guaranty
     Corporation (or any successor agency, "PBGC") is waived under applicable
     regulations, (B) a notice of intent to terminate a Plan subject to Title IV
     of ERISA under a distress termination under section 4041C(c) of ERISA shall
     be filed or an amendment to such a Plan shall be treated as a termination
     under section 4041(c) of ERISA, (C) proceedings by the PBGC shall be
     instituted to terminate a Plan subject to Title IV of ERISA or a trustee
     shall be appointed to administer any such Plan or an event or condition
     that might reasonably be expected to constitute grounds under Section 4042
     of ERISA for the termination of, or the appointment of a trustee to
     administer, any Plan subject to section 4042 shall occur, (D) and liability
     under Title IV of ERISA, other than for PBGC premiums due but not yet
     payable, shall be imposed, (E) an application for a

                                       26
<PAGE>

     minimum funding waiver under section 412 of the IRC shall be filed with
     respect to any Plan. (F) the Company or any ERISA Affiliate shall withdraw
     from a Plan subject to section 4062 of ERISA during a plan year which was a
     "substantial employer" as (as defined section 4001(a)(2) of ERISA), (G)
     such Plan intending to qualify under section 401(a) of the IRC shall lose
     such qualified status (other than a because of a Remediable Defect), (H) a
     material required contribution to a Plan shall not be made. (I) the Company
     or any ERISA Affiliate shall be in "default" (as defined in section
     4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
     because of its complete or partial withdrawal (as described in Section 4203
     or 4205 of ERISA) from such Multlemployer Plan, or (J) a material
     non-exempt prohibited transaction within the meaning of section 4975 of the
     IRC or section 406 of ERISA shall occur with respect to any Plan that is
     not cured within 60 days after the Company has knowledge thereof;

          (i) FINANCING DOCUMENTS - any Financing Document shall cease to be in
     full force and effect or shall be declared by a court or other Governmental
     Authority of competent jurisdiction to be void, voidable or unenforceable
     against any Obligor; the validity or enforceability of any Financing
     Document against any Obligor shall be contested by any Obligor, Subsidiary
     or Affiliate; or any Obligor, Subsidiary or Affiliate shall deny that any
     Obligor has any further liability or obligation under any Financing
     Document to which it is a party; or

          (j) CERTAIN ACTIVITIES OF THE PARENT -- the Parent:

               (i) owns, holds or acquires any material Property other than the
          Capital Stock of the Company (and, for a period not exceeding sixty
          (60) days prior to the payment thereof in respect of permitted
          obligations of the Parent or as dividends or distributions in respect
          of the Common Stock, dividends and distributions made in respect of
          the Capital Stock of the Company);

               (ii) conducts any business other than as incidental to being a
          stockholder of the Company;

               (iii) creates, incurs, assumes or permits to exist any
          indebtedness, or guaranty, endorse, become surety for or otherwise be
          responsible, directly or indirectly, for the indebtedness of any other
          Person other than pursuant to and in respect of any Right or any
          guaranty or other similar contingent obligation to pay any
          indebtedness of the Company; or

               (iv) fails to own at any time all of the issued and outstanding
          Capital Stock and Rights of the Company.

If any action, condition, event or other matter would, at any time, constitute
an Event of Default under any provision of this Section 6.1, then an Event of
Default shall exist, regardless of whether the same or a similar action,
condition, event or other matter is addressed in a different provision of this
Section 6.1 and would not constitute an Event of Default at such time under such
different provision.

     6.2  DEFAULT REMEDIES.

          (a)  ACCELERATION OF MATURITY OF NOTES.

               (i)  ACCELERATION ON EVENT OF DEFAULT.

                                       27
<PAGE>

                    (A) AUTOMATIC. If any Event of Default specified in Section
               6.1(e) or Section 6.1(f) shall exist, then all of the Notes at
               the time outstanding shall automatically become immediately due
               and payable together with interest accrued thereon and, to the
               extent permitted by applicable law, the Prepayment Compensation
               Amount with respect thereto, without presentment, demand, protest
               or notice of any kind, all of which are hereby expressly waived.

                    (B) BY ACTION OF HOLDERS. If any Event of Default (other
               than an Event of Default specified in Section 6.1(e) or Section
               6.1(f) shall exist, the Required Holders may exercise any right,
               power or remedy permitted to such holder or holders by law, and
               shall have, in particular, without limiting the generality of the
               foregoing, the right to declare the entire principal of, and all
               interest accrued on, all the Notes then outstanding to be, and
               such Notes shall thereupon become, immediately due and payable,
               without any presentment, demand, protest or other notice of any
               kind, all of which are hereby expressly waived, and the Company
               shall forthwith pay to the holder or holders of all the Notes
               then outstanding the entire principal of, and interest accrued
               on, the Notes and, to the extent permitted by law, the Prepayment
               Compensation Amount at such time with respect to such principal
               amount of such Notes.

               (ii) ACCELERATION ON PAYMENT DEFAULT. During the existence of an
          Event of Default described in Section 6.1(a), and irrespective of
          whether the Notes then outstanding shall have become due and payable
          pursuant to Section 6.2(a)(i)(B), any holder of Notes who or which
          shall have not consented to any waiver with respect to such Event of
          Default may, at his or its option, by notice in writing to the
          Company, declare the Notes then held by such holder to be, and such
          Notes shall thereupon become, immediately due and payable together
          with all interest accrued thereon, without any presentment, demand,
          protest or other notice of any kind, all of which are hereby expressly
          waived, and the Company shall forthwith pay to such holder the entire
          principal of and interest accrued on such Notes and, to the extent
          permitted by law, the Prepayment Compensation Amount at such time with
          respect to such principal amount of such Notes.

          (b) VALUABLE RIGHTS. The Company acknowledges, and the parties hereto
     agree, that the right of each holder to maintain its investment in the
     Notes free from repayment by the Company (except as herein specifically
     provided for) is a valuable right and that the provision for payment of a
     Prepayment Compensation Amount by the Company in the event that any Notes
     are prepaid or are accelerated as a result of an Event of Default is
     intended to provide compensation for the deprivation of such right under
     such circumstances.

          (c) OTHER REMEDIES. During the existence of an Event of Default and
     irrespective of whether the Notes then outstanding shall become due and
     payable pursuant to Section 6.2(a), and irrespective of whether any holder
     of Notes then outstanding shall otherwise have pursued or be pursuing and
     other rights or remedies, any holder of Notes may proceed to protect and
     enforce its rights hereunder and under such Notes by exercising such
     remedies as are available to such holder in respect thereof under
     applicable law, either by suit in equity or by action at law, or both,
     whether for specific performance of any agreement contained herein or in
     aid of the exercise of any power granted herein; PROVIDED, HOWEVER, that
     the maturity of such holder's Notes may be accelerated only in accordance
     with Section 6.2(a).

                                       28
<PAGE>

          (d) NONWAIVER; REMEDIES CUMULATIVE. No course of dealing on the part
     of any holder of Notes nor any delay or failure on the part of any holder
     of Notes to exercise any right shall operate as a waiver of such right or
     otherwise prejudice such holder's rights, powers and remedies. All rights
     and remedies of each holder of Notes hereunder and under applicable law are
     cumulative to, and not exclusive of, any other rights or remedies any such
     holder of Notes would otherwise have.

     6.3  ANNULMENT OF ACCELERATION OF NOTES.

     If a declaration is made pursuant to Section 6.2(a)(i)(B) or Section
6.2(a)(ii), then and in every such case, the Required Holders may, by written
instrument filed with the Company, rescind and annul such declaration, and the
consequences thereof; PROVIDED, HOWEVER, that at the time such declaration is
annulled and rescinded:

          (a) no judgment or decree shall have been entered for the payment of
     any moneys due on or pursuant hereto or the Notes;

          (b) all arrears of interest upon all of the Notes and all of the other
     sums payable hereunder and under the Notes (except any principal of, or
     interest or Prepayment Compensation Amount on, the Notes which shall have
     become due and payable by reason of such declaration under Section
     6.2(a)(i)(B) or Section 6.2(a)(ii) shall have been duly paid; and

          (c) each and every other Default and Event of Default shall have been
     waived pursuant to Section 9.5 or otherwise made good or cured;

and PROVIDED, FURTHER, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.

7.   SUBORDINATION OF SUBORDINATED DEBT

     7.1  GENERAL.

     The Subordinated Debt is subordinate and junior in right of payment to the
prior payment in full of all Senior Debt to the extent provided in this Section
7. Notwithstanding the foregoing, but subject to the provisions of this Section
7, the holders of the Notes may receive and retain payments with respect to the
Notes provided for in this Agreement.

     7.2  INSOLVENCY.

     In the event of:

          (a) any insolvency, bankruptcy, receivership, liquidation,
     reorganization, readjustment, composition or other similar proceeding
     relating to the Company, its creditors or its Property;

          (b) any proceeding for the liquidation, dissolution or other
     winding-up of the Company, voluntary or involuntary, whether or not
     involving insolvency or bankruptcy proceedings;

          (c) any assignment by the Company for the benefit of creditors; or

          (d) any other marshalling of the assets of the Company;

                                       29
<PAGE>

all Senior Debt shall first be paid in full before any payment or distribution,
whether in cash, Securities or other Property (other than Permitted Securities),
shall be made to and holder of any Subordinated Debt on account of any
Subordinated Debt. Any payment or distribution, whether in cash, Securities or
other Property (other than Permitted Securities), which would otherwise (but for
this Section 7) be payable or deliverable in respect of Subordinated Debt shall
be paid or delivered directly to the holders of Senior Debt in accordance with
the priorities then existing among such holders until all Senior Debt shall have
been paid in full; PROVIDED, HOWEVER, that the holders of the Subordinated Debt
may retain Permitted Securities.

     7.3  PROOFS OF CLAIM.

     If any holder of Subordinated Debt does not file a proper claim or proof of
debt therefor prior to ten (10) days before the expiration of the time to file
such claim or proof, then the holders of the Senior Debt are hereby authorized
and permitted (but not obligated) for the specific and limited purpose set forth
in this paragraph, to file such claim or proof for or on behalf of such holder;
PROVIDED, HOWEVER, that the Senior Agent shall have notified such holder in
writing not less than ten (10) days in advance of its intention to file such
claim or proof. No provision of this Agreement shall be deemed to authorize the
holders of Senior Debt to authorize or consent to or accept or adopt on behalf
of any holder of Subordinated Debt any plan of reorganization, arrangement,
adjustment or composition affecting the Subordinated Debt, to exercise the right
of any holder of Subordinated Debt in respect of any plan of reorganization,
arrangement, adjustment or composition affecting the Subordinated Debt, or to
vote in respect of the claim of any holder of Subordinated Debt in any such
proceeding.

     7.4  PAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.

     In the event the Company shall default in the payment of the principal of,
interest on or premium, if any, in respect of any Senior Debt (a "PAYMENT
DEFAULT") when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration of acceleration or otherwise, then,
unless and until such default shall have been cured or waived in accordance with
the terms of the Senior Credit Agreement or shall have ceased to exist, no
direct or indirect payment (in cash, Property or Securities (other than
Permitted Securities) or by set-off or otherwise) shall be made or agreed to be
made on account of any Subordinated Debt, or as a sinking fund for any
Subordinated Debt, or in respect of any redemption, retirement, purchase,
prepayment or other acquisition or payment of any Subordinated Debt.

     The Company shall give prompt written notice to each holder of Subordinated
Debt of its knowledge of facts which would give rise to any Payment Default.

     7.5  NONPAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.

     Upon receipt by the Company from the Senior Agent, following the actual
occurrence of any Nonpayment Default, of written notice (a "NONPAYMENT DEFAULT
NOTICE") of the happening of such Nonpayment Default, stating that such notice
is a payment blockage notice pursuant to Section 7.5 of this Agreement, no
direct or indirect payment (in cash, Property or Securities (other than
Permitted Securities) or by set-off or otherwise) shall be made or agreed to be
made for or on account of any Subordinated Debt, or as a sinking fund for any
Subordinated Debt, or in respect of any redemption, retirement, repurchase,
prepayment, purchase or other acquisition or payment of any Subordinated Debt,
for a period (each, a "PAYMENT BLOCKAGE PERIOD") commencing on the date of
receipt by the Company of such notice from the Senior Agent and ending on the
Payment Blockage Termination Date relating to such Payment Blockage Period;
PROVIDED, HOWEVER, that:

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<PAGE>

          (a) only one such Payment Blockage Period may arise in any period of
     three hundred sixty-five (365) consecutive days;

          (b) no more than three (3) such Payment Blockage Periods, in the
     aggregate, may arise while the Subordinated Debt is outstanding; and

          (c) no Payment Blockage Period may be imposed as a result of any
     Nonpayment Default which served as the basis for, or was continuing during,
     a previous Payment Blockage Period unless such Nonpayment Default shall
     have been cured for a period of not less than one hundred eighty (180)
     consecutive days.

All payments in respect of Subordinated Debt postponed under Section 7.4 or
during any Payment Blockage Period shall be immediately due and payable upon the
termination thereof (together with such additional interest as is provided for
herein and in the Notes for late payment of principal, Prepayment Compensation
Amount or interest, as applicable).

     The Company shall give prompt written notice to each holder of Subordinated
Debt of its receipt of any Nonpayment Default Notice under this Section 7.5.

     7.6  EXERCISE OF REMEDIES.

     Notwithstanding anything contained in this Agreement or any other Financing
Document to the contrary, for so long as any Senior Debt is outstanding, if any
Payment Default or Nonpayment Default in respect thereof shall have occurred and
is continuing, then no holder of any Subordinated Debt may take any action to
accelerate all or any portion of the Subordinated Debt (and no acceleration or
purported acceleration pursuant to Section 6.2(a)(i)(B) or Section 6.2(a)(ii)
shall become effective) or exercise any other Remedies in respect thereof during
any period (a "STANDSTILL PERIOD"):

          (a)  commencing:

               (i) in the event of a Payment Default, on the date of such
          Payment Default;

               (ii) in the event of a Nonpayment Default, on the date that the
          Nonpayment Blockage Period begins;

          (b)  and ending upon the earliest of:

               (i) the date forty-five (45) days after the commencement of such
          Standstill Period;

               (ii) the date upon which any holder or holders of any Material
          Obligations, or any holder or holders of any Senior Debt, accelerate
          or declare such Debt to be due and payable prior to its stated
          maturity or prior to the regularly scheduled date or dates of payment
          or otherwise commence the exercise of and Remedies against the
          Company;

               (iii) the first date upon which any of the Events of Default
          described in Section 6.1(e) shall have occurred and be continuing
          beyond any period of grace specified therein; and, in such event, the
          automatic acceleration of the Notes contemplated in respect

                                       31
<PAGE>

          of such Event of Default pursuant to Section 6.2(a)(i)(B) shall occur
          immediately upon the termination of the Standstill Period; and

               (iv) the date of termination of the Payment Blockage Period or
          Nonpayment Blockage Period, as the case may be.

     Other than during a Standstill Period. in the event that any Event of
Default shall have occurred and shall be continuing, the holders of the
Subordinated Debt may take action any action permitted pursuant to Section 6.2
and any other action permitted by applicable law to protect its rights and seek
any Remedy in respect of an Event of Default; PROVIDED, HOWEVER, that the rights
of the holders to receive payment in respect of the exercise of any such rights
or remedies shall at all times be subject to the provisions of Section 7.2,
Section 7.4, Section 7.5, Section 7.6(b)(iv) and the other provisions of this
Section 7.

     7.7  TURNOVER OF PAYMENTS.

     If:

          (a) any payment or distribution shall be paid to or collected or
     received by any holders of Subordinated Debt

               (i) in contravention of any of the terms of this Section 7 or

               (ii) pursuant to the provisions of Section 1.3 or Section 1.6 at
          a time when such payment would be prohibited by an Acceptable Credit
          Facility; and

          (b) any holder of Senior Debt or the Company shall have notified the
     holders of Subordinated Debt, within ninety (90) days of any such payment
     or distribution, of the facts by reason of which such payment or collection
     or receipt so contravenes this Section 7 or, in the case of any payment
     made pursuant to the provisions of Section 1.3 or Section 1.6, of the facts
     by reason of which such payment was prohibited by the Acceptable Credit
     Facility;

then such holders of Subordinated Debt will deliver such payment or
distribution, to the extent necessary to pay all such Senior Debt in full to the
holders of such Senior Debt and, until so delivered, the same shall be held in
trust by such holders of Subordinated Debt as the property of the holders of
such Senior Debt. If any amount is delivered to the holders of Senior Debt
pursuant to this Section 7.6(b)(iv), whether or not such amounts has been
applied to the payment of Senior Debt, and the outstanding Senior Debt shall
thereafter be paid in full by the Company or otherwise other than pursuant to
this Section 7.6(b)(iv), the holders of Senior Debt shall return to such holders
of Subordinated Debt an amount equal to the amount delivered to such holders of
Senior Debt pursuant to this Section 7.6(b)(iv), so long as after the return of
such amounts the Senior Debt shall remain paid in full.

     7.8  SUBORDINATION UNAFFECTED BY CERTAIN EVENTS.

     The rights set forth in this Section 7 of the holders of the Senior Debt as
against each holder of Subordinated Debt shall remain in full force and effect
without regard to, and shall not be impaired by:

          (a) any act or failure to act on the part of the Company;

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<PAGE>

          (b) any act or failure to act on the part of the Senior Agent or any
     holder of Senior Debt (other than any action prohibited by this Section 7
     or any failure to take any action required by this Section 7);

          (c) any extension or indulgence in respect of any payment or
     prepayment of the Senior Debt or any part therefor in respect of any other
     amount payable to any holder of Senior Debt;

          (d) any amendment, modification, restatement, refinancing or waiver
     of, or addition or supplement to, or deletion from, or compromise, release,
     consent or other action in respect of, any of the terms of any Senior Debt
     or any other agreement which may be relating to any Senior Debt or any
     security or collateral therefor which does not result in the Senior Debt
     failing to satisfy the definition of Senior Debt;

          (e) any exercise or non-exercise by any holder of Senior Debt of any
     right, power, privilege or remedy under or in respect of any Senior Debt or
     any waiver of any such right, power, privilege or remedy or any default in
     respect of any Senior Debt or any security or collateral therefor, or any
     receipt by any holder of Senior Debt of any security or collateral, or any
     failure by any holder of Senior Debt to perfect a security interest in, or
     any release or other action or inaction by any such holder of Senior Debt
     of, any security or collateral for the payment of any Senior Debt;

          (f) any merger or consolidation of the Company or any of the
     Subsidiaries into or with any of the Subsidiaries or into or with any
     Person, or any transfer of any or all of the assets of the Company or any
     of the Subsidiaries to any other Person; or

          (g) the absence of any notice to, or knowledge by, any holder of
     Subordinated Debt of the existence or occurrence of any of the matters or
     events set forth in the foregoing clauses (a) through (f).

     7.9  REINSTATEMENT OF SUBORDINATION.

     The obligations of each holder of Subordinated Debt under the provisions
set forth in this Section 7 shall continue to be effective, or be reinstated, as
the case may be, as to any payment in respect of any Senior Debt that is
rescinded, avoided, set aside or must otherwise be returned by the holder of
such Senior Debt upon the occurrence of or as a result of or pursuant to any
bankruptcy or judicial proceeding, all as though such payment had not been made,
a Payment Default then existed and this Agreement had at all times remained in
effect.

     7.10 OBLIGATIONS NOT IMPAIRED.

     Nothing contained in this Section 7 shall impair, as between the Company
and any holder of Subordinated Debt, the obligation of the Company to pay to
such holder the principal thereof and Prepayment Compensation Amount, if any,
and interest thereon as and when the same shall become due and payable in
accordance with the terms thereof or prevent any holder of any Subordinated Debt
from exercising all rights, powers and remedies otherwise permitted by
applicable law and under this Agreement, all subject to the rights of the
holders of the Senior Debt to receive cash, Securities or other Property
otherwise payable or deliverable to the holders of Subordinated Debt.

     7.11 PAYMENT OF SENIOR DEBT; SUBROGATION.

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<PAGE>

     Upon the payment in full of the Senior Debt and the termination of all
obligations to lend in respect of such Senior Debt,. the holders of Subordinated
Debt shall be subrogated to all rights of any holder of Senior Debt to receive
any further payments or distributions applicable to the Senior Debt until the
Subordinated Debt shall have been paid in full, and such payments or
distributions received by the holders of Subordinated Debt by reason of such
subrogation, of cash, Securities or other Property which otherwise would be paid
or distributed to the holders of Senior Debt, shall, as between the Company and
its creditors other than the holders of Senior Debt, on the one hand, and the
holders of Subordinated Debt, on the other hand, be deemed to be a payment by
the Company on account of Senior Debt and not on account of Subordinated Debt.

     7.12 RELIANCE OF HOLDERS OF SENIOR DEBT; ACKNOWLEDGMENT.

     Each holder of Subordinated Debt by its acceptance thereof shall be deemed
to acknowledge and agree that the foregoing subordination provisions are, and
are intended to be, an inducement to and a consideration of each holder of any
Senior Debt, whether such Senior Debt was created or acquired before or after
the creation of Subordinated Debt, to acquire and hold, or to continue to hold,
such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Debt.

     7.13 IDENTITY OF HOLDERS OF SENIOR DEBT.

     The Company shall deliver to each holder written notice of any change of
the Senior Agent hereunder, together with evidence of the consent of the former
Senior Agent to such change, which notice shall provide the name and address of
such new Senior Agent. Upon the request of any holder of Subordinated Debt, the
Company shall deliver to such holder a list of all holders, of Senior Debt
outstanding at such time, providing the name and address of each such holder of
Senior Debt and the principal amount of Senior Debt held by each such holder.

     7.14 AMENDMENTS TO THIS AGREEMENT.

     Notwithstanding the provisions of Section 9.5, the holders of the Notes and
the Company will not, without the prior written consent of the Senior Agent,
amend or modify:

          (a) any provision of this Section 7 or any defined term to the extent
     used herein;

          (b) any provision of Section 1, the Notes or the other Financing
     Documents that would move forward the date of any payment or increase the
     amount of any payment under the Subordinated Debt, or any defined term to
     the extend related thereto; or

          (c) any provision of Section 3, Section 4 or Section 6 or any defined
     term to the extent used therein if such amendment or modification would
     result in any such provision being more restrictive on the Company.

     7.15 AMENDMENTS TO SENIOR CREDIT FACILITY.

     Notwithstanding the other provisions of this Section 7, no amendment to or
refinancing, replacement or refunding of the Senior Credit Agreement or another
Acceptable Credit Facility or any other agreement or instrument related thereto
shall be effective as to the holders of the Subordinated Debt or be entitled to
the benefits of this Section 7 without the consent of each holder of Notes to
the extent that such amendment would restrict required payments on the
Subordinated Debt so as to create any default or event of default in respect

                                       34
<PAGE>

of such facility by virtue of no other fact except the making by the Company of
a payment required to be made in respect of the Notes; and no amendment to or
refinancing, replacing or refunding of the Senior Credit Agreement or another
Acceptable Credit Facility or any other agreement or instrument related thereto
shall restrict the payment of dividends or distributions from the Subsidiaries
to the Company in any manner which would have such effect.

     7.16 CERTIFICATION OF SUBORDINATION.

     Promptly following the written request of the Company to acknowledge to any
Person (including, without limitation, any lender proposing to enter into an
Acceptable Credit Facility) that the Debt in respect of any credit facility or
loan agreement comprises or will comprise Senior Debt, which written request is
accompanied by a certificate of a Senior Officer of the Company to the effect
that such credit facility or loan agreement meets the definition herein of an
Acceptable Credit Facility and that the Debt thereunder comprises or will
comprise Senior Debt, the holders of the Subordinated Debt (unless the same
shall have reason to believe that the facts contained in such certificate of the
Company are not true) shall acknowledge in writing to such Person that such that
such credit facility or loan agreement meets the definition herein of an
Acceptable Credit Facility and that the Debt thereunder comprises or will
comprise Senior Debt.

8.   INTERPRETATION OF THIS AGREEMENT

     8.1  TERMS DEFINED.

     As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:

     ACCEPTABLE CONSIDERATION - means, with respect to any Transfer of any
Property of the Company or any Subsidiary, consideration consisting of cash or
marketable securities (or any combination of the foregoing) as is, in each case,
determined by the board of directors of the Company, in its good faith opinion,
to be in the best interests of the Company and to reflect the Fair Market Value
of such Property.

     ACCEPTABLE CREDIT FACILITY - means and includes:

          (a) the Senior Credit Agreement, as in effect on the date hereof;

          (b) the Senior Credit Agreement, as hereafter amended, modified or
     supplemented, and each successive loan or credit agreement replacing,
     refinancing or refunding, in whole or in part, the Debt incurred under the
     Senior Credit Agreement or any such successor Acceptable Credit Facility,
     but, in each case, only so long as:

               (i) the principal amount of Debt outstanding under the Senior
          Credit Agreement, as so amended, modified or supplemented, and all
          such outstanding loan or credit agreements, together with any
          additional amounts permitted to be incurred pursuant to the Senior
          Credit Agreement, as so amended, modified or supplemented, and all
          such outstanding loan or credit agreements (including, without
          limitation, the aggregate of all unused revolving credit commitments
          in respect of the Senior Credit Agreement, as so amended, modified or
          supplemented, and all such successive loan or credit agreements) does
          not exceed, at the time of Incurrence or creation of any Debt in
          respect of any thereof, the Maximum Senior Debt Amount;

                                       35
<PAGE>

               (ii) such amendment, modification or supplement, or such other
          loan or credit agreement, as the case may be, does not provide for
          either an overall final maturity or an average life to maturity of the
          Debt incurred thereunder which is greater than such maturities in
          respect of the Debt at the time outstanding pursuant to the Note
          Agreement and the Notes;

               (iii) the interest rate applicable to such amendment,
          modification or supplement, or such other loan or credit agreement, as
          the case may be, does not at any time exceed by more than two hundred
          (200) basis points the maximum interest rate which would have been
          applicable at such time to any Debt in respect of the Senior Credit
          Agreement, as in effect on the date hereof;

               (iv) such amendment, modification or supplement, or such other
          loan or credit agreement, as the case may be, does not restrict
          required payments on the Subordinated Debt so as to create any default
          or event of default in respect of such facility by virtue of no other
          fact except the making by the Company of a payment required to be made
          in respect of the Notes; and shall not restrict the payment of
          dividends or distributions from the Subsidiaries to the Company in any
          manner which would have such effect; and

               (v) such amendment, modification or supplement, or such other
          loan or credit agreement, as the case may be, does not:

                    (A) provide for financial covenants. or events of default
               arising out of the breach or violation of financial covenants
               which, taken as a whole, are materially more restrictive to the
               Company than those contained in the Senior Credit Agreement as in
               effect on the Closing Date;

                    (B) provide for available revolving credit commitments at
               any date in an amount less than fifty percent (50%) of the amount
               of Gross Receivables (as such term is defined in the Senior
               Credit Agreement, as in effect on the date hereof), as calculated
               at the date of determination.

          ACQUISITION DOCUMENT - has the meaning specified in the Securities
     Purchase Agreement.

          AFFILIATE - means, at and time, a Person (other than a Subsidiary or a
     Purchaser):

          (a) that directly or indirectly through one or more intermediaries
     controls, or is controlled by, or is under common control with, the
     Company;

          (b) that beneficially owns or holds ten percent (10%) or more of any
     class of the Voting Stock of the Company; or

          (c) ten percent (10%) or more of the Voting Stock (or in the case of a
     Person that is not a corporation, ten percent (10%) or more of the equity
     interest) of which is beneficially owned or held by the Company or a
     Subsidiary;

at such time.

As used in this definition,

                                       36
<PAGE>

               CONTROL - means the possession. directly or indirectly, of the
          power to direct or cause the direction of the management and policies
          of a Person, whether through the ownership of voting securities, by
          contract or otherwise.

          AFFILIATE GUARANTOR - means and includes the Parent, Jostens and each
     Subsidiary becoming a party, or required to become a party, to the
     Affiliate Guaranty on or after the date hereof.

          AFFILIATE GUARANTY - means the Affiliate Guaranty, of even date
     herewith, of the Parent and Jostens, in the form of Exhibit 4.6(e) to the
     Securities Purchase Agreement, as amended, supplemented or modified in
     accordance with its terms, and together with each Joinder Agreement
     executed by any Subsidiary becoming a party thereto after the date hereof.

          AGREEMENT, THIS - means this Note Agreement, as it may be amended,
     restated or otherwise modified from time to time.

          APPLICABLE INTEREST LAW - means any present or future law (including,
     without limitation, the laws of the State of New York and the United States
     of America) which has application to the interest and other charges
     pursuant to this Agreement and the Notes.

          BOARD OF DIRECTORS - means, at any time, the board of directors of the
     Company or and committee thereof which, in the instance, shall have the
     lawful power to exercise the power and authority of such board of
     directors.

          BUSINESS DAY - means a day other than a Saturday, a Sunday or a day on
     which banks in the State of New York are required or permitted by law
     (other than a general banking moratorium or holiday for a period exceeding
     four (4) consecutive days to be closed.

          CAPITAL LEASE - means, at any time, a lease with respect to which the
     lessee is required to recognize the acquisition of an asset and the
     incurrence of a liability in accordance with GAAP.

          CAPITAL LEASE OBLIGATION - means, with respect to any Person and a
     Capital Lease, the amount of the obligation of such Person as the lessee
     under such Capital Lease which would, in accordance with GAAP, appear as a
     liability on a balance sheet of such Person.

          CAPITAL STOCK - means:

               (a) with respect to any corporation, shares of any class of
          preferred, common or other capital stock;

               (b) with respect to any partnership, any limited, general or
          other partnership interests; and

               (c) with respect to any limited liability company, membership
          interests or units or any similar interests;

or, in each such case or in the case of any other Person, all share capital or
similar equity interest of a Person.

                                       37
<PAGE>

     CHANGE IN CONTROL - means the failure, at any time and for any reason,
whether voluntary or involuntary, of Ripplewood Holdings L.L.C., together with
its management, affiliates and subsidiaries, to have the right to vote, directly
or indirectly, 51% of the shares of Voting Stock the Company.

     CHANGE IN CONTROL NOTICE EVENT - means:

          (a) the execution of any written agreement which, when fully performed
     by the parties thereto, would result in a Change in Control; or

          (b) the making of any written offer by any person (as such term is
     used in section 13(d) and section 14(d)(2) of the Exchange Act as in effect
     on the Closing Date) or related persons constituting a group (as such term
     is used in Rule 13d-5 under the Exchange Act as in effect on the Closing
     Date) to the holders of the Common Stock, or of the Common Stock and the
     Warrants, which offer, if accepted by the requisite number of such holders,
     would result in a Change in Control.

     CHANGE IN CONTROL PAYMENT DATE - Section 1.6(b).

     CLOSING DATE - means the first day upon which any Securities are sold to
any Purchaser under the Securities Purchase Agreement.

     COMMON STOCK - means the Common Stock, par value $0.01 per share, of the
Company, and each other Security into which the Common Stock may be
recapitalized or reclassified, or for which such Common Stock shall be exchanged
or into which such Common Stock shall be converted.

     COMPANY - the introductory paragraph.

     CONSOLIDATED EBITDA - means, for any period, the sum of:

          (a) Consolidated Net Income for such period; PLUS

          (b) to the extent, and only to the extent, in each case, that such
     amount was deducted in the computation of Consolidated Net Income for such
     period, the aggregate amount of:

               (i) Consolidated Interest Expense for such period; PLUS

               (ii) income tax expense and deferred tax expense of the Company
          and the Subsidiaries, determined on a consolidated basis for such
          Persons; PLUS

               (iii) depreciation and amortization expense of the Company and
          the Subsidiaries, determined on a consolidated basis for such Persons.

     CONSOLIDATED INTEREST EXPENSE - means, as of any date of determination, the
Interest Expense of the Company and its Subsidiaries on a consolidated basis for
such period.

     CONSOLIDATED NET INCOME - means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries on a consolidated basis for
such period, excluding therefrom (to the extent otherwise included):

                                       38
<PAGE>

          (a) the income (or loss) of any Person accrued prior to the date it
     becomes a Subsidiary or is merged into or consolidated with the Company or
     a Subsidiary, and the income (or loss) of any Person, substantially all of
     the assets of which have been acquired in any manner, realized by such
     other Person prior to the date of acquisition;

          (b) the income (or loss) of any Person (other than a Subsidiary) in
     which the Company or any Subsidiary has an ownership interest, except to
     the extent that any such income has been actually received by the Company
     or such Subsidiary in the form of cash dividends or similar cash
     distributions;

          (c) the undistributed earnings of any Subsidiary to the extent that
     the declaration or payment of dividends or similar distributions by such
     Subsidiary is not at the time permitted by the terms of its charter or any
     agreement, instrument, judgment, decree, order, statute, rule or
     governmental regulation applicable to such Subsidiary;

          (d) any restoration to income of any contingency reserve, except to
     the extent that provision for such reserve was made out of income accrued
     during such period;

          (e) any aggregate net gain or net loss during such period arising from
     the sale, conversion, exchange or other disposition of capital assets;

          (f) any gains or losses resulting from any write-up or write-down of
     any assets;

          (g) any net gain from the collection of the proceeds of life insurance
     policies;

          (h) any gain arising from the acquisition of any Security, or the
     extinguishment, under GAAP, of any Debt, of the Company or any Subsidiary;

          (i) any net income, gain or loss during such period from:

               (i) any change in accounting principles in accordance with GAAP;

               (ii) any prior period adjustments resulting from any change in
          accounting principles;

               (iii) any extraordinary or non-recurring items; or

               (iv) any discontinued operations or the disposition thereof;

          (j) any deferred credit representing the excess of equity in any
     Subsidiary at the date of acquisition over the cost of the investment in
     such Subsidiary;

          (k) in the case of a successor to the Company by consolidation or
     merger or as a transferee of its assets, any earnings of the successor
     corporation prior to such consolidation, merger or transfer of assets; and

          (l) any portion of such net income that cannot be freely converted
     into United States Dollars.

                                       39
<PAGE>

     CONSOLIDATED TOTAL DEBT - means, as of any date of determination, the total
Debt of the Company and its Subsidiaries on a consolidated basis at such time.

     CONTROL - means, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of Capital Stock, by
contract or otherwise.

     DEBT - with respect to any Person, means, without duplication, the
liabilities of such Person with respect to:

          (a) BORROWED MONEY - all liabilities evidenced by a note, bond,
     debenture or similar instrumen; and all obligations in respect of borrowed
     money, whether or not such liabilities are evidenced by a note, bond
     debenture or other instrument;

          (b) DEFERRED PURCHASE PRICE OF PROPERTY - the deferred purchase price
     of Property acquired by such Person (excluding accounts payable arising in
     the ordinary course of business consistent with past practice but including
     all liabilities created or arising under any conditional sale or other
     title retention agreement with respect to any such Property);

          (c) SECURED LIABILITIES - borrowed money secured by any Lien existing
     on Property owned by such Person (whether or not such liabilities have been
     assumed);

          (d) CAPITAL LEASES - Capital Leases of such Person;

          (e) LETTERS OF CREDIT - letters of credit, bankers'
         acceptances or instruments serving a similar function issued or
         accepted by banks and other financial institutions for the account of
         such Person, other than undrawn trade letters of credit in the ordinary
         course of business;

          (f) TAKE-OR-PAY OBLIGATIONS - obligations of such Person to pay a
     stipulated amount or stipulated minimum amount for a product or service,
     whether or not such product or service is delivered, whether by way of
     Guaranty or otherwise; and

          (g) GUARANTEES - any Guaranty of such Person of any obligation or
     liability of another Person of obligations of the type listed in clause (a)
     through clause (g) of this definition of Debt.

Unless the context otherwise requires, "Debt" means Debt of the Company or of a
Subsidiary.

     DEBT OBLIGATIONS - means, with respect to any Debt, all obligations,
liabilities and indebtedness, whether now or hereafter existing and whether
fixed or contingent, for principal, premium (including, without limitation,
Prepayment Compensation Amounts), interest (including, without limitation,
interest accruing after the commencement of bankruptcy or other insolvency
proceedings by or against the Company or any assets of the Company, but only to
the extent such interest is allowed in such bankruptcy or other proceedings),
expenses (including, without limitation, reimbursement obligations in respect of
taxes) and fees (other than attorneys' fees) incurred by the Company in respect
of such Debt.

     DEFAULT - means any event which, with the giving of notice or the passage
of time, or both, would become an Event of Default.

     DISTRIBUTION - means and includes:

                                       40
<PAGE>

          (a) the declaration or making of, or the Incurrence of any liability
     to make or declare, and dividends or other distributions in respect of the
     Capital Stock or Equity Equivalents of the Company or any Subsidiary (other
     than such dividends or distributions to the extent made solely in Common
     Stock); and

          (b) any optional or mandatory redemption, retirement, repurchase or
     other acquisition, direct or indirect, of any Capital Stock or Equity
     Equivalents of the Company or any Subsidiary.

     DOL - means the United States Department of Labor and any successor agency.

     EAC III - means EAC III L.L.C., a Delaware limited liability company.

     ENVIRONMENTAL PROTECTION LAW - eans any law, statute or regulation enacted
by any Governmental Authority in connection with or relating to the protection
or regulation of the environment, including, without limitation, those laws,
statutes and regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing or transporting of Hazardous
Materials and any applicable orders, decrees or judgments issued by any court of
competent jurisdiction in connection with any of the foregoing.

     EQUITY EQUIVALENT - means and includes, with respect to any Capital Stock
of any Person:

          (a) any warrants, rights or options exercisable into such Capital
     Stock;

          (b) any conversion or exchange privilege or right pursuant to any
     Security which is convertible or exchangeable into such Capital Stock; and

          (c) any equity appreciation. phantom stock or similar rights relating
     to such Capital Stock or the value thereof.

     ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

     ERISA AFFILIATE - means trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the IRC.

     EVENT OF DEFAULT - Section 6.1.

     EXCHANGE ACT - means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations of the SEC thereunder.

     EXCLUDED FOREIGN SUBSIDIARY - means any Subsidiary organized under the laws
of any jurisdiction outside of the United States of America, PROVIDED that such
term shall not include any Subsidiary giving a Guaranty in favor of the lenders
under the Senior Credit Agreement.

     FAIR MARKET VALUE - means, with respect to any Property, the sale value of
such Property that would be realized in an arm's-length sale at such time
between an informed and willing buyer, and an informed and willing seller, under
no compulsion to buy or sell, respectively.

     FINANCING DOCUMENTS - means and includes this Agreement, the Securities
Purchase Agreement, the Notes, the Affiliate Guaranty, the Warrant Agreement,
the Warrants and the certificates representing the Warrants, the certificates
representing the shares of Common Stock sold pursuant to the Securities Purchase

                                       41
<PAGE>

Agreement, the Stockholders Agreement and the other agreements, certificates and
instruments to be executed pursuant to the terms of each of the foregoing, as
each may be amended, restated or otherwise modified from time to time.

     FOREIGN PENSION PLAN - means any plan, fund or other similar program:

          (a) established or maintained outside of the United States of America
     by the Company primarily for the benefit of the employees (substantially
     all of whom are aliens not residing in the United States of America) of the
     Company, which plan, fund or other similar program provides for retirement
     income for such employees or results in a deferral of income for such
     employees in contemplation of retirement; or

          (b) not otherwise subject to ERISA.

     GAAP - means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States of
America.

     GOVERNMENTAL AUTHORITY - means:

          (a) the government of:

               (i) the United States of America and any state or other political
          subdivision thereof; or

               (ii) any other jurisdiction in which the Company or any
          Subsidiary conducts all or any part of its business, or that asserts
          any jurisdiction over the conduct of the affairs of, or the Property
          of, the Company or any Subsidiary; and

          (b) any entity exercising executive, legislative, judicial, regulatory
     or administrative functions of, or pertaining to, any such government.

     GUARANTY - means with respect to any Person (for the purposes of this
definition, the "GUARANTOR") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by the Guarantor:

          (a) to purchase such indebtedness or obligation or any Property
     constituting security therefor;

          (b) to advance or supply funds;

               (i) for the purchase or payment of such indebtedness, dividend or
          obligation;

          or

                                       42
<PAGE>

               (ii) to maintain working capital or other balance sheet condition
          or any income statement condition of the Primary Obligor or otherwise
          to advance or make available funds for the purchase or payment of such
          indebtedness, dividend or obligation;

          (c) to lease Property or to purchase Securities or other Property or
     services primarily for the purpose of assuring the owner of such
     indebtedness or obligation of the ability of the Primary Obligor to make
     payment of the indebtedness or obligation; or

          (d) otherwise to assure the owner of the indebtedness or obligation of
     the Primary Obligor against loss in respect thereof.

For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability:

               (i) in each case where the obligation that is the subject of such
          Guaranty is in the nature of indebtedness for money borrowed it shall
          be assumed that the amount of the Guaranty is the amount of the direct
          obligation then outstanding; and

               (ii) in each case where the obligation that is the subject of
          such Guaranty is not in the nature of indebtedness for money borrowed
          it shall be assumed that the amount of the Guaranty is the amount (if
          any) of the direct obligation that is then due.

     HAZARDOUS MATERIAL - means all or any of the following:

          (a) substances that are defined or listed in, or otherwise classified
     pursuant to, any applicable Environmental Protection Laws as "hazardous
     substances", "hazardous materials", "hazardous wastes", "toxic substances"
     or any other formulation intended to define, list or classify substances by
     reason of deleterious properties such as ignitability, corrosivity,
     reactivity, carcinogenicity, reproductive toxicity, "TLCP toxicity" or "EP
     toxicity";

          (b) oil, petroleum or petroleum derived substances, natural gas,
     natural gas liquids or synthetic gas and drilling fluids, produced waters
     and other wastes associated with the exploration, development or production
     of crude oil, natural gas or geothermal resources;

          (c) any flammable substances or explosives or any radioactive
     materials;

          (d) asbestos or urea formaldehyde in any form; and

          (e) dielectric fluid containing levels of polychlorinated biphenyls in
     excess of fifty parts per million.

     INCUR - means, with respect to any Debt, to create, incur, issue, assume,
guarantee or otherwise become liable with respect to such Debt; and the term
"INCURRENCE" shall have a correlative meaning.

     INITIAL PUBLIC OFFERING DATE - means the first date upon which Common Stock
shall have been issued or sold pursuant to an underwritten public offering
(whether on a firm commitment basis or a best efforts basis if such best efforts
are successful) thereof pursuant to an effective registration statement filed
with the SEC pursuant to the Securities Act resulting in not less than
thirty-five percent (35%) of the outstanding Common

                                       43
<PAGE>

Stock, having an aggregate fair market value of not less than Twenty-Five
Million Dollars ($25,000,000), being publicly traded.

     INTEREST EXPENSE - means, with respect to any Person for any period, the
sum (without duplication) of the following:

          (a) all interest in respect of Debt of such Person (including, without
     limitation, imputed interest on Capital Lease Obligations) deducted in
     determining Consolidated Net Income for such period; PLUS

          (b) all interest capitalized or deferred during such period and not
     deducted in determining Consolidated Net Income for such period; and

          (c) all debt discount and expense amortized or required to be
     amortized in the determination of Consolidated Net Income for such period.

     INTEREST COVERAGE RATIO - means, for any period, the ratio of:

          (a) Consolidated EBITDA for such period; to

          (b) Consolidated Interest Expense for such period.

     IRC - means the Internal Revenue Code of 1986, together with all rules and
regulations promulgated pursuant thereto,. as amended from time to time.

     JOSTENS - means JLC Learning Corporation- an Illinois corporation and a
Wholly-Owned Subsidiary.

     LIEN - means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property (for purposes of this
definition. the "OWNER"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:

          (a) the lien arising from a security interest, mortgage, encumbrance,
     pledge, conditional sale or trust receipt or a lease, consignment or
     bailment for security purposes, and the filing of any financing statement
     under the Uniform Commercial Code of any jurisdiction, or an agreement to
     give any of the foregoing:

          (b) reservations, exceptions, encroachments, easements, rights-of-way,
     covenants, conditions, restrictions, leases and other title exceptions and
     encumbrances affecting real Property;

          (c) stockholder agreements, voting trust agreements, buy-back
     agreements and all similar arrangements affecting the Owner's rights in
     Capital Stock owned by the Owner; and

          (d) any interest in any Property held by the Owner evidenced by a
     conditional sale agreement, Capital Lease or other arrangement pursuant to
     which title to such Property has been retained by or vested in some other
     Person for security purposes.

The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements.

                                       44
<PAGE>

     LIQUIDITY EVENT - means. in connection with any payment of all the Notes
pursuant to Section 1.3. an event which permits all the holders of Purchaser
Shares to sell all such Purchaser Shares in the same or a contemporaneous and
related transaction (whether or not the holders of the Purchaser Shares actually
sell all such Purchaser Shares) on, or substantially contemporaneously with, the
date of such payment of all the Notes pursuant to Section 1.3.

     MATERIAL ADVERSE EFFECT - means, with respect to any event or circumstance
(either individually or in the aggregate with all other events and
circumstances), an effect caused thereby or resulting therefrom that would be
materially adverse as to, or in respect of:

          (a) the business, operations, profits, financial condition, Properties
     or business prospects of the Company and the Subsidiaries, taken as a
     whole;

          (b) the ability of any Obligor to perform its respective obligations
     under any Financing Document to which it is a party: or

          (c) the validity or enforceability of any of the Financing Documents.

     MATERIAL OBLIGATION - means Debt (other than evidenced by the Notes and the
Affiliate Guaranty), or Swaps, of any one or more of the Company and its
Subsidiaries in an aggregate principal amount exceeding One Million Dollars
($1,000.000).

     MAXIMUM LEGAL RATE OF INTEREST - means the maximum rate of interest that a
holder of Notes may from time to time legally charge the Company by agreement
and in regard to which the Company would be prevented successfully from raising
the claim or defense of usury under the Applicable Interest Law as now or
hereafter construed by courts having appropriate jurisdiction.

     MAXIMUM SENIOR DEBT AMOUNT - means, at any time, the product of:

          (a) one hundred thirty percent (130%); MULTIPLIED BY

          (b) the DIFFERENCE of:

               (i) Nineteen Million Dollars ($19,.000,000); MINUS

               (ii) the aggregate amount of all prepayments or repayments of
          principal made by the Company in respect of the Senior Debt after the
          Closing Date (including, without limitation, payments in respect of a
          Revolving Credit Facility resulting in a permanent reduction of the
          availability or commitments thereunder), other than:

                    (A) payments made in respect of one Acceptable Credit
               Facility which are made with the proceeds of a contemporaneous
               loan or advance under another Acceptable Credit Facility; and

                    (B) payments in respect of a Revolving Credit Facility which
               do not result in a permanent reduction of the commitments or
               availability thereunder.

     MEMORANDUM - means that Confidential Summary Financing Memorandum dated
January 1999 prepared by Ripplewood Holdings L.L.C.

                                       45
<PAGE>

     MERGER DOCUMENTS - means the Articles of Merger for Jostens to be filed
with the Secretary of State of the State of Illinois and the Certificate of
Ownership and Merger of the Company to be filed with the Secretary of State of
the State of Delaware.

     MULTIEMPLOYER PLAN -means any "multiemployer plan" (as defined in section
4001(a)(3) of ERISA).

     NET PURCHASER SHARE PRICE - means, with respect to any sale of Purchaser
Shares, the net price (after deduction of any out-of-pocket expenses in
connection with such sale but before deduction for payment of any income taxes
in respect thereof) received by the holders of Purchaser Shares from such sale.

     NONPAYMENT DEFAULT - means any event of default (other than a Payment
Default) with respect to the Senior Debt.

     NONPAYMENT DEFAULT NOTICE - Section 7.5.

     NOTE - means and includes each 13.375% Senior Subordinated Note due July
13, 2007 issued pursuant to this Agreement.

     OBLIGOR - means and includes the Company and each Affiliate Guarantor.

     PARENT - means EAC II Inc., a Delaware corporation.

     PAYMENT BLOCKAGE PERIOD -Section 7.5.

     PAYMENT BLOCKAGE TERMINATION DATE - means, with respect to any Payment
Blockage Period, the earliest of:

          (a) the date which is one hundred seventy-nine (179) days after the
     date of receipt by the Company of the Nonpayment Default Notice commencing
     such Payment Blockage Period;

          (b) the date on which all Nonpayment Defaults giving rise to such
     Payment Blockage Period shall have been cured or waived in accordance with
     the Senior Credit Agreement;

          (c) the date such Payment Blockage Period shall have been terminated
     by written notice to the Company from the Senior Agent; and

          (d) the date of the repayment in full in cash of the Senior Debt and
     termination of all commitments thereunder.

     PAYMENT DEFAULT - Section 7.4.

     PBGC - means the Pension Benefit Guaranty Corporation, or any other Person
succeeding to the duties thereof.

     PERMITTED MANAGEMENT FEE PAYMENTS - means payments to Ripplewood Holdings
L.L.C. pursuant to the Management Agreement between Ripplewood Holdings L.L.C.
and the Company not exceeding Five Hundred Thousand Dollars ($500,000) in any
one calendar year.

                                       46
<PAGE>

     PERMITTED SECURITIES - means Securities of the Company or any other Person
provided for by a plan of recapitalization, restructuring, reorganization or
readjustment:

          (a) which either:

               (i) comprise Common Stock or other Capital Stock; or

               (ii) to the extent they comprise Capital Stock (other than Common
          Stock) of the Company, or comprise Debt, the payment thereof is
          subordinated, at least to the extent provided in Section 7 with
          respect to Subordinated Debt, to the payment of all Senior Debt at the
          time outstanding and to any Debt Securities issued in respect of the
          Senior Debt under any such plan of recapitalization, restructuring,
          reorganization or readjustment: or

          (b) in connection with which the holders of Senior Debt have
     acknowledged that the Senior Debt has been paid in full.

     PERSON - means an individual, partnership, corporation, limited liability
company, joint venture, trust, unincorporated organization, or a government or
agency or political subdivision thereof.

     PLAN - means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

     PREPAYMENT COMPENSATION AMOUNT - means, with respect to a principal amount
of the Notes to which a Prepayment Compensation Amount is required to be paid,
an amount equal to the applicable percentage set out below of such principal
amount of Notes:

<TABLE>
<CAPTION>

=======================================  ======================================
       IF THE PREPAYMENT COMPENSATION    PERCENTAGE OF THE PREPAID PRINCIPAL
    AMOUNT IS DUE DURING THE PERIOD SET    AMOUNT TO BE PAID AS PREPAYMENT
                FORTH BELOW:                COMPENSATION AMOUNT SHALL BE:
=======================================  ======================================
<S>                                                     <C>
              Closing Date to                           4.00%
          June 30, 2000, inclusive

              July 1, 2000 to                           3.00%
          June 30, 2001, inclusive

              July 1, 2001 to                           1.00%
          June 30, 2002, inclusive

              July 1, 2002 and                          0.00%
                 thereafter

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

</TABLE>

     PRO FORMA INTEREST EXPENSE - means, for any period, in connection with the
Incurrence of any Debt during such period, the amount of Consolidated Interest
Expense which would have resulted during and for such period, had such Debt been
incurred on the first day of such period and had any other Debt repaid with the
proceeds of such Debt been repaid on the first day of such period; and further
assuming:

                                       47
<PAGE>

          (a) that the rate of interest in effect for floating rate Debt shall
     at all times be the rate of interest in effect on the date of
     determination; and

          (b) that the entire principal amount of such newly incurred Debt shall
     be outstanding for each day during such period.

     PROPERTY - means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.

     PURCHASERS - the introductory paragraph.

     PURCHASER AFFILIATE - means a Purchaser, the Purchaser Representative and
any Person controlled by, controlling or under common control with, or advised
with respect to its investments by, the Purchaser Representative, or which
advises the Purchaser Representative with respect to its investments.

     PURCHASER REPRESENTATIVE - means The Northwestern Mutual Life Insurance
Company.

     PURCHASER SHARES - means, without duplication, shares of Common Stock
issued to a Purchaser pursuant to the terms of the Securities Purchase
Agreement, shares of Common Stock that have been issued upon the exercise of any
exercised Warrant and any shares of Common Stock that are issuable upon the
exercise of outstanding Warrants.

     REALIZABLE IRR - means, at any time in connection with a Liquidity Event,
that pretax internal rate of return in respect of the Notes and the Purchaser
Shares at such time, calculated in accordance with generally accepted financial
practice, such calculation to be made based on the following assumptions:

          (a) the entire principal of all the Notes is paid in full at par,
     together with accrued interest thereon, on the payment date fixed therefor
     pursuant to Section 1.3;

          (b) the holders of the Notes and Purchaser Shares at such time
     purchased their Notes or Purchaser Shares, or both, at the Closing;

          (c) all Warrants (whether or not previously exercised) are exercised
     immediately prior to the occurrence of the Liquidity Event, and that the
     holders thereof paid the purchase price therefor;

          (d) all Purchaser Shares (whether or not actually previously sold) are
     sold immediately upon the occurrence of such Liquidity Event for cash at
     the Net Purchaser Share Price which would have been actually received by
     the holders of Purchaser Shares in connection with such Liquidity Event,
     and the proceeds of such sale are received by the holders of the Notes and
     included in the determination of such internal rate of return.

         REALIZED IRR - means, at any time in connection with a Change in
Control, that actual internal rate of return in respect of the Notes and the
Purchaser Shares, calculated in accordance with generally accepted financial
practice, such calculation to be made based on the following assumptions:

          (a) the actual payment of all the Notes (whether or not the holders of
     all such Notes actually accept the offered prepayment in respect of such
     Change in Control) at par, together with accrued interest thereon, on the
     Change in Control Payment Date pursuant to Section 1.5(g);

                                       48
<PAGE>

          (b) the holders of the Notes and Purchaser Shares at such time
     purchased their Notes or Purchaser Shares, or both, at the Closing;

          (c) the Warrants actually exercised prior to the Change in Control
     Prepayment Date were exercised, and payment of the purchase price therefor
     made, on the actual date(s) of exercise thereof.

          (d) any Purchaser Shares actually sold prior to the Change in Control
     Prepayment Date were sold on the actual date of sale thereof, that the
     return in respect of such Purchaser Shares was equal to the Net Purchaser
     Share Price actually received by the holders of Purchaser Shares in
     connection with such sales, and that the return was received on the date(s)
     actually received by the holders of the Purchaser Shares; and

          (e) all Purchaser Shares not actually previously sold are sold on the
     Change in Control Prepayment Date at the actual Net Purchaser Share Price
     in connection with such sale, and the Net Purchaser Share Price is received
     by the holders of the Purchaser Shares on such date;

PROVIDED, HOWEVER, that if:

               (i) a Liquidity Event occurs in connection with such Change of
          Control;

               (ii) a holder of Notes and Purchaser Shares has elected to have
          such holder's Notes prepaid in accordance with Section 1.6 as a result
          of such Change in Control, but shall have declined to sell such
          holder's Purchaser Shares in connection , with such Liquidity Event
          (despite having the right and ability to do so);

then, with respect to such holder of Notes, "Realized IRR" shall mean the
Realizable IRR with respect to such Liquidity Event.

     RELEASE - has the meaning set forth in the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. 39601 ET SEQ.

     REMEDIES - means and includes, with respect to any Debt:

          (a) the acceleration of the maturity such Debt; the exercise of any
     option by the holder of such Debt to require any Obligor to repurchase such
     Debt; or the demand for payment in respect of any Debt due on demand;

          (b) the collection of or commencement of proceedings to enforce or
     collect, such Debt against any Obligor or any of their respective Property;

          (c) the holder of such Debt taking possession of or foreclosing
     (whether by judicial proceedings or otherwise) upon any security for, or
     exercising any other such nights and remedies with respect to, such Debt or
     any claim with respect thereto;

          (d) the filing by any Obligor or any holders of such Debt of a
     petition under any insolvency, bankruptcy, receivership, liquidation,
     reorganization, readjustment, composition or other similar proceeding
     relating to such Obligor, its creditors or its Property, any proceeding for
     the liquidation, dissolution or other winding-up of any Obligor, voluntary
     or involuntary, whether or not

                                       49
<PAGE>

     involving insolvency or bankruptcy proceedings or any assignment by the
     Company for the benefit of creditors or marshaling of the assets of any
     Obligor; or

          (e) the taking by the holder of such Debt of any other similar action
     against any Obligor.

As used in this definition, the term "holder" of Debt shall include an agent or
trustee therefor, whether or not such agent or trustee holds any Debt.

     REQUIRED HOLDERS - means, at any time, the holders of a majority in
principal amount of the Notes, or either of the Purchasers so long as such
Person continues to hold at least 50% in principal amount of the Notes
originally purchased by such Person pursuant to this Agreement, at the time
outstanding (exclusive of Notes then owned by any one or more of the Company,
any Subsidiary or any Affiliate); PROVIDED that in connection with any proposed
amendment or waiver in respect of Sections 1, 2.2, 4.3, 4.6, 4.8, 9.6 or 9.8,
"Required Holders" shall be deemed to include SGC so long as any such proposed
amendment or waiver would adversely affect SGC interests hereunder and under the
Notes if implemented in such proposed form.

     RESTRICTED PAYMENT -- means

          (a) any Distribution in respect of the Company or any Subsidiary
     (other than on account of Capital Stock or other Equity Equivalents of a
     Subsidiary owned legally and beneficially by the Company or a Wholly-Owned
     Subsidiary), including, without limitation, any Distribution resulting in
     the acquisition by the Company of Securities which would constitute
     treasury stock; and

          (b) any payment, repayment, redemption, retirement, repurchase or
     other acquisition, direct or indirect, by the Company or any Subsidiary of,
     on account of, or in respect of, the principal of, or any other payment (of
     interest, premium, fees or otherwise) in respect of any Debt of the Company
     which is either:

               (i) owned by the Company to any Affiliate or Subsidiary; or

               (ii) subordinated in right of payment to the Notes.

     For purposes of this Agreement, the amount of any Restricted Payment made
in Property shall be the greater of the Fair Market Value of such Property (as
determined in good faith by the board of directors or equivalent governing body
of the Person making such Restricted Payment or, to the extent that the Required
Holders dispute such determination, by the Valuation Agent) and the net book
value thereof on the books of such Person, in each case determined as of the
date on which such Restricted Payment is made.

     REVOLVING CREDIT FACILITY - means any facility under an Acceptable Credit
Facility providing commitments by the lenders thereunder to make loans or issue
letters of credit, bankers' acceptances or similar trade credits to the Company,
under a revolving credit, letter of credit or similar facility permitting the
Company to obtain loans or credits from time to time and repay such loans or
credits from time to time.

     RIGHT - means and includes:

          (a) any warrants (including, without limitation, the Warrants), rights
     or other options exercisable into Common Stock; and

                                       50
<PAGE>

          (b) any conversion or exchange privilege or right pursuant to any
     Security (including, without limitation, any share of capital stock) which
     is convertible or exchangeable into Common Stock.

     RIPPLEWOOD - means Ripplewood Partners, L.P., a Delaware limited
partnership.

     RIPPLEWOOD AFFILIATES - means Ripplewood, Ripplewood Holdings L.L.C. and
any affiliate of Ripplewood that is controlled by either of the foregoing.

     SEC - means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.

     SECURITIES ACT - means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.

     SECURITIES PURCHASE AGREEMENT - means, collectively, the several separate
Securities Purchase Agreements, each of even date herewith, between the Company
and each Purchaser, as such agreement may be amended, restated or otherwise
modified from time to time.

     SECURITY - means "security" as defined by section 2(l) of the Securities
Act.

     SENIOR AGENT - means, on the date hereof and for so long as the Senior
Credit Agreement shall remain in effect, Bank of America, as agent under the
Senior Credit Agreement; and thereafter, any one (1) contractual representative
or agent under an Acceptable Credit Facility which the Company and the
predecessor Senior Agent shall have identified in writing to each holder of
Notes as the "Senior Agent".

     SENIOR CREDIT AGREEMENT - means the Credit Agreement, dated as of July 13,
1999, among the Company, the Senior Agent and the lenders thereunder as in
effect on the Closing Date.

     SENIOR DEBT - means all Debt Obligations arising under an Acceptable Credit
Facility; PROVIDED, HOWEVER, that if the aggregate amount of all such Debt
Obligations shall exceed the Maximum Senior Debt Amount, such excess shall not
constitute Senior Debt for purposes of this Agreement.

     SENIOR FINANCIAL OFFICER -- means any one of the chief financial officer,
the treasurer, the controller and the principal accounting officer of the
Company.

     SENIOR OFFICER -- means any one of the chairman of the board of directors,
the chief executive officer, the chief operating officer, and the president, of
the Company.

     SGC -- means SGC Partners II LLC., a Delaware limited liability company.

     STOCKHOLDERS AGREEMENT - means the Stockholders Agreement, of even date
herewith, among the Company, the Purchasers and EAC III, as such agreement may
be amended, restated or otherwise modified from time to time.

     SUBORDINATED DEBT - means all Debt Obligations arising under this Agreement
or the Notes.

                                       51
<PAGE>

     SUBSIDIARY - means,. at any time, each corporation,. association, limited
liability company or other business entity which qualifies as a subsidiary of
the Company that is properly included in a consolidated financial statement of
the Company and its subsidiaries in accordance with GAAP at such time, and shall
include, without limitation, Jostens.

     SUBSIDIARY STOCK - Section 4.7(b).

     SWAPS -- means, with respect to any Person, obligations with respect to
interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency, except that if any agreement relating to such obligation provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligations shall be the net
amount thereof. The aggregate net obligation of Swaps at any time shall be the
aggregate amount of the obligations of such Person under all Swaps assuming all
such Swaps had been terminated by such Person as of the end of the then most
recently ended fiscal quarter of such Person. If such net aggregate obligation
shall be an amount owing to such Person, then the amount shall be deemed to be
Zero Dollars ($0).

     TARGET IRR - means, as of any date set forth in the chart below, the
internal rate of return, calculated in accordance with generally accepted
financial practice, set forth in the chart below for such date:

<TABLE>
<CAPTION>

       IF DURING THE PERIOD SET FORTH BELOW:           TARGET IRR:
     ========================================   =============================
<S>                                                    <C>
                   Closing Date to
              June 30, 2000, inclusive                   25.00%

                  July 1, 2000 to
              June 30, 2001, inclusive                   22.00%

                  July 1, 2001 to                        20.00%
                  June 30, 2003

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

</TABLE>

     TRANSFERS - means and includes, with respect to any Property, any sales,
leases, transfers or other dispositions of such Property, the term "TRANSFER",
when used as a verb with respect to any Property, means to sell, lease as
lessor, transfer or otherwise dispose of such Property: and the term
"TRANSFERRED" has a correlative meaning.

     VALUATION AGENT - means a firm of independent certified public accountants,
an investment banking firm or appraisal firm (which firm shall own no Securities
of, and shall not be an Affiliate, Subsidiary or a related Person of, the
Company) of recognized national standing retained by the Company and reasonably
acceptable to the Required Holders, and whose fees and disbursements shall be
borne by the Company.

     VOTING STOCK - means, with respect to any Person, any Capital Stock of such
Person whose holders are entitled under ordinary circumstances to vote for the
election of directors, managers. trustees, the managing partner or other
individuals fulfilling similar duties with respect to such Person (irrespective
of whether at the time Capital Stock of any other class or classes shall have or
might have voting power by reason of the happening of any contingency);
PROVIDED, HOWEVER, that Purchaser Shares shall be deemed not to be Voting Stock.

                                       52
<PAGE>

     WARRANT - means each warrant to purchase Common Stock issued pursuant to
the Warrant Agreement.

     WARRANT AGREEMENT - means the Warrant Agreement, of even date herewith,
between the Company and The Northwestern Mutual Life Insurance Company, as such
agreement may be amended, restated or otherwise modified from time to time,
pursuant to which the Warrants were issued.

     WHOLLY-OWNED SUBSIDIARY - means, at any time, any Subsidiary one hundred
percent (100%) of all of the Capital Stock of which is owned by any one or more
of the Company and the Company's other Wholly-Owned Subsidiaries at such time,
and shall include, without limitation, Jostens.

     YEAR 2000 COMPLIANT - means all computer applications (including those
affected by information received from its suppliers and vendors) that are
material to the Company's and the Subsidiaries' business and operations will on
a timely basis be able to perform properly date-sensitive functions involving
dates on or after January 1. 2000,

     8.2  ACCOUNTING PRINCIPLES.

          (a) GENERALLY. Unless otherwise provided herein, all financial
     statements delivered in connection herewith will be prepared in accordance
     with GAAP. Where the character or amount of any asset or liability or item
     of income or expense, or any consolidation or other accounting computation
     is required to be made for any purpose hereunder, it shall be done in
     accordance with GAAP, PROVIDED, HOWEVER, that if any term defined herein
     includes or excludes amounts, items or concepts that would not be included
     in or excluded from such term if such term were defined with reference
     solely to GAAP, such term will be deemed to include or exclude such
     amounts, items or concepts as set forth herein.

          (b) CONSOLIDATION. Whenever accounting amounts of a group of Persons
     are to be determined "on a consolidated basis" it shall mean that, as to
     balance sheet amounts to be determined as of a specific time, the amount
     that would appear on a consolidated balance sheet of such Persons prepared
     as of such time, and as to income statement amounts to be determined for a
     specific period, the amount that would appear on a consolidated income
     statement of such Persons prepared in respect of such period, in each case
     with all transactions among such Persons eliminated, and prepared in
     accordance with GAAP except as otherwise required hereby.

          (c) CURRENCY. With respect to any determination, consolidation or
     accounting computation required hereby, any amounts not denominated in the
     currency in which this Agreement specifics shall be converted to such
     currency in accordance with the requirements of GAAP (as such requirements
     relate to such determination, consolidation or computation) and, if no such
     requirements shall exist, converted to such currency in accordance with
     normal banking procedures, at the closing rate as reported in THE WALL
     STREET JOURNAL published most recently as of the date of such
     determination, consolidation or computation or, if no such quotation shall
     then be available, as quoted on such date by any bank or trust company
     reasonably acceptable to the Required Holders.

     8.3  DIRECTLY OR INDIRECTLY.

     Where any provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including
actions taken by or on behalf of any partnership in which such Person is a
general partner.

                                       53
<PAGE>

     8.4  SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.

          (a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of the
     Sections of this Agreement and the Table of Contents of this Agreement
     appear as a matter of convenience only, do not constitute a part hereof and
     shall not affect the construction hereof. The words "herein", "hereof",
     "hereunder" and "hereto" refer to this Agreement as a whole and not to any
     particular Section or other subdivision. References to Sections are, unless
     otherwise specified, references to Sections of this Agreement. References
     to Annexes and Exhibits are, unless otherwise specified, references to
     Annexes and Exhibits attached to this Agreement.

          (b) CONSTRUCTION. Each covenant contained herein shall be construed
     (absent an express contrary provision herein) as being independent of each
     other covenant contained herein, and compliance with any one covenant shall
     not (absent such an express contrary provision) be deemed to excuse
     compliance with one or more other covenants.

     8.5  GOVERNING LAW.

     THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. IN
ADDITION, THE PARTIES HERETO SELECT, TO THE EXTENT THEY MAY LAWFULLY DO SO, THE
INTERNAL LAWS OF THE STATE OF NEW YORK AS THE APPLICABLE INTEREST LAW.

     8.6  GENERAL INTEREST PROVISIONS.

          (a) INTEREST IN RESPECT OF THE NOTES. The Purchasers and the Company
     agree that the provisions of section 5-501(6) and 5-521 of the New York
     General Obligations Law apply to the transaction contemplated by the
     Financing Documents. Notwithstanding the foregoing, is the intention of the
     Company and the Purchasers to conform strictly to the Applicable Interest
     Law, and the parties agree that the aggregate of all interest, and any
     other charges or consideration constituting interest under the Applicable
     Interest Law that is taken, reserved, contracted for, charged or received
     pursuant to this Agreement or the Notes shall under no circumstances exceed
     the maximum amount of interest allowed by the Applicable Interest Law. If
     any such excess interest is ever charged, received or collected on account
     of or relating to this Agreement and the Notes (including any charge or
     amount which is not denominated as "interest" but is legally deemed to be
     interest under Applicable Interest Law), then in such event:

               (i) the provisions of this Section 8.6 shall govern and control;

               (ii) the Company shall not be obligated to pay the amount of such
          interest to the extent that it is in excess of the maximum amount of
          interest allowed by the Applicable Interest Law;

               (iii) any excess shall be deemed a mistake and cancelled
          automatically and, if theretofore paid, shall be credited to the
          principal amount of the Notes by the holders thereof, and if the
          principal balance of the Notes is paid in full, any remaining excess
          shall be forthwith paid to the Company; and

                                       54
<PAGE>

               (iv) the effective rate of interest shall be automatically
          subject to reduction to the Maximum Legal Rate of Interest.

If at any time thereafter, the Maximum Legal Rate of Interest is increased,
then, to the extent that it shall be permissible under the Applicable Interest
Law, the Company shall forthwith pay to the holders of the Notes, on a pro rata
basis, all amounts of such excess interest that the holders of the Notes would
have been entitled to receive pursuant to the terms of this Agreement and the
Notes had such increased Maximum Legal Rate of Interest been in effect at all
times when such excess interest accrued. To the extent permitted by the
Applicable Interest Law, all sums paid or agreed to be paid to the holders of
the Notes for the use, forbearance or detention of the indebtedness evidenced
thereby shall be amortized, prorated, allocated and spread throughout the full
term of the Notes.

          (b) EFFECT OF ISSUANCE OF NOTES TOGETHER WITH WARRANTS. The Company
     and the Purchasers agree, to the extent permitted by the Applicable
     Interest Law, that, for purposes of computing the interest in respect of
     the those Notes issued together with Warrants under the Applicable Interest
     Law:

               (i) the aggregate purchase price of such Notes shall equal the
          difference of

                    (A) the initial aggregate principal amount of such Notes;
               and

                    (B) the amount of original issue discount attributable to
               the Notes in respect of the issuance of the Warrants together
               with such Notes;

               (ii) the amount of original issue discount attributable to such
          Notes in respect of the issuance of the Warrants shall be deemed to be
          One Hundred Thousand Dollars ($100.000);

               (iii) the Warrants and such Notes shall be deemed to have been
          separately issued for the respective purchase prices set forth above;
          and

               (iv) no portion of the return, if any, to the holders of the
          Warrants in respect of their investment therein shall be deemed to be
          interest in respect of the Notes;

     and, with respect to the Notes issued without Warrants, the aggregate
     purchase price of such Notes shall be one hundred percent (100%) of the
     principal amount thereof, and no original issue discount shall result.

9.   MISCELLANEOUS

     9.1  COMMUNICATIONS.

          (a) METHOD; ADDRESS. All communications hereunder or under the Notes
     shall be in writing and shall be delivered either by nationwide overnight
     courier or by facsimile transmission (confirmed by delivery by nationwide
     overnight courier sent on the day of the sending of such facsimile
     transmission). Communications to the Company shall be addressed as set
     forth on Annex 2, or at such other address of which the Company shall have
     notified each holder of Notes. Communications to the holders of the Notes
     shall be addressed as set forth on Annex 1 by such holder, or at such other
     address of which such holder shall have notified the Company (and the

                                       55
<PAGE>

     Company shall record such address in the register for the registration and
     transfer of Notes maintained pursuant to Section 2.1).

          (b) WHEN GIVEN. Any communication addressed and delivered as herein
     provided shall be deemed to be received when actually delivered to the
     address of the addressee whether or not delivery is accepted) or received
     by the telecopy machine of the recipient. Any communication not so
     addressed and delivered shall be ineffective.

          (c) SERVICE OF PROCESS. Notwithstanding the foregoing provisions of
     this Section 9.1, service of process in any suit, action or proceeding
     arising out of or relating to this agreement or any document, agreement or
     transaction contemplated hereby, or any action or proceeding to execute or
     otherwise enforce any judgment in respect of any breach hereunder or under
     any document or agreement contemplated hereby, shall be delivered in the
     manner provided in Section 9.7(c).

     9.2  REPRODUCTION OF DOCUMENTS.

     This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by any holder of Notes on the Closing Date (except the Notes
themselves), and financial statements, certificates and other information
previously or hereafter furnished to any holder of Notes, may be reproduced by
the Company or any holder of Notes by any photographic, photostatic, microfilm,
micro-card, miniature photographic, digital or other similar process and each
holder of Notes may destroy any original document so reproduced. Any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Company or such
holder of Notes in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence. Nothing in this Section 9.2 shall prohibit the Company
or any holder of Notes from contesting the accuracy or validity of any such
reproduction.

     9.3  SURVIVAL.

     All warranties, representations, certifications and covenants made by the
Company herein, in the Securities Purchase Agreement or in any certificate or
other instrument delivered hereunder shall be considered to have been relied
upon by each holder of Notes and shall survive the delivery to you of the
Purchased Securities (including, without limitation, the Notes) regardless of
any investigation made by or on behalf of any party hereto. All statements in
any certificate or other instrument delivered pursuant to the terms hereof or of
the Securities Purchase Agreement shall constitute warranties and
representations of the Company hereunder. All obligations hereunder (other than
payment of the Notes, but including, without limitation, reimbursement
obligations in respect of costs, expenses and fees) shall survive the payment of
the Notes and the termination hereof.

     9.4  SUCCESSORS AND ASSIGNS.

     This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder whether or not an express assignment to
such holder of rights hereunder shall have been made by any such holder or its
successor or assign. Anything contained in this Section 9.4 notwithstanding, the
Company may not assign any of its respective rights, duties or obligations
hereunder or under any of the other Financing Documents without the prior
written consent of all holders of Notes. For purposes of the avoidance of doubt,
any holder of a Note shall be permitted to pledge

                                       56
<PAGE>

or otherwise grant a Lien in and to such Note (including, without limitation,
pledging such Note to a trustee for the benefit of certain secured noteholders
pursuant to documents relating to the financing of such holder or to one or more
banks or other institutions providing financing in connection with the purchase
by such holder of such Note), PROVIDED, HOWEVER, that any such pledgee or holder
of a Lien shall not be considered a holder hereunder until it shall have
foreclosed upon such Note in accordance with applicable law and informed the
Company, in writing, of the same.

     9.5  AMENDMENT AND WAIVER.

          (a) REQUIREMENTS. This Agreement may be amended, and the observance of
     any term hereof may be waived, with (and only with) the written consent of
     the Company and the Required Holders; PROVIDED, HOWEVER, that no such
     amendment or waiver shall, without the written consent of the holders of
     all Notes (exclusive of Notes held by the Company, any Subsidiary or any
     Affiliate) at the time outstanding;

               (i) change the amount or time of any prepayment or payment of
          principal or Prepayment Compensation Amount or the rate or time of
          payment of interest;

               (ii) amend or waive the provisions of Section 6.1., Section 6.2.,
          Section 6.3 or Section 7, or amend or waive any defined term to the
          extent used therein;

               (iii) amend or waive the definition of "Required Holders"; or

               (iv) amend or waive this Section 9.5 or amend or waive any
          defined term to the extent used herein.

     The holder of any Note may specify that any such written consent executed
     by it shall be effective only with respect to a portion of the Notes held
     by it (in which case it shall specify by dollar amount, the aggregate
     principal amount of Notes with respect to which such consent shall be
     effective) and in the event of any such specification such holder shall be
     deemed to have executed such written consent only with respect to the
     portion of the Notes so specified.

          No amendment, supplement or modification of the provisions of Section
     7, or any defined term to the extent used therein, shall be effective as to
     any holder of Senior Debt who has not consented to such amendment,
     supplement or modification.

          (b) SOLICITATION OF NOTEHOLDERS.

               (i) SOLICITATION. Each holder of the Notes (irrespective of the
          amount of Notes then owned by it) shall be provided by the Company
          with all material information provided by the Company to any other
          holder of Notes with respect to any proposed waiver or amendment of
          any of the provisions hereof or the Notes. Executed or true and
          correct copies of any amendment or waiver effected pursuant to the
          provisions of this Section 9.5 shall be delivered by the Company to
          each holder of outstanding Notes forthwith following the date on which
          such amendment or waiver becomes effective.

               (ii) PAYMENT. The Company shall not, nor shall any Subsidiary or
          Affiliate, directly or indirectly, pay or cause to be paid any
          remuneration, whether by way of supplemental or additional interest,
          fee or otherwise, or grant any security, to any holder of

                                       57
<PAGE>

          Notes as consideration for or as an inducement to the entering into by
          any holder of Notes of any waiver or amendment of any of the
          provisions hereof or of the Notes unless such remuneration is
          concurrently paid, or security is concurrently granted, on the same
          terms, ratably to the holders of all Notes then outstanding.

               (iii) SCOPE OF CONSENT. Any amendment or waiver made pursuant to
          this Section 9.5 by a holder of Notes that has transferred or has
          agreed to transfer its Notes to the Company, any Subsidiary or any
          Affiliate and has provided or has agreed to provide such amendment or
          waiver as a condition to such transfer shall be void and of no force
          and effect except solely as to such holder. and any amendments
          effected or waivers granted that would not have been or would not be
          so effected or granted but for such amendment or waiver (and the
          amendments or waivers of all other holders of Notes that were acquired
          under the same or similar conditions) shall be void and of no force
          and effect, retroactive to the date such amendment or waiver initially
          took or takes effect, except solely as to such holder.

          (c) BINDING EFFECT. Except as provided in Section 9.5(b)(iii), any
     amendment or waiver consented to as provided in this Section 9.5 shall
     apply equally to all holders of Notes and shall be binding upon them and
     upon each future holder of any Note and upon the Company whether or not
     such Note shall have been marked to indicate such amendment or waiver. No
     such amendment or waiver shall extend to or affect any obligation,
     covenant, agreement, Default or Event of Default not expressly amended or
     waived or impair any right consequent thereon. Solely for the purpose of
     determining whether the holders of the requisite percentage of the
     aggregate principal amount of Notes then outstanding approved or consented
     to any amendment waiver or consent to be given under this Agreement or the
     Notes, or have directed the taking of any action provided herein or in the
     Notes to be taken upon the direction of the holders of a specified
     percentage of the aggregate principal amount of Notes then outstanding,
     Notes directly or indirectly owned by the Company, any Subsidiary or any
     Affiliate shall be deemed not to be outstanding.

     9.6  EXPENSES.

          (a) AMENDMENTS AND WAIVERS. The Company shall pay or cause to be paid
     when billed the reasonable costs and expenses (including reasonable
     attorneys' fees) incurred by the holders of the Notes in connection with
     the consideration, negotiation, preparation or execution of any amendments,
     waivers, consents, standstill agreements and other similar agreements with
     respect to this Agreement or any other Financing Document (whether or not
     any such amendments, waivers, consents, standstill agreements or other
     similar agreements are executed).

          (b) RESTRUCTURING AND WORKOUT, INSPECTIONS. At any time when the
     Company and the holders of Notes are conducting restructuring or workout
     negotiations in respect hereof, or a Default or Event of Default exists,
     the Company shall pay when billed the reasonable costs and expenses
     (including reasonable attorneys' fees of a single firm and the reasonable
     fees of professional advisors) incurred by the holders of the Notes in
     connection with the reasonable assessment, analysis or enforcement of any
     rights or remedies that are or may be available to the holders of Notes,
     including, without limitation, in connection with inspections made pursuant
     to Section 5.4; PROVIDED, HOWEVER, that at all other times inspections will
     be at the expense of the inspecting holder of Notes.

          (c) COLLECTION. If the Company shall fail to pay when due any
     principal of or Prepayment Compensation Amount or interest on, any Note,
     the Company shall pay to each holder of Notes, to the extent permitted by
     law, such amounts as shall be sufficient to cover the reasonable

                                       58
<PAGE>

     costs and expenses, including but not limited to reasonable attorneys'
     fees, incurred by such holder in collecting any sums due on such Note.

     9.7  WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.

          (a) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
     INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
     RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
     AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED
     HEREBY.

          (b) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING ARISING
     OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS, AGREEMENTS
     OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE
     OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS
     AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT
     BY SUCH PARTY IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW
     YORK, OR ANY NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS
     SUCH PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND
     DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND
     UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF
     EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND
     AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF
     MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE
     IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE
     PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
     ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
     ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
     OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN
     ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT,
     ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
     INCONVENIENT FORUM.

          (c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES THAT
     PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
     ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
     PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
     PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT,
     AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION OR PROCEEDING
     TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH
     HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY. RECEIPT
     OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A
     DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY
     COMMERCIAL DELIVERY SERVICE.

                                       59
<PAGE>

          (d) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
     THE ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR SUMMONSES
     IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER
     THE COMPANY OR THE PARENT IN SUCH OTHER JURISDICTION, AND IN SUCH OTHER
     MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.

     9.8  INDEMNIFICATION OF EACH HOLDER.

          From and at all times after the date of this Agreement, and in
     addition to all of the holders' of Notes other rights and remedies against
     the Company, the Company agrees to indemnify and hold harmless each holder
     of the Notes and each director, officer, employee, agent, investment
     advisor and affiliate of each such holder against any and all claims
     (whether valid or not), losses, damages, liabilities, costs and expenses of
     any kind or nature whatsoever (including, without limitation, reasonable
     attorneys' fees, costs and expenses of one firm), incurred by or asserted
     against such holder or any such director, officer, employee, agent or
     affiliate, from and after the date hereof, whether direct, indirect or
     consequential,. as a result of or arising from or in any way relating to
     any suit, action or proceeding (including any inquiry or investigation) by
     any Person, whether threatened or initiated, asserting a claim for any
     legal or equitable remedy against any Person under any statute or
     regulation, including, but not limited to, any federal or state securities
     laws, or under any common law or equitable cause or otherwise, arising from
     or in connection with the negotiation, preparation, execution, performance
     or enforcement of this Agreement or the other Financing Documents or any
     transactions contemplated herein or therein, or any of the transactions
     contemplated hereunder, or arising out of any breach of any representation
     or warranty, covenant or agreement of the Company or any of the
     Subsidiaries under any Financing Document, including, without limitation,
     the failure to make payment when due of amounts arising under the Notes on
     the respective due dates thereof (whether at the scheduled maturity of any
     such payment, upon acceleration or otherwise, whether or not such holder or
     any such director, officer, employee, agent or affiliate is a party to any
     such action, proceeding, suit or the target of any such inquiry or
     investigation; PROVIDED, HOWEVER, that no indemnified party shall have the
     night to be indemnified hereunder for any liability resulting from the
     willful misconduct or gross negligence of such indemnified party). All of
     the foregoing losses, damages, costs and expenses of any holder of Notes
     shall be payable as and when incurred upon demand by such holder and shall
     be additional obligations hereunder. Without limiting the generality of the
     foregoing, each holder of Notes shall be entitled to collect and the
     Company shall be obligated to advance to each holder of Note sand its
     directors, trustees, officers, employees, agents, investment advisors and
     affiliates, to the fullest extent permitted by applicable law, all
     reasonable expenses (including, without limitation, reasonable fees and
     disbursements of one counsel) attendant to defending against any such
     claims (whether valid or not), losses, damages, liabilities, costs and
     expenses when and as incurred, regardless of whether any judicial
     determination of the indemnified party's entitlement to such indemnity has
     been made, until or unless a final judicial determination that such
     indemnified party is not entitled to such indemnity as a result of the
     willful misconduct or gross negligence of such indemnified party, in which
     case, such indemnified party shall promptly repay to the Company, with
     interest at the applicable statutory rate applicable to judgments in the
     relevant jurisdiction, all amounts so advanced by the Company. The
     obligations of the Company, and the rights of the holders of Notes under
     this Section 9.8 shall survive payment of the Notes and the termination of
     this Agreement.

     9.9  ENTIRE AGREEMENT.

         This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms.

                                       60
<PAGE>

     9.10 EXECUTION IN COUNTERPART.

          This Agreement may be executed in one or more counterparts and shall
     be effective when at least one counterpart shall have been executed by each
     party hereto, and each set of counterparts that, collectively, show
     execution by each party hereto shall constitute one duplicate original.

      [Remainder of page intentionally blank. Next page is signature page.]

                                       61
<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed and delivered by one of its duly authorized officers or
representatives.

                                        EAC I INC.,

                                             by
                                                  /s/Charles Laurey
                                                  -----------------------------
                                                  Name: Charles Laurey
                                                  Title:

                                       62
<PAGE>

SGC PARTNERS II, LLC

By:  /s/ Frank Poltow
     ------------------------
     Name:  Frank Poltow
     Title: Managing Director

                                       63
<PAGE>

Agreed to and Accepted By:

THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY

By:  /s/ Richard A. Strait
     ------------------------
     Name:  Richard A. Strait
     Title: Its Authorized Representative

                                       64
<PAGE>

                                     ANNEX 1
                  ADDRESSES OF PURCHASER; PAYMENT INSTRUCTIONS

<TABLE>
<CAPTION>

PURCHASER NAME                           THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
--------------------------------------   ------------------------------------------------------------------
<S>                                      <C>
Name in which Note is Registered         THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
--------------------------------------   ------------------------------------------------------------------
Note Registration Number,                R-1; $14,000,000
Principal Amount of Note
--------------------------------------   ------------------------------------------------------------------
Payment on Account of Note

     Method                              Federal Funds Wire Transfer

     Account Information                 Bankers Trust Company
                                         16 Wall Street
                                         Insurance Unit - 4th Floor
                                         New York, NY 10005

                                         ABA No.: 021-001-003
                                         For the account of The Northwestern Mutual Life Insurance Company
                                         Account No. 00-000-27

                                         (See "Accompanying Information" below)
--------------------------------------   ------------------------------------------------------------------
Accompanying Information                 Name of Company:  EAC I INC.

                                         Description of
                                         Security      13.375% Senior Subordinated Notes due
                                                       July 13, 2007

                                         PPN:          26823@AA 6

                                         Due Date and Application (as among principal, Prepayment
                                         Compensation Amount and interest) of the payment being made:
--------------------------------------   ------------------------------------------------------------------
Address for Notices Related              The Northwestern Mutual Life Insurance Company
to Payments                              720 East Wisconsin Avenue
                                         Milwaukee, WI 53202
                                         Attention: Investment Operations
                                         Fax #: 414-299-5714
--------------------------------------   ------------------------------------------------------------------
Address for All Other Notices            The Northwestern Mutual Life Insurance Company
                                         720 East Wisconsin Avenue
                                         Milwaukee, WI 53202
                                         Attention: Securities Department
                                         Fax #: 414-299-7124
--------------------------------------   ------------------------------------------------------------------
Other Instructions                       THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

                                         By
                                            ---------------------------------
                                              Name:
                                              Title:
--------------------------------------   ------------------------------------------------------------------
Tax Identification Number                39-0509570
======================================   ==================================================================

</TABLE>

                                    Annex 1-1

<PAGE>

<TABLE>
<CAPTION>

PURCHASER NAME                           SGC PARTNERS II LLC
--------------------------------------   ------------------------------------------------------------------
<S>                                      <C>

Name in which Note is Registered         SGC PARTNERS II LLC
--------------------------------------   ------------------------------------------------------------------
Note Registration Number,                R-2; $5,000,000
Principal Amount of Note
--------------------------------------   ------------------------------------------------------------------
Payment on Account of Note

     Method                              Federal Funds Wire Transfer

     Account Information                 Bank Name:       Societe Generale
                                         Account Name:    SGC Partners II LLC
                                         Account Number:  183024
                                         ABA #:           0260-042-26
                                         Contact:         Jackie Ramos (212) 278-6720

                                         (See "Accompanying Information" below)
--------------------------------------   ------------------------------------------------------------------
Accompanying Information                 Name of Company: EAC I INC.

                                         Description of
                                         Security         13.375% Senior Subordinated Notes due
                                                          July 13, 2007

                                         PPN:             26823@AA 6

                                         Due Date and Application (as among principal, Prepayment
                                         Compensation Amount and interest) of the payment being made:
--------------------------------------   ------------------------------------------------------------------
Address for Notices Related              SGC Partners II LLC
to Payments                              1221 Avenue of the Americas
                                         New York, NY 10020
                                         Attention: V. Frank Pottow and Brian Lloyd
                                         Fax #: (2  12) 278-5454
--------------------------------------   ------------------------------------------------------------------
Address for All Other Notices            SGC Partners II LLC
                                         1221 Avenue of the Americas
                                         New York, NY 10020
                                         Attention: V. Frank Pottow and Brian Lloyd
                                         Fax #: (212) 278-5454

                                         with a copy to:

                                         SG Cowen Securities Corporation
                                         1221 Avenue of the Americas
                                         New York, NY 10020
                                         Attention: Elisabeth Duncan
                                         Fax #: (212) 278-7995

                                         and

                                         Howard, Smith & Levin LLP
                                         1330 Avenue of the Americas
                                         New York, NY 10019
                                         Attention: Scott F. Smith
                                         Fax #: (212) 841-1010
======================================   ==================================================================

</TABLE>

                                    Annex 1-2

<PAGE>

<TABLE>
<CAPTION>

--------------------------------------   ==================================================================
PURCHASER NAME                           SGC PARTNERS II LLC
--------------------------------------   ------------------------------------------------------------------
<S>                                      <C>

Other Instructions                       SGC PARTNERS II LLC

                                         By
                                            ----------------------------------
                                               Name:
                                               Title:
--------------------------------------   ------------------------------------------------------------------
Tax Identification Number                [13-4052814]
======================================   ==================================================================

</TABLE>

                                    Annex 1-3

<PAGE>

                                     ANNEX 2
                               ADDRESS OF COMPANY

                                   EAC I Inc.
                         c/o Ripplewood Holdings L.L.C.
                        One Rockefeller Plaza, 32nd Floor
                            New York, New York 10020
                          Attn: Mr. Timothy C. Collins
                              Mr. Charles L. Laurey

                            Facsimile: (212) 582-4110

                         with a copy of all notices to:

                             Cravath, Swaine & Moore
                                 Worldwide Plaza
                                825 Eighth Avenue
                            New York, New York 10019

                           Attn: Peter S. Wilson, Esq.

                            Facsimile: (212) 765-0978

                                    Annex 2-1

<PAGE>

                                  ATTACHMENT A
                                 [FORM OF NOTE]

                                   EAC I INC.
                   (TO BE RENAMED "JLC LEARNING CORPORATION")

               13.375% SENIOR SUBORDINATED NOTE DUE JULY 13, 2007

No. R-___                                                       PPN: [        ]
$_______                                                  ______________ , ____

     EAC I INC. (together with its successors, the "Company"; to be renamed
"JLC Learning Corporation"), a Delaware corporation, for value received, hereby
promises to pay to ____________________or registered assigns the principal sum
of _______________DOLLARS ($__________ ) on July 13, 2007, and to pay interest
(computed on the basis of a 360 day year of twelve 30-day months) on the unpaid
principal balance hereof from the date of this Note at the rate of thirteen and
three hundred seventy-five one-thousandths (13.375%) PER ANNUM, in arrears,
quarterly on each January 13, April 13, July 13, and October 13 in each year,
commencing on the later of October 13, 1999 and the payment date next succeeding
the date hereof, until the principal amount hereof shall become due and payable;
and to pay on demand interest on any overdue principal (including any overdue
partial payment of principal and principal payable at the maturity hereof) and
Prepayment Compensation Amount if any, and (to the extent permitted by
applicable law) on any overdue installment of interest (the due date of such
payments to be determined without giving effect to any grace period), at a rate
PER ANNUM equal to the lesser of (a) the highest rate allowed by applicable law
and (b) the greater of (i) fifteen and three hundred seventy-five
one-thousandths (15.375%). and (ii) two percent (2%) over the rate of interest
publicly announced from time to time by Morgan Guaranty Trust Company of New
York in New York, New York as its "base" or "prime" rate.

     Payments of principal, Prepayment Compensation Amount, if any, and interest
shall be made in such coin or currency of the United States of America as at the
time of payment is legal tender for the payment of public and private debts to
the registered holder hereof at the address shown in the register maintained by
the Company for such purpose, in the manner provided in the Note Agreement
(defined below).

     This Note is one of an issue of Notes of the Company issued in an aggregate
principal amount limited to Nineteen Million Dollars ($19,000,000) pursuant to
the Note Agreement (as may be amended, restated or otherwise modified from time
to time, the "Note Agreement"), dated as of July 13, 1999, between the Company
and the purchasers listed on Annex 1 thereto. The holder of this Note is
entitled to the benefits of the Note Agreement. This Note is subject to the
terms of the Note Agreement, and such terms are incorporated herein by
reference. Capitalized terms used herein and not defined herein have the
meanings specified in the Note Agreement.

     As provided in the Note Agreement, this Note is subject to prepayment, in
whole or in part, in certain cases without a Prepayment Compensation Amount and
in other cases with a Prepayment Compensation Amount, on the terms and subject
to the conditions set forth in the Note Agreement. The holder of this Note, on
the terms and subject to the conditions set forth in the Note Agreement, may
elect to have the Company prepay the entire principal amount of this Note
(together with any applicable Prepayment Compensation Amount) in connection with
a Change in Control. All of the

                                 Attachment A-1

<PAGE>

principal of this Note (together with any applicable Prepayment Compensation
Amount) may, under certain circumstances, be declared due and payable in the
manner and with the effect provided in the Note Agreement.

     This Note is a registered Note and is transferable only by surrender at the
principal office of the Company as specified in the Note Agreement, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.

     The obligations evidenced by this Note are subordinated to the Senior Debt
on the terms provided in the Note Agreement.

     THIS NOTE AND THE NOTE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.

                                        EAC I INC.,

                                        By:__________________________________
                                             Name:
                                             Title:

                                 Attachment A-2<PAGE>

                                                     EXHIBIT 10.2

                            STOCK PURCHASE AGREEMENT

                                    Among

                            SOFTWARE SYSTEMS CORP.

                        SYLVAN LEARNING SYSTEMS, INC.

                             PYRAMID VENTURES, INC.

                       GE CAPITAL EQUITY INVESTMENTS, INC.

                             JLC LEARNING CORPORATION

                                     and

                                   EAC I INC.

                            Dated as of June 7, 1999

<PAGE>

                                   TABLE OF CONTENTS

<TABLE>
<CAPTION>

            SECTION                                                    PAGE

           <S>        <C>                                              <C>
                                     ARTICLE I

                      PURCHASE AND SALE OF SHARES; CLOSING

            1.01.     PURCHASE AND SALE OF THE SHARES..................  1
            1.02.     CLOSING DATE.....................................  3
            1.03.     TRANSACTIONS TO BE EFFECTED AT THE CLOSING.......  3

                                     ARTICLE II

                      REPRESENTATIONS AND WARRANTIES OF THE PREFERRED SELLERS

            2.01.     ORGANIZATION, STANDING AND POWER.................  4
            2.02.     AUTHORITY; EXECUTION AND DELIVERY;
                      ENFORSEABILITY...................................  5
            2.03.     NO CONFLICTS; SHARES.............................  5
            2.04.     THE PREFERRED SHARES.............................  6
            2.05.     PRIVATE OFFERING.................................  6
            2.06.     NO CLAIMS........................................  7
            2.07.     TAXES............................................  7

                                     ARTICLE III

                      REPRESENTATION AND WARRANTIES OF SSC

            3.01.     ORGANIZATION, STANDING AND POWER.................  7
            3.02.     AUTHORITY; EXECUTION AND DELIVERY;
                      ENFORCEABILITY...................................  7
            3.03.     NO CONFLICTS; CONSENTS...........................  8
            3.04.     THE COMMON SHARES................................  8
            3.05.     BUSINESS OF SSC..................................  8
            3.06.     FINANCIAL STATEMENTS.............................  8
            3.07.     NO CLAIMS........................................  9

                                      ARTICLE IV

                           REPRESENTATIONS AND WARRANTIES OF
                      SSC AND THE COMPANY RELATING TO THE COMPANY

            4.01.     ORGANIZATION AND STANDING; BOOKS;
                      AND RECORDS.....................................   9
            4.02.     CAPITAL STOCK OF THE COMPANY....................  10
            4.03.     AUTHORITY; EXECUTION AND DELIVERY;
                      ENFORCEABILITY..................................  11
            4.04.     NO CONFLICTS; CONSENTS..........................  11
            4.05.     FINANCIAL STATEMENTS............................  12
            4.06.     ASSETS OTHER THAN REAL PROPERTY INTERESTS.......  13
            4.07.     REAL PROPERTY...................................  13
            4.08.     INTELLECTUAL PROPERTY...........................  14
            4.09.     CONTRACTS.......................................  18
            4.10.     INVENTORY.......................................  21
            4.11.     PERSONAL PROPERTY...............................  21
            4.12.     RECEIVABLES.....................................  21
</TABLE>

<PAGE>

                                           ii

<TABLE>
<CAPTION>

            SECTION                                                    PAGE

           <S>        <C>                                              <C>
            4.13.     PERMITS.........................................  21
            4.14.     INSURANCE.......................................  22
            4.15.     TAXES...........................................  22
            4.16.     PROCEEDINGS.....................................  27
            4.17.     EMPLOYEE BENEFIT PLANS..........................  27
            4.18.     ABSENCE OF CHANGES OR EVENTS....................  29
            4.19.     COMPLIANCE WITH APPLICABLE LAWS.................  29
            4.20.     EMPLOYEE AND LABOR MATTERS......................  31
            4.21.     TRANSACTIONS WITH AFFILIATES....................  31
            4.22.     EFFECT OF TRANSACTION...........................  32
            4.23.     DISCLOSURE......................................  32
            4.24.     SUPPLIERS.......................................  32
            4.25.     CUSTOMERS.......................................  32
            4.26.     PRIVATE OFFERING................................  33
            4.27.     SUBSIDIARIES....................................  33
            4.28.     YEAR 2000.......................................  33

                                        ARTICLE V

                      REPRESENTATION AND WARRANTIES OF PURCHASER

            5.01.     ORGANIZATION, STANDING AND POWER................  34
            5.02.     AUTHORITY; EXECUTION AND DELIVERY;
                      ENFORCEABILITY..................................  34
            5.03.     NO CONFLICTS; CONSENTS..........................  34
            5.04.     FINANCING.......................................  35
            5.05.     SECURITIES ACT..................................  35

                                       ARTICLE VI
                                       COVENANTS

            6.01.     COVENANTS RELATING TO CONDUCT OF BUSINESS.......  35
            6.02.     NO SOLICITATION.................................  38
            6.03.     ACCESS TO INFORMATION...........................  39
            6.04.     CONFIDENTIALITY.................................  39
            6.05.     REASONABLE EFORTS...............................  40
            6.06.     EXPENSES; TRANSFER TAXES........................  40
            6.07.     BROKERS OR FINDERS..............................  41
            6.08.     RESIGNATIONS....................................  41
            6.09.     TAX MATTERS.....................................  41
            6.10.     SUPPLEMENTAL DISCLOSURES........................  49
            6.11.     POST-CLOSING COOPERATION........................  50
            6.12.     PUBLICITY.......................................  51
            6.13.     RECORDS.........................................  51
            6.14.     AGGREEMENT NOT TO SOLICIT EMPLOYEES.............  51
            6.15.     CERTAIN LICENSES AND PERMITS....................  52
            6.16.     FURTHER ASSURANCES..............................  52
            6.17.     ASSIGNMENT OF CONFIDENTIALITY AGREEMENTS........  52
            6.18.     FINANCIAL STATEMENTS............................  52
</TABLE>

<PAGE>

                                             iii

<TABLE>
<CAPTION>

            SECTION                                                    PAGE
           <S>        <C>                                              <C>
            6.19.     BENEFIT PLAN MATTERS...........................   53
            6.20.     STRATEGIC ALLIANCE AGREEMENT...................   53

                                  ARTICLE VII

                               CONDITIONS PRECEDENT

            7.01.     CONDITIONS TO EACH PARTY'S OBLIGATION...........  53
            7.02.     CONDITIONS TO OBLIGATION OF PURCHASER...........  54
            7.03.     CONDITIONS TO OBLIGATIONS OF SELLERS............  56
            7.04.     FRUSTRATION OF CLOSING CONDITIONS...............  57

                                  ARTICLE VIII

                                INDEMNIFICATION

            8.01.     INDEMNIFICATION.................................  57
            8.02.     CALCULATION OF LOSSES...........................  61
            8.03.     TERMINATION OF INDEMNIFICATION..................  62
            8.04.     PROCEDURES......................................  62

                                    ARTICLE IX

                           TERMINATION, AMENDMENT AND WAIVER

            9.01.     TERMINATION.....................................  65
            9.02.     EFFECT OF TERMINATION...........................  66
            9.03.     AMENDMENTS AND WAIVERS..........................  66

                                     ARTICLE X

                                 GENERAL PROVISIONS

           10.01.     SURVIVAL........................................  67
           10.02.     ASSIGNMENT......................................  67
           10.03.     NO THIRD-PARTY BENEFICIARIES....................  67
           10.04.     NOTICES.........................................  68
           10.05.     INTERPRETAION; EXHIBITS AND SCHEDULES;
                      CERTAIN DEFINITIONS.............................  70
           10.06.     COUNTERPARTS....................................  71
           10.07.     ENTIRE AGREEMENT................................  71
           10.08.     SEVERABILITY....................................  71
           10.09.     CONSENT TO JURISDICITON.........................  71
           10.10.     GOVERNING LAW...................................  72
           10.11.     WAIVER OF JURY TRIAL............................  72
</TABLE>

                                     EXHIBITS

        Exhibit A     Term sheet for Escrow Agreement

<PAGE>

                                      iv

                              INDEX OF DEFINED TERMS

      DEFINED TERM                                      LOCATION OF DEFINITION

      Acquisition                                       Section 1.01
      affiliate                                         Section 10.05(b)
      Applicable Law                                    Section 2.03
      Applicable Percentages                            Section 8.01(d)
      Balance Sheet                                     Section 4.05(a)
      CERCLA                                            Section 4.19(b)
      Class A Preferred Shares                          Recitals
      Class B Preferred Shares                          Recitals
      Closing                                           Section 1.02
      Closing Date                                      Section 1.02
      Code                                              Section 4.15(a)
      Common Shares                                     Recitals
      Common Purchase Price                             Section 1.01
      Commonly Controlled Entity                        Section 4.17(a)
      Company                                           Preamble
      Company Contracts                                 Section 4.09(b)
      Company Indebtedness                              Section 1.01
      Company Material Adverse Effect                   Section 4.01(a)
      Company Plans                                     Section 4.17(a)
      Confidentiality Agreement                         Section 6.04(a)
      Consent                                           Section 2.03
      Contract                                          Section 2.03
      Copyrights                                        Section 4.08(a)
      Customer Agreements                               Section 4.08(a)
      DOJ                                               Section 6.05(b)
      EBITDA                                            Section 7.02(h)
      Environmental Law                                 Section 4.19(b)
      ERISA                                             Section 4.17(a)
      Escrow                                            Section 1.03(e)
      Escrow Agent                                      Section 1.03(e)
      Escrow Agreement                                  Section 1.03(e)
      Financial Statements                              Section 4.05(a)
      Fixed Sales Bonuses                               Section 4.02
      Foothill Facility                                 Section 1.01
      Form 8023                                         Section 6.09(e)
      FTC                                               Section 6.05(b)
      GAAP                                              Section 3.06(a)
      GE Cap-Eq                                         Preamble
      GE Purchase Price                                 Section 1.01
      Governmental Entity                               Section 2.03
      Hazardous Substance                               Section 4.19(b)
      HSR Act                                           Section 2.03
      including                                         Section 10.05(b)
      indemnified party                                 Section 8.04(a)
      Intellectual Property                             Section 4.08(a)
      Jostens Agreement                                 Section 8.02(b)
      Judgment                                          Section 2.03
      Leased Property                                   Section 4.07
      Liens                                             Section 4.06(a)
      Limited Covenants                                 Section 8.01(b)
      Losses                                            Section 8.01(a)

<PAGE>

      March Balance Sheet                               Section 6.18
      Material Inbound License Agreements               Section 4.08(a)
      Material Outbound License Agreements              Section 4.08(a)
      Original Purchase Date                            Section 4.08(b)
      other bid                                         Section 6.02
      Patents                                           Section 4.08(a)
      Pension Plan                                      Section 4.17(a)
      Per Share Price                                   Section 1.01
      Permits                                           Section 4.13
      Permitted Liens                                   Section 4.06(a)
      person                                            Section 10.05(b)
      Post-Closing Tax Period                           Section 4.15(a)
      Pre-Closing Tax Period                            Section 4.15(a)
      Preferred Shares                                  Recitals
      Preferred Sellers                                 Preamble
      Preferred Seller Indemnitees                      Section 8.01(e)
      Proceeding                                        Section 4.13
      Projected Disclosure                              Section 4.23
      Purchaser                                         Preamble
      Purchaser Indemnitees                             Section 8.01(a)
      Pyramid                                           Preamble
      Pyramid Purchase Price                            Section 1.01
      RCRA                                              Section 4.19(b)
      Records                                           Section 6.13
      Rights Plan                                       Section 1.01
      Section 338(h)(10) Election                       Section 6.09(e)
      Securities Act                                    Section 2.05
      Sellers                                           Preamble
      Shares                                            Recitals
      Software                                          Section 4.08(a)
      Specific Preferred Seller Obligation              Section 8.01(d)
      SSC                                               Preamble
      SSC Balance Sheet                                 Section 3.06(a)
      Statement of Operations                           Section 6.18
      Straddle Period                                   Section 6.09(a)
      Strategic Alliance Agreemnt                       Section 6.20
      subsidiary                                        Section 10.05(b)
      Sylvan                                            Preamble
      Sylvan Purchase Price                             Section 1.01
      Systems                                           Section 4.28
      Tax/Taxes                                         Section 4.15(a)
      Tax Return/Tax Returns                            Section 4.15(a)
      Taxing Authority                                  Section 4.15(a)
      Third Party Claim                                 Section 8.04(a)
      Trade Secrets                                     Section 4.08(a)
      Trademarks                                        Section 4.08(a)
      Transfer Tax                                      Section 4.15(a)
      Triggering Event                                  Section 6.09(e)
      TSCA                                              Section 4.19(b)
      Voting Company Debt                               Section 4.02
      Welfare Plan                                      Section 4.17(a)
      Year 2000 Problems                                Section 4.28

<PAGE>

                                                                               1

                                    STOCK PURCHASE AGREEMENT dated as of June 7,
                           1999, among SOFTWARE SYSTEMS CORP., a Delaware
                           corporation ("SSC"), SYLVAN LEARNING SYSTEMS, INC., a
                           Maryland corporation ("Sylvan"), PYRAMID VENTURES,
                           INC., a Delaware corporation ("Pyramid"), GE CAPITAL
                           EQUITY INVESTMENTS, INC., a Delaware corporation ("GE
                           Cap-Eq" and, together with Sylvan and Pyramid, the
                           "Preferred Sellers"; the Preferred Sellers and SSC,
                           collectively the "Sellers"), JLC LEARNING
                           CORPORATION, an Illinois corporation (the "Company"),
                           and EAC I Inc., a Delaware corporation ("Purchaser").

                  WHEREAS Purchaser desires to purchase from Sylvan and Pyramid,
and Sylvan and Pyramid desire to sell to Purchaser, all the issued and
outstanding shares of Class A Preferred Stock, par value $0.01 per share (the
"Class A Preferred Shares"), of the Company;

                  WHEREAS Purchaser desires to purchase from GE Cap-Eq and
Pyramid, and GE Cap-Eq and Pyramid desire to sell to Purchaser, all the issued
and outstanding shares of Class B Preferred Stock, par value $0.01 per share
(the "Class B Preferred Shares" and, together with the Class A Preferred Shares,
the "Preferred Shares");

                  WHEREAS Purchaser desires to purchase from SSC, and SSC
desires to sell to Purchaser, all the issued and outstanding shares of Class A
Common Stock, par value $0.001 per share (the "Common Shares" and, together with
the Preferred Shares, the "Shares"), of the Company; and

                  WHEREAS, as a result of such purchases and sales, Purchaser
will own all the issued and outstanding capital stock of the Company.

                  NOW, THEREFORE, the parties hereby agree as follows:

                                    ARTICLE I

                      PURCHASE AND SALE OF SHARES; CLOSING

                  SECTION 1.01. PURCHASE AND SALE OF THE SHARES. On the terms
and subject to the conditions of this Agreement, at the Closing (as defined in
Section 1.02), Sylvan shall sell, transfer and deliver to Purchaser, and
Purchaser shall purchase from Sylvan, the Class A Preferred

<PAGE>

                                                                               2

Shares owned by Sylvan, including any and all rights to the payment of any
accrued and unpaid dividends thereon, for an aggregate purchase price (the
"Sylvan Purchase Price") equal to the product of 15,000 and the Per Share Price
(as defined below), payable as set forth below in Section 1.02. On the terms and
subject to the conditions of this Agreement, at the Closing, Pyramid shall sell,
transfer and deliver to Purchaser, and Purchaser shall purchase from Pyramid the
Class A Preferred Shares and the Class B Preferred Shares owned by Pyramid,
including any and all rights to the payment of any accrued and unpaid dividends
thereon, for an aggregate purchase price (the "Pyramid Purchase Price") equal to
the product of 7,500 and the Per Share Price, payable as set forth below in
Section 1.02. On the terms and subject to the conditions of this Agreement, at
the Closing, GE Cap-Eq shall sell, transfer and deliver to Purchaser, and
Purchaser shall purchase from GE Cap-Eq, the Class B Preferred Shares owned by
GE Cap-Eq, including any and all rights to the payment of any accrued and unpaid
dividends thereon, for an aggregate purchase price (the "GE Purchase Price")
equal to the product of 7,500 and the Per Share Price, payable as set forth
below in Section 1.02. On the terms and subject to the conditions of this
Agreement, at the Closing, SSC shall sell, transfer and deliver to Purchaser,
and Purchaser shall purchase from SSC, the Common Shares for an aggregate
purchase price of $1,500,000 (the "Common Purchase Price"). The purchase and
sale of the Common Shares, the Class A Preferred Shares and the Class B
Preferred Shares is referred to in this Agreement as the "Acquisition". The term
"Per Share Price" means the result of (x) the excess of (1) $53,700,000 over (2)
the sum of (i) the aggregate principal amount of the Company Indebtedness (as
defined below) as of the Closing Date (as defined in Section 1.02), plus (ii)
the amount of all accrued and unpaid interest thereon as of the Closing Date and
all prepayment penalties and other amounts payable in connection with, or as a
result of, a payment of the Company Indebtedness as of the Closing Date plus
(iii) the aggregate amount payable under the JLC Learning Corporation 1998 Stock
Appreciation Rights Plan (the "Rights Plan") as a result of the Acquisition
(which includes the $400,000 to be deposited with the Escrow Agent (as defined
in Section 1.03(e)) pursuant to Section 1.03(e)) and the maximum aggregate
amount payable under the Fixed Sales Bonuses (as defined in Section 4.02)
divided by (y) 30,000. Schedule 1.01 sets forth a sample calculation of the Per
Share Price, assuming (x) that the Closing Date is June 30, 1999, (y) other than
the aggregate principal amount of the Company Indebtedness as of the Closing
Date, all accrued and unpaid interest thereon as of the Closing Date and all
prepayment penalties, there are no other amounts payable in connection with, or
as

<PAGE>

                                                                               3

a result of, a payment of the Company Indebtedness as of the Closing Date and
(z) there are no changes with respect to the components of the Per Share Price.
The term "Company Indebtedness" means the indebtedness of the Company under (i)
the Loan and Security Agreement by and between the Company and Foothill Capital
Corporation dated as of March 30, 1998 (the "Foothill Facility"); PROVIDED that,
if the aggregate principal amount of the indebtedness outstanding thereunder as
of the Closing Date (other than the Special Advance as defined therein) is
greater than $7,250,000, then the principal amount of such indebtedness as of
the Closing Date shall be deemed to be $7,250,000; (ii) the series of Senior
Subordinated 12.25% Notes of the Company issued to The Chase Manhattan Bank,
N.A., Pyramid, GE Cap-Eq and Sylvan dated June 29, 1995, October 1, 1997,
October 1, 1997 and October 1, 1997, respectively, in an aggregate principal
amount as of the date of this Agreement equal to $17,000,000; and (iii) the
Subordinated Promissory Note of the Company issued to Sylvan dated June 30,
1998.

                  SECTION 1.02. CLOSING DATE. The closing of the Acquisition
(the "Closing") shall take place at the offices of Cravath, Swaine & Moore, 825
Eighth Avenue, New York, New York 10019, at 10:00 a.m. on the second business
day following the satisfaction (or, to the extent permitted, the waiver) of the
conditions set forth in Section 7.01, or, if on such day any condition set forth
in Section 7.02 or 7.03 has not been satisfied (or, to the extent permitted,
waived by the parties entitled to the benefit thereof), as soon as practicable
after all the conditions set forth in Article VII have been satisfied (or, to
the extent permitted, waived by the parties entitled to the benefits thereof),
or at such other place, time or date as shall be agreed between SSC and
Purchaser. The date on which the Closing occurs is referred to in this Agreement
as the "Closing Date".

                  SECTION 1.03.  TRANSACTIONS TO BE EFFECTED AT THE
CLOSING.  At the Closing:

                  (a) each Seller shall deliver to Purchaser (i) certificates
         representing the Shares owned by such Seller, duly endorsed in blank or
         accompanied by stock powers duly endorsed in blank in proper form for
         transfer, with appropriate transfer tax stamps, if any, affixed and
         (ii) such other documents as Purchaser or its counsel may reasonably
         request to demonstrate satisfaction of the conditions and compliance
         with the covenants set forth in this Agreement;

<PAGE>

                                                                               4

                  (b) Purchaser shall deliver to each Seller, (i) payment, by
         wire transfer to a bank account designated in writing by such Seller
         (such designation to be made at least two business days prior to the
         Closing Date), of immediately available funds in an amount equal to, in
         the case of Sylvan, the Sylvan Purchase Price, in the case of Pyramid,
         the Pyramid Purchase Price, in the case of GE Cap-Eq, the GE Purchase
         Price and, in the case of SSC, the Common Purchase Price and (ii) such
         other documents as any of the Sellers or their respective counsel may
         reasonably request to demonstrate satisfaction of the conditions and
         compliance with the covenants set forth in this Agreement;

                  (c) Purchaser shall cause the Company to prepay the Company
         Indebtedness so long as the applicable Lenders deliver appropriate
         documents releasing all Liens on the Shares or on assets of the Company
         that collateralize the Company Indebtedness;

                  (d) Purchaser shall cause the Company to release JLC Holdings,
         Inc. and SSC from their payment obligations in respect of any accounts
         receivable of the Company from JLC Holdings, Inc. or SSC; and

                  (e) Purchaser shall cause the Company to deposit the amount of
         $400,000 (the "Escrow") with Bankers Trust Company, as escrow agent
         (the "Escrow Agent"), pursuant to Section 8.01(g) and to be held in
         accordance with the terms of an escrow agreement having the terms set
         forth in Exhibit A hereto (the "Escrow Agreement").

The Company hereby waives any obligation of any Preferred Seller to deliver an
opinion of counsel in connection with the transfer of Preferred Shares held by
it pursuant to this Agreement.

                                   ARTICLE II

             REPRESENTATIONS AND WARRANTIES OF THE PREFERRED SELLERS

                  Each Preferred Seller hereby severally (and not jointly)
represents and warrants as to itself to Purchaser, as of the date of this
Agreement and as of the Closing Date, as follows:

                  SECTION 2.01.  ORGANIZATION, STANDING AND POWER.
Such Preferred Seller is duly organized, validly existing

<PAGE>

                                                                               5

and in good standing under the laws of the jurisdiction in which it is organized
and has full corporate power and authority to own and sell the Preferred Shares
owned by it.

                  SECTION 2.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. Such Preferred Seller has full power and authority to execute
this Agreement and to consummate the sale of the Preferred Shares owned by it
and the other transactions contemplated to be consummated by it hereby. The
execution and delivery by such Preferred Seller of this Agreement and the
consummation by such Preferred Seller of the Acquisition and the other
transactions contemplated to be consummated by it hereby have been duly
authorized by all necessary corporate action. Such Preferred Seller has duly
executed and delivered this Agreement and this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.

                  SECTION 2.03. NO CONFLICTS; CONSENTS. The execution and
delivery by such Preferred Seller of this Agreement do not, and the consummation
of the Acquisition and the other transactions contemplated to be consummated by
it hereby and compliance by such Preferred Seller with the terms hereof will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or to increased, additional, accelerated or guaranteed rights or
entitlements of any person under, or result in the creation of any Lien (as
defined in Section 4.06) upon any of the properties or assets of such Preferred
Seller under, any provision of (i) the certificate of incorporation or by-laws
or other organizational documents of such Preferred Seller, (ii) any contract,
lease, license, indenture, agreement, commitment or other legally binding
arrangement (a "Contract") to which such Preferred Seller is a party or by which
it or any of its properties or assets is bound or (iii) any judgment, order or
decree ("Judgment") or statute, law (including common law), ordinance, rule or
regulation ("Applicable Law") applicable to such Preferred Seller or any of its
properties or assets. No consent, approval, license, permit, order or
authorization ("Consent") of, or registration, declaration or filing with, any
Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity"), is
required to be obtained or made by or with respect to such Preferred Seller or
any of its affiliates in connection with the execution, delivery and performance
of this Agreement or the

<PAGE>

                                                                               6

consummation of the Acquisition or the other transactions contemplated to be
consummated by it hereby other than compliance with and filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if required.

                  SECTION 2.04. THE PREFERRED SHARES. Such Preferred Seller is
the record and beneficial owner of, and has good and valid title to, in the case
of Sylvan, 15,000 shares of the Class A Preferred Shares, in the case of
Pyramid, 5,000 shares of the Class A Preferred Shares and 2,500 shares of the
Class B Preferred Shares and, in the case of GE Cap-Eq, 7,500 shares of the
Class B Preferred Shares, in each case, free and clear of all Liens. Assuming
Purchaser has the requisite power and authority to be the lawful owner of the
Preferred Shares, upon delivery to Purchaser at the Closing of certificates
representing, in the case of Sylvan, the Class A Preferred Shares owned by it,
in the case of Pyramid, the Class A Preferred Shares and the Class B Preferred
Shares owned by it and, in the case of GE Cap-Eq, the Class B Preferred Shares
owned by it, duly endorsed by such Preferred Seller for transfer to Purchaser,
and upon receipt of, in the case of Sylvan, the Sylvan Purchase Price, in the
case of Pyramid, the Pyramid Purchase Price, and in the case of GE Cap-Eq, the
GE Purchase Price, good and valid title to the Preferred Shares will pass to
Purchaser, free and clear of any Liens, other than those arising from acts of
Purchaser or its affiliates. Other than this Agreement and the agreements set
forth in Schedule 2.04, the Preferred Shares owned by such Preferred Seller are
not subject to any voting trust agreement or other Contract, including any
Contract restricting or otherwise relating to the voting, dividend rights or
disposition of such Preferred Shares. Other than the Preferred Shares owned by
such Preferred Seller, such Preferred Seller does not own of record or
beneficially any shares of capital stock of the Company.

                  SECTION 2.05. PRIVATE OFFERING. None of such Preferred Seller,
its affiliates and its representatives has sold or offered any of the Preferred
Shares or any other security of the Company to any person under circumstances
that would cause the sales of the Shares, as contemplated by this Agreement, to
be subject to the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Assuming the representations of SSC and the
Company contained in Section 4.26 and those of Purchaser contained in Section
5.05 are true and correct, the sale and delivery of the Preferred Shares owned
by such Preferred Seller hereunder are exempt from the registration and
prospectus delivery requirements of the Securities Act.

<PAGE>

                                                                               7

                  SECTION 2.06. NO CLAIMS. None of such Preferred Seller or any
of its affiliates is a party to any Contract with the Company, except as
disclosed in Schedule 2.06. Other than its rights as the owner of the Preferred
Shares owned by it, all of which rights will be sold and transferred to
Purchaser at the Closing, none of such Preferred Seller or any of its affiliates
has, and from and after the Closing none of them will have, any rights or claims
against or in respect of the Company, except as disclosed in Schedule 2.06.

                  SECTION 2.07.  TAXES.  Such Preferred Seller is
not a "foreign person" within the meaning of Section 1445 of
the Code (as defined in Section 4.15).

                                   ARTICLE III

                      REPRESENTATIONS AND WARRANTIES OF SSC

                  SSC hereby represents and warrants to Purchaser, as of the
date of this Agreement and as of the Closing Date, as follows:

                  SECTION 3.01. ORGANIZATION, STANDING AND POWER. SSC is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to conduct its business as presently conducted. SSC has delivered to
Purchaser true and complete copies of its certificate of incorporation and
by-laws, in each case as amended through the date of this Agreement.

                  SECTION 3.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. SSC has full power and authority to execute this Agreement and
to consummate the sale of the Common Shares and the other transactions
contemplated to be consummated by it hereby. The execution and delivery by SSC
of this Agreement and the consummation by SSC of the Acquisition and the other
transactions contemplated to be consummated by it hereby have been duly
authorized by all necessary corporate action on the part of SSC and its sole
stockholder. SSC has duly executed and delivered this Agreement, and this
Agreement constitutes, its legal, valid and binding obligation, enforceable
against it in accordance with its terms.

<PAGE>

                                                                               8

                  SECTION 3.03. NO CONFLICTS; CONSENTS. The execution and
delivery by SSC of this Agreement do not, and the consummation of the
Acquisition and the other transactions contemplated hereby and compliance by SSC
with the terms hereof will not conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in the creation
of any Lien upon any of the properties or assets of SSC under, any provision of
(i) the certificate of incorporation or by-laws of SSC, (ii) except as disclosed
in Schedule 3.03, any Contract to which SSC is a party or by which it or any of
its properties or assets is bound or (iii) any Judgment or Applicable Law
applicable to SSC or any of its properties or assets. No Consent of, or
registration, declaration or filing with, any Governmental Entity is required to
be obtained or made by or with respect to SSC or any of its affiliates in
connection with the execution, delivery and performance of this Agreement or the
consummation of the Acquisition or the other transactions contemplated hereby,
other than compliance with and filings under the HSR Act, if required.

                  SECTION 3.04. THE COMMON SHARES. SSC is the record and
beneficial owner of, and has good and valid title to, the Common Shares, free
and clear of all Liens. Assuming Purchaser has the requisite power and authority
to be the lawful owner of the Common Shares, upon delivery to Purchaser at the
Closing of certificates representing the Common Shares, duly endorsed by SSC for
transfer to Purchaser, and upon SSC's receipt of the Common Purchase Price, good
and valid title to the Common Shares will pass to Purchaser, free and clear of
any Liens, other than those arising from acts of Purchaser or its affiliates.
Other than this Agreement and the agreements set forth in Schedule 2.04, the
Common Shares are not subject to any voting trust agreement or other Contract,
including any Contract restricting or otherwise relating to the voting, dividend
rights or disposition of the Common Shares.

                  SECTION 3.05. BUSINESS OF SSC. SSC is a holding company, the
sole asset of which consists of the Common Shares. SSC is not engaged in any
business other than holding the Common Shares.

                  SECTION 3.06. FINANCIAL STATEMENTS.
(a) Schedule 3.06 sets forth SSC's unconsolidated balance sheet as of December
31, 1998 (the "SSC Balance Sheet").

<PAGE>

                                                                               9

The SSC Balance Sheet has been prepared in conformity with generally accepted
accounting principles ("GAAP"), subject to the absence of footnotes, and on that
basis fairly presents the financial condition of SSC as of December 31, 1998.

                  (b) Except as set forth in Schedule 3.06, SSC does not have
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except (i) as disclosed, reflected or reserved against
in the SSC Balance Sheet, (ii) for liabilities incurred in the ordinary course
of business consistent with past practice since the date of the SSC Balance
Sheet and (iii) for Taxes (as defined in Section 4.15).

                  SECTION 3.07. NO CLAIMS. None of SSC or any of its affiliates
is a party to any Contract with the Company, except as disclosed in Schedule
2.06 or 3.07. Other than its rights as the owner of the Common Shares, all of
which rights will be sold and transferred to Purchaser at the Closing, none of
SSC or any of its affiliates has, and from and after the Closing none of them
will have, any rights or claims against or in respect of the Company, except as
disclosed in Schedule 2.06 or Schedule 3.07.

                                   ARTICLE IV

                        REPRESENTATIONS AND WARRANTIES OF
                   SSC AND THE COMPANY RELATING TO THE COMPANY

                  SSC and the Company hereby jointly and severally represent and
warrant to Purchaser, as of the date hereof and as of the Closing Date, as
follows:

                  SECTION 4.01. ORGANIZATION AND STANDING; BOOKS AND RECORDS.
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois. The Company has full corporate
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to own, lease or
otherwise hold its properties and assets and to carry on its business as
presently conducted, other than such franchises, licenses, permits,
authorizations and approvals, the lack of which, individually or in the
aggregate, would not have a material adverse effect (i) on the business, assets,
condition (financial or otherwise), results of operations or prospects of the
Company, (ii) on the ability of the Company to perform its obligations under
this Agreement or (iii) on the ability of the parties to consummate the
Acquisition and the

<PAGE>

                                                                              10

other transactions contemplated hereby (a "Company Material Adverse Effect").
The Company is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which the conduct or nature of its business
or the ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure to be so qualified or in
good standing, individually or in the aggregate, would not have a Company
Material Adverse Effect. A list of the jurisdictions in which the Company is so
qualified is set forth in Schedule 4.01. Except as set forth in Schedule 4.01
and except for non-compete agreements set forth in Schedule 4.09, the Company is
not subject to, bound by or a party to any Contract, or subject to any charter
or other corporate restriction which is reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect.

                  (b) The Company has delivered to Purchaser prior to the
execution of this Agreement true and complete copies of (i) the articles of
incorporation and by-laws, each as amended to date, of the Company. Except as
and to the extent disclosed in Schedule 4.01, the stock certificate and transfer
books and the minute books of the Company (which have been made available for
inspection by Purchaser prior to the date hereof) are true and complete.

                  SECTION 4.02.  CAPITAL STOCK OF THE COMPANY.  The authorized
capital stock of the Company consists of 120,565,000 shares of Class A Common
Stock, par value $0.001 per share, of which 1,000 shares, constituting the
Common Shares, are issued and outstanding, 20,000 shares of Class A Preferred
Stock, par value $0.01 per share, of which 20,000 shares, constituting the Class
A Preferred Shares, are issued and outstanding, and 10,000 shares of Class B
Preferred Stock, par value $0.01 per share, of which 10,000 shares, constituting
the Class B Preferred Shares, are issued and outstanding.  Except for the
Shares, there are no shares of capital stock or other equity securities of the
Company issued, reserved for issuance or outstanding.  The Shares are duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the Illinois Business Corporation Act of 1983, the articles of incorporation or
by-laws of the Company or any Contract to which the Company is a party or by
which the Company is otherwise bound.  There are not any bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on

<PAGE>

                                                                              11

any matters on which holders of Shares may vote ("Voting Company Debt"). Except
as set forth above and under the Rights Plan and the arrangements for payment of
certain fixed sales bonuses ("Fixed Sales Bonuses") pursuant to letter
agreements dated January 11, 1999 which provide for a maximum aggregate amount
payable by the Company of $912,500, there are not any options, warrants, rights,
convertible or exchangeable securities, "phantom" stock rights or other
commitments to which the Company is a party or by which it is bound (i)
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity interests
in, or any security convertible or exercisable for or exchangeable into any
capital stock of or other equity interest in, the Company or any Voting Company
Debt, (ii) obligating the Company to issue, grant, extend or enter into any such
option, warrant, right, security or other commitment, or (iii) that give any
person the right to receive any economic benefit or right similar to or derived
from the economic benefits and rights accruing to holders of Shares. Except as
provided in the Articles of Incorporation of the Company, as amended, there are
not any outstanding contractual obligations of the Company to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company.

                  SECTION 4.03. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. The Company has full power and authority to execute this
Agreement and to consummate the transactions contemplated to be consummated by
it hereby. The execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated to be consummated
by it hereby have been duly authorized by all necessary corporate action. The
Company has duly executed and delivered this Agreement and this Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.

                  SECTION 4.04. NO CONFLICTS; CONSENTS. The execution and
delivery by the Sellers and the Company of this Agreement do not, and the
consummation of the Acquisition and the other transactions contemplated hereby
and compliance by the Sellers and the Company with the terms hereof will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or to material increased, additional, accelerated or guaranteed rights or
entitlements of any person under, or result in the creation of any Lien upon any
of the properties or assets of the Company under,

<PAGE>

                                                                              12

any provision of (i) the articles of incorporation or by-laws of the Company,
(ii) except as disclosed in Schedule 4.04, any Contract to which the Company is
a party or by which it or any of its properties or assets is bound or (iii) any
Judgment or Applicable Law applicable to the Company or any of its affiliates or
any of its properties or assets. No Consent of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to the Company or any of its affiliates in connection with the
execution, delivery and performance of this Agreement or the consummation of the
Acquisition or the other transactions contemplated hereby, other than compliance
with and filings under the HSR Act. Except as set forth in Schedule 4.04, no
additional Consents from third parties are necessary or appropriate in
connection with the execution, delivery and performance of this Agreement or the
consummation of the Acquisition or the other transactions contemplated hereby.

                  SECTION 4.05. FINANCIAL STATEMENTS. (a) Schedule 4.05 sets
forth the Company's audited balance sheet as of December 31, 1996, and its draft
audited balance sheets as of December 31, 1997, and December 31, 1998 (the
"Balance Sheet"), and the related statements of operations, stockholders'
deficit and cash flows of the Company for the fiscal years then ended, together
with the notes to such financial statements and, in the case of the audited
financial statements, the report thereon of PricewaterhouseCoopers LLP and, in
the case of the draft audited financial statements as of and for the fiscal
years ended December 31, 1997 and December 31, 1998, a draft of the report
thereon of PricewaterhouseCoopers LLP (collectively and including the financial
statements delivered pursuant to Section 6.18, the "Financial Statements"), and
drafts of the Company's financial statements as of and for the three months
ended March 31, 1999 compared with the three months ended March 31, 1998. The
Financial Statements have been prepared in conformity with GAAP consistently
applied (except in each case as described in the notes thereto) and on that
basis fairly present the financial condition and results of operations and cash
flows of the Company as of the respective dates thereof and for the respective
periods indicated.

                  (b) The Company does not have any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except (i) as disclosed, reflected or reserved against in the Balance Sheet and
the notes thereto, (ii) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the date of the Balance
Sheet (or disclosed

<PAGE>

                                                                              13

in the Schedules hereto) and not in violation of this Agreement, (iii) for
matters disclosed on Schedule 4.16 or matters that would be required to be
disclosed on Schedule 4.16 if such matters related to or involved more than
$100,000, (iv) liabilities and obligations under any Contract disclosed in the
Schedules hereto or that is not required to be disclosed in the Schedules hereto
and (v) for Taxes.

                  SECTION 4.06. ASSETS OTHER THAN REAL PROPERTY INTERESTS. (a)
The Company has good and marketable title to all the assets reflected on the
Balance Sheet or thereafter acquired, other than those disposed of since the
date of the Balance Sheet in the ordinary course of business consistent with
past practice, in each case free and clear of all mortgages, liens, security
interests, charges, easements, leases, subleases, covenants, rights of way,
options, claims, restrictions or encumbrances of any kind (collectively,
"Liens"), except (i) such Liens as are set forth in Schedule 4.06 (all of which
shall be discharged at or prior to the Closing), (ii) mechanics', carriers',
workmen's, repairmen's or other like Liens arising or incurred in the ordinary
course of business, Liens arising under original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary course of business and liens for Taxes that are not due and payable or
that may thereafter be paid without penalty, (iii) Liens that secure Company
Indebtedness that are reflected as liabilities on the Balance Sheet or Liens the
existence of which is referred to in the notes to the Balance Sheet and (iv)
other imperfections of title or encumbrances, if any, that, individually or in
the aggregate, do not materially impair, and could not reasonably be expected
materially to impair, the continued use and operation of the assets to which
they relate in the conduct of the business of the Company as presently conducted
(the Liens described in clauses (ii) and (iv) above, together with the Liens
referred to in clauses (iii) and (iv) of Section 4.07, are referred to
collectively as "Permitted Liens").

                  (b) This Section 4.06 does not relate to real property or
interests in real property, such items being the subject of Section 4.07, or to
Intellectual Property, such items being the subject of Section 4.08.

                SECTION 4.07. REAL PROPERTY. The Company does not own any real
property. Schedule 4.07 sets forth a complete list of all real property and
interests in real property leased by the Company (individually, a "Leased
Property"). Except as set forth in Schedule 4.07, the

<PAGE>

                                                                              14

Company has good and valid title to the leasehold estates in all Leased
Property, in each case free and clear of all Liens, except (i) Liens described
in clause (ii), (iii) or (iv) of Section 4.06(a), (ii) such Liens as are set
forth in Schedule 4.08, (iii) subleases and similar agreements set forth in
Schedule 4.09 and (iv) Liens that have been placed by any landlord or other
third party on any Leased Property. None of the items set forth in clause (iv)
above, individually or in the aggregate, materially impairs, or could reasonably
be expected materially to impair, the continued use and operation of the Leased
Property to which they relate in the conduct of the business of the Company as
presently conducted.

                  SECTION 4.08.  INTELLECTUAL PROPERTY.

                  (a)      DEFINITIONS.  For purposes of this Agreement:

                  (i) "Intellectual Property" means trademarks and service marks
         (whether registered or unregistered) and trade names (collectively,
         "Trademarks"); patents (including any continuations, continuations in
         part, renewals and applications for any of the foregoing)
         (collectively, "Patents"); copyrights (including any registrations and
         applications therefor and whether registered or unregistered)
         (collectively, "Copyrights"); Software (as defined below); works of
         authorship; mask works; technology; trade secrets, know-how,
         proprietary processes, formulae, algorithms, models, user interfaces,
         inventions, discoveries, concepts, ideas, techniques, methods, source
         codes, object codes, methodologies and, with respect to all of the
         foregoing, related confidential data or information (collectively,
         "Trade Secrets"); but excluding any limited copyright license or
         permission from authors, publishers or other parties to use material in
         the Company's products that have no future payment obligations.

                  (ii) "Material Inbound License Agreements" means all license
         agreements granting to the Company any material right to use
         Intellectual Property, but does not include (w) development tools
         software under pre-paid license agreements, (x) office automation
         software used generally in the Company's operations and (y) other
         software not used in the design, development, maintenance and support,
         testing, assembly and manufacture of the Company's products, that, in
         the case of clause (w), (x) or (y), is commercially available for a
         license fee of less than $100,000 per annum.

<PAGE>

                                                                              15

                  (iii) "Material Outbound License Agreements" means all license
         agreements under which the Company grants material rights to others to
         use Intellectual Property owned by the Company, but does not include
         agreements with customers for the use of Company products on customary
         terms granted by the Company to its customers generally ("Customer
         Agreements").

                  (iv) "Software" means any and all (i) computer programs,
         including any and all software implementations of algorithms, models
         and methodologies, whether in source code or object code, (ii)
         databases and compilations, including any and all data and collections
         of data, whether machine readable or otherwise, (iii) descriptions,
         flowcharts and other work product used to design, plan, organize and
         develop any of the foregoing, and (iv) all documentation, including
         user manuals and training materials, relating to any of the foregoing.

                  (b) TRADEMARKS, PATENTS AND COPYRIGHTS. (i) Schedule 4.08 sets
         forth a true and complete list of all United States and foreign (x)
         Trademark registrations and applications by the Company and material
         unregistered Trademarks of the Company and (y) copyright registrations
         and applications by the Company, indicating for each, the applicable
         jurisdiction, registration number (or application number), and date
         issued (or date filed). The Company does not own any Patents.

                  (ii) All Trademark registrations in the United States are
         currently in compliance in all material respects with all legal
         requirements (including the timely post registration filing of
         affidavits of use and incontestability and renewal applications) other
         than any requirement that, if not satisfied, would not result in a
         cancellation of any such registration or otherwise materially affect
         the priority and enforceability of the Trademark in question.

                  (iii) Except as set forth in Schedule 4.08, no registered
         Trademark has been since June 29, 1995 (the "Original Purchase Date"),
         or is now involved in any material opposition or cancellation
         proceeding in the United States Patent and Trademark Office. To the
         knowledge of SSC and the Company, no such action has been threatened in
         writing since the Original Purchase Date.

<PAGE>

                                                                              16

                  (iv) Except as set forth in Schedule 4.08, to the knowledge of
         SSC and the Company, there has been no prior use of any material
         Trademark by any third party which would confer upon such third party
         superior rights in any such Trademark.

                  (v) All material Trademarks registered in the United States
         have been in continuous use by the Company.

                  (c) LICENSE AGREEMENTS. (i) Schedule 4.08 sets forth a true
and complete list of Material Inbound License Agreements and Material Outbound
License Agreements, indicating for each the title and the parties thereto and
the amount of any future royalty or license fee payable thereunder. The Company
has made available to the Purchaser true and complete copies of all Material
Inbound License Agreements and Material Outbound License Agreements. There is no
material outstanding or, to the knowledge of either SSC or the Company,
threatened dispute or disagreement with respect to any Material Inbound License
Agreement or any Material Outbound License Agreement. Except as set forth in
Schedule 4.08, no Material Outbound License Agreement contains noncompete or
other material restrictions on the sale or distribution of the Company's
products or services.

                  (ii) Except pursuant to the Material Outbound License
         Agreements and as set forth in Schedule 4.08, (x) the Company has not
         granted any third party the right to sublicense, distribute, sell or
         acquire title to any Intellectual Property of the Company, including
         the Software comprising the Company's products, and (y) the Company has
         not granted any third party a license (contingent or otherwise) with
         respect to the source code for such Software.

                  (d) SOFTWARE. The Software owned by the Company was either:

                  (i) developed by employees of Company within the
         scope of their employment;

                  (ii) developed by independent contractors who have
         assigned their rights to the Company pursuant to
         written agreements; or

                  (iii) otherwise acquired by the Company from a third
         party on an arm's-length commercially reasonable basis;

<PAGE>

                                                                              17

in each case, except to the extent that it would not materially impair the
Company's right to use or sublicense the Software.

                  The Company's currently marketed and material Software
products listed in Schedule 4.08 operate substantially in accordance with the
written specifications and end-user documentation approved by the Company,
provided such Software is utilized in accordance with the Company's recommended
hardware configurations.

                  (e) OWNERSHIP; SUFFICIENCY OF INTELLECTUAL PROPERTY ASSETS.
The Intellectual Property owned by the Company is free and clear of all Liens
other than Permitted Liens. The Intellectual Property owned by the Company,
together with the Company's rights to Intellectual Property under licenses
granted to the Company, are all the Intellectual Property rights necessary to
operate the Company's business after the Closing in substantially the same
manner as such business has been operated by the Company prior thereto. The
consummation of the transactions contemplated by this Agreement will not impair
the Company's rights to use or sublicense Intellectual Property rights used in
the Company's business.

                 (f)PROTECTION OF INTELLECTUAL PROPERTY. The Company enforces a
policy of requiring each relevant employee, consultant and contractor to execute
confidentiality and work-for-hire agreements substantially in the forms made
available to Purchaser that reserve to the Company all rights to any
Intellectual Property rights relating to the Company's business and that
otherwise appropriately protect the Intellectual Property of the Company, and,
to the knowledge of SSC and the Company, except under confidentiality
agreements, there has been no disclosure by the Company of material confidential
information. Except as set forth in Schedule 4.08, the Company has not provided
any third party access to, or the right to modify, any source code of the
Software comprising the Company's products.

                  (g) NO INFRINGEMENT BY THE COMPANY. To the knowledge of SSC
and the Company, the products used, marketed, sold or licensed by the Company,
and the Company's use of the Intellectual Property used in the conduct of the
Company's business as currently conducted, do not infringe upon, violate or
constitute the unauthorized use of any rights owned or controlled by any third
party, including any Intellectual Property of any third party. Except as set
forth in Schedule 4.08, (i) no claims are pending or, to the knowledge of SSC
and the Company, threatened against the

<PAGE>

                                                                              18

Company by any person with respect to the ownership, validity, enforceability,
effectiveness or use in the business of the Company of any Intellectual Property
that would materially impair the Company's right to use or sublicense such
Intellectual Property and (ii) since the Original Purchase Date, neither SSC nor
the Company has received any written communication alleging that the Company
violated any rights relating to Intellectual Property of any person.

                  (h) NO INFRINGEMENT BY THIRD PARTIES. Except as set forth in
Schedule 4.08, to the knowledge of SSC and the Company, no third party is
currently misappropriating, infringing, diluting, or violating any Intellectual
Property owned or exclusively licensed to the Company, and since May 1, 1996, no
such claims have been brought against any third party by the Company.

                 SECTION 4.09. CONTRACTS. (a) Except as set forth in Schedule
4.09, the Company is not a party to or bound by any:

                  (i) employment agreement with any current employee or officer
         of the Company whose salary is in excess of $100,000, Contract with any
         current or former director, consultant or independent contractor of the
         Company that has an aggregate future liability in excess of $75,000 or
         employment agreement or Contract providing for severance obligation in
         excess of $50,000;

                  (ii) covenant not to compete or other covenant restricting the
         development, manufacture, marketing or distribution of the products and
         services of the Company (it being understood that this does not relate
         to the scope of licenses granted to the Company);

                  (iii) Contract (other than this Agreement and those agreements
         set forth in Schedule 2.06) with (A) any Seller or any affiliate of any
         Seller or (B) any current or former officer or employee of the Company,
         SSC or any affiliate of SSC (other than employment agreements covered
         by clause (i) above and other than, in the case of clause (B), any
         employment agreement or Contract the only obligations under which are
         severance obligations fully accrued on the Company's balance sheet as
         of March 31, 1999) that has an aggregate future liability in excess of
         $75,000;

                  (iv) sublease or similar Contract with any person under which
         the Company is a sublessor of, or makes available for use to any
         person, any Leased Property;

<PAGE>

                                                                              19

                  (v) lease, sublease or similar Contract with any person under
         which (A) the Company is lessee of, or holds or uses, any machinery,
         equipment, vehicle or other tangible personal property owned by any
         person or (B) the Company is a lessor or sublessor of, or makes
         available for use by any person, any tangible personal property owned
         or leased by the Company, in any such case which has an aggregate
         future liability or receivable, as the case may be, in excess of
         $100,000;

                  (vi) (A) continuing Contract for the future purchase of
         materials, supplies or equipment (other than hardware pass-through
         contracts in the ordinary course of business consistent with past
         practice), (B) management, service, consulting or other similar
         Contract or (C) advertising agreement or arrangement; in any such case
         which has an aggregate future liability to any person in excess of
         $150,000;

                  (vii) Contract under which the Company has borrowed any money
         from, or issued any note, bond, debenture or other evidence of
         indebtedness to, any person or any other note, bond, debenture or other
         evidence of indebtedness of the Company;

                  (viii) Contract (including any so-called take-or-pay or
         keepwell agreements) under which (A) any person has directly or
         indirectly guaranteed indebtedness, liabilities or obligations of the
         Company or (B) the Company has directly or indirectly guaranteed
         indebtedness, liabilities or obligations of any person, (in each case
         other than endorsements for the purpose of collection in the ordinary
         course of business);

                  (ix) Contract under which the Company has, directly or
         indirectly, made any advance or loan to, or other investment in, any
         person, other than employee travel and relocation loans and allowances
         that individually are not in excess of $10,000;

                  (x) Contract granting a Lien upon any asset of the
         Company;

                  (xi) Contract providing for indemnification of any person with
         respect to liabilities relating to any former business of the Company
         or any predecessor person;

                  (xii) a power of attorney (other than a power of attorney
         given in the ordinary course of business with respect to routine tax
         matters);

<PAGE>

                                                                              20

                  (xiii) a Contract (including a sales order) involving the (x)
         future obligation of the Company to deliver products or services for
         payment of more than $150,000 or (y) obligation of the Company
         extending for a term more than 365 days from the date of this Agreement
         and involving a future obligation of more than $100,000 (in the case of
         either clause (x) or clause (y), unless terminable without payment or
         penalty upon no more than 60 days' notice);

                  (xiv) a Contract for the sale of any asset of the Company
         (other than inventory sales in the ordinary course of business) or the
         grant of any preferential rights to purchase any such asset or
         requiring the consent of any party to the transfer thereof;

                  (xv) a Contract with any Governmental Entity (other than any
         school or school district);

                  (xvi) a currency exchange, interest rate exchange, commodity
         exchange or similar Contract;

                  (xvii) a Contract for any joint venture, partnership or
         similar arrangement;

                  (xviii) a Contract providing for the services of any dealer,
         distributor, sales representative, franchisee or similar representative
         involving the payment or receipt over the past year in excess of
         $100,000 by the Company;

                  (xix) other Contract that has an aggregate future liability to
         any person in excess of $150,000 and is not terminable by the Company
         by notice of not more than 60 days for a cost of less than $25,000
         (other than purchase orders and sales orders); or

                  (xx) a Contract other than as set forth above to which the
         Company is a party or by which it or any of its assets or properties is
         bound or subject that is material to the business of the Company or the
         use or operation of its assets, properties or businesses.

                  (b) Except as set forth in Schedule 4.09, all Contracts listed
in the Schedules (the "Company Contracts") are valid, binding and in full force
and effect and are enforceable by the Company in accordance with their terms
except as to the availability of equitable remedies. Except as set forth in
Schedule 4.09, the Company has performed all material obligations required to be
performed by it to date under the Company Contracts, and it is not (with or
without

<PAGE>

                                                                              21

the lapse of time or the giving of notice, or both), and it is not alleged in
writing to be, in breach or default in any material respect thereunder and, to
the knowledge of SSC and the Company, no other party to any Company Contract is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder. Neither SSC nor the Company has,
except as disclosed in the applicable Schedule, received any notice of the
intention of any party to terminate any Company Contract. Complete and correct
copies of all Company Contracts, together with all modifications and amendments
thereto, have been made available to Purchaser.

                  SECTION 4.10. INVENTORY. Each item of inventory of the
Company, whether reflected on the Balance Sheet or subsequently acquired, (a)
net of any applicable reserves, is free of any material defect or deficiency,
(b) net of any applicable reserves, is in good, usable and currently marketable
condition in the ordinary course of the business of the Company and (c) is
properly reflected in the books and records of the Company at the lesser of cost
and fair market value, with adequate obsolescence reserves, all as determined in
accordance with GAAP.

                  SECTION 4.11. PERSONAL PROPERTY. Each material item of
personal property of the Company is in good working order (ordinary wear and
tear excepted), is free from any material defect and has been maintained in all
material respects in accordance with the past practice of the Company, and no
repair, replacement or regularly scheduled maintenance relating to any such item
has been deferred. All leased personal property of the Company is in all
material respects in the condition required of such property by the terms of the
lease applicable thereto.

                  SECTION 4.12. RECEIVABLES. All the accounts receivable of the
Company (a) represent actual indebtedness incurred by the applicable account
debtors, (b) have arisen from bona fide transactions and (c) are good and
collectible at the aggregate recorded amounts thereof, net of any applicable
reserves for doubtful accounts reflected on the Balance Sheet. Since the date of
the Balance Sheet, there have not been any write-offs as uncollectible of any
customer accounts receivable of the Company, except for write-offs in the
ordinary course of the business of the Company and consistent with past
practice.

                  SECTION 4.13.  PERMITS.  Schedule 4.13 sets forth
all material certificates, licenses, permits, authorizations
and approvals ("Permits") issued or granted to the Company.
Except as set forth in Schedule 4.13, (i) all such Permits

<PAGE>

                                                                              22

are validly held by the Company, and the Company has complied in all material
respects with all terms and conditions thereof, (ii) since May 1, 1996, neither
SSC nor the Company has received written notice of any suit, action or
proceeding (a "Proceeding") relating to the revocation or modification of any
such Permits, the loss of which, individually or in the aggregate, has had or
could reasonably be expected to have a Company Material Adverse Effect, and
(iii) none of such Permits will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby. All
Permits that are held in the name of any employee, officer, director,
stockholder, agent or otherwise on behalf of the Company shall be deemed
included under this warranty.

                  SECTION 4.14. INSURANCE. The Company maintains policies of
fire and casualty, liability and other forms of insurance in such amounts, with
such deductibles and against such risks and losses as are, in SSC's and the
Company's judgment, reasonable for the business and assets of the Company. The
insurance policies maintained with respect to the Company and its assets and
properties are set forth on Schedule 4.14. All such policies are in full force
and effect, all premiums due and payable thereon have been paid (other than
retroactive or retrospective premium adjustments that are not yet, but may be,
required to be paid with respect to any period ending prior to the Closing
Date), and no notice of cancellation or termination has been received with
respect to any such policy which has not been replaced on substantially similar
terms prior to the date of such cancellation. Except as set forth in Schedule
4.14, to the knowledge of SSC and the Company, the activities and operations of
the Company have been conducted in a manner so as to conform in all material
respects to all applicable provisions of such insurance policies.

                  SECTION 4.15.  TAXES.  (a)  For purposes of this
Agreement:

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

                  "Post-Closing Tax Period" shall mean any taxable period (or
portion thereof) that begins after the Closing Date.

                  "Pre-Closing Tax Period" shall mean all taxable periods (or
portions thereof) ending on or before the Closing Date.

<PAGE>

                                                                              23

                  "Tax" or "Taxes" shall mean all Federal, state, county, local,
municipal, foreign and other taxes, assessments, duties or similar charges of
any kind whatsoever, including all corporate franchise, income, sales, use, ad
valorem, receipts, value added, profits, license, withholding, payroll,
employment, excise, premium, property, customs, net worth, capital gains,
transfer, stamp, documentary, social security, environmental, alternative
minimum, occupation, recapture and other taxes, and including all interest,
penalties and additions imposed with respect to such amounts, and all amounts
payable pursuant to any agreement or arrangement with respect to Taxes.

                  "Taxing Authority" shall mean any domestic, foreign, Federal,
national, state, county or municipal or other local government, any subdivision,
agency, commission or authority thereof, or any quasi-governmental body
exercising tax regulatory authority.

                  "Tax Return" or "Tax Returns" shall mean all returns,
declarations of estimated tax payments, reports, estimates, information returns
and statements, including any related or supporting information with respect to
any of the foregoing, filed or to be filed with any Taxing Authority in
connection with the determination, assessment, collection or administration of
any Taxes.

                  "Transfer Tax" means any transfer, documentary, recording,
stamp, sales, intangibles, ad valorem or other similar transactional tax.

                  (b) Except as set forth in Schedule 4.15, (i) the Company and
any affiliated group, within the meaning of Section 1504 of the Code, of which
the Company is or has been a member, has filed or caused to be filed in a timely
manner (within any applicable extension periods) all material Tax Returns
required to be filed by the Code or by applicable state, local or foreign tax
laws, (ii) all material Taxes with respect to taxable periods covered by such
Tax Returns, and all other material Taxes for which the Company or any such
group is or might otherwise be liable have been timely paid in full or will be
timely paid in full by the due date thereof and the most recent Financial
Statements reflect an adequate reserve (in accordance with GAAP) for all Taxes
payable by the Company for all taxable periods and portions thereof through the
date of such Financial Statements, and (iii) no Liens exist for Taxes (other
than Liens for Taxes not yet due and payable) with respect to any of the assets
or properties of the Company or any such group.

<PAGE>

                                                                              24

                  (c) No Tax Returns of the Company or any affiliated group of
which the Company is or has ever been a member have ever been examined by the
Internal Revenue Service. No Tax Returns of the Company or any such group are
under audit or examination by any Taxing Authority, and no written notice of any
such audit or examination has been received by the Company or any such group.

                  (d) Any deficiency resulting from any audit or examination
relating to Taxes by any Taxing Authority has been timely paid. No issues
relating to Taxes were raised in writing by the relevant Taxing Authority in any
completed audit or examination that can reasonably be expected to recur in a
later taxable period. The Tax Returns of the Company, SSC and JLC Holdings, Inc.
with respect to Federal income Taxes have been examined by the Internal Revenue
Service, or the statute of limitations with respect to the assessment or
collection of the relevant Tax liability has expired, for all taxable periods
through and including the year ended December 31, 1994. The Company has made
available to Purchaser documents setting forth the dates of the most recent
audits or examinations of the Company or any affiliated group of which the
Company is or has ever been a member by any Taxing Authority in respect of
Federal, foreign and state and local Taxes for all taxable periods for which the
statute of limitations has not yet expired.

                  (e) Except as set forth in Schedule 4.15, neither the Company
nor the affiliated group that includes the Company, SSC and JLC Holdings, Inc.
is party to or bound by any tax-sharing agreement, tax indemnity obligation or
similar agreement, arrangement or practice with respect to Taxes (including any
advance pricing agreement, closing agreement or other agreement relating to
Taxes with any Taxing Authority).

                  (f) Other than deferred revenue of $22,976,000 as of December
31, 1998, neither the Company nor the affiliated group that includes the
Company, SSC and JLC Holdings, Inc. shall be required to include in a taxable
period ending after the Closing Date taxable income attributable to income that
accrued in a prior taxable period but was not recognized in any prior taxable
period as a result of the installment method of accounting, the long-term
contract method of accounting, the cash method of accounting or Section 481 of
the Code or any comparable provision of state, local, or foreign Tax law, or for
any other reason.

                  (g) None of SSC, JLC Holdings, Inc. or any of its affiliates
has made with respect to the Company or the affiliated group that includes the
Company, SSC and JLC

<PAGE>

                                                                              25

Holdings, Inc., or any property held by the Company or such group, any consent
under Section 341 of the Code, no property of the Company or such group is "tax
exempt use property" within the meaning of Section 168(h) of the Code, neither
the Company nor such group is a party to any lease made pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, and none of the assets of the
Company or such group is subject to a lease under Section 7701(h) of the Code or
under any predecessor section thereof.

                  (h) Except as set forth in Schedule 4.15, (i) neither the
Company nor any affiliated group of which the Company is or has ever been a
member has outstanding any agreements or waivers extending, or having the effect
of extending, the statute of limitations with respect to the assessment or
collection of any Tax, (ii) other than extensions to file for the year ended
December 31, 1998, neither the Company nor any affiliated group, within the
meaning of Section 1504 of the Code, of which the Company is or has been a
member, has requested any extension of time within which to file any Tax Return,
which return has not yet been filed, and (iii) no power of attorney with respect
to any Taxes has been executed or filed with any Taxing Authority by or on
behalf of the Company or any affiliated group of which the Company is or has
ever been a member.

                  (i) The Company and any affiliated group of which the Company
is or has ever been a member have complied in all material respects with all
Applicable Laws relating to the payment and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code
or any comparable provision of any state, local or foreign laws) and have,
within the time and in the manner prescribed by Applicable Law, withheld from
and paid over to the proper Taxing Authorities all amounts required to be so
withheld and paid over under Applicable Laws.

                  (j) The Company has delivered to Purchaser for inspection (i)
complete and correct copies of all Federal and other material Tax Returns of the
Company and any affiliated groups of which the Company is or has ever been a
member relating to Taxes for all taxable periods beginning on or after June 29,
1995 and (ii) complete and correct copies of all private letter rulings, revenue
agent reports, information document requests, notices of proposed deficiencies,
deficiency notices, protests, petitions, closing agreements, settlement
agreements, pending ruling requests, and any similar documents, submitted by,
received by or agreed to by or on behalf of the Company or any such group, or,
to the extent related to the income, business, assets, operations, activities or
status of the Company or

<PAGE>

                                                                              26

any such group, submitted by, received by or agreed to by or on behalf of any
affiliated group of which the Company is or has ever been a member, and relating
to Taxes for all taxable periods for which the statute of limitations has not
yet expired.

                  (k) Schedule 4.15 sets forth (i) each jurisdiction in which
the Company or the affiliated group that includes the Company, SSC and JLC
Holdings, Inc. joins or has joined for any taxable period ending after 1995 in
the filing of any consolidated, combined or unitary Tax Return, and (ii) the
common parent corporation and the other individual members of the consolidated,
combined or unitary group filing such Tax Return.

                  (l) Schedule 4.15 sets forth each state, county, local,
municipal or foreign jurisdiction in which the Company or any affiliated group
of which the Company is or has ever been a member files, is required to file or
has been required to file a Tax Return relating to state and local income,
franchise, license, excise, net worth, property or sales and use taxes or is or
has been liable for any Taxes on a "nexus" basis at any time for taxable periods
ending after 1995.

                  (m) There is no accrual for deferred Taxes (whether on a gross
or net basis) reflected on the Company's most recent balance sheet included in
the Financial Statements.

                  (n) The Company is not a "United States real property holding
corporation" within the meaning of Section 897 of the Code.

                  (o) SSC is not a "foreign person" within the meaning of
Section 1445 of the Code.

                  (p) On the Closing Date and immediately prior to the Closing,
the Company will be a member of the consolidated group, within the meaning of
Treasury Regulation Section 1.1502-1(h), of which JLC Holdings, Inc. is the
common parent and which includes SSC, and such consolidated group will actually
file a consolidated Federal income Tax Return for the taxable year including the
Closing Date.

                  (q) Schedule 4.15 sets forth the following information with
respect to the Company as of December 31, 1997: (i) the amount of any net
operating loss carryforwards of the Company, (ii) the amount of any deferred
gain or loss allocable to the Company or such group arising out of any deferred
intercompany transaction, and

<PAGE>

                                                                              27

(iii) the aggregate Tax basis in the Company's assets, in each case determined
after giving effect to the amended Tax Returns described in Section 6.09(g) but
without regard to any Tax attribute reduction after the date hereof pursuant to
Section 108(b) of the Code.

                  SECTION 4.16. PROCEEDINGS. Schedule 4.16 sets forth a list of
each pending or, since May 1, 1996, threatened Proceeding or claim with respect
to which SSC or the Company has been contacted in writing by counsel for the
plaintiff or claimant, against or affecting the Company or its properties,
assets, operations or business and that (a) relates to or involves more than
$100,000 or (b) may give rise to any legal restraint on or prohibition against
the transactions contemplated by this Agreement. Except as set forth in Schedule
4.16, none of the Proceedings or claims listed in Schedule 4.16 as to which
there is at least a reasonable possibility of adverse determination would have,
if so determined, individually or in the aggregate, a Company Material Adverse
Effect. Except as set forth in Schedule 4.16, to the knowledge of SSC and the
Company, there are no unasserted claims of the type that would be required to be
disclosed in Schedule 4.16 if counsel for the claimant had contacted the Company
that are considered probable of assertion and that if asserted would have at
least a reasonable possibility of an adverse determination. To the knowledge of
SSC and the Company, except as set forth in Schedule 4.16, the Company is not a
party or subject to or in default under any Judgment. Except as set forth in
Schedule 4.16, as of the date of this Agreement there is not any Proceeding or
claim by the Company pending, or which the Company intends to initiate, against
any other person. Except as set forth in Schedule 4.16, to the knowledge of SSC
and the Company, there is no pending or threatened investigation of the Company.

                  SECTION 4.17. EMPLOYEE BENEFIT PLANS. (a) Schedule 4.17
contains a list of each "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (a "Welfare Plan"), and each other written plan,
arrangement or policy relating to stock options, stock purchases, compensation,
deferred compensation, severance, fringe benefits or other employee benefits, in
each case maintained or contributed to, or required to be maintained or
contributed to, by the Company or any other person or entity that, together with
the Company, is or was treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code (each, together

<PAGE>

                                                                              28

with the Company, a "Commonly Controlled Entity") for the benefit of any present
or former officers, employees, agents, directors or independent contractors of
the Company (all the foregoing being herein called "Company Plans"). The Company
has made available to Purchaser true, complete and correct copies of (i) each
Company Plan, (ii) the most recent annual reports on Form 5500 (including all
schedules and attachments thereto) filed with the Internal Revenue Service with
respect to each Company Plan (if any such report was required by Applicable
Law), (iii) the most recent summary plan description (or similar document) for
each Company Plan for which such a summary plan description is required by
Applicable Law or was otherwise provided to plan participants or beneficiaries
and (iv) each trust agreement and insurance or annuity contract or other funding
or financing arrangement relating to any Company Plan.

                  (b) Each Company Plan has been administered in all material
respects in accordance with its terms. The Company and all the Company Plans are
in compliance in all material respects with the applicable provisions of ERISA,
the Code, all other Applicable Laws and the terms of any applicable collective
bargaining agreements. There are no investigations by any Governmental Entity,
termination proceedings or other claims (except routine claims for benefits
payable under the Company Plans) or proceedings against or involving any Company
Plan or asserting any rights to or claims for benefits under any Company Plan
that could give rise to any liability that could reasonably be expected to have
a Company Material Adverse Effect.

                  (c) Each Company Pension Plan that is intended to be a
tax-qualified plan has been the subject of a determination letter from the
Internal Revenue Service to the effect that such Company Pension Plan and
related trust is qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code and no such determination letter
has been revoked, and, to the knowledge of SSC and the Company, the Internal
Revenue Service has not threatened to revoke any such determination letter. The
Company has made available to Purchaser a copy of the most recent determination
letter received with respect to each Company Pension Plan for which such a
letter has been issued.

                  (d) Neither the Company, nor any of the Company Plans or any
trusts created thereunder, nor any trustee or administrator thereof, has engaged
in a "prohibited transaction" (as defined in Section 4975 of the Code or Section
406 of ERISA) which would cause the Company or the Company Plans (or related
trusts) to become subject to any

<PAGE>

                                                                              29

penalty under such applicable ERISA or Code provisions that could reasonably be
expected to have a Company Material Adverse Effect.

                  (e) No Company Plan is subject to Part 3 of Subtitle B of
Title I of ERISA or Title IV of ERISA or Section 412 of the Code and neither the
Company nor any Commonly Controlled Entity contributes to any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any such
multiemployer plan where such withdrawal has resulted or would result in any
"withdrawal liability" (within the meaning of Section 4201 of ERISA) that has
not been fully paid.

                  (f) Schedule 4.17 discloses each Welfare Plan which is funded
through a "welfare benefit fund", as such term is defined in Section 419(e) of
the Code, or other funding mechanism. Except as disclosed on Schedule 4.17, the
Company does not have any obligations for retiree welfare benefits (other than
COBRA payments) under any Company Plan. Each Welfare Plan may be amended or
terminated prospectively, within a period of 90 days without the imposition of
any material liability to the Company for additional benefits not accrued as of
such amendment or termination.

                  (g) Except as set forth in Schedule 4.17, as a result of the
transactions contemplated by this Agreement, no employee of the Company will be
entitled to any additional benefits or any acceleration of the time of payment
or vesting of any benefits under any Company Plan or Contract and no amount
payable to any employee would be characterized as an "excess parachute payment"
(as such term is defined in Section 280G of the Code).

                  SECTION 4.18. ABSENCE OF CHANGES OR EVENTS. Except as set
forth in Schedule 4.18, since December 31, 1998, there has not been any material
adverse change in the business, assets, condition (financial or otherwise),
results of operations or prospects of the Company. Except as set forth in
Schedule 4.18, since December 31, 1998, the business of the Company has been
conducted in the ordinary course and in substantially the same manner as
previously conducted. Except as set forth in Schedule 4.18, since December 31,
1998, to the date of this Agreement, neither the SSC nor the Company has taken
any action that, if taken after the date of this Agreement, would constitute a
breach of any of the covenants set forth in Section 6.01.

                  SECTION 4.19.  COMPLIANCE WITH APPLICABLE LAWS.
(a)  Except as set forth in Schedule 4.19, the Company is in

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                                                                              30

compliance with all Applicable Laws, except for instances of noncompliance that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Company Material Adverse Effect. Except as set forth in
Schedule 4.19, neither SSC nor the Company has received any written
communication since May 1, 1996, from any Governmental Entity that alleges that
the Company is not in compliance with any Applicable Law. This Section 4.19(a)
does not relate to matters with respect to Taxes, which are the subject of
Section 4.15, or to environmental matters, which are the subject of Section
4.19(b).

                  (b) (i) The Company is in compliance in all material respects
with all Environmental Laws (as defined below), and the Company holds all
material permits, licenses, orders, approvals and other authorizations required
under Environmental Laws for the Company to conduct its business as currently
conducted; (ii) neither SSC nor the Company has received any written notice of a
pending or threatened action, demand, investigation or inquiry by any
Governmental Entity or other person relating to any actual or alleged violations
of Environmental Law or any actual or potential obligation to investigate or
take any other action relative to the release or threatened release of any
Hazardous Substances (as defined below); (iii) to the knowledge of SSC and the
Company, the Company has not released or disposed of, or otherwise handled or
permitted the release or disposal of, any Hazardous Substances that could
reasonably be expected to result in any liability under any Environmental Law;
(iv) there are no underground storage tanks on or under any property operated or
leased by SSC or the Company; and (v) all information, data, studies,
assessments, audits or other evaluations related to compliance and or liability
of SSC or the Company under Environmental Laws of which SSC or the Company is
aware have been made available to the Purchaser.

                  The term "Environmental Law" means the common law and all
Federal, state or local statutes, regulations, ordinances, permits and permit
conditions, administrative and judicial orders, consent decrees, notice letters,
demands or any other governmental requirement relating to health, safety, the
environment (including without limitation ambient air, indoor air, surface and
groundwater, surface and subsurface soils and other natural resources), or to
the manufacture, generation, processing, distribution, use, treatment, storage,
handling, transportation or disposal of Hazardous Substances. Such laws
specifically include but are not limited to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Resource Conservation and

<PAGE>

                                                                              31

Recovery Act ("RCRA"), 42 U.S.C. 6901 ET SEQ., as amended; the Toxic Substances
Control Act ("TSCA"), 15 U.S.C. 2601 ET SEQ., as amended; and the Clean Water
Act, 33 U.S.C. 1251 ET SEQ., as amended; the Clean Air Act, 42 U.S.C. 7401 ET
SEQ., as amended.

                  The term "Hazardous Substances" means hazardous substances,
pollutants, hazardous constituents, contaminants, toxic substances or any other
chemicals, waste or materials of any kind whatsoever including, without
limitation, crude oil, petroleum, or any fraction thereof.

                  SECTION 4.20. EMPLOYEE AND LABOR MATTERS. (a) None of the
Company's employees are covered by a collective bargaining agreement, no union
organizational efforts with respect to any employees of the Company are pending
or, to the knowledge of SSC and the Company, are threatened and, to the
knowledge of SSC and the Company, there is no labor dispute, strike, work
stoppage or slowdown pending or threatened that may in any material respect
interfere with the business of the Company or any material liability relating to
any unfair labor or employment practices or any charge or complaint by the
National Labor Relations Board or by any other comparable agency pending or
threatened against the Company.

                  (b) No employee of the Company is, to the knowledge of SSC and
the Company, a party to or bound by any Contract, or subject to any Judgment
that may interfere with the use of such person's best efforts to promote the
interests of the Company, may conflict with the transactions contemplated hereby
or that has had or could reasonably be expected to have a Company Material
Adverse Effect. To the knowledge of SSC and the Company, no activity of any
employee of the Company as or while an employee of the Company caused a material
violation of any employment contract, confidentiality agreement, or other
Contract to which such employee was a party. To the knowledge of SSC and the
Company, neither the execution and delivery of this Agreement nor the
consummation of the Acquisition will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any Contract
under which any such employee is now obligated.

                  SECTION 4.21. TRANSACTIONS WITH AFFILIATES. Except as set
forth in Schedule 4.21, none of the Contracts set forth in Schedule 2.06 or 4.09
between the Company, on the one hand, and any Seller or any of its affiliates,
on the other hand, will continue in effect subsequent to the Closing.

<PAGE>

                                                                              32

                  SECTION 4.22. EFFECT OF TRANSACTION. To the knowledge of SSC
and the Company, no creditor, employee, client, customer or other person having
a material business relationship with the Company has materially changed, or
informed SSC or the Company that such person intends to materially change, such
relationship because of the purchase and sale of the Company or the consummation
of any other transaction contemplated hereby.

                  SECTION 4.23. DISCLOSURE. No representation or warranty of SSC
or the Company contained in this Agreement, and no written statement directly or
indirectly made to or for the benefit of Purchaser contained in any document,
certificate or Schedule furnished or to be furnished by or on behalf of SSC or
the Company to Purchaser pursuant to this Agreement, contains or will contain on
the Closing Date any untrue statement of a material fact, or omits or will omit
on the Closing Date to state any material fact necessary, in light of the
circumstances under which it was or will on the Closing Date be made, in order
to make the statements herein or therein not misleading; PROVIDED, HOWEVER, that
no such representation or warranty is made as to any Projected Disclosures (as
defined in the next sentence). To the extent that any document, certificate or
Schedule referenced above relates to projections or predictions as to future
performance (in any case, a "Projected Disclosure"), such Projected Disclosure,
when made, was based upon assumptions reasonably believed in good faith to be
reasonable by the person making such Projected Disclosure.

                  SECTION 4.24. SUPPLIERS. Except as set forth in Schedule 4.24,
between December 31, 1998 and the date of this Agreement, the Company has not
entered into or made any Contract or commitment for the purchase of merchandise
other than in the ordinary course of business consistent with past practice.
Except for the suppliers named in Schedule 4.24, the Company does not have any
supplier from whom it purchased more than 5% of the total amount of goods and
services which it purchased during its most recent full fiscal year. Except as
set forth in Schedule 4.24, since December 31, 1998, there has not been (i) any
material adverse change in the business relationship of the Company with any
supplier of merchandise named in Schedule 4.24 or (ii) any change in any
material term (including credit terms) of the supply agreements or related
arrangements with any such supplier.

                  SECTION 4.25.  CUSTOMERS.  Schedule 4.25 sets
forth the top 10 customers of the Company on the basis of
total sales during its most recent full fiscal year.  Except

<PAGE>

                                                                              33

as set forth in Schedule 4.25, since December 31, 1998, there has not been (i)
any material adverse change in the business relationship of the Company with any
significant customer of the Company or (ii) any change in any material term
(including credit terms) of the sales agreements or related agreements with any
such customer. During the past year, the Company has not received any customer
complaint concerning its products and services, nor has it had any of its
products returned by a purchaser thereof, other than (x) complaints and (y)
returns in the ordinary course of business, in the case of either clause (x) or
clause (y), that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Company Material Adverse Effect.

                  SECTION 4.26. PRIVATE OFFERING. None of SSC, the Company,
their affiliates and their representatives has issued, sold or offered any
security of the Company to any person under circumstances that would cause the
sales of the Shares, as contemplated by this Agreement to be subject to the
registration requirements of the Securities Act. Assuming the representations of
Purchaser contained in Section 5.05 are true and correct, the sale and delivery
of the Shares hereunder are exempt from the registration and prospectus delivery
requirements of the Securities Act.

                  SECTION 4.27. SUBSIDIARIES. The Company does not have any
subsidiaries and, except as set forth in Schedule 4.27, does not own, directly
or indirectly, any capital stock or other ownership interest in any person.

                  SECTION 4.28. YEAR 2000. The Company has engaged in a
reasonably appropriate process of assessment of the existence of limitations in
the capacity of its hardware and software systems associated with information
processing and delivery, billing, payables, management, operations or services
operated by or otherwise reasonably necessary to the business operations of the
Company (collectively, the "Systems") to handle date information and avoid date
processing errors arising from the advent of the year 2000 ("Year 2000
Problems"). Additionally, the Software currently and previously licensed and
sold by the Company to its customers has been analyzed for Year 2000 Problems.
Except with respect to the Systems and the Software identified on Schedule 4.28,
the Company has adopted or is implementing a plan of correction that the Company
reasonably believes will result in a substantial elimination of Year 2000
Problems. SSC and the Company believe that the assessment and correction of Year
2000 Problems, which if not corrected, individually or in the aggregate would
have a

<PAGE>

                                                                              34

Company Material Adverse Effect, will be completed on or prior to October 31,
1999.

                                    ARTICLE V

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

                  Purchaser hereby represents and warrants to Sellers and the
Company, as of the date of this Agreement and as of the Closing Date, as
follows:

                  SECTION 5.01. ORGANIZATION, STANDING AND POWER. Purchaser is
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to acquire and own
the Shares.

                  SECTION 5.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. Purchaser has full power and authority to execute this Agreement
and to consummate the Acquisition and the other transactions contemplated to be
consummated by it hereby. The execution and delivery by Purchaser of this
Agreement and the other transactions contemplated to be consummated by it hereby
have been duly authorized by all necessary corporate action. Purchaser has duly
executed and delivered this Agreement and this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.

                  SECTION 5.03. NO CONFLICTS; CONSENTS. The execution and
delivery by Purchaser of this Agreement do not, and the consummation of the
Acquisition and the other transactions contemplated hereby and compliance by
Purchaser with the terms hereof will not conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any person
under, or result in the creation of any Lien upon any of the properties or
assets of Purchaser under, any provision of (i) the certificate of incorporation
or by-laws of Purchaser, (ii) any Contract to which Purchaser is a party or by
which it or any of its properties or assets is bound or (iii) any Judgment or
Applicable Law applicable to Purchaser or any of its properties or assets. No
Consent of, or registration, declaration or filing with, any Governmental Entity
is required to be obtained or made by or with respect to Purchaser or its
affiliates in connection with the execution, delivery and performance of this

<PAGE>

                                                                              35

Agreement or the consummation of the Acquisition or the other transactions
contemplated hereby, other than compliance with and filings under the HSR Act.

                  SECTION 5.04. FINANCING. Purchaser has received commitment
letters dated May 6, 1999, May 12, 1999 and May 3, 1999, respectively, from The
Northwestern Mutual Life Insurance Company, NationsBanc Montgomery Securities
LLC and SG Capital Partners LLC and has delivered copies of same to the Company
and each of the Sellers. If all applicable conditions of such commitment letters
are satisfied, the funds to be provided to Purchaser thereunder will provide
Purchaser with sufficient financial resources, together with the equity
investment contemplated by Purchaser, to consummate the Acquisition. To the
knowledge of Purchaser, as of the date of this Agreement none of such commitment
letters has been modified or terminated.

                  SECTION 5.05. SECURITIES ACT. The Shares to be purchased by
Purchaser pursuant to this Agreement are being acquired for investment only and
not with a view to any public distribution thereof, and Purchaser will not offer
to sell or otherwise dispose of the Shares so acquired by it in violation of any
of the registration requirements of the Securities Act.

                                   ARTICLE VI

                                    COVENANTS

                 SECTION 6.01. COVENANTS RELATING TO CONDUCT OF BUSINESS. (a)
Except for matters set forth in Schedule 6.01 or otherwise expressly permitted
by the terms of this Agreement, from the date of this Agreement to the Closing,
SSC shall cause the business of the Company to be conducted, and the Company
shall conduct its business, in the usual, regular and ordinary course in
substantially the same manner as previously conducted and SSC shall cause the
Company to, and the Company shall, use all reasonable efforts to keep intact its
business, keep available the services of its current employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others with whom it deals. SSC shall not, and shall not permit the Company to,
and the Company shall not, take any action that would, or that could reasonably
be expected to, result in any of the conditions to the purchase and sale of the
Shares set forth in Article VII not being satisfied. In addition (and without
limiting the generality of the foregoing), except as set forth in Schedule 6.01
or otherwise expressly permitted or

<PAGE>

                                                                              36

required by the terms of this Agreement, from the date of this Agreement to the
Closing, SSC shall not permit the Company to, and the Company shall not, do any
of the following without the prior written consent of Purchaser:

                  (i) amend its articles of incorporation or
         by-laws;

                  (ii) declare or pay any dividend or make any other
         distribution to SSC, Sylvan, Pyramid or GE Cap-Eq or any of their
         affiliates;

                  (iii) redeem or otherwise acquire any shares of its capital
         stock or issue any capital stock or any option, warrant or right
         relating thereto or any securities convertible into or exchangeable for
         any shares of capital stock;

                  (iv) adopt or amend any Company Plan (or any plan
         that would be a Company Plan if adopted);

                  (v) grant to any officer or employee any increase in
         compensation or benefits, except to nonmanagement employees in the
         ordinary course of business and consistent with past practice or as may
         be required under existing agreements and except for any increases for
         which SSC shall be solely obligated;

                  (vi) incur or assume any liabilities, obligations or
         indebtedness for borrowed money or guarantee any such liabilities,
         obligations or indebtedness, other than in the ordinary course of
         business and consistent with past practice; PROVIDED, HOWEVER, that in
         no event shall the Company incur or assume any long-term indebtedness
         for borrowed money other than additional borrowings under the Foothill
         Facility in the ordinary course of business;

                  (vii) permit, allow or suffer any of its assets to become
         subjected to any Lien of any nature whatsoever that would have been
         required to be set forth in Schedule 4.05 or 4.06 if existing on the
         date of this Agreement;

                  (viii) cancel any material indebtedness (individually or in
         the aggregate) or waive any claims or rights of substantial value;

                  (ix) pay, loan or advance any amount to, or sell, transfer or
         lease any of its assets to, or enter into any agreement or arrangement
         with, SSC, Sylvan, Pyramid

<PAGE>

                                                                              37

         or GE Cap-Eq or any of their affiliates, except, in the
         case of Sylvan, as set forth in Schedule 6.01;

                  (x) make any change in any method of accounting or accounting
         practice or policy other than those required by GAAP;

                  (xi) acquire by merging or consolidating with, or by
         purchasing a substantial portion of the assets of, or by any other
         manner, any business or any corporation, partnership, association or
         other business organization or division thereof or otherwise acquire
         any assets (other than inventory) that are material;

                  (xii) make or incur any capital expenditure that is not
         currently approved in writing or budgeted and that, individually, is in
         excess of $25,000 or make or incur any such expenditures which, in the
         aggregate, are in excess of $100,000;

                  (xiii) sell, lease, license or otherwise dispose of any of its
         assets, except inventory sold in the ordinary course of business and
         consistent with past practice;

                  (xiv) enter into any lease of real property, except any
         renewals of existing leases in the ordinary course of business and
         consistent with past practice, with respect to which Purchaser shall
         have the right to participate;

                  (xv) modify, amend, terminate or permit the lapse of any lease
         of, or reciprocal easement agreement, operating agreement or other
         material agreement relating to, real property (except modifications or
         amendments associated with renewals of existing leases in the ordinary
         course of business and consistent with past practice, with respect to
         which Purchaser shall have the right to participate); or

                  (xvi) authorize any of, or commit or agree to take, whether in
         writing or otherwise, to do any of, the foregoing actions.

                  (b) ADVISE OF CHANGES. From the date of this Agreement to the
Closing, SSC and the Company shall promptly advise Purchaser in writing of the
occurrence of any matter or event that is material to the business, assets,
condition (financial or otherwise) or results of operations of the Company.

<PAGE>

                                                                              38

                 (c) AFFIRMATIVE COVENANTS. Until the Closing, SSC shall cause
the Company to, and the Company shall:

                  (i) maintain its assets in the ordinary course of
         business in good operating order and condition,
         reasonable wear and tear excepted;

                  (ii) upon any damage, destruction or loss to any asset, apply
         any and all insurance proceeds received with respect thereto to the
         prompt repair, replacement and restoration thereof to the condition of
         such asset before such event or, if required, to such other (better)
         condition as may be required by Applicable Law; and

                  (iii) maintain its level and quality of inventory and supplies
         in the ordinary course of business in a manner consistent with its
         practices in place as of December 31, 1998.

                 (d) CONSULTATION. In connection with the continuing operation
of the business of the Company between the date of this Agreement and the
Closing, SSC and the Company shall use reasonable efforts to consult in good
faith on a regular and frequent basis with the representatives of Purchaser to
report material operational developments and the general status of ongoing
operations pursuant to procedures reasonably requested by Purchaser or such
representatives. SSC and the Company acknowledge that any such consultation in
and of itself shall not constitute a waiver by Purchaser of any rights it may
have under this Agreement, and that Purchaser shall not have any liability or
responsibility for any actions of SSC or the Company or any of its officers or
directors with respect to matters that are the subject of such consultations;
PROVIDED, HOWEVER, that any written consents or approvals given pursuant to
Section 9.03 in connection with the consultation contemplated by this Section
6.01(d) shall be binding in accordance with their terms.

                  (e) INSURANCE. SSC shall use all commercially reasonable
efforts to cause the Company to, and the Company shall use all commercially
reasonable efforts to, keep all insurance policies set forth in Schedule 4.14 or
suitable replacements therefor in full force and effect through the close of
business on the Closing Date.

                  SECTION 6.02.  NO SOLICITATION.  From the date of
this Agreement to the earlier to occur of the Closing or
termination hereof in accordance with Article IX, none of
Sellers, any of their affiliates and the Company shall, nor

<PAGE>

                                                                              39

shall they permit any of their respective officers, directors or stockholders or
other representatives to, directly or indirectly, (i) solicit, initiate or
encourage any "other bid", (ii) enter into any agreement with respect to any
other bid or (iii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any other bid. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any officer, director, stockholder or other
representative of any Seller, the Company or any affiliate of any Seller,
whether or not such person is purporting to act on behalf of any Seller, the
Company or any other affiliate of any Seller or otherwise, shall be deemed to be
a breach of this Section 6.02. In the event that any Seller, the Company or any
affiliate of any Seller receives a proposal relating to any such transaction,
such Seller or the Company shall promptly advise Purchaser of such proposal. As
used in this Section 6.02, "other bid" shall mean any proposal for a merger,
consolidation, sale of securities, sale of substantial assets or similar
transaction involving the Company, other than (A) the transactions contemplated
by this Agreement and (B) the sale of inventory in the ordinary course of
business.

                  SECTION 6.03. ACCESS TO INFORMATION. SSC shall, and shall
cause the Company to, and the Company shall, afford to Purchaser and its lenders
and their accountants, counsel and other representatives reasonable access, upon
reasonable notice during normal business hours during the period prior to the
Closing, to all the personnel, properties, books, Contracts, commitments, Tax
Returns and records of SSC and the Company, and, during such period shall
furnish promptly to Purchaser any information concerning SSC or the Company as
Purchaser may reasonably request.

                  SECTION 6.04. CONFIDENTIALITY. (a) Purchaser acknowledges that
the information being provided to it in connection with the Acquisition and the
consummation of the other transactions contemplated hereby is subject to the
terms of a confidentiality agreement between Purchaser and the Company (the
"Confidentiality Agreement"), the terms of which are incorporated herein by
reference. Effective upon, and only upon, the Closing, the Confidentiality
Agreement shall terminate.

                  (b)  Each Seller shall keep confidential, and
cause its affiliates and its and their officers, directors,

<PAGE>

                                                                              40

employees and advisors to keep confidential, all information relating to the
Company, except as required by law or administrative process and except for
information that is not confidential or proprietary to the Company or that is
available to the public on the Closing Date, or thereafter becomes available to
the public other than as a result of a breach of this Section 6.04(b). The
covenant set forth in this Section 6.04(b) shall terminate two years after the
Closing Date.

                  SECTION 6.05. REASONABLE EFFORTS. (a) On the terms and subject
to the conditions of this Agreement, each of Purchaser, SSC and the Company
shall use commercially reasonable efforts to cause the Closing to occur,
including taking all reasonable actions necessary to comply promptly with all
legal requirements that may be imposed on it or any of its affiliates with
respect to the Closing. Without limiting the foregoing or the provisions set
forth in Section 6.05(b), each of Purchaser, SSC and the Company shall use its
commercially reasonable efforts to cause the Closing to occur on or prior to
June 29, 1999 or as soon as practicable thereafter.

                  (b) Each of SSC and Purchaser shall as promptly as
practicable, but in no event later than five business days following the
execution and delivery of this Agreement, file or cause to be filed with the
United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form, if any,
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act. Any such
notification and report form and supplemental information shall be in
substantial compliance with the requirements of the HSR Act. Each of SSC and
Purchaser shall furnish to the other such necessary information and reasonable
assistance as the other may request in connection with its preparation of any
filing or submission that is necessary under the HSR Act. SSC and Purchaser
shall keep each other apprised of the status of any communications with, and any
inquiries or requests for additional information from, the FTC and the DOJ and
shall comply promptly with any such inquiry or request. Any such supplemental
information shall be in substantial compliance with the requirements of the HSR
Act.

                 SECTION 6.06. EXPENSES; TRANSFER TAXES. (a) Whether or not the
Closing takes place, all fees, costs and expenses incurred in connection with,
or in anticipation of, this Agreement and to consummate the transactions
contemplated hereby shall be paid by the party incurring

<PAGE>

                                                                              41

such expense, including all such fees, costs and expenses incurred pursuant to
Section 6.05, except as provided in Article VIII and Section 6.09 and except
that all such fees, costs and expenses of third party professionals, including
BT Alex.Brown Incorporated and Hennigan, Mercer & Bennett incurred by the
Company, shall be paid by SSC, except that after the Closing Purchaser shall
cause the Company to pay any remaining unpaid fees, costs and expenses incurred
by the Company pursuant to the written retainer agreement with John C. Bender
dated November 14, 1996, and any fees, costs and expenses of
PricewaterhouseCoopers LLP incurred by the Company.

                  (b) All Transfer Taxes applicable to the transfer of the
Shares shall be paid by SSC. Each party shall use reasonable efforts to avail
itself of any available exemptions from any such Taxes or fees, and to cooperate
with the other parties in providing any information and documentation that may
be necessary to obtain such exemptions.

                  SECTION 6.07. BROKERS OR FINDERS. Each of Purchaser, the
Company and each Seller represents and warrants, as to itself and its
affiliates, that no agent, broker, investment banker or other firm or person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, except, as to the Company, BT Alex.Brown Incorporated, whose fees and
expenses will be paid by SSC.

                  SECTION 6.08. RESIGNATIONS. On the Closing Date, the Company
shall cause to be delivered to Purchaser duly signed resignations from the board
of directors of the Company, effective immediately after the Closing, of all the
directors and shall take such other action as is necessary to accomplish the
foregoing.

                  SECTION 6.09. TAX MATTERS. (a) For any taxable period of the
Company as a separate taxpayer that includes (but does not end on) the Closing
Date (a "Straddle Period"), Purchaser shall timely prepare and file with the
appropriate authorities all Tax Returns required to be filed and shall pay all
Taxes due with respect to such Tax Returns.

For any taxable period that ends on or before the Closing Date, Purchaser shall
timely prepare and timely file with the appropriate authorities, all Tax Returns
required to be filed for such period other than the consolidated Federal income
Tax Return for the affiliated group that includes the

<PAGE>

                                                                              42

Company, SSC and JLC Holdings, Inc., and any other Tax Return for which the
Company is part of any consolidated, combined, unitary, affiliated or aggregate
group that includes SSC or JLC Holdings, Inc.; PROVIDED, HOWEVER, that (i) the
Preferred Sellers shall pay all Taxes due with respect to such Tax Returns and
reimburse Purchaser for all out-of-pocket costs and expenses incurred to prepare
such Tax Returns (except to the extent, if any, that such Taxes have been
expressly accrued as a separate liability on the 1998 Financial Statements of
the Company or that such fees and expenses are to be borne by the Company
pursuant to the last sentence of Section 6.09(g)(i)), and (ii) no such Tax
Return shall be filed without the written consent of JLC Holdings, Inc. (which
consent may not be unreasonably delayed or withheld).

For any taxable period that ends on or before the Closing Date or includes but
does not end on the Closing Date, Sellers and JLC Holdings, Inc. shall cause
PricewaterhouseCoopers LLP to timely prepare and timely file with the
appropriate authorities the consolidated Federal income Tax Return for the
affiliated group that includes the Company, SSC and JLC Holdings, Inc., and any
other Tax Return for which the Company is part of any consolidated, combined,
unitary, affiliated or aggregate group that includes SSC or JLC Holdings, Inc.,
and shall pay all Taxes due with respect to the Company pursuant to such Tax
Returns; PROVIDED, HOWEVER, that (i) each such Return shall be filed on a basis
consistent with the amended Tax Returns filed in accordance with Section
6.09(g)(i), (ii) at least 30 days prior to the due date for filing any such Tax
Return (taking into account any applicable extensions), JLC Holdings, Inc. shall
furnish Purchaser with a completed copy of each such Tax Return for Purchaser's
review and comment, (iii) no such Tax Return shall be filed with any Taxing
Authority without Purchaser's prior written consent (which consent shall not be
unreasonably delayed or withheld), and (iv) Purchaser shall reimburse Sellers
for the reasonable fees and expenses of PricewaterhouseCoopers LLP for the
preparation of such Tax Returns. Except as contemplated by clause (i) of the
proviso in the preceding sentence, any Tax Return described in this Section
6.09(a) shall be prepared on a basis consistent with the past practices of the
Company and the affiliated group that includes the Company, SSC and JLC
Holdings, Inc. and in a manner that does not distort taxable income (E.G., by
deferring income or accelerating deductions), except to the extent that any
inconsistency or distortion would not adversely affect the Company after the
Closing Date. All Tax Returns for any period including the Closing Date shall be
filed on the basis that the relevant taxable period ended as of the close of
business on the

<PAGE>

                                                                              43

Closing Date, unless the relevant Taxing Authority will not accept a Tax Return
filed on that basis.

                  (b) SSC, JLC Holdings, Inc., the Company and Purchaser shall
reasonably cooperate, and shall cause their respective affiliates, officers,
employees, agents, auditors and representatives reasonably to cooperate, in
preparing and filing all Tax Returns and any election referred to in Section
6.09(e) and with respect to the other Tax matters referred to in this Section
6.09, including without limitation providing copies of all correspondence to or
from any Taxing Authority promptly after sending or receiving such
correspondence and maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and audits with
respect to all taxable periods relating to Taxes; PROVIDED, HOWEVER, that in no
event shall Purchaser be required to provide any Tax Return to SSC or JLC
Holdings, Inc. (except as contemplated by the second sentence of Section
6.09(a)).

                  (c) With respect to any Company Tax Return relating to any
taxable period (other than the consolidated Federal income Tax Return for the
affiliated group that includes the Company, SSC and JLC Holdings, Inc., and any
other Tax Return for which the Company is part of any consolidated, combined,
unitary, affiliated or aggregate group that includes SSC or JLC Holdings, Inc.),
Purchaser shall have the right, at its sole cost and expense, to supervise,
control and coordinate any examination or audit process by any Taxing Authority,
and to negotiate, resolve, settle or contest any asserted Tax deficiencies or
assert and prosecute any claims for refunds; PROVIDED, HOWEVER, that without the
prior written consent of each of the Preferred Sellers (which consent may not be
unreasonably delayed or withheld), Purchaser shall not take any such action, or
amend any Tax Return, if such action could result in (i) any claim for
indemnification by any Purchaser Indemnitee (as defined in Section 8.01(a))
against any of the Preferred Sellers, or (ii) any liability or obligation of JLC
Holdings, Inc., SSC or any of the Preferred Sellers for Taxes; and PROVIDED
FURTHER, that in the case of any refund claim for any Tax paid by the Preferred
Sellers with respect to a Tax Return referred to in the second sentence of
Section 6.09(a), Purchaser shall prosecute any claim for refund that is
reasonably requested by the Preferred Sellers if the Preferred Sellers agree to
reimburse Purchaser for all out-of-pocket costs and expenses incurred to
prosecute such refund claim. Any such Tax refund (and the interest received
thereon) with respect to a Tax Return referred to in the second sentence of
Section 6.09(a) shall belong to (and shall be paid to) the Preferred Sellers.
With respect

<PAGE>

                                                                              44

to the consolidated Federal income Tax Return for the affiliated group that
includes the Company, SSC and JLC Holdings, Inc. or any other Tax Return for
which the Company is part of any consolidated, combined, unitary, affiliated or
aggregate group that includes SSC or JLC Holdings, Inc. for any taxable period,
the Preferred Sellers shall have the right, at their sole cost and expense, to
supervise, control and coordinate any examination or audit process by any Taxing
Authority, and to negotiate, resolve, settle or contest any asserted Tax
deficiencies or assert and prosecute any claims for refunds; PROVIDED, HOWEVER,
that (I) any such action by the Preferred Sellers shall be consistent with
Sections 6.09(e), (f) and (g), (II) no such Preferred Seller shall take any such
action which may have a material adverse effect on the Company or Purchaser
without Purchaser's written consent (which consent may not be unreasonably
delayed or withheld) and (III) Purchaser shall have the right, at its sole cost
and expense, to take any of the actions described in this sentence with respect
to any examination, audit or proceeding that primarily involves Tax liabilities
and/or Tax attributes of the Company for which the Preferred Sellers would not
be responsible pursuant to Section 8.01 (taking into account the limitations in
Section 8.01(b)); PROVIDED, FURTHER, HOWEVER, that Purchaser may not enter into
any proposed settlement agreement pursuant to clause (III) above without the
consent of the Preferred Sellers (which consent may not be unreasonably delayed
or withheld) if such settlement agreement would result in a final determination
of Tax liabilities and/or Tax attributes as to which the Preferred Sellers would
bear more than half the cost pursuant to Section 8.01. The control rights set
forth in this Section 6.09(c) shall supersede those set forth in Section 8.04(b)
as applied to Tax proceedings.

                  (d)  JLC Holdings, Inc. shall cause the provisions
of any Tax sharing agreement between JLC Holdings, Inc. or
any of its affiliates (other than the Company), and the
Company to be terminated on or before the Closing Date.
After the Closing Date, no party shall have any rights or
obligations under any such Tax sharing agreement.

                  (e) (i) In the event that all the Tax Returns described in the
first two sentences of Section 6.09(g)(i) have not been prepared and filed with
the applicable Taxing Authority in accordance with Section 6.09(g)(i) on or
before the Closing Date or the amended Tax Returns described therein for each
applicable Tax jurisdiction do not result in an aggregate net Tax basis increase
of at least $16,000,000 as of December 31, 1998, so as to result in an aggregate
Tax basis of at least $75,000,000 as of

<PAGE>

                                                                              45

December 31, 1998 in each such jurisdiction (the failure to satisfy such
condition being referred to herein as the "Triggering Event"), then, at
Purchaser's election in its sole discretion (the "Section 338(h)(10) Election"),
Sellers shall cause JLC Holdings, Inc. to (and JLC Holdings, Inc. shall) (x)
join Purchaser in timely making an election under Section 338(h)(10) of the Code
(and any comparable election available under applicable state or local Tax law)
with respect thereto and (y) cooperate with Purchaser in the completion and
timely filing of such elections in accordance with the provisions of Treasury
Regulation Section 1.338(h)(10)-1 (or any comparable provisions of state or
local Tax law). In the event Purchaser makes the Section 338(h)(10) Election,
Purchaser and JLC Holdings, Inc. shall endeavor in good faith to agree upon the
fair market value of the assets of the Company for purposes of Section
338(h)(10) of the Code (and any comparable provisions of state or local Tax law)
within 45 days after the date on which Purchaser notifies the Preferred Sellers
of its final decision to make the Section 338(h)(10) Election. To facilitate
such agreement, Purchaser shall initially prepare a completed set of Internal
Revenue Service Forms 8023 and all attachments required to be filed therewith
pursuant to applicable Treasury Regulations ("Form 8023") (and any comparable
forms required to be filed under state or local Tax law) and, no later than 15
days after making the Section 338(h)(10) Election, deliver said forms to JLC
Holdings, Inc. for approval and execution, which approval and execution shall
not be unreasonably delayed or withheld; PROVIDED, HOWEVER, that if Purchaser
and JLC Holdings, Inc. cannot agree upon the fair market value of the assets of
the Company within the 45 day period described in the preceding sentence, then
Purchaser may finalize and file said forms (and JLC Holdings, Inc. must execute
said forms) after good faith consideration of the views of JLC Holdings, Inc. as
to the fair market value of the assets of the Company. None of the parties (nor
any of their respective affiliates) shall take any position on any Tax Return or
with any Taxing Authority that is inconsistent with the fair market values set
forth in such Form 8023 (and any such comparable forms). In the event that the
Section 338(h)(10) Election is made, the Preferred Sellers shall be responsible
for paying the first $200,000 of any Taxes incurred by the Company as a result
of any election made under Section 338(h)(10) of the Code (and any comparable
elections available under applicable state or local law) pursuant to this
Section 6.09(e) and the first $200,000 of reasonable fees and expenses of
PricewaterhouseCoopers LLP with respect to the preparation of the amended Tax
Returns described in Section 6.09(g)(including without limitation the fees and
expenses of PricewaterhouseCoopers LLP incurred by the Company before

<PAGE>

                                                                              46

the Closing Date for work on matters relating to such amended Tax Returns); any
such Taxes in excess of $200,000 in the aggregate and/or any such fees and
expenses in excess of $200,000 in the aggregate shall be paid by Purchaser.

         (ii) In the event that the Triggering Event does not occur, then
Purchaser may in its sole discretion nevertheless make the Section 338(h)(10)
Election and the parties hereto will be subject to the provisions of Section
6.09(e)(i); PROVIDED, HOWEVER, that the $200,000 limitations in the last
sentence of Section 6.09(e)(i) shall each be reduced to $100,000.

         (iii) In the event that it is reasonably likely that the Taxes
described in the last sentence of Section 6.09(e)(i) will exceed $200,000 (or,
if Section 6.09(e)(ii) applies, $100,000), then, notwithstanding any provision
herein to the contrary, Purchaser may direct and control the filing of all
amended Tax Returns described in Section 6.09(g) (and any other similar amended
Tax Returns), including without limitation requiring that any such amended Tax
Returns that have not previously been prepared and filed be prepared and filed
at its direction and requiring that any such amended Tax Return that has
previously been prepared and filed be modified or superseded by a further
amended Tax Return in order to reduce such Taxes. Any expenses incurred in
connection with any such amended Tax Returns shall be borne by the Preferred
Sellers to the extent contemplated by Section 6.09(e)(i) (and, if applicable,
Section 6.09(e)(ii)) and otherwise by Purchaser.

         (iv) Notwithstanding Section 6.09(g), in the event that Purchaser makes
a Section 338(h)(10) Election, and, based upon the amended Tax Returns described
in Section 6.09(g) that have been filed by the Closing Date, the Taxes and fees
and expenses described in the last sentence of Section 6.09(e)(i) would not
exceed the applicable thresholds, Sellers may elect to not file any other
amended Tax Returns described in Section 6.09(g); PROVIDED, HOWEVER, that, if
Sellers make such election, any such Taxes or fees and expenses in excess of
such threshold shall be the sole responsibility of Sellers.

                  (f) JLC Holdings, Inc. shall be responsible for filing any
amended consolidated, combined or unitary Tax Returns for taxable years ending
on or prior to the Closing Date which are required as a result of examination
adjustments made by the Internal Revenue Service or by the applicable state,
local or foreign Taxing Authority for such taxable years as finally determined;
PROVIDED, HOWEVER, that (i) any such Tax Return shall be consistent with the
amended

<PAGE>

                                                                              47

Tax Returns filed in accordance with Section 6.09(g) and (ii) no such Tax Return
shall be filed without the prior written consent of Purchaser (which consent may
not be unreasonably delayed or withheld). For those jurisdictions in which
separate Tax Returns are filed by the Company, any required amended returns
resulting from such examination adjustments, as finally determined, shall be
prepared by JLC Holdings, Inc. in a manner consistent with the amended Tax
Returns filed in accordance with Section 6.09(g) and furnished to the Company
for approval (which approval may not be unreasonably delayed or withheld),
signature and filing at least 30 days prior to the due date for filing such Tax
Returns.

                  (g) (i) As soon as practicable after June 3, 1999 and in all
events before the Closing Date, the Sellers shall cause the Federal income Tax
consolidated group of which JLC Holdings, Inc. is the common parent to (and JLC
Holdings, Inc. shall) (x) prepare and file amended Federal income Tax Returns
for 1995 and thereafter as necessary so as to increase, on a net basis, the Tax
basis of the Company's assets for Federal income Tax purposes as of December 31,
1998 by at least $16,000,000 (or such lower amount which is the maximum amount
of basis increase for which there is a reasonable basis in law and fact) from
what such Tax basis would have been if no such amended Tax Returns had been
filed so as to result in an aggregate Tax basis for the Company's assets as of
December 31, 1998 of at least $75,000,000 (or an amount corresponding to any
such lower basis increase amount) by correcting the prior Federal income Tax
Returns of such group in accordance with the principles set forth in Schedule
6.09(g) and (y) prepare and file the 1998 Federal income Tax Return for such
group on a basis consistent with such amended Tax Returns. Before the Closing
Date, the Sellers and JLC Holdings, Inc. also shall cause corresponding amended
Tax Returns to be prepared and filed by the Company or the consolidated,
combined, unitary, affiliated or aggregate group, as applicable, in each of the
ten state and local Tax jurisdictions listed in Schedule 6.09(g) and cause the
1998 Tax Return for the Company or such group, as applicable, to be filed in
each such jurisdiction. By June 21, 1999, Sellers and JLC Holdings, Inc. shall
cause to be prepared and filed all other state and local income, franchise or
similar Tax Returns that must be filed for 1998 by the Company or the
consolidated, combined, unitary, affiliated or aggregate group of which the
Company is a member, as applicable, on a basis that is consistent with the Tax
Returns described in the first two sentences of this Section 6.09(g)(i). Subject
to Section 6.09(e), (I) each amended Tax Return described in the first two
sentences of this Section 6.09(g)(i) shall be prepared

<PAGE>

                                                                              48

by PricewaterhouseCoopers LLP at the sole cost and expense of the Preferred
Sellers and each 1998 Tax Return shall be reviewed and signed as preparer (but
not actually prepared) by PricewaterhouseCoopers LLP at the sole cost and
expense of the Company and (II) each such amended Tax Return and each such 1998
Tax Return shall be submitted to Purchaser for review and comment at least ten
days prior to the Closing Date (or three days prior to the Closing Date in the
case of non-Federal Tax Returns) and shall not be filed without the prior
written consent of Purchaser (which consent may not be unreasonably delayed or
withheld, it being understood that, absent manifest error, Purchaser may not
withhold its consent to any such amended Tax Return that is based solely on the
principles set forth in Schedule 6.09(g)).

         (ii) Other than as may be required by Sec tion 6.09(g)(i), after the
date this Agreement is signed, neither SSC, JLC Holdings, Inc. or the Company or
any consolidated, combined, unitary, affiliated or aggregate group of which the
Company is a member shall make or change any Tax election, change an annual Tax
Accounting period, adopt or change any Tax accounting method, file any amended
Tax Return, enter into any closing agreement, settle any Tax Claim or
assessment, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the statute of limitations period applicable to any Tax
Claim or assessment, take any other action or omit to take any action relating
to Taxes, if any such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action or omission would have the effect
of increasing the Tax liability or reducing any net operating loss, net capital
loss, investment tax credit, foreign tax credit, charitable deduction or tax
basis or any other credit or tax attribute of the Company which could reduce
Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes) without the prior written consent of Purchaser (which
consent may not be withheld if such action or omission is not expected to cause
a material adverse effect on the Company after the Closing Date).

                  (h) Purchaser agrees to cause the Company (i) to use its
reasonable best efforts to properly retain and maintain all Records (as defined
in Section 6.13) relating to Taxes of the Company for the Pre-Closing Tax Period
for the full period of the applicable statutes of limitations, including
extensions, for the period to which such Taxes relate, and (ii) to allow the
Preferred Sellers and their agents and representatives, at times and dates
mutually acceptable to the parties, to inspect, review and make

<PAGE>

                                                                              49

copies of such Records as the Preferred Sellers may reasonably deem necessary or
appropriate from time to time, such activities to be conducted during normal
business hours and at the Preferred Sellers' expense.

                  (i) In the event any audit, amended Tax Return or other action
results in a refund of Taxes (i) relating to the consolidated Federal income Tax
Return for the affiliated group that includes the Company, SSC and JLC Holdings,
Inc. for any Pre-Closing Tax Period, or any other Tax Return for which the
Company is part of any consolidated, combined, unitary, affiliated or aggregate
group that includes SSC or JLC Holdings, Inc., the Preferred Sellers shall be
entitled to such refund (including any interest thereon) provided that Purchaser
shall be entitled to any such refund (including any interest thereon) that is
attributable to any Tax for which it is responsible pursuant to Section 6.09(e);
or (ii) relating to any other Tax Return, Purchaser shall be entitled to such
refund including any interest thereon (except to the extent, if any, that the
Preferred Sellers are expressly entitled to such refund pursuant to Section
6.09(c)). The recipient of any refund described in this Section 6.09(i) shall
promptly forward to the applicable party(ies) or reimburse such party(ies) for
all refunds due to such party(ies) pursuant to the preceding sentence.

                  (j) JLC Holdings, Inc. agrees that it shall not elect to
reattribute to itself pursuant to Treasury Regulation Section 1.1502-20(g) any
net operating loss carryovers or net capital loss carryovers of the Company.

                  (k) Sellers shall cause JLC Holdings, Inc. to (and JLC
Holdings, Inc. shall) (i) give Purchaser thirty days advance written notice of
the adoption by JLC Holdings, Inc. of any plan to liquidate and/or dissolve,
(ii) designate the Company to be the common agent of the Federal income tax
consolidated group of which JLC Holdings, Inc. was the common parent for all
periods during which the Company was a member thereof by providing notice to the
Internal Revenue Service in the manner prescribed by Treasury Regulation Section
1.1502-77 (or any successor provision) and (iii) take such actions as may be
necessary to cause the Company to be treated as the common agent of (or to have
any similar status with respect to) each consolidated, combined, unitary,
affiliated or aggregate group that included the Company for state and local Tax
purposes.

                 SECTION 6.10. SUPPLEMENTAL DISCLOSURE. (a) SSC and the Company
shall have the continuing obligation until the Closing promptly to supplement or
amend the Schedules

<PAGE>

                                                                              50

with respect to any matter hereafter arising or discovered that, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules; PROVIDED, HOWEVER, that for the purpose of the
rights and obligations of the parties under this Agreement, any such
supplemental or amended Schedule shall not be deemed to have been disclosed as
of the date of this Agreement. It is understood that a breach of this covenant
will not result in any obligation for indemnification pursuant to Section
8.01(a)(ii).

                  (b) SSC and the Company shall promptly notify Purchaser of,
and furnish Purchaser any information it may reasonably request with respect to,
the occurrence to the knowledge of SSC and the Company of any event or condition
or the existence to the knowledge of SSC and the Company of any fact that would
cause any of the conditions to Purchaser's obligations to consummate the
Acquisition not to be fulfilled.

                  (c) Purchaser shall promptly notify SSC and the Company of,
and furnish SSC and the Company any information they may reasonably request with
respect to, the occurrence to Purchaser's knowledge of any event or condition or
the existence to Purchaser's knowledge of any fact that would cause any of the
conditions to Sellers' obligations to consummate the Acquisition not to be
fulfilled.

                 SECTION 6.11. POST-CLOSING COOPERATION. (a) SSC and Purchaser
shall cooperate with each other, and shall cause their officers, agents,
auditors and representatives to cooperate with each other, for a period of 180
days after the Closing to ensure the orderly transition of the Company from
Sellers to Purchaser and to minimize any disruption to the Company that might
result from the transactions contemplated hereby (it being understood that a
breach of this covenant will not result in any obligation for indemnification
pursuant to Section 8.01(a)(ii)). After the Closing, upon reasonable written
notice, SSC and Purchaser shall furnish or cause to be furnished to each other
and their respective employees, counsel, auditors and representatives access,
during normal business hours, to such information and assistance relating to the
Company (to the extent within the control of such party) as is reasonably
necessary for financial reporting and accounting matters.

                  (b) Each party shall reimburse the other for reasonable
out-of-pocket costs and expenses incurred in assisting the other pursuant to
this Section 6.11. Neither party shall be required by this Section 6.11 to take
any

<PAGE>

                                                                              51

action that would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations (or, in the case of Purchaser, those
of the Company).

                  SECTION 6.12. PUBLICITY. From the date hereof through the
earlier to occur of the Closing or termination hereof in accordance with Article
IX, no public release or announcement concerning the transactions contemplated
hereby shall be issued by any party without the prior consent of SSC and
Purchaser (which consent shall not be unreasonably withheld), except as such
release or announcement may be required by law or the rules or regulations of
any United States or foreign securities exchange, in which case the party
required to make the release or announcement shall allow the other party
reasonable time to comment on such release or announcement in advance of such
issuance.

                  SECTION 6.13. RECORDS. On the Closing Date, SSC shall deliver
or cause to be delivered to Purchaser all agreements, documents, books, records
and files, including records and files stored on computer disks or tapes or any
other storage medium (collectively, "Records"), if any, in the possession of SSC
or JLC Holdings, Inc. relating to the business and operations of the Company, to
the extent not then in the possession of the Company, subject to the following
exceptions:

                  (i) Purchaser recognizes that certain Records may contain
         incidental information relating to the Company or may relate primarily
         to SSC or JLC Holdings, Inc., and that SSC may retain such Records and
         shall provide copies of the relevant portions thereof to Purchaser;

                  (ii) SSC may retain all Records prepared in connection with
         the sale of the Shares, including bids received from other parties and
         analyses relating to the Company; and

                  (iii) SSC may retain any personal tax returns, reports or
         forms, and Purchaser shall be provided with copies of such returns,
         reports or forms to the extent they relate to the Company's returns or
         tax liability.

                  SECTION 6.14. AGREEMENT NOT TO SOLICIT EMPLOYEES. For a period
of three years from the Closing, SSC, JLC Holdings, Inc. and Sylvan shall not,
and shall cause each of their affiliates (in no event including GE Cap-Eq and
Pyramid) not to, directly or indirectly solicit, recruit or hire any employee of
the Company or person who has worked for the Company or solicit or encourage any
employee of the Company to leave the employment of the Company.

<PAGE>

                                                                              52

                 SECTION 6.15. CERTAIN LICENSES AND PERMITS. SSC agrees that all
permits, licenses and authorizations which are held in the name of any employee,
officer, director, stockholder, agent or otherwise on behalf of the Company
shall be duly and validly transferred to the Company without consideration prior
to the Closing and that the representations, warranties, covenants and
conditions contained in this Agreement shall apply to the same as if held by the
Company as of the date hereof.

                  SECTION 6.16. FURTHER ASSURANCES. From time to time, as and
when requested by any party, each party shall execute and deliver, or cause to
be executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions (subject to Section 6.05),
as such other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement, including, in the case of Sellers,
executing and delivering to Purchaser such assignments, deeds, bills of sale,
consents and other instruments as Purchaser or its counsel may reasonably
request as necessary or desirable for such purpose.

                  SECTION 6.17. ASSIGNMENT OF CONFIDENTIALITY AGREEMENTS. On the
Closing Date, SSC shall, and shall cause JLC Holdings, Inc. to, assign to
Purchaser its rights under all confidentiality agreements, if any, entered into
by it in connection with the proposed sale of the Company to the extent such
rights relate to the Company. Copies of such confidentiality agreements shall be
provided to Purchaser on the Closing Date.

                  SECTION 6.18. FINANCIAL STATEMENTS. Prior to or at the
Closing, SSC shall cause to be delivered to Purchaser (i) the Company's audited
balance sheets as of December 31, 1997 and December 31, 1998, and the related
audited statements of operations, stockholders' deficit and cash flows of the
Company for the fiscal years then ended, together with the notes to such
financial statements and the unqualified report thereon of
PricewaterhouseCoopers LLP which balance sheets and statements and notes shall
be identical (except that they will not include any going-concern qualifications
and related disclosure and except for changes directly relating to the
Acquisition and the other transactions contemplated hereby) to the financial
statements for the fiscal years ended December 31, 1997 and December 31, 1998,
and the related notes set forth in Schedule 4.05, and (ii) the Company's audited
balance sheet as of March 31, 1999 (the "March Balance Sheet") and the related
audited statements of operations (the "Statement of Operations"), stockholders'
deficit and cash flows of the

<PAGE>

                                                                              53

Company for the three months then ended, together with the notes thereto
prepared in accordance with GAAP applied on a basis consistent with the
practices and procedures followed in the preparation of the Company's Financial
Statements and the unqualified report thereon of Arthur Andersen.

                  SECTION 6.19. BENEFIT PLAN MATTERS. For a period of 12 months
after the Closing, Purchaser shall maintain, or cause to be maintained, benefits
for employees of the Company that, in the aggregate, are substantially similar
to those provided to such employees as of the date of this Agreement. Until
December 31, 1999, Purchaser shall maintain, or cause to be maintained, the same
severance plans and policies for employees of the Company as those provided to
such employees as of the date of this Agreement. Until December 31, 1999,
Purchaser shall maintain, or cause to be maintained, the Key Management Bonus
Program and Sales Force Compensation Plan.

                 SECTION 6.20. STRATEGIC ALLIANCE AGREEMENT. Each of Sylvan and
the Company agrees that it will not, and each Seller agrees that it will not
authorize or take any other action to permit the Company to, amend, terminate or
repudiate the Strategic Alliance Agreement dated as of the date hereof between
Sylvan and the Company (the "Strategic Alliance Agreement") or any of the terms
thereof between the date of this Agreement and the Closing.

                                   ARTICLE VII

                              CONDITIONS PRECEDENT

                  SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION. The
obligation of Purchaser to purchase and pay for the Shares and the obligation of
Sellers to sell the Shares to Purchaser is subject to the satisfaction or waiver
by SSC and Purchaser on or prior to the Closing of the following conditions:

                  (a) GOVERNMENTAL APPROVALS. The waiting period under the HSR
Act, if applicable to the consummation of the Acquisition, shall have expired or
been terminated. All other authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity necessary for the consummation of the Acquisition shall have
been obtained or filed or shall have occurred.

                  (b)  NO INJUNCTIONS OR RESTRAINTS.  No Applicable
Law or Injunction enacted, entered, promulgated, enforced or

<PAGE>

                                                                              54

issued by any Governmental Entity or other legal restraint or prohibition
preventing the consummation of the Acquisition shall be in effect.

                  SECTION 7.02. CONDITIONS TO OBLIGATION OF PURCHASER. The
obligation of Purchaser to purchase and pay for the Shares is subject to the
satisfaction (or waiver by Purchaser) on or prior to the Closing Date of the
following conditions:

                  (a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Seller and the Company in this Agreement shall be true and
correct as of the date hereof and as of the Closing Date as though made on the
Closing Date, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be true and correct on and as of such earlier date), and Purchaser shall
have received a certificate signed by an authorized officer of each Seller and
the Company to such effect.

                 (b) PERFORMANCE OF OBLIGATIONS OF SELLERS. Each Seller and the
Company shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by such Seller or the Company by the time of the Closing, and Purchaser
shall have received a certificate signed by an authorized officer of each Seller
and the Company to such effect.

                  (c) ESCROW AGREEMENT. The Company, the Preferred Sellers and
the Escrow Agent shall have executed and delivered the Escrow Agreement to
Purchaser.

                  (d) ABSENCE OF PROCEEDINGS. There shall not be pending or
threatened by any Governmental Entity (other than any school or school district)
any Proceeding (or by any other person, including any school or school district,
any Proceeding that has a reasonable likelihood of success) (i) challenging or
seeking to restrain or prohibit the Acquisition or any other transaction
contemplated by this Agreement or seeking to obtain from Purchaser in connection
with the Acquisition any damages that are material in relation to Purchaser,
(ii) seeking to prohibit or limit the ownership or operation by Purchaser of any
material portion of the business or assets of Purchaser or the Company, or to
compel Purchaser or the Company to dispose of or hold separate any material
portion of the business or assets of Purchaser or the Company, in each case as a
result of the Acquisition or any of the other transactions contemplated by this
Agreement, (iii) seeking to impose limitations on the

<PAGE>

                                                                              55

ability of Purchaser to acquire or hold, or exercise full rights of ownership
of, the Shares, including the right to vote the Shares on all matters properly
presented to the stockholders of the Company or (iv) seeking to prohibit
Purchaser from effectively controlling in any material respect the business or
operations of the Company.

                  (e) NAME. The Trademark License Agreement between Purchaser,
Jostens, Inc. and the Company dated as of the date hereof regarding use of the
marks and name and proprietary designations comprising the Jostens name shall be
in full force and effect and Jostens, Inc. shall not have repudiated such
Agreement or any of its terms.

                  (f) FINANCING. Purchaser shall have received the funds
described in, and on the terms and conditions set forth in, the commitment
letters previously delivered to Sellers or upon terms and conditions that are
substantially equivalent thereto, and to the extent that any of the terms and
conditions are more onerous or more costly than the terms and conditions set
forth in such commitment letters, on terms and conditions reasonably
satisfactory to Purchaser.

                  (g) OTHER DOCUMENTS. Sellers and the Company shall have
furnished to Purchaser such other documents (including legal opinions) relating
to corporate existence and authority, enforceability of this Agreement, title to
the Shares, absence of Liens, and such other matters as Purchaser or its counsel
may reasonably request.

                  (h) FINANCIAL PERFORMANCE. Earnings before interest, taxes,
depreciation, amortization and restruc turing charges of the Company ("EBITDA")
as derived from the Statement of Operations shall be no less than $(1,350,000)
and EBITDA for the 12 months ended March 31, 1999 shall be at least $6,900,000.
Stockholders' Equity as set forth in the March Balance Sheet shall be not less
than $(46,840,000).

                  (i) CERTAIN EMPLOYMENT AGREEMENTS. Purchaser shall have
negotiated employment agreements between the Company and Therese K. Crane, Joyce
F. Russell, Nancy Lockwood and Susan R. Collins, on terms satisfactory to
Purchaser, which shall be in full force and effect as of the Closing and none of
the employees who have entered into such agreements shall have repudiated such
agreements or any of the terms therein. In connection with such negotiations,
Purchaser shall have caused any prior employment agreement between any such
individual and the Company to terminate and be without further force or effect
as of the Closing.

<PAGE>

                                                                              56

Except for claims or rights under the agreements as and to the extent set forth
in Schedule 7.02, Purchaser shall have obtained releases from such individuals
discharging any claims or rights under any prior employment agreements with the
Company, and taken any other action required to effect the foregoing as of the
Closing, without any liability or other adverse consequences to the Company or
Purchaser.

                  (j) AFFILIATE AGREEMENTS. The Strategic Alliance Agreement
shall not have been amended or terminated and shall be in full force and effect
as of the Closing and none of the parties thereto shall have repudiated such
agreement or any of the terms thereof. The Management and Advisory Agreement by
and between JLC Holdings, Inc., SSC, JLC Acquisition Corp. and Bain Capital
Partners IV, L.P. dated as of June 29, 1995, shall have been terminated without
any payments of amounts due thereunder, whether or not overdue, and otherwise
without any liability or adverse consequence to the Company.

                  (k) FIRPTA CERTIFICATE. Each Seller shall have delivered to
Purchaser at the Closing a certificate, in form and substance satisfactory to
Purchaser, certifying that the Acquisition is exempt from withholding pursuant
to the Foreign Investment in Real Property Tax Act.

                  (l) AMENDED TAX RETURNS. All the amended Tax Returns described
in the first two sentences of Section 6.09(g)(i) shall have been prepared and
filed with the applicable Taxing Authority in accordance with Section 6.09(g)(i)
unless Purchaser in its sole discretion chooses to exercise its option to make
the Section 338(h)(10) Election (in which event, subject to Sections
6.09(e)(iii) and (iv), Sellers shall be required to file any remaining amended
Tax Returns described in Section 6.09(g) as promptly as practicable after the
Closing Date).

                  SECTION 7.03. CONDITIONS TO OBLIGATIONS OF SELLERS. The
obligations of Sellers to sell the Shares is subject to the satisfaction (or
waiver by SSC) on or prior to the Closing Date of the following conditions:

                  (a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser made in this Agreement shall be true and correct as of
the date hereof and as of the Closing Date as though made on the Closing Date,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties shall be true
and correct on and as of such earlier date), and Sellers shall

<PAGE>

                                                                              57

have received a certificate signed by an authorized
representative of Purchaser to such effect.

                  (b) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by
Purchaser by the time of the Closing, and Sellers and the Company shall have
received a certificate signed by an authorized representative of Purchaser to
such effect.

                  (c) ESCROW AGREEMENT. Purchaser and the Escrow Agent shall
have executed and delivered the Escrow Agreement to the Company and the
Preferred Sellers.

                  (d) STRATEGIC ALLIANCE AGREEMENT. The Strategic Alliance
Agreement shall be in full force and effect as of the Closing and the Company
shall not have repudiated such agreement or any of the terms thereof; PROVIDED,
HOWEVER, that the obligations of Sellers to sell the Shares shall not be subject
to satisfaction of this condition if any of the Preferred Sellers have breached
their covenants contained in Section 6.20.

                  SECTION 7.04. FRUSTRATION OF CLOSING CONDITIONS. Neither
Purchaser nor any Seller may rely on the failure of any condition set forth in
this Article VII to be satisfied if such failure was caused by such party's
failure to act in good faith or to use its commercially reasonable efforts to
cause the Closing to occur, as required by Section 6.05.

                                  ARTICLE VIII

                                 INDEMNIFICATION

                  SECTION 8.01. INDEMNIFICATION. (a) From and after the Closing,
the Preferred Sellers shall be liable for, and shall indemnify Purchaser, its
affiliates (including the Company), and each of their respective officers,
directors, employees, stockholders, agents and representatives (the "Purchaser
Indemnitees"), against and hold each Purchaser Indemnitee harmless from, any
loss, liability, claim, damage or expense including reasonable legal fees and
expenses (collectively, "Losses"), as incurred by such Purchaser Indemnitee to
the extent arising from, in connection with or otherwise with respect to:

                  (i) any breach of any representation or warranty
         of any Seller (in the case of a Specific Preferred
         Seller Obligation (as defined in Section 8.01(d)),

<PAGE>

                                                                              58

         subject to the limitation set forth in the first
         sentence of Section 8.01(d)) or the Company that
         survives the Closing pursuant to this Agreement; or

                  (ii) any breach of any covenant of any Seller (in the case of
         a Specific Preferred Seller Obligation, subject to the limitation set
         forth in the first sentence of Section 8.01(d)) or the Company
         contained in this Agreement.

Prior to pursuing any claim for indemnification for any Loss incurred by a
Purchaser Indemnitee arising from, in connection with or otherwise with respect
to any breach of the Limited Covenants (as defined below), Purchaser shall give
the Preferred Sellers written notice of such breach and an opportunity to cure
such breach within 15 days of receipt of such written notice.

                  (b) The Preferred Sellers shall not be required to indemnify
any Purchaser Indemnitee, and shall not have any liability:

                  (i) under clause (i) of Section 8.01(a) or, with respect to
         the covenants contained in Article VI (other than the covenants
         contained in Sections 6.04(b), 6.09(b), 6.09(c), 6.09(e), 6.09(g),
         6.09(h), 6.09(i), 6.09(j), 6.14 and 6.16 to be performed by the
         Preferred Sellers and other than the covenants contained in Sections
         6.06, 6.07, 6.11(b) and 6.20 (collectively, the "Limited Covenants")),
         under clause (ii) of Section 8.01(a) unless the aggregate of all Losses
         for which the Preferred Sellers would, but for this clause (i), be
         liable thereunder exceeds on a cumulative basis an amount equal to an
         aggregate of $1,000,000 (and taking into account both such clauses for
         purposes of calculating the aggregate of $1,000,000), and then only to
         the extent of any such excess, subject to clause (iii) of this Section
         8.01(b);

                  (ii) under clause (i) of Section 8.01(a) or, with respect to
         the covenants contained in Article VI (other than the Limited
         Covenants), under clause (ii) of Section 8.01(a) for any individual
         items where the Loss relating thereto is less than $125,000 (only for
         purposes of computing such amount, excluding any portion of such Loss
         that consists of incidental, consequential, prospective or special
         damages of any kind), and such items (including any portion of such
         Loss that consists of incidental, consequential, prospective or special
         damages of any kind) shall not

<PAGE>

                                                                              59

         be aggregated for purposes of clause (i) of this Section 8.01(b); and

                  (iii) under clause (i) of Section 8.01(a) or, with respect to
         the covenants contained in Article VI (other than the Limited
         Covenants), under clause (ii) of Section 8.01(a) in excess of an
         aggregate of $4,000,000 (and taking into account both such clauses for
         purposes of calculating the aggregate of $4,000,000).

                  (c) Except as otherwise specifically provided in this
Agreement, Purchaser acknowledges that its sole and exclusive monetary remedy
after the Closing with respect to any and all claims against any Seller relating
to this Agreement, the Acquisition and the other transactions contemplated
hereby (other than claims of, or causes of action arising from, fraud or
intentional breach) shall be pursuant to the indemnification provisions set
forth in this Article VIII.

                  (d) Subject to the limitations set forth in Section 8.01(b),
each Preferred Seller shall be fully and solely responsible for any obligations
under Section 8.01(a) for any breach of any representation, warranty or covenant
of such Preferred Seller (a "Specific Preferred Seller Obligation"), and no
other Preferred Sellers shall be liable therefor. All other obligations of the
Preferred Sellers under Section 8.01(a) shall be several, but shall be borne in
part by the Escrow described in Section 8.01(g), in accordance with the
following percentages (the "Applicable Percentages") except as otherwise
provided in the immediately succeeding sentence:

                  Escrow = 10%
                  Sylvan = 45%
                  Pyramid = 22.50%
                  GE Cap-Eq = 22.50%

As to claims made either prior to July 1, 2000 (to the extent relating to Losses
arising out of a breach of the covenants contained in Section 6.09(e)(i)
regarding payment of the amount of $200,000 for Taxes and the amount of $200,000
for fees and expenses of PricewaterhouseCoopers LLP, Section 6.09(e)(ii)
regarding payment of the amount of $100,000 for Taxes and the amount of $100,000
for fees and expenses of PricewaterhouseCoopers LLP, and Section 6.09(g)(i)
regarding (subject to Section 6.09(e)) payments of fees and expenses of
PricewaterhouseCoopers LLP for preparation of the amended Tax Returns described
therein or to the extent the Escrow has been reduced to zero) or

<PAGE>

                                                                              60

after June 30, 2000, the Applicable Percentages shall be as follows:

                  Sylvan = 50%
                  Pyramid = 25%
                  GE Cap-Eq = 25%

                  (e) From and after the Closing, Purchaser shall be liable for,
and shall indemnify each Preferred Seller and its affiliates and each of their
respective officers, directors, employees, stockholders, agents and
representatives (the "Preferred Seller Indemnitees") against, and hold it
harmless from any Loss as incurred by such Preferred Seller Indemnitee to the
extent arising from, in connection with or otherwise with respect to:

                  (i) any breach of any representation or warranty of Purchaser
         that survives the Closing pursuant to this Agreement; or

                  (ii) any breach of any covenant of Purchaser contained in this
         Agreement;

                  (f) Purchaser shall not be required to indemnify any Preferred
Seller Indemnitee, and shall not have any liability:

                  (i) under clause (i) of Section 8.01(e) unless the aggregate
         of all Losses for which the Purchaser would, but for this clause (i),
         be liable thereunder exceeds on a cumulative basis an amount equal to
         $1,000,000, and then only to the extent of any such excess, subject to
         clause (iii) of this Section 8.01(f);

                  (ii) under clause (i) of Section 8.01(e) for any individual
         items where the Loss relating thereto is less than $125,000 (only for
         purposes of computing such amount, excluding any portion of such Loss
         that consists of incidental, consequential, prospective or special
         damages of any kind) and such items (including any portion of such Loss
         that consists of incidental, consequential, prospective or special
         damages of any kind) shall not be aggregated for purposes of clause (i)
         of this Section 8.01(f); and

                  (iii) under clause (i) of Section 8.01(e) in excess of
         $4,000,000.

                  (g) Purchaser and the Company have agreed to, and at the
Closing shall (as set out in Section 1.03(e)), cause to be deposited the amount
of $400,000 into an Escrow to be

<PAGE>

                                                                              61

held and administered in accordance with the terms of the Escrow Agreement. The
purpose of the Escrow is to pay obligations under Section 8.01(a), as set out in
Section 8.01(d).

                 SECTION 8.02. CALCULATION OF LOSSES. (a) The amount of any Loss
for which indemnification is provided under this Article VIII shall be (i)
increased to take account of the present value (determined by using a discount
rate equal to the "applicable Federal rate" (as defined in Section 1274 of the
Code), compounded semi-annually, for short-term debt instruments) of any net Tax
cost incurred (or expected to be incurred in other Tax periods) by the Purchaser
Indemnitees or the Preferred Seller Indemnitees arising from the receipt of
indemnity payments hereunder (grossed up for such increase) and (ii) reduced to
take account of any net Tax benefit realized (or expected to be realized in
other Tax periods) by the Purchaser Indemnitees or the Preferred Seller
Indemnitees arising from the incurrence or payment of any such Loss. Any such
increase (or any such decrease) in Loss shall be treated as a Loss (or reduction
in Loss) under Section 8.01(a) or 8.01(e), as the case may be, for all purposes
of this Agreement (including, without limitation, the $4,000,000 limitation set
forth in Section 8.01(b)(iii) or 8.01(f)(iii), as the case may be, if
applicable). In computing the amount of any such Tax cost or Tax benefit, the
Purchaser Indemnitees or the Preferred Seller Indemnitees shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt of any indemnity payment hereunder
or the incurrence or payment of any indemnified Loss. Any indemnity payment
under this Agreement shall be treated as an adjustment to the purchase price for
Tax purposes, unless otherwise required by law.

                  (b) Any Loss for which indemnification is provided shall be
net of all amounts recovered under the Company's insurance policies, it being
understood that the Company shall use commercially reasonable efforts to pursue
claims under such insurance policies except to the extent that the Company
determines that it will be materially adversely affected by pursuing any such
claim. Any out-of-pocket expenses (in no event including charges for time
expended by Company personnel) incurred in pursuing such claim shall be
considered part of the Loss for which indemnification is provided.

                  Any Loss relating to Taxes for which indemnifi cation is
available to the Company under the Stock Purchase Agreement dated June 29, 1995,
by and between JLC Holdings,

<PAGE>

                                                                              62

Inc., SSC, and JLC Acquisitions, Inc., as purchasers, and Jostens, Inc., as
seller (the "Jostens Agreement"), shall be net of any actual recovery by the
Company under the Jostens Agreement (as reduced by any out-of-pocket expenses
(in no event including charges for time expended by Company personnel) incurred
in pursuing such claim), it being understood and agreed that the Company shall
use commercially reasonable efforts to pursue any applicable claims under the
Jostens Agreement (except to the extent that the Company determines that it
would be materially adversely affected by pursuing any such claim), that the
Company shall pursue such claims prior to pursuing a claim for indemnification
under this Agreement and that any otherwise applicable survival period for
indemnification by the Preferred Sellers pursuant to Section 10.01 shall be
extended for so long as any such claim is being pursued by the Company. The
Company shall give written notice to the Preferred Sellers of its pursuit of any
such claim.

                  SECTION 8.03. TERMINATION OF INDEMNIFICATION. The obligations
to indemnify and hold harmless any party, pursuant to Section 8.01(a) or
8.01(e), shall terminate when the applicable representation or warranty or
covenant terminates pursuant to Section 10.01; PROVIDED, HOWEVER, that such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice of such claim pursuant to Section 8.04 to the party to be providing the
indemnification.

                  SECTION 8.04. PROCEDURES. (a) In order for a person (the
"indemnified party") to be entitled to any indemnification provided for under
this Agreement in respect of, arising out of or involving a claim made by any
person against the indemnified party (a "Third Party Claim"), such indemnified
party must notify the indemnifying party in writing (and in reasonable detail)
of the Third Party Claim promptly following receipt by such indemnified party of
written notice of the Third Party Claim; PROVIDED, HOWEVER, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the indemnifying party shall have been actually prejudiced as a
result of such failure. Thereafter, the indemnified party shall deliver to the
indemnifying party, promptly following the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim other than those notices and
documents separately addressed to the indemnifying party.

<PAGE>

                                                                              63

                  (b) If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party. Should the indemnifying party so elect to assume the defense
of a Third Party Claim, the indemnifying party shall not be liable to the
indemnified party for any legal expenses subsequently incurred by the
indemnified party in connection with the defense and the resolution thereof. If
the indemnifying party assumes such defense, the indemnified party shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the indemnifying party, it
being understood that the indemnifying party shall control such defense and the
resolution thereof. The indemnifying party shall be liable for the reasonable
fees and expenses of counsel employed by the indemnified party for any period
during which the indemnifying party has not assumed the defense thereof (other
than during any period in which the indemnified party shall have failed to give
notice of the Third Party Claim as provided above) and during any such period
(not to exceed four weeks), the indemnified party shall not admit any liability
with respect to, or settle, compromise or discharge a Third Party Claim without
the indemnifying party's prior written consent (which consent shall not be
unreasonably withheld).

                  If the indemnifying party chooses to defend or prosecute a
Third Party Claim, all the indemnified parties shall cooperate in the defense or
prosecution thereof. Such cooperation shall include the retention and (upon the
indemnifying party's reasonable request) the timely provision to the
indemnifying party of records and information that are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. If the indemnifying party assumes the defense of a Third Party Claim,
no settlement or compromise thereof may be effected by the indemnifying party
without the indemnified party's prior written consent (which consent shall not
be unreasonably withheld). If the indemnifying party assumes the defense of a
Third Party Claim, the indemnified party shall agree to any settlement,
compromise or discharge of a Third Party Claim that the indemnifying party may
recommend and that by its terms obligates the indemnifying party to pay the full
amount of the liability in connection with such Third Party Claim, that releases
the indemnified party completely in connection with such Third Party Claim and

<PAGE>

                                                                              64

that would not otherwise adversely affect the indemnified party.

                  Notwithstanding the foregoing two paragraphs, the indemnifying
party shall not be entitled to assume the defense of any Third Party Claim (and
shall be liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if the Third Party Claim
seeks (i) monetary damages in excess of the maximum amount set forth in Section
8.01(b)(iii) or 8.01(e)(iii), as the case may be, or (ii) an order, injunction
or other equitable relief or relief for other than money damages against the
indemnified party that the indemnified party reasonably determines, after
conferring with its outside counsel, cannot be separated from any related claim
for money damages; PROVIDED, HOWEVER, that, in such case, the indemnified party
shall not admit any liability with respect to, or settle, compromise or
discharge such Third Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably withheld). If such equitable
relief or other relief portion of the Third Party Claim can be so separated from
that for money damages, the indemnifying party shall be entitled to assume the
defense of the portion relating to money damages.

                  (c) In the event any indemnified party should have a claim
against any indemnifying party under Section 8.01 that does not involve a Third
Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any indemnified
party so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to such indemnified party under
Section 8.01, except to the extent that the indemnifying party demonstrates that
it has been actually prejudiced by such failure. If the indemnifying party does
not notify the indemnified party within 30 calendar days following its receipt
of such notice that the indemnifying party disputes its liability to the
indemnified party under Section 8.01, such claim specified by the indemnified
party in such notice shall be conclusively deemed a liability of the
indemnifying party under Section 8.01 and the indemnifying party shall pay the
amount of such liability to the indemnified party on demand or, in the case of
any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the indemnifying party has timely
disputed its liability with respect to such claim, as

<PAGE>

                                                                              65

provided above, the indemnifying party and the indemnified party shall proceed
in good faith to negotiate a resolution of such dispute and, if not resolved
through negotiations, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction.

                  (d) For purposes of this Section 8.04 (except with respect to
Section 8.01(e)) and except with respect to the payment obligations of the
Preferred Sellers, Sylvan shall be considered the indemnifying party; PROVIDED,
HOWEVER, that in the event Sylvan fails to notify Purchaser (within 15 days
after Sylvan's receipt of notice of a Third Party Claim pursuant to Section
8.04(a) above) that either (i) Sylvan is assuming the defense of such Third
Party Claim or (ii) Sylvan disputes the indemnified party's right to indemnity
hereunder, GE Cap-Eq and Pyramid, collectively, shall be considered the
indemnifying party and the exercise of any rights of the indemnifying party
shall require the mutual agreement of GE Cap-Eq and Pyramid; PROVIDED FURTHER
that in all events the notice and delivery required to be made by the
indemnified party to the indemnifying party pursuant to Section 8.04(a) shall be
provided by the indemnified party to each of the Preferred Sellers; PROVIDED
FURTHER that in the event of a Specific Preferred Seller Obligation, the
applicable Preferred Seller shall be considered the indemnifying party
hereunder.

                                   ARTICLE IX

                        TERMINATION, AMENDMENT AND WAIVER

                 SECTION 9.01. TERMINATION. (a) Notwithstanding anything to the
contrary in this Agreement, this Agreement may be terminated and the Acquisition
and the other transactions contemplated by this Agreement abandoned at any time
prior to the Closing:

                 (i) by mutual written consent of SSC and Purchaser;

                  (ii) by SSC if any of the conditions set forth in Section 7.01
         or 7.03 shall have become incapable of fulfillment, and shall not have
         been waived by SSC;

                  (iii) by Purchaser if any of the conditions set forth in
         Section 7.01 or 7.02 shall have become incapable of fulfillment, and
         shall not have been waived by Purchaser; or

<PAGE>

                                                                              66

                  (iv) by SSC or Purchaser, if the Closing does not occur on or
         prior to June 30, 1999;

PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (ii),
(iii) or (iv) is not then in breach in any material respect (unless such breach
did not directly or indirectly result in or contribute to the state of facts
giving rise to the right of termination under clause (ii), (iii) or (iv)) of any
of its representations, warranties, covenants or agreements contained in this
Agreement.

                  (b) In the event of termination by SSC or Purchaser pursuant
to this Section 9.01, written notice thereof shall forthwith be given to the
other parties and the transactions contemplated by this Agreement shall be
terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein:

                  (i) Purchaser shall return all documents and other material
         received from the Company or SSC relating to the transactions
         contemplated hereby, whether so obtained before or after the execution
         hereof, to the Company; and

                  (ii) all confidential information received by Purchaser with
         respect to the business of the Company shall be treated in accordance
         with the Confidentiality Agreement, which shall remain in full force
         and effect notwithstanding the termination of this Agreement.

                  SECTION 9.02. EFFECT OF TERMINATION. If this Agreement is
terminated and the transactions contemplated hereby are abandoned as described
in Section 9.01, this Agreement shall become null and void and of no further
force and effect, except for the provisions of (i) Section 6.04 relating to the
obligation of Purchaser to keep confidential certain information and data
obtained by it, (ii) Section 6.06 relating to certain expenses, (iii) Section
6.07 relating to finder's fees and broker's fees, (iv) Section 9.01 and this
Section 9.02 and (v) Section 6.12 relating to publicity. Nothing in this Section
9.02 shall be deemed to release any party from any liability for any breach by
such party of the terms and provisions of this Agreement or to impair the right
of any party to compel specific performance by any other party of its
obligations under this Agreement.

                 SECTION 9.03. AMENDMENTS AND WAIVERS. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. By

<PAGE>

                                                                              67

an instrument in writing, Purchaser may waive compliance by any Seller or the
Company, or SSC may waive compliance by Purchaser, with any term or provision of
this Agreement that such other party was or is obligated to comply with or
perform; PROVIDED, HOWEVER, that none of such waivers by Purchaser or SSC shall
be effective without the prior written consent of the Preferred Sellers.

                                    ARTICLE X

                               GENERAL PROVISIONS

                  SECTION 10.01. SURVIVAL. The representations and warranties
contained in this Agreement shall survive the Closing solely for purposes of
Article VIII and shall terminate at the close of business on June 30, 2000,
except for the representations and warranties contained in Sections 2.04, 3.04
and 4.02. Subject to Section 8.02(b), the other covenants contained in Article
VI shall terminate at the close of business on June 30, 2000, except for the
covenants contained in Sections 6.04(b) and 6.14, which shall terminate on the
dates set forth therein, and the covenants contained in Section 6.09, which
shall not terminate (except for the covenants in Section 6.09 to pay Taxes,
which covenants shall expire with respect to any particular Tax upon the
expiration of the applicable statute of limitations for the assessment of such
Tax).

                  SECTION 10.02. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
without the prior written consent of the other parties hereto. Notwithstanding
the foregoing, (a) Purchaser may assign its right to purchase the Shares to an
affiliate of Purchaser without the prior written consent of any other party (but
Purchaser shall give written notice of same to each other party), and (b)
Purchaser may assign its rights hereunder by way of security and such secured
party may assign such rights by way of exercise of remedies (but Purchaser shall
give written notice of same to each other party); PROVIDED, HOWEVER, that no
assignment shall limit or affect the assignor's obligations hereunder. Any
attempted assignment in violation of this Section 10.02 shall be void.

                  SECTION 10.03.  NO THIRD-PARTY BENEFICIARIES.
Except as provided in Article IX, this Agreement is for the
sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give
or be construed to give to any person, other than the

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                                                                              68

parties hereto and such assigns, any legal or equitable rights hereunder.

                  SECTION 10.04. NOTICES. All notices or other communications
required or permitted to be given hereunder shall be in writing and shall be
delivered by hand or sent by facsimile or sent, postage prepaid, by registered,
certified or express mail or reputable overnight courier service and shall be
deemed given when so delivered by hand or facsimile, or if mailed, five days
after mailing (one business day in the case of overnight courier service), as
follows:

                  (i) if to Purchaser or, after the Closing, the
         Company,

                           EAC I Inc.
                           c/o Ripplewood Holdings L.L.C.
                           One Rockefeller Plaza, 32nd Floor
                           New York, New York 10020
                           Attention: Mr. Timothy C. Collins
                                      Mr. Charles L. Laurey
                           Facsimile: (212) 582-4110

         with a copy to:

                           Cravath, Swaine & Moore
                           Worldwide Plaza
                           825 Eighth Avenue
                           New York, New York  10019
                           Attention:  Peter S. Wilson, Esq.
                           Facsimile:  (212) 765-0978

                  (ii) if to SSC or, prior to the Closing, the
         Company,

                           Software Systems Corp.
                           9920 Pacific Heights Blvd., Suite 500
                           San Diego, California 92121
                           Attention: Mr. David Veit
                           Facsimile: (619) 646-6444

         with a copy to:

                           John C. Bender, Esq.
                           150 East 58th Street, Suite 3401
                           New York, New York 10155
                           Facsimile: (212) 755-8894

         and

<PAGE>

                                                                              69

                           Hennigan, Mercer & Bennett
                           601 South Figueroa Street, Suite 3300
                           Los Angeles, California 90017
                           Attention: Bruce Bennett, Esq.
                           Facsimile: (213) 694-1234

                  (iii) if to Sylvan,

                          Sylvan Learning Systems, Inc.
                          1000 Lancaster Street
                          Baltimore, Maryland 21202
                          Attention: Robert W. Zentz, Esq.
                          Facsimile: (410) 843-8060

         with a copy to:

                           Venable, Baetjer and Howard, LLP
                           1800 Mercantile Bank & Trust Building
                           Two Hopkins Plaza
                           Baltimore, Maryland  21201
                           Attention:  Newton B. Fowler, III, Esq.
                           Facsimile:  (410) 244-7742

                  (iv) if to Pyramid,

                           Pyramid Ventures, Inc.
                           1 BT Plaza, 29th Floor
                           M/S 2291
                           New York, New York 10006
                           Attention:  Melanie Hackney
                           Facsimile: (212) 669-1502

         with a copy to:

                           Emmet Marvin Martin LLP
                           120 Broadway
                           New York, New York 10271
                           Attention: Martha Coultrap, Esq.
                           Facsimile: (212) 238-3100

                  (v) if to GE Cap-Eq,

                           GE Capital Equity Investments, Inc.
                           120 Long Ridge Road
                           Stamford, Connecticut 06927
                           Attention: Mr. Jerome Marcus
                           Facsimile: (203) 357-6527

<PAGE>

                                                                              70

         with a copy to:

                           Kaye, Scholer, Fierman, Hays & Handler, LLP
                           425 Park Avenue
                           New York, NY 10022-3598
                           Attention:  Joseph D. Hansen, Esq.
                           Facsimile:  (212) 836-7149

                  SECTION 10.05. INTERPRETATION; EXHIBITS AND SCHEDULES; CERTAIN
DEFINITIONS. (a) The headings contained in this Agreement, in any Exhibit or
Schedule hereto and in the table of contents to this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All Exhibits and Schedules annexed hereto or referred to herein
are hereby incorporated in and made a part of this Agreement as if set forth in
full herein. Any capitalized terms used in any Schedule or Exhibit, but not
otherwise defined therein, shall have the meaning as defined in this Agreement.
When a reference is made in this Agreement to a Section, Exhibit or Schedule,
such reference shall be to a Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated.

                  (b)  For all purposes hereof:

                  "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person.

                  "including" means including, without limitation.

                  "person" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, Governmental Entity or other
entity.

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

                  "to Purchaser's knowledge" means to the actual
knowledge after reasonable inquiry of Timothy C. Collins or
Charles L. Laurey.

<PAGE>

                                                                              71

                 "to the knowledge of SSC and the Company" means to the actual
knowledge of David M. Veit, Therese K. Crane, Joyce F. Russell, Curtis Hedges,
Nancy Lockwood, Susan R. Collins, Gary Columb, Michael Hayes and Michael
DePasquale.

                  SECTION 10.06. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other party.

                  SECTION 10.07. ENTIRE AGREEMENT. This Agreement, and the
Confidentiality Agreement, along with the Schedules and Exhibits hereto, contain
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter. None of the parties shall be
liable or bound to any other party in any manner by any representations,
warranties or covenants relating to such subject matter except as specifically
set forth herein or in the Confidentiality Agreement.

                  SECTION 10.08. SEVERABILITY. If any provision of this
Agreement (or any portion thereof) or the application of any such provision (or
any portion thereof) to any person or circumstance 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 (or the remaining portion thereof) or the application of such
provision to any other persons or circumstances.

                  SECTION 10.09. CONSENT TO JURISDICTION. Each party irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York County, and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each party further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 10.09. Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in (i) the
Supreme Court of the State of New York, New York County, or (ii) the United
States District Court for the Southern

<PAGE>

                                                                              72

District of New York, and hereby and thereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.

                  SECTION 10.10. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.

                  SECTION 10.11. WAIVER OF JURY TRIAL. Each party hereby waives,
to the fullest extent permitted by Applicable Law, any right it may have to a
trial by jury in respect to any litigation directly or indirectly arising out
of, under or in connection with this Agreement or any transaction contemplated
hereby. Each party (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to enter
into this Agreement and, as applicable, by, among other things, the mutual
waivers and certifications in this Section 10.11.

                  IN WITNESS WHEREOF, SSC, the Preferred Sellers, Purchaser and
the Company have duly executed this Agreement as of the date first written
above.

                                         SOFTWARE SYSTEMS CORP.,

                                           by /s/ JOYCE F. RUSSELL
                                            --------------------------
                                            Name: Joyce F. Russell
                                            Title: CEO & Secretary

                                         SYLVAN LEARNING SYSTEMS, INC.,

                                           by /s/ B. LEE MCGEE
                                            ---------------------------
                                            Name: B. Lee McGee
                                            Title: Exec VP & CFO

<PAGE>

                                                                              73

                                         PYRAMID VENTURES, INC.,

                                           by /s/ BRIAN TOLBET
                                            ----------------------------
                                            Name: Brian Tolbet
                                            Title: Managing Director

                                          GE CAPITAL EQUITY INVESTMENTS, INC.,

                                           by /s/ JEROME MARCUS
                                            -----------------------------
                                            Name: Jerome Marcus
                                            Title: Senior Vice President

                                          JLC LEARNING CORPORATION,

                                           by /s/ DAVID M. VEIT
                                            ------------------------------
                                            Name: David M. Veit
                                            Title: CEO

                                          EAC I Inc.,

                                           by /s/ CHARLES L. LAUREY
                                            -------------------------------
                                            Name: Charles L. Laurey
                                            Title: Secretary

    JLC Holdings, Inc. hereby agrees to
    comply with all its obligations
    under Section 6.09.

    JLC HOLDINGS, INC.,

      by /s/ JOYCE F. RUSSELL
       -------------------------------
       Name: Joyce F. Russell
       Title: CFO & Secretary

<PAGE>

                                                                       EXHIBIT A

1.       AMOUNT:           $400,000

2.       ESCROW TO BE ESTABLISHED BY:       Company

3.       ESCROW AGENT:     Bankers Trust Company

4.       INVESTMENT:       Only in highly liquid short-term
                           investments

5.       DISBURSEMENT:

          WHEN:            Whenever payment on account of Loss to
                           be indemnified pursuant to Section 8.01
                           is required to be made by the three
                           Preferred Sellers (in no case in respect
                           of a Specific Preferred Seller
                           Obligation)

          AMOUNT:          10% of the total amount to be paid on
                           account of Loss to be indemnified except
                           as provided in Section 8.01(d)
                           (PROVIDED, that escrow not to cover
                           attorney's fees/expenses incurred by the
                           Preferred Sellers in handling the
                           defense of any indemnified claim)

6.       FEES:             All expenses of Escrow (including preparation
                           of agreement, escrow agent fees and expenses, etc.)
                           paid out of escrow amount (and interest thereon).

7.       DURATION:         June 30, 2000, except as to claims made
                           (and unresolved) before July 1, 2000.
                           Funds that are subject of a disputed
                           claim are held until resolution of such
                           claim.

8.       TERMINATION:      Upon termination, Escrow Agent pays all
                           remaining funds (and interest earned thereon) to
                           Company, which in turn pays (via payroll) all
                           recipients in accordance with pre-arranged
                           percentages.

<PAGE>

SCHEDULE 1.01
SAMPLE CALCULATION OF PER SHARE PRICE

Per Share Price:
Per share price = x/y                                         x/y =      $421.06
                                                                         =======
Where:

  x = (1) - (2)                                                 x =  $12,631,941
  y = 30,000                                                    y =       30,000

and:

  (1) = $53,700,000                                           (1) =  $53,700,000
  (2) = (i) + (ii) + (iii)                                    (2) =   41,068,059
                                                                     -----------
                                                                x =  $12,631,941
                                                                     -----------

where:

(i)   = Aggregate Principal of Company Indebtedness $33,892,901
        (See pg. 2 of 4)

(ii)  = Accrued and Unpaid Interest thereon           4,382,408 (As of: 6/30/99)
        (See pg. 2 of 4)

        Prepayment Penalties (Foothill Capital)         360,000 (As of: 6/30/99)

(iii) = Aggregate amount payable under JLC 1998       1,520,250
        Stock Appreciation Rights Plan and

        the maximum aggregate amount payable under      912,500
        the Fixed Sales Bonuses
                                                    -----------
                                              (2) = $41,068,059
                                                    -----------

Note: Amounts are estimated based upon assumptions of remaining obligations as
of 6/30/99 and will change based upon actual obligations outstanding and actual
closing date.
<PAGE>

SCHEDULE 1.01
SCHEDULE OF OUTSTANDING DEBT
AND ACCRUED INTEREST

<TABLE>
<CAPTION>
             Payee                            Date     Principal  Interest   Description
             ------                           ----     ---------  --------   -----------

<S>                                          <C>       <C>         <C>       <C>
1a Foothill Capital Corp.-(Revolver)         3/30/98   $7,250,000   9.25%    Prime plus 1.5%; 18% on overadvance;
                                                                             Interest paid monthly though 5/31/99;
                                                                             Plus $7,500/mo. servicing fee; $600/mo.
                                                                             other handling fees.

1b Foothill Capital Corp.-(Special Advance)  3/30/98    7,500,000  15.00%    Interest paid monthly through 5/30/99

 2 Chase Manhattan Bank                      6/29/95    8,500,000  12.25%    Senior Subordinated Note (No interest
                                                                             paid since 10/1/97)

 3 Pyramid Ventures, Inc.                    3/31/99    1,000,000  12.25%    Senior Subordinated Note (No interest
                                                                             paid since 10/1/97)

 4 GE Capital Equity Investments             3/31/99    2,500,000  12.25%    Senior Subordinated Note (No interest
                                                                             paid since 10/1/97)

 5 Sylvan Learning Systems, Inc              3/31/99    5,000,000  12.25%    Senior Subordinated Note (No interest
                                                                             paid since 10/1/97)

 6 Sylvan Learning Systems, Inc              6/30/98    2,142,901  10.00%    Subordinated Promissory Note
                                                      -----------
                                                      $33,892,901
                                                      ===========
</TABLE>

<TABLE>
<CAPTION>
                                   -----------------------------------------------------------------------------------------
                                                                          ACCRUED INTEREST
                                   -----------------------------------------------------------------------------------------
                                   FCC-Revolver   FCC-S.A.    Chase      Pyramid   GE Cap Eq   Sylvan     Sylvan
                                   ------------------------------------------------------------------------------     Total
                Debt Holder           7,250,000  7.500,000  8,500,000   1,000,000  2,500,000  5,000,000  2,142,901
                Principal Amount   -----------------------------------------------------------------------------------------
                Interest Amount:
<S>                                   <C>        <C>        <C>         <C>        <C>        <C>        <C>      <C>
As of 6/30/98 - Regular Interest          -          -      $780,938    $91,875   $229,688   $459,375       -     $1,561,875
              - Penalty Interest          -          -        27,821      3,273      8,183     16,365       -         55,642
      9/30/98 - Regular Interest          -          -       260,313     30,625     76,563    153,125     53,573     574,198
              - Penalty Interest          -          -        27,821      3,273      8,183     16,365       -         55,642
     12/31/98 - Regular Interest          -          -       260,313     30,625     76,563    153,125     53,573     574,198
              - Penalty Interest          -          -        37,095      4,364     10,910     21,820       -         74,189
      3/31/99 - Regular Interest          -          -       260,313     30,625     76,563    153,125     53,573     574,198
              - Penalty Interest          -          -        46,368      5,455     13,638     27,275       -         92,736
      4/30/99 - Regular Interest          -          -        86,771     10,208     25,521     51,042     17,858     191,399
              - Penalty Interest          -          -        18,547      2,182      5,455     10,910       -         37,095
      6/30/99 - Regular Interest       90,500     93,750     173,542     20,417     51,042    102,083     35,715     567,048
              - Penalty Interest          -          -        37,095      4,364     10,910     21,820       -         74,189
                                   -----------------------------------------------------------------------------------------
              Total Interest           90,500     93,750   2,016,934    237,286    593,216  1,186,432    214,290   4,432,408
                                   -----------------------------------------------------------------------------------------
      Reduction of Penalty Interest                          (50,000)                                                (50,000)
                                   -----------------------------------------------------------------------------------------
              Net Interest             90,500     93,750   1,966,934    237,286    593,216  1,186,432    214,290   4,382,408
                                   -----------------------------------------------------------------------------------------
              Total Obligation     $7,340,500 $7,593,750 $10,466,934 $1,237,286 $3,093,216 $6,186,432 $2,357,191 $38,275,309
                                   =========================================================================================
</TABLE>

Note: Amounts are estimated based upon a 6/30/99 closing date and will change
based upon actual closing date.
<PAGE>

SCHEDULE 1.01
CALCULATION OF PENALTY INTEREST ON $17 MILLION
12.25% SENIOR SUBORDINATED NOTES

     Interest Rate: 14.25%

         Interest Due       Total         Penalty    Total Penalty
         and Payable     Interest Due    Interest      Interest
         ------------    ------------    --------    -------------
12/31/97    520,625         520,625          -             -
 1/31/98                    520,625        6,182         6,182
 2/28/98                    520,625        6,182        12,365
 3/31/98    520,625       1,041,250        6,182        18,547
 4/30/98                  1,041,250       12,365        30,912
 5/31/98                  1,041,250       12,365        43,277
 6/30/98    520,625       1,561,875       12,365        55,642
 7/31/98                  1,561,875       18,547        74,189
 8/31/98                  1,561,875       18,547        92,736
 9/30/98    520,625       2,082,500       18,547       111,284
10/31/98                  2,082,500       24,730       136,013
11/30/98                  2,082,500       24,730       160,743
12/31/98    520,625       2,603,125       24,730       185,473
 1/31/99                  2,603,125       30,912       216,385
 2/28/99                  2,603,125       30,912       247,297
 3/31/99    520,625       3,123,750       30,912       278,209
 4/30/99                  3,123,750       37,095       315,304
 5/31/99                  3,123,750       37,095       352,398
 6/30/99    520,625       3,644,375       37,095       389,493
                         ==========                 ==========

Penalty Interest begins to accrue on the first day after interest becomes due
and payable.

Note: Amounts are estimated based upon a 6/30/99 closing date and will change
based upon actual closing date.
<PAGE>

SCHEDULE 1.01
CALCULATION/ALLOCATION OF SHARE PROCEEDS

               Assumed Closing Date: 6/30/99

<TABLE>
<CAPTION>
                                            --------------------------------------------------------------------
                                                                                          Per        Total Share
                                                     Asset Sold             # Shares   Share Price     Proceeds
                                            --------------------------------------------------------------------
<S>                                         <C>                              <C>         <C>         <C>
Sylvan Learning Systems, Inc. - "Sylvan"    Class A Preferred; par $0.01     15,000      $421.06     $ 6,315,970

Pyramid Ventures Inc. - "Pyramid"           Class A Preferred; par $0.01
                                            Class B Preferred; par $0.01      7,500       421.06       3,157,985

GE Capital Equity Inv. - "GE Cap-Eq"        Class B Preferred; par $0.01      7,500       421.06       3,157,985
                                                                            -------                 ------------
                                                                             30,000                  $12,631,941
                                                                            =======                 ============
</TABLE>

Note: Amounts are estimated based upon assumptions of remaining obligations as
of 6/30/99 and will change based upon actual obligations outstanding and actual
closing date.
<PAGE>

                                 SCHEDULE 2.04

1.    Sylvan:

      a.    Securities Purchase Agreement dated as of November 1, 1996 by and
            among JLC Holdings, Inc., Software Systems Corp., JLC Learning
            Corporation and Sylvan Learning Systems, Inc., amended as
            follows:(1)

                  First Amendment to Securities Purchase Agreement dated as of
                  December 5, 1996 by and among JLC Holdings, Inc., Software
                  Systems Corp., JLC Learning Corporation and Sylvan Learning
                  Systems, Inc.

                  Consent and Termination Agreement, dated as of June 30, 1998,
                  among JLC Holdings, Inc., Software Systems Corp., JLC Learning
                  Corporation and Sylvan Learning Systems, Inc.

      b.    Assignment and Exchange Agreement by and among Pyramid Ventures,
            Inc., Sylvan Learning Systems, Inc., JLC Learning Corporation and
            JLC Holdings, Inc., dated as of March 31, 1999, and the notes issued
            pursuant thereto.

      c.    Restatement Agreement dated as of December 19, 1996, amending the
            Second Restated Stockholders Agreement dated November 1, 1996, by
            and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
            Corporation, Bain Capital Funds IV, L.P., Bain Capital Fund IV-B,
            L.P., BCIP Associates, BCIP Trust Associates, L.P., Information
            Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC Partners,
            Chase Manhattan Investment Holdings, Inc., HAL International
            Investments N.V., Lifetouch Learning, Inc., Sylvan Learning Systems,
            Inc. and General Electric Capital Corporation.

      d.    Third Restated Stockholders Agreement, dated as of December 19,
            1996, by and among JLC Holdings, Inc., Software Systems Corp., JLC
            Learning Corporation, Bain Capital Funds IV, L.P., Bain Capital Fund
            IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P.,
            Information Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC
            Partners, Chase Manhattan Investment Holdings, Inc., HAL
            International Investments N.V., Lifetouch Learning, Inc., Sylvan
            Learning Systems, Inc. and General Electric Capital Corporation.

----------
(1)   All references to this document throughout the Schedules shall include
      both the First Amendment and Consent and Termination Agreement set forth
      below.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 2.04 (CONT'D)

      e.    Indemnification Agreement dated as of November 1, 1996, by and
            between JLC Learning Corporation and Sylvan Learning Systems, Inc.

      f.    Consent and Termination Agreement, dated as of June 30, 1998, among
            JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation
            and Sylvan Learning Systems, Inc.

2.    GE Capital Equity Investments:

      a.    Assignment and Exchange Agreement by and among Pyramid Ventures,
            Inc., General Electric Capital Corporation, G.E. Capital Equity
            Investments, Inc., JLC Learning Corporation, and JLC Holdings, Inc.,
            dated as of March 31, 1999, and the notes issued pursuant thereto.

      b.    Restatement Agreement dated as of December 19, 1996, amending the
            Second Restated Stockholders Agreement dated November 1, 1996, by
            and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
            Corporation, Bain Capital Funds IV, L.P., Bain Capital Fund IV-B,
            L.P., BCIP Associates, BCIP Trust Associates, L.P., Information
            Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC Partners,
            Chase Manhattan Investment Holdings, Inc., HAL International
            Investments N.V., Lifetouch Learning, Inc., Sylvan Learning Systems,
            Inc. and General Electric Capital Corporation.

      c.    Third Restated Stockholders Agreement, dated as of December 19,
            1996, by and among JLC Holdings, Inc., Software Systems Corp., JLC
            Learning Corporation, Bain Capital Funds IV, L.P., Bain Capital Fund
            IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P.,
            Information Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC
            Partners, Chase Manhattan Investment Holdings, Inc., HAL
            International Investments N.V., Lifetouch Learning, Inc., Sylvan
            Learning Systems, Inc. and General Electric Capital Corporation.

      d.    Securities Purchase Agreement dated as of December 19, 1996 by and
            among Software Systems Corp., JLC Learning Corporation and General
            Electric Capital Corporation.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 2.04 (CONT'D)

3.    Pyramid Ventures:

      a.    Securities Purchase Agreement dated as of November 1, 1996 by and
            among JLC Holdings, Inc., Software Systems Corp., JLC Learning
            Corporation and Sylvan Learning Systems, Inc.

      b.    Assignment and Exchange Agreement by and among Pyramid Ventures,
            Inc., Sylvan Learning Systems, Inc., JLC Learning Corporation and
            JLC Holdings, Inc., dated as of March 31, 1999, and the notes issued
            pursuant thereto.

      c.    Assignment and Exchange Agreement by and among Pyramid Ventures,
            Inc., General Electric Capital Corporation, G.E. Capital Equity
            Investments, Inc., JLC Learning Corporation, and JLC Holdings, Inc.,
            dated as of March 31, 1999, and the notes issued pursuant thereto.

      d.    Restatement Agreement dated as of December 19, 1996, amending the
            Second Restated Stockholders Agreement dated November 1, 1996, by
            and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
            Corporation, Bain Capital Funds IV, L.P., Bain Capital Fund IV-B,
            L.P., BCIP Associates, BCIP Trust Associates, L.P., Information
            Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC Partners,
            Chase Manhattan Investment Holdings, Inc., HAL International
            Investments N.V., Lifetouch Learning, Inc., Sylvan Learning Systems,
            Inc. and General Electric Capital Corporation.

      e.    Third Restated Stockholders Agreement, dated as of December 19,
            1996, by and among JLC Holdings, Inc., Software Systems Corp., JLC
            Learning Corporation, Bain Capital Funds IV, L.P., Bain Capital Fund
            IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P.,
            Information Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC
            Partners, Chase Manhattan Investment Holdings, Inc., HAL
            International Investments N.V., Lifetouch Learning, Inc., Sylvan
            Learning Systems, Inc. and General Electric Capital Corporation.

      f.    Securities Purchase Agreement dated as of December 19, 1996 by and
            among Software Systems Corp., JLC Learning Corporation and General
            Electric Capital Corporation.

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 2.06

1.    Product Supply and License Agreement entered into by and between JLC
      Learning Corporation and Sylvan Learning Systems, Inc. dated as of
      November 1, 1996.

2.    Securities Purchase Agreement dated as of November 1, 1996 by and among
      JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
      Sylvan Learning Systems, Inc.

3.    Texas Caretaker Project Pilot entered into by and between JLC Learning
      Corporation and Sylvan Learning Systems, Inc. on July 23, 1997.

4.    Publication and Distribution Agreement entered into by and between JLC
      Learning Corporation and Addison Wesley Longman Limited on December 8,
      1997. Amendment One to this Agreement was entered into on December 18,
      1998. Amendment Two to this Agreement was entered into on March 12, 1999.
      The Agreement contains a provision providing for limited distribution
      rights to Sylvan Learning Systems, Inc. Amendments Three and Four were
      entered into on May 28, 1999.

5.    International Development and Distribution Agreement entered into by and
      between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
      20, 1998. Amendment One to this Agreement was entered into on February 28,
      1998. A Letter of Amendment and Subdistribution Agreement are currently
      under negotiation. The Agreement contains a clause for the provision of
      localized products to Sylvan Learning Systems, Inc.

6.    Engagement Letter entered into by and between BT Alex. Brown and JLC
      Learning Corporation on January 5, 1998.

7.    Subordinated Promissory Note between Sylvan Learning Systems, Inc. and JLC
      Learning Corporation issued on June 30, 1998 in the principal amount of
      $2,142,901.36.

8.    Assignment and Exchange Agreement by and among Pyramid Ventures, Inc.,
      Sylvan Learning Systems, Inc., JLC Learning Corporation and JLC Holdings,
      Inc., dated as of March 31, 1999, and the notes issued pursuant thereto.

9.    Assignment and Exchange Agreement by and among Pyramid Ventures, Inc.,
      General Electric Capital Corporation, G.E. Capital Equity Investments,
      Inc., JLC Learning Corporation, and JLC Holdings, Inc., dated as of March
      31, 1999, and the notes issued pursuant thereto.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 2.06 (CONT'D)

10.   In March of 1999, JLC Learning Corporation's receivable under the Product
      Supply and License Agreement of November 1, 1996, was applied against JLC
      Learning Corporation's obligations to Sylvan under the Securities Purchase
      Agreement dated as of November 1, 1996.

11.   Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
      Acquisition, Inc., JLC Holdings, Inc., Software Systems Corp., Chase
      Manhattan Bank, N.A. and Maximum Investments, N.V., dated as of June 29,
      1995, amended as follows: (1)

      (a)   Amendment No. 1 and Waiver dated as of December 15, 1995.

      (b)   Amendment No. 2 and Waiver dated as of July 17, 1996.

      (c)   Waiver and Ratification dated as of September 30, 1996.

      (d)   Amendment No. 3 and Waiver dated as of November 1, 1996.

      (e)   Amendment No. 4 and Waiver dated as of December 6, 1996.

      (f)   Amendment No. 5 and Waiver dated as of December 19, 1996.

      (g)   Assignment and Exchange Agreement by and among Pyramid Ventures,
            Inc., Sylvan Learning Systems, Inc., JLC Learning Corporation and
            JLC Holdings, Inc., dated as of March 31, 1999, and the notes issued
            pursuant thereto.

      (h)   Assignment and Exchange Agreement by and among Pyramid Ventures,
            Inc., General Electric Capital Corporation, G.E. Capital Equity
            Investments, Inc., JLC Learning Corporation, and JLC Holdings, Inc.,
            dated as of March 31, 1999, and the notes issued pursuant thereto.

      (i)   Assignment and Agreement of September 15, 1998 by and among HAL
            International Investments N.V., formerly known as Maximum
            Investments N.V., Pyramid Ventures, Inc., JLC Learning Corp. and JLC
            Holdings, Inc.

12.   Stock Purchase Agreement by and between JLC Holdings, Inc., Software
      Systems Corp., JLC Acquisition and Jostens, Inc. dated as of June 29,
      1995.

----------
(1)   All references to this document throughout the Schedules shall include
      nine (9) documents set forth below.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 2.06 (CONT'D)

13.   Restatement Agreement dated as of December 19, 1996, amending the Second
      Restated Stockholders Agreement dated November 1, 1996, by and among JLC
      Holdings, Inc., Software Systems Corp., JLC Learning Corporation, Bain
      Capital Funds IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates,
      BCIP Trust Associates, L.P., Information Partners Capital Fund, L.P.,
      Jostens, Inc., Indosuez JLC Partners, Chase Manhattan Investment Holdings,
      Inc., HAL International Investments N.V., Lifetouch Learning, Inc., Sylvan
      Learning Systems, Inc. and General Electric Capital Corporation.

14.   Third Restated Stockholders Agreement, dated as of December 19, 1996, by
      and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
      Corporation, Bain Capital Funds IV, L.P., Bain Capital Fund IV-B, L.P.,
      BCIP Associates, BCIP Trust Associates, L.P., Information Partners Capital
      Fund, L.P., Jostens, Inc., Indosuez JLC Partners, Chase Manhattan
      Investment Holdings, Inc., HAL International Investments N.V., Lifetouch
      Learning, Inc., Sylvan Learning Systems, Inc. and General Electric Capital
      Corporation.

15.   Indemnification Agreement dated as of November 1, 1996, by and between JLC
      Learning Corporation and Sylvan Learning Systems, Inc.

16.   Securities Purchase Agreement dated as of December 19, 1996 by and among
      Software Systems Corp., JLC Learning Corporation and General Electric
      Capital Corporation.

17.   Letter Agreement modifying and terminating certain licensing rights
      granted by Academic Systems to JLC Learning Corporation, dated as of June
      17, 1998.

18.   Subordination Agreement, dated June 30, 1998 among Foothill Capital
      Corporation, JLC Learning Corporation and Sylvan Learning Systems, Inc.

19.   Management and Advisory Agreement by and between JLC Holdings, Inc.,
      Software Systems Corp., JLC Acquisition Corp. and Bain Capital Partners
      IV, L.P. dated as of June 29, 1995.

20.   Consent and Termination Agreement, dated as of June 30, 1998, among JLC
      Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
      Sylvan Learning Systems, Inc.

21.   Strategic Alliance Agreement dated the date hereof between Sylvan Learning
      Systems, Inc. and JLC Learning Corporation.

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 3.03

1.    Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
      Acquisition, Inc., JLC Holdings, Inc., Software Systems Corp., Chase
      Manhattan Bank, N.A. and Maximum Investments, N.V., dated as of June 29,
      1995.

2.    Software Systems Corp.'s $57,150,000 Subordinated Note due 2003, dated
      November 8, 1996 between Software Systems Corp. and Jostens, Inc.

3.    Software Systems Corp.'s $4,000,115 Exchangeable Subordinated Note due
      2003, between Software Systems Corp. and Jostens, Inc. dated June 29,
      1995.

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 3.06

              SOFTWARE SYSTEMS CORP. UNCONSOLIDATED BALANCE SHEET,
                               DECEMBER 31, 1998

Assets

Investments in JLC Learning Corporation                       $40,000,000
                                                       -------------------------
Total Assets:                                                 $40,000,000
                                                       =========================

Liabilities                                                   $48,628,000(1)
Paid in kind notes - Jostens, Inc.                              9,058,000
                                                       -------------------------

Total Liabilities                                             $57,686,000
                                                       =========================
Shareholder's equity

Retained earnings                                            ($11,953,000)
Current year profit (loss)                                   ($ 5,733,000)
                                                       -------------------------
Shareholder's equity                                         ($17,686,000)
                                                       =========================
Total liabilities and equity                                  $40,000,000
                                                       -------------------------

(1)   This figure represents the present value of Software Systems Corp.'s
      $57,150,000 Subordinated Note due 2003, dated November 8, 1996 between
      Software Systems Corp. and Jostens, Inc.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 3.06 (CONT'D)

                       SOFTWARE SYSTEMS CORP. LIABILITIES

1.    Securities Purchase Agreement dated as of November 1, 1996 by and among
      JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
      Sylvan Learning Systems, Inc.

2.    Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
      Acquisition, Inc., JLC Holdings, Inc., Software Systems Corp., Chase
      Manhattan Bank, N.A. and Maximum Investments, N.V.

3.    Stock Purchase Agreement by and between JLC Holdings, Inc., Software
      Systems Corp., JLC Acquisition, Inc. and Jostens, Inc. dated as of June
      29, 1995.

4.    Restatement Agreement dated as of December 19, 1996, amending the Second
      Restated Stockholders Agreement dated November 1, 1996, by and among JLC
      Holdings, Inc., Software Systems Corp., JLC Learning Corporation, Bain
      Capital Funds IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates,
      BCIP Trust Associates, L.P., Information Partners Capital Fund, L.P.,
      Jostens, Inc., Indosuez JLC Partners, Chase Manhattan Investment Holdings,
      Inc., HAL International Investments N.V., Lifetouch Learning, Inc., Sylvan
      Learning Systems, Inc. and General Electric Capital Corporation.

5.    Third Restated Stockholders Agreement, dated as of December 19, 1996, by
      and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
      Corporation, Bain Capital Funds IV, L.P., Bain Capital Fund IV-B, L.P.,
      BCIP Associates, BCIP Trust Associates, L.P., Information Partners Capital
      Fund, L.P., Jostens, Inc., Indosuez JLC Partners, Chase Manhattan
      Investment Holdings, Inc., HAL International Investments N.V., Lifetouch
      Learning, Inc., Sylvan Learning Systems, Inc. and General Electric Capital
      Corporation.

6.    Securities Purchase Agreement dated as of December 19, 1996 by and among
      Software Systems Corp., JLC Learning Corporation and General Electric
      Capital Corporation.

7.    Management and Advisory Agreement by and between JLC Holdings, Inc.,
      Software Systems Corp., JLC Acquisition Corp. and Bain Capital Partners
      IV, L.P. dated as of June 29, 1995.

8.    Consent and Termination Agreement, dated as of June 30, 1998, among JLC
      Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
      Sylvan Learning Systems, Inc.

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 3.07

1.    See Schedule 2.06.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.01

             JURISDICTIONS IN WHICH THE COMPANY IS QUALIFIED TO DO
                                    BUSINESS

<TABLE>
<CAPTION>
STATE             FINE/FEE                   STATE             FINE/FEE
-----             --------                   -----             --------

<S>               <C>                        <C>               <C>
Alabama(1)        To be determined/$10.00    Montana(2)        $120.00/To be determined

Alaska(2)         $350.00/To be determined   Nebraska(2)       $145.00/To be determined

Arizona                                      Nevada(2)         $325.00/To be determined

Arkansas                                     New Hampshire(2)  To be determined

California                                   New Jersey

Colorado(1)       To be determined           New Mexico(2)     $200.00/To be determined

Connecticut(2)    $20.00/$20.00              New York(2)       $225.00/To be determined

Delaware(2)       $150.00/To be determined   North Carolina

District of(2)    To be determined           North Dakota(1)   To be determined/$20.00
Columbia

Florida                                      Ohio(2)           $100.00/$5.00

Georgia                                      Oklahoma(2)       To be determined/$20.00

Guam                                         Oregon

Hawaii(1)         To be determined/$25.00    Pennsylvania

Idaho(2)          $100.00/To be determined   Puerto Rico(1)    To be determined

Illinois                                     Rhode Island(2)   To be determined

Indiana                                      South Carolina

Iowa(2)           $100.00/To be determined   South Dakota(2)   $130.00/To be determined

Kansas(1)         $170.00/$7.50              Tennessee(1)      To be determined/$20.00

Kentucky(1)       To be determined/$10.00    Texas(1)          To be determined

Louisiana                                    Utah

Maine(2)          $180.00/To be determined   Vermont(2)        $100.00/To be determined

Maryland                                     Virginia(1)       $3755.00/To be determined

Massachusetts(2)  $300.00/$12.00             Washington(2)     $175.00/To be determined

Michigan(2)       $60.00/To be determined    West Virginia

Minnesota(1)      To be determined/$5.00     Wisconsin(2)      $250.00/To be determined

Mississippi(1)    To be determined/$25.00    Wyoming(2)        $100.00/To be determined

Missouri(1)       To be determined/$10.00
</TABLE>

----------
(1)   The company is required to either pay a fine or file an annual report or
      both as a condition to receiving a current Certificate of Good Standing.
      The Company is currently in the process of either paying a fine or filing
      a report or both.

(2)   The Company is in the process of applying for a Certificate of Authority
      and will pay any fees that may he required.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.01 (CONT'D)

                               CORPORATE RECORDS

1.    Some certificates representing shares of Class A Common Stock of JLC
      Learning Corp. are not presently held in books and records of JLC Learning
      Corporation. However, at the time JLC Learning was purchased from Jostens,
      Inc., JLC Holdings Inc., Software Systems Corp. and JLC Acquisition, Inc.
      purchased all issued and outstanding shares of Class A Common Stock.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.01 (CONT'D)

                               COMPANY CONTRACTS

1.    Discontinued the marketing of Vital Tools. A settlement agreement has been
      reached with APTEX/HNC.

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 4.04

1.    Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
      Acquisition, Inc., JLC Holdings, Inc., Software Systems Corp., Chase
      Manhattan Bank, N.A. and Maximum Investments, N.V., dated as of June 29,
      1995.

2.    Loan and Security Agreement entered into by and between JLC Learning
      Corporation, the Financial Institutions named therein as the Lenders and
      Foothill Capital Corporation on March 30, 1998.(1)

      (a)   Amendment No. One to the Loan and Security and Agreement dated as of
            July 28, 1998.

      (b)   Amendment No. Two to the Loan and Security and Agreement dated as of
            May 1, 1999.

3.    Software Systems Corp.'s $57,150,000 Subordinated Note due 2003, dated
      November 8, 1996 between Software Systems Corp. and Jostens, Inc.

4.    Software Systems Corporation's $4,000,115 Exchangeable Subordinated Note
      due 2003, between Software Systems Corp. and Jostens, Inc. dated as of
      June 29, 1995.

5.    License Agreement between Lernout and Hauspie Speech Products N.V.
      assignee of INSO Corp., assignee of Houghton Mifflin Co. and JLC Learning
      Corp., Assignee of Ideal Learning Inc., September 30, 1993, amendment I
      dated September 30, 1998.

6.    Lease with Spieker Properties for 9920 Pacific Heights Blvd., with
      termination date of March 21, 2001.

7.    Compaq Authorized Reseller Sales Agreement dated as of January 7, 1998.

8.    Trademark License Agreement among Jostens, Inc., JLC Holdings, Inc.,
      Software Systems Corp. and Jostens Learning Corp., dated June 29, 1995.

9.    Directors and Officers insurance coverage.

----------
(1)   All references to this document throughout the Schedules shall include
      both Amendment No. One and Amendment No. Two to the Loan and Security
      Agreement as set forth below.

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 4.05

1.    Audited Balance Sheet as of December 31, 1996.

2.    Draft of Audited Balance Sheets as of December 31, 1997 and December 31,
      1998 (form of opinion letter and footnotes to financial statements subject
      to change as described in section 6.18).

3.    Draft Financial Statements as of March 31, 1999.

                               JLC - CONFIDENTIAL
<PAGE>

                                                               [GRAPHIC OMITTED]

JLC LEARNING
CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
<PAGE>

                      [LETTERHEAD OF PRICE WATERHOUSE LLP]

                       Report of Independent Accountants

March 21, 1997

To the Board of Directors of
JLC Learning Corporation

In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of JLC Learning Corporation, formerly
Jostens Learning Corporation, at December 31, 1996 and 1995, and the results of
its operations and its cash flows for the year ended December 31, 1996 and the
six-month period ended December 31, 1995 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of JLC
Learning Corporation's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PRICE WATERHOUSE LLP
<PAGE>

                            JLC LEARNING CORPORATION
--------------------------------------------------------------------------------

                                 BALANCE SHEET
                                 (In thousands)

                                     Assets

                                                                December 31,
                                                           ---------------------
                                                             1996        1995
                                                           --------   ----------

Current assets:
  Cash and cash equivalents                                $ 11,453   $   1,372
  Accounts receivable, less allowance of
    $2,896 and $2,367, respectively                          33,441      53,678
  Inventories                                                 2,533       3,092
  Prepaid expenses                                            4,110       3,795
  Current portion of amounts due from related parties         1,347       7,000
                                                           --------   ---------
    Total current assets                                     52,884      68,937

Amounts due from related parties, less current portion                      350
Other assets:
  Software development costs, net                            26,505      30,865
  Intangible assets, net                                      6,654       9,899
  Deferred financing fees, net                                1,322       1,687
  Investments in equity securities                            2,157       2,157
Fixed assets, net                                             5,541       9,777
                                                           --------   ---------
    Total assets                                           $ 95,063   $ 123,672
                                                           ========   =========

                      Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable                                         $  3,937   $   8,087
  Due to related parties                                        370       7,930
  Salaries, wages and commissions payable                     5,376       6,418
  Deferred revenue                                           24,543      27,990
  Other accrued liabilities                                  12,904      16,193
                                                           --------   ---------
    Total current liabilities                                47,135      66,618
                                                           --------   ---------
Noncurrent portion of deferred revenue                        7,306       7,640
                                                           --------   ---------
Noncurrent other accrued liabilities                          1,464       4,888
                                                           --------   ---------
Revolving line of credit                                        -        10,700
                                                           --------   ---------
Long-term debt                                               16,020      15,750
                                                           --------   ---------

Stockholders' equity:
  Mandatorily redeemable preferred stock                      9,076         -
  Redeemable preferred stock                                    -           -
  Common stock                                                  -           -
  Paid-in capital                                            75,803      57,538
  Accumulated deficit                                       (43,760)    (21,481)
  Unallocated purchase consideration                        (17,981)    (17,981)
                                                           --------   ---------
    Total stockholders' equity                               23,138      18,076
                                                           --------   ---------
    Total liabilities and stockholders' equity             $ 95,063   $ 123,672
                                                           ========   =========

   The accompanying notes are an integral part of these financial statements.

                                       -2-
<PAGE>

                            JLC LEARNING CORPORATION
--------------------------------------------------------------------------------

                            STATEMENT OF OPERATIONS
                                 (In thousands)

                                                                    For the six-
                                                     For the year   month period
                                                        ended          ended
                                                     December 31,   December 31,
                                                         1996          1995
                                                     ------------   ------------
Net revenue:
  Software                                            $ 40,423       $ 15,812
  Service                                               35,385         19,331
  Hardware                                              10,924         13,295
                                                      --------       --------
                                                        86,732         48,438
                                                      --------       --------

Cost of products sold:
  Software                                              12,937          4,754
  Service                                               28,973         15,551
  Hardware                                               8,251         11,744
                                                      --------       --------
                                                        50,161         32,049
                                                      --------       --------

Selling and administrative expenses:
  Sales and marketing                                   28,019         14,204
  Research and development                              11,715          4,977
  General and administrative                            11,281          4,618
  Amortization of intangible assets                      3,245          1,853
                                                      --------       --------

                                                        54,260         25,652
                                                      --------       --------

Loss from operations                                   (17,689)        (9,263)
Interest expense                                        (4,590)        (1,819)
                                                      --------       --------

Loss before income taxes                               (22,279)       (11,082)
Income tax expense                                         -              -
                                                      --------       --------

Net loss                                              $(22,279)      $(11,082)
                                                      ========       ========

   The accompanying notes are an integral part of these financial statements.

                                      -3-
<PAGE>

                            JLC LEARNING CORPORATION
--------------------------------------------------------------------------------

                       STATEMENT OF STOCKHOLDERS' EQUITY
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                              Mandatorily
                                              Redeemable          Redeemable
                             Common Stock   Preferred Stock    Preferred Stock   Additional               Unallocated
                            --------------  ----------------  -----------------   Paid-in   Accumulated     Purchase
                            Shares     $    Shares      $     Shares       $      Capital     Deficit    Consideration   Total
                            ------   -----  -------  -------  -------   -------  ---------- -----------  -------------   ------

<S>                         <C>      <C>    <C>      <C>      <C>        <C>      <C>        <C>          <C>          <C>
Balance at July 3, 1995     1,000    $  -      -     $  -        -       $  -     $57,538    $(10,399)    $(17,981)    $29,158

Net loss for the six-
  month period ended
  December 31, 1995                                                                           (11,082)                  (11,082)
                           ------    -----  ------   ------    ------    -----    -------    --------     --------     --------

Balance at
  December 31, 1995         1,000       -      -        -        -          -      57,538     (21,481)     (17,981)      18,076

Issuance of
  redeemable
  preferred stock                                              20,000              18,165                                18,165

Contribution from Holdings                                                            100                                   100

Issuance of
  mandatorily
  redeemable
  preferred stock                           10,000     9,076                                                              9,076

Net loss for the year ended
  December 31, l996                                                                           (22,279)                  (22,279)
                           ------    -----  ------    ------   ------    -----    -------    --------     --------     --------

                            1,000    $  -   10,000    $9,076   20,000    $  -     $75,803    $(43,760)    $(17,961)    $ 23,130
                           ======    =====  ======    ======   ======    =====    =======    ========     ========     ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      -4-
<PAGE>

                            JLC LEARNING CORPORATION
--------------------------------------------------------------------------------

                            STATEMENT OF CASH FLOWS

                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                             For the six-month
                                                            For the year          period
                                                               ended               ended
                                                            December 31,       December 31,
                                                               1996                1995
                                                            ------------     -----------------

<S>                                                         <C>                 <C>
Operating activities:
  Net loss                                                  $ (22,279)          $ (11,082)
  Adjustments to reconcile net loss to net
    cash provided by (used in) operating activities:
      Depreciation and amortization                            15,746               8,246
      Amortization of deferred financing fees                     365                 180
      Amortization of debt discount                               270
      Changes in assets and liabilities, net of effects
        of purchase of Ideal:
        Decrease in accounts and notes receivable              26,240              28,085
        Decrease in inventories                                   396               1,553
        Increase in prepaid expenses                             (315)             (1,319)
        Increase (decease) in accounts payable                 (4,150)                528
        Increase (decease) in due to related parties           (7,560)              6,810
        Decrease in salaries, wages and commissions payable    (1,042)             (6,845)
        Decrease is deferred revenue                           (3,776)            (12,803)
        Increase (decrease) in current and noncurrent
          other accrued liabilities                            (6,494)                777
                                                            ---------           ---------

      Net cash provided by (used in) operating activities      (2,599)             14,130
                                                            ---------           ---------

Investing activities:
  Payment in connection with purchase of
    Ideal, net of cash acquired                                                    (4,089)
  Capital expenditures, net                                      (901)             (1,323)
  Software development costs                                   (2,841)             (3,547)
                                                            ---------           ---------
      Net cash used in investing activities                    (3,742)             (8,959)
                                                            ---------           ---------

Financing activities:
  Decrease in due to former parent                               (219)               (150)
  Repayments of borrowings on revolving line of credit        (34,700)            (28,000)
  Borrowings on revolving line of credit                       24,000              19,200
  Proceeds from sale of preferred stock, net                   27,241
  Contribution from Holdings                                      100
                                                            ---------           ---------
      Net cash provided by (used in) financing activities      16,422              (8,950)
                                                            ---------           ---------
Increase (decrease) in cash and cash equivalents               10,081              (3,779)
Cash and cash equivalents, beginning of period                  1,372               5,151
                                                            ---------           ---------
Cash and cash equivalents, end of period                    $  11,453           $   1,372
                                                            =========           =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      -5-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 1- NATURE OF THE BUSINESS:

JLC Learning Corporation (JLC or the Company), formerly Jostens Learning
Corporation, is a leading provider of technology-based educational programs to
school districts for kindergarten through twelfth grade. JLC is a wholly-owned
subsidiary of Software Systems Corporation (SSC), a wholly-owned subsidiary of
JLC Holdings, Inc. (Holdings).

JLC operates in the educational software industry and has maintained a
leadership position among a multitude of providers. JLC's products and services
include fully integrated software systems, standalone CD ROM delivery,
connection to the Internet and a full service offering including installation,
teacher training, onsite and remote diagnostics and maintenance.

JLC focuses its market efforts in the educational channel, with sales and
service coverage in the United States and several U.S. territories and is
exploring opportunities in international markets. The Company's selling and
distribution efforts include a direct sales force, telemarketing and catalog
sales, The Company also has a small presence in the retail market.

On June 29, 1995, Holdings acquired all of the outstanding stock of JLC from
Jostens, Inc. (Jostens). The acquisition was accounted for under the purchase
method (see Note 16).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Fiscal Year

The Company changed its fiscal year to a calendar year effective December 31,
1995. Through July 3, 1995, the Company operated on a fifty-two or fifty-three
week fiscal year for financial reporting purposes. Unless otherwise noted,
reference to the six-month period ended December 31, 1995 relates to the period
from July 4, 1995 to December 31, 1995.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with maturities at
date of purchase of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or
market.

                                      -6-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

Capitalized Computer Software Development Costs

The Company, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed," capitalizes software development costs by
project commencing when technological feasibility is established and concluding
when the product is ready for release. Software development costs are amortized
on a straight-line basis over five years or the expected life of the product,
whichever is less. Research and development costs are charged to expense as
incurred.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the
assets acquired. Goodwill resulting from the acquisition of JLC by Holdings on
June 29, 1995 and the acquisition of Ideal Learning, Inc. (Ideal) discussed in
Note 3 is being amortized on a straight-line basis over 7 years.

In addition to goodwill, intangible assets include the Company's tradename and
workforce in place. The tradename and workforce in place, valued at June 29,
1995 at $5,804 and $3,835, respectively, are being amortized on a straight-line
basis over 3 and 4 years, respectively.

Investments in Equity Securities

The Company has investments in certain equity securities. At December 31, 1996
and 1995, the Company holds investments with a value totaling $2,157. The
Company's investments in equity securities are classified as available-for-sale
and recorded at fair value with unrealized gains or losses reported on a net
basis as a separate component of stockholders' equity until realized. No
unrealized gains or losses are included in stockholders' equity at December 31,
1996 or 1995 as there was no change in the fair market value of these
investments. During 1996, the Company sold one of its investments with a book
value of $0 for $500. In conjunction with the sale, the Company entered into a
royalty agreement with the former investee. The gain on sale of this investment
was deferred and will be recognized over the life of the royalty agreement on a
units-of-production basis.

Deferred Financing Fees

Deferred financing fees relate to the revolving credit agreement (see Note 8)
and the senior subordinated notes (see Note 9) and are being amortized over the
term of the related debt. Amortization for the year ended December 31, 1996 and
the six-month period ended December 31, 1995 approximated $365 and $180,
respectively.

                                      -7-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

Fixed Assets

Fixed assets are recorded at cost and depreciated over the estimated useful
lives of the related assets. Depreciation is provided principally on the
straight-line method for financial reporting purposes and on accelerated methods
for income tax purposes. Leasehold improvements are depreciated over the shorter
of their useful life or the lease term.

Revenue Recognition

Revenue is recognized for hardware and software upon shipment of the product,
provided that no significant vendor or post contract support obligations remain
outstanding and collection of the resulting receivable is deemed probable.
Revenue from service contracts, instruction and user training and post-contract
customer support is recognized ratably over the period of the related contract.
The Company accrues all vendor and post-contract obligations remaining at the
time of shipment. Deferred revenue represents the Company's obligation to
perform under signed contracts.

Advertising

Advertising costs are expensed as incurred. Advertising expense totaled $2,279
and $1,865 for the year ended December 31, 1996 and the six-month period ended
December 31, 1995, respectively.

Income Taxes

The Company accounts for income taxes in accordance with SFAS 109, "Accounting
for Income Taxes," which requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.

Use of Estimates

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.

                                      -8-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 3 - BUSINESS ACQUISITION:

Effective December 19, 1995, Holdings acquired all of the outstanding stock of
Ideal for $4,100 in cash, a $900 note payable and a warrant to purchase a
specified number of shares of Holdings Common Stock. The acquisition was
accounted for under the purchase method. Goodwill in the amount of $1,713 was
recorded in conjunction with the acquisition of Ideal. Effective July 1, 1996,
the assets and liabilities of Ideal were transferred to JLC. Because the
transfer of assets occurred among entities under common control, the Company has
accounted for the transfer in a manner similar to a pooling of interests and,
accordingly, the Company's financial statements include the historical results
of Ideal from the date of acquisition by Holdings.

NOTE 4 - INVENTORIES:

Inventories are as follows:

                                                                December 31,
                                                           ---------------------
                                                             1996          1995
                                                           -------       -------

Finished products                                          $ 2,380       $ 2,889
Materials and supplies                                         153           203
                                                           -------       -------
                                                           $ 2,533       $ 3,092
                                                           =======       =======

NOTE 5 - CAPITALIZED COMPUTER SOFTWARE DEVELOPMENT COSTS:

Capitalized computer software development costs are as follows:

                                                                December 31,
                                                           --------------------
                                                             1996         1995
                                                           -------      -------

Capitalized software costs                                $ 36,588      $33,747
Less accumulated amortization                              (10,083)      (2,882)
                                                          --------      -------
                                                          $ 26,505      $30,865
                                                          ========      =======

Amortization of capitalized computer software development costs aggregated
$7,201 and $2,839 for the year ended December 31, 1996 and for the six-month
period ended December 31, 1995, respectively. No charges were recorded during
the year ended December 31, 1996 or the six-month period ended December 31, 1995
due to impairment of net realizable value.

                                      -9-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS:

Goodwill and other intangible assets are as follows:

                                                                December 31,
                                                           --------------------
                                                             1996         1995
                                                           -------      -------

Tradename                                                  $ 5,804      $ 5,804
Workforce in place                                           3,835        3,835
Goodwill                                                     2,138        2,138
                                                           -------      -------
                                                            11,777       11,777
Less accumulated amortization                               (5,123)      (1,878)
                                                           -------      -------
                                                           $ 6,654      $ 9,899
                                                           =======      =======

Amortization of goodwill and other intangible assets aggregated $3,245 and
$1,853 for the year ended December 31, 1996 and for the six-month period ended
December 31, 1995, respectively. Amortization charges of approximately $47 and
$356 were recorded for the year ended December 31, 1996 and for the six-month
period ended December 31, 1995, respectively, due to accelerated amortization of
the workforce in place as a result of higher than estimated employee turnover.

NOTE 7 - FIXED ASSETS:

Fixed assets are comprised of the following:

                                                              December 31,
                                          Depreciable     --------------------
                                             Life           1996        1995
                                         ------------     -------     --------
Computer equipment                       1 to 3 years     $ 8,609     $ 7,963
Warehouse                                     2 years         261         397
Leasehold improvements                   3 to 5 years         559         231
Other furniture and fixtures             2 to 7 years       3,607       3,552
                                                          -------     -------
                                                           13,036      12,143
Less accumulated depreciation                              (7,495)     (2,366)
                                                          -------     -------
                                                          $ 5,541     $ 9,777
                                                          =======     =======

Depreciation expense aggregated $5,129 and $2,320 for the year ended December
31, 1996 and for the six-month period ended December 31, 1995, respectively.

                                      -10-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 8 - REVOLVING CREDIT AGREEMENT:

On June 29, 1995, the Company entered into a revolving credit agreement with a
maximum loan availability of $40,000 including up to $3,000 of letters of credit
(the Loan Facility). Loans under this agreement are secured by 100% of all
capital or other equity interests of SSC and JLC, as well as accounts
receivable, inventory, fixed assets, intangibles and contract rights of JLC. The
revolving credit agreement is also guaranteed by Holdings and SSC. Interest on
borrowings under the agreement during fiscal 1996 was computed at 1.5% plus the
prime lending rate of the bank acting as agent for the revolving credit
agreement or LIBOR plus 3.0%. The Company is subject to a commitment fee
computed at a rate equal to 1/2% of the daily average unutilized commitment
under the Loan Facility. Interest and the commitment fee are due quarterly. The
Company may prepay the Loan Facility at any time, subject to prepayment fees as
defined in the agreement. The termination date for the revolving line of credit
is the last business day of June 2000. At December 31, 1996, no amounts were
outstanding under this agreement. At December 31, 1995, $10,700 was outstanding
under this agreement.

The revolving credit agreement requires JLC to meet certain operating ratios and
limits, among other things, the Company's indebtedness, dividend payments and
capital expenditures. The Company failed to meet certain covenants during the
year ended December 31, 1996, but obtained waivers from the lenders. As of
December 31, 1996, the Company believes it is in compliance with all applicable
covenants.

NOTE 9 - LONG-TERM DEBT:

Senior Subordinated Notes

On June 29, 1995, the Company entered into a senior subordinated note purchase
agreement whereby the Company borrowed a total of $17,000 from two lending
institutions under note agreements which bear interest at 12.25% and mature on
the last business day of June 2002. Interest is payable quarterly. The notes are
secured by the same collateral as the $40,000 revolving credit agreement (see
Note 8) and are guaranteed by Holdings.

The agreement requires the Company to meet certain operating ratios and limits,
among other things, the Company's indebtedness and dividend payments. The
Company failed to meet certain covenants during the year ended December 31,
1996, but obtained waivers from the lenders. As of December 31, 1996, the
Company believes it is in compliance with all applicable covenants.

In connection with the issuance of the note agreements, the lending institutions
each received warrants to acquire a specified number of shares of Holdings
Common Stock. The value ascribed to the warrants of $1,260 was recorded as a
discount from the face value of the debt and is being amortized over the term of
the Senior Subordinated Notes. The unamortized discount on the Senior
Subordinated Notes totaled $980 and $1,250 at December 31, 1996 and 1995,
respectively.

                                      -11-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 10 - LEASE OBLIGATIONS, COMMITMENTS AND CONTINGENCIES:

The Company has operating leases for office and warehouse space that include
remaining noncancelable minimum rental commitments as follows:

Year ending December 31:                                         Amount
                                                               ----------
  1997                                                          $ 3,926
  1998                                                            3,273
  1999                                                            2,226
  2000                                                            2,271
  2001                                                            1,267
  Thereafter                                                        453
                                                                -------
  Total minimum lease payments                                   13,416
  Total minimum noncancelable sublease rentals                   (1,004)
                                                                -------
                                                                $12,412
                                                                =======

Rent expense for all operating leases aggregated $3,843, net of sublease rentals
of $611, for the year ended December 31, 1996 and $1,924, net of sublease
rentals of $201, for the six-month period ended December 31, 1995, respectively.

The Company is a party to litigation arising in the normal course of business.
Management regularly analyzes current information and, as necessary, provides
accruals for probable liabilities on the eventual disposition of these matters.
Management believes that the effect on the Company's results of operations and
financial position, if any, for the disposition of these matters, will not be
material.

NOTE 11 - ROYALTY AGREEMENTS:

The Company has commitments for minimum guaranteed royalties under various
software license agreements which are payable over periods ranging from three to
five years. The software under license has been or will be integrated with the
Company's existing software. Minimum future obligations under these royalty
agreements are as follows:

Year ending December 31:                                               Amount
                                                                    -----------
      1997                                                          $     400
      1998                                                              3,030
      1999                                                              1,050
      2000                                                                450
                                                                    ---------
      Total minimum royalty payments                                $   4,930
                                                                    =========

                                      -12-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 11 - ROYALTY AGREEMENTS: (Continued)

The Company has prepaid royalties associated with these license agreements
totaling $1,150 at December 31, 1996. The prepaid royalties will be amortized on
a units-of-products basis.

NOTE 12 - INCOME TAXES:

Due to losses incurred from operations, the Company has no provision for income
tax for the year ended December 31, 1996 or for the six-month period ended
December 31, 1995.

Significant components of the deferred tax balances are:

                                  December 31, 1996        December 31, 1995
                                ----------------------   ---------------------
                                 Current  Non-Current    Current   Non-Current
                                 Assets      Assets      Assets       Assets
                                --------- ------------   -------   -----------

Depreciation and amortization   $    --   $  6,153       $   --      $  2,670
Net operating loss carryovers                9,074                      3,274
Accrued expenses                  1,416        200        1,383           400
Other                               325          6          114             6
Valuation allowance              (1,741)   (15,433)      (1,497)       (6,350)
                                -------   --------       -------     --------
                                $    --   $     --       $    --     $     --
                                =======   ========       =======     ========

Management has determined, based on the Company's history of prior operating
losses and its expectations for the future, that a full valuation allowance for
deferred tax assets should be provided at December 31, 1996 and 1995.

NOTE 13 - RELATED PARTY TRANSACTIONS:

Bain Capital Partners IV, L.P. (Bain), an affiliate of certain shareholders,
provides management and advisory services to the Company and Holdings.
Approximately $427 of fees paid to Bain for the year ended December 31, 1996
were included as issuance costs of the Class A and Class B Preferred Stock (see
Notes 14 and 15). Additionally, $46 of fees for out-of-pocket expenses were paid
to Bain during the year ended December 31, 1996.

                                      -13-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousand,, except per share data)
--------------------------------------------------------------------------------

NOTE 13 - RELATED PARTY TRANSACTIONS: (Continued)

At December 31, 1996 and 1995, the Company had outstanding a note receivable
from Jostens in the amount of $350 and $7,350, respectively, related to certain
liabilities which existed at the date of acquisition. Also included in amounts
due from related parties at December 31, 1996 is $120 due from an investor in
conjunction with the issuance of the Class A Preferred Stock and $877 of
intercompany amounts due from Holdings.

In conjunction with the issuance of the Class A Preferred Stock, the Company
entered into a consulting arrangement with an investor. The arrangement provides
for $500 per year to be paid to the investor for consulting services through
November 1, 1999. At December 31, 1996, $416 was included in prepaid expenses
and the statement of operations reflects $84 in consulting expenses for the year
ended December 31, 1996 related to this arrangement. In addition to the
consulting arrangement, the Company entered into a sales and marketing agreement
whereby the Company would sell product to the investor at a discount.
Approximately $192 in sales were made to this investor during the year ended
December 31, 1996.

Included in other noncurrent accrued liabilities at December 31, 1996 and 1995
is $341 and $560, respectively, representing the noncurrent portion of a note
payable to Jostens related to settlement of intercompany transactions. Also
included in other noncurrent accrued liabilities at December 31, 1996 is $350
related to the consulting arrangement described above.

Included in due to related parties at December 31, 1996 is the current portion
of the note payable to Jostens of $220 as well as $150 related to the consulting
arrangement described above. Included in due to related parties at December 31,
1995 are payroll amounts paid on behalf of JLC by Jostens, totaling
approximately $7,430, the current portion of the note payable to Jostens of $220
and $280 of intercompany amounts due to Holdings.

NOTE 14 - MANDATORILY REDEEMABLE PREFERRED STOCK:

On December 19, 1996, the Company issued 10,000 shares of $.01 par value Class B
Preferred Stock and recorded the stock at $10,000 less issuance costs of
approximately $900, its fair value on date of issuance. These shares represent
all of the authorized shares of Class B Preferred Stock. JLC is required to
redeem all outstanding shares of Class B Preferred Stock, at a redemption price
of $1,000 per share plus any accrued and unpaid dividends, by December 19, 2008.
Holders of Class B Preferred Stock have no voting rights, are entitled to a
preferential distribution of $1,000 per share plus accrued and unpaid dividends
in the event of a liquidation, and are entitled to annual dividends of $100 per
share until the Company redeems the stock. The stock will be accreted to its
redemption value through charges to paid-in-capital.

                                      -14-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 15 - STOCKHOLDERS' EQUITY:

On November 1, 1996, the Company issued 20,000 shares of $.01 par value Class A
Preferred Stock for $20,000 less issuance costs of $1,835. In conjunction with
the issuance of the Class A Preferred Stock, $100 was paid to Holdings for a
warrant to purchase a specified number of shares of Holdings Common Stock.
Concurrent with the sale of the warrant, Holdings contributed the proceeds
received to JLC.

The authorized redeemable preferred stock and common stock of the Company
consists of 20,000 shares of $.01 par value Class A Preferred Stock and 120,565
shares of $.001 par value Class A Common Stock. At December 31, 1996 and 1995,
1,000 shares of the Class A Common Stock were issued and outstanding. All
outstanding shares of Class A Common Stock are held by SSC. At December 31,
1996, all 20,000 shares of the Class A Preferred Stock were issued and
outstanding. No preferred shares were authorized, issued or outstanding at
December 31, 1995. Holders of Class A Common stock are entitled to one vote per
share. Holders of Class A Preferred Stock have no voting rights. In the event of
a liquidation of the Company, holders of Class A Preferred Stock are entitled to
a preferential distribution of $1,000 per share plus accrued and unpaid
dividends. Distribution amounts in excess of the Class A and Class B preferred
stock distribution preference are to be distributed ratably to all of the Class
A common shareholders. The Company, at its option, may redeem all the shares of
Class A Preferred Stock at a redemption price of $1,000 per share plus any
accrued and unpaid dividends. Holders of Class A Preferred Stock are entitled to
annual dividends of $100 per share.

Included in paid-in capital of JLC is $40,000 in debt payable by SSC to the
Company's former parent, Jostens, as part of the purchase consideration. Such
debt is not payable by JLC, guaranteed by JLC nor subject to repayment from the
proceeds of any future equity transactions of JLC.

NOTE 16 - UNALLOCATED PURCHASE CONSIDERATION:

In conjunction with the acquisition of JLC by Holdings on June 29, 1995,
warrants and an exchangeable note issued to Jostens allowed the former parent to
acquire up to a 30.7% interest in Holdings. Accordingly, 69.3% of the purchase
consideration was allocated to the assets acquired and liabilities assumed at
their respective fair values, with the remainder allocated at Jostens' book
value as of the date of acquisition. The application of the purchase method
resulted in an allocation of the excess purchase consideration over historical
carryover basis of Jostens ("unallocated purchase consideration") of
approximately $17,981.

                                      -15-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 17 - EMPLOYEE BENEFIT PLANS:

Stock Option Plan

Certain JLC employees, consultants or advisors are eligible to participate in
the Stock Option Plan (the Plan) adopted by the Board of Directors of Holdings
in August 1996. The Board of Directors of Holdings determines the award date,
the number of shares subject to each award and the exercise price of each
option. Awards are categorized as either basic options or performance options,
as defined in the Plan. Options issued in 1996 vest over a five-year period.
Basic options and performance options expire 10 years and 7 years, respectively,
from the date of grant.

Holdings has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation"
at December 31, 1996. Accordingly, no compensation cost has been recognized for
the stock option plans. Had compensation cost for the Holdings' Stock Option
Plan been determined based on the fair value at the grant date for awards
consistent with the provisions of SFAS No. 123, the financial impact to JLC
would have been immaterial.

401(k) Retirement Plan

The Company has a retirement savings plan covering substantially all eligible
employees. The plan provides for discretionary matching contributions by the
Company, limited to eligible contributions by employees. The Company's
contribution to the plan for the period ended December 31, 1996 was $350.

                                      -16-
<PAGE>

                            JLC LEARNING CORPORATION
                         Notes to Financial Statements
                 (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

NOTE 18 - SUPPLEMENTAL CASH FLOW INFORMATION:

Supplemental disclosures of cash flow information:

                                                                   For the six-
                                                 For the year      month period
                                                    ended             ended
                                                 December 31,      December 31,
                                                    1996               1995
                                                 ------------      -------------

Cash paid during the period for interest           $ 4,686            $ 1,113
                                                   =======            =======
Cash paid during the period for income taxes       $   127            $    --
                                                   =======            =======

Supplemental schedule of noncash investing and remaining activities:

Holdings purchased certain assets of Ideal for a total purchase price of $5,000.
In conjunction with the acquisition, liabilities were assumed as follows (in
thousands):

Fair value of assets acquired                        $ 5,746
Less cash paid for stock of Ideal                     (4,100)
                                                     -------
Liabilities assumed                                  $ 1,646
                                                     =======

                                      -17-

<PAGE>

                                                                           DRAFT

JLC LEARNING
CORPORATION
Financial Statements
December 31, 1998 and 1997

<PAGE>

                                                                           DRAFT

                        Report of Independent Accountants

February __, 1999

To the Board of Directors and Shareholders of
JLC Learning Corporation

In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of JLC Learning Corporation at December 31,
1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of JLC Learning Corporation's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern As discussed in Note 1 to the financial
statements, the Company is not in compliance with certain covenants required by
the subordinated notes. In the event that the holders demand payment of the
notes and the Company is not able to obtain suitable alternative financing,
there is substantial doubt about the Company's ability to continue as a going
concern Management's plans in regard to this matter are also described in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

<PAGE>

JLC LEARNING CORPORATION                                                   DRAFT
Balance Sheet - (in thousands except share and per share data)
December 31, 1998 and 1997
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               1998         1997
<S>                                                                         <C>          <C>
                                  Assets
Current assets
   Cash and cash equivalents                                                $      --    $     860
   Accounts receivable, less allowance of $1,327 and $2,393, respectively      21,877       29,440
   Inventories                                                                  1,011        1,050
   Prepaid expenses                                                             2,629        1,238
   Investment in equity securities                                                314           --
                                                                            ---------    ---------
     Total current assets                                                      25,831       32,588

Other assets
   Software development costs, net                                              2,690        4,879
   Intangible assets, net                                                         959        1,204
   Deferred financing fees, net                                                   859           --

   Fixed assets, net                                                            2,090        3,145
                                                                            ---------    ---------
   Total assets                                                             $  32,429    $  41,816
                                                                            =========    =========

                   Liabilities and Stockholders'  Deficit
Current liabilities
   Accounts payable                                                         $   2,678    $   2,817
   Due to related parties                                                         955        1,070
   Salaries and related items                                                   6,005        5,388
   Other accrued liabilities                                                   10,112        8,976
                                                                            ---------    ---------
                                                                               19,750       18,251
   Deferred revenue                                                            21,253       25,648
   Revolving line of credit                                                     2,238        8,500
   Senior subordinated debt                                                    17,000       17,000
                                                                            ---------    ---------
       Total current liabilities                                               60,241       69,399

Non-current portion of deferred revenue                                         1,723        3,873

Non-current portion of due to related parties                                   2,901          712

Non-current other accrued liabilities                                             293          898

Term note payable to bank                                                       7,500           --
                                                                            ---------    ---------
   Total liabilities                                                           72,658       74,882
                                                                            ---------    ---------

Stockholder's' deficit
   Mandatorily redeemable preferred stock, $0.01 par value, 10,000 shares
    authorized, issued and outstanding ($11,230 and
    $10,153 liquidation preference, respectively)                              11,230       10,153
   Redeemable preferred stock, $.01 par value, 20,000 shares authorized,
    issued and outstanding                                                         --           --
   Common stock, $.001 par value, 120,565,000 shares authorized,
    1,000 shares issued and outstanding                                            --           --
   Additional paid-in capital                                                  75,803       75,803
   Accumulated deficit                                                       (109,595)    (101,041)
   Unallocated purchase consideration                                         (17,981)     (17,981)
   Accumulated other comprehensive income                                         314           --
                                                                            ---------    ---------
    Total stockholders' deficit                                               (40,229)     (33,066)
                                                                            ---------    ---------
    Total liabilities and stockholders' deficit                             $  32,429    $  41,816
                                                                            =========    =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      - 2 -

<PAGE>

JLC LEARNING CORPORATION                                                   DRAFT
Statement of Operations - (in thousands)
Years Ended December 31, 1998 and 1997
--------------------------------------------------------------------------------

                                                           1998            1997
Net revenue
   Software                                            $ 31,422        $ 29,159
   Service                                               33,935          36,029
   Hardware                                               4,014           6,624
                                                       --------        --------
                                                         69,371          71,812
                                                       --------        --------

Cost of products sold
   Software                                               7,050          30,435
   Service                                               19,235          23,399
   Hardware                                               3,229           5,550
                                                       --------        --------
                                                         29,514          59,384
                                                       --------        --------
Gross profit                                             39,857          12,428
                                                       --------        --------

Selling and administrative expenses
   Sales and marketing                                   24,097          31,357
   Research and development                               8,022          11,177
   General and administrative                             7,705          13,508
   Amortization of intangibles                              245           5,449
   Restructuring                                          2,012              --
                                                       --------        --------
                                                         43,081          61,491
                                                       --------        --------

Loss from operations                                     (3,224)        (49,063)
Interest expense                                         (4,286)         (5,013)
Other income (expense)                                       33          (2,128)
                                                       --------        --------

Loss before income taxes                                 (7,477)        (56,204)
Income tax expense                                           --              --
                                                       --------        --------
Net loss                                               $ (7,477)       $(56,204)
                                                       ========        ========

   The accompanying notes are an integral part of these financial statements.

                                     - 3 -
<PAGE>

JLC LEARNING CORPORATION                                                  DRAFT
Statement of Stockholders' Deficit - (in thousands except share data)
Years Ended December 31, 1998 and 1997
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                  Mandatorily       Redeemable
                                Preferred Stock   Preferred Stock    Common Stock     Additional
                                ---------------  ----------------  -----------------   Paid-in    Accumulated
                                Shares      $    Shares      $     Shares      $       Capital      Deficit
                                ------  -------  ------  --------  -------  --------  ----------  -----------

<S>                             <C>     <C>      <C>     <C>       <C>      <C>        <C>        <C>
Balance at December 31, 1996    10,000  $ 9,076  20,000  $     --  $ 1,000  $     --   $75,803   $ (43,760)

Accrued dividends on
  mandatorily redeemable
  preferred stock                         1,000                                                     (1,000)

Accretion of stock issuance
  costs and related
  discount                                   77                                                        (77)

Net loss for the year ended
  December 31, 1997                                                                                (56,204)
                                ------  -------  ------  --------  -------  --------   -------   ---------
Balance at December 31, 1997    10,000   10,153  20,000        --    1,000        --   $75,803    (101,041)

Accrued dividends on
  mandatorily redeemable
  preferred stock                         1,000                                                     (1,000)

Accretion of stock issuance
  costs and related
  discount                                   77                                                        (77)

Comprehensive income (loss)

  Net loss for the year ended
   December 31, 1998                                                                                (7,477)

  Unrealized gain on
   available for sale
   securities

Total Comprehensive
  income (loss)
                                ------  -------  ------  --------  -------  --------   -------   ---------
Balance at December 31, 1998    10,000  $11,230  20,000  $     --  $ 1,000  $     --   $75,803   $(109,595)
                                ======  =======  ======  ========  =======  ========   =======   =========

<CAPTION>
                                                Accumulated
                                Unallocated       Other
                                  Purchase     Comprehensive
                                Consideration     Income       Total
                                -------------  -------------   -----

<S>                              <C>             <C>          <C>
Balance at December 31, 1996     $(17,981)       $      --   $ 23,138

Accrued dividends on
  mandatorily redeemable
  preferred stock

Accretion of stock issuance
  costs and related
  discount

Net loss for the year ended
  December 31, 1997                                           (56,204)
                                 --------        ---------   --------
Balance at December 31, 1997      (17,981)                    (33,066)

Accrued dividends on
  mandatorily redeemable
  preferred stock

Accretion of stock issuance
  costs and related
  discount

Comprehensive income (loss)

  Net loss for the year ended
   December 31, 1998                                           (7,477)

  Unrealized gain on
   available for sale
   securities                                          314        314
                                                 ---------   --------
Total Comprehensive
  income (loss)                                        314     (7,163)
                                 --------        ---------   --------
Balance at December 31, 1998     $(17,981)       $     314   $(40,229)
                                 ========        =========   ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                     - 4 -

<PAGE>

JLC LEARNING CORPORATION                                                  DRAFT
Statement of Cash Flows - (in thousands)
Years Ended December 31, 1998 and 1997
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                 1998        1997
<S>                                                          <C>         <C>
Cash flows used in operating activities
   Net loss                                                  $ (7,477)   $(56,204)
   Adjustments to reconcile net loss to net cash used in
    operating activities
     Depreciation and amortization                              4,025      33,733
     Impairment of investments in equity securities                --       2,157
     Amortization of deferred financing fees                      286       1,322
     Amortization of debt discount                                 --         980
     Changes in assets and liabilities
       Decrease in accounts receivable                          7,563       5,348
       Decrease in inventories                                     39       1,483
       Decrease in prepaid expenses                               220       2,872
       Decrease in accounts payable                              (139)     (1,120)
       Increase (decrease) in due to related parties              (15)        700
       Increase in salaries and related items                     617          12
       Decrease in current and noncurrent deferred revenue     (6,545)     (2,333)
       Increase (decrease) in current and noncurrent
         accrued liabilities                                    1,171      (3,603)
                                                             --------    --------
           Net cash used in operating activities                 (255)    (14,653)
                                                             --------    --------

Cash flows used in investing activities:
   Capital expenditures                                          (536)     (1,136)
   Software development costs capitalized                          --      (3,125)
                                                             --------    --------
           Net cash used in investing activities                 (536)     (4,261)
                                                             --------    --------

Cash flows provided by (used in) financing activities:
   Decrease in due to former parent                              (162)       (179)
   Repayments of borrowings on revolving line of credit       (65,552)    (14,300)
   Proceeds from revolving line of credit, net of
     financing fees of $1,145 in 1998                          66,645      22,800
   Retirement of previous line of credit, net                  (8,500)         --
   Borrowings on long-term note payable to bank                 7,500          --
                                                             --------    --------
           Net cash provided by (used in)
            financing activities                                  (69)      8,321
                                                             --------    --------

Decreases in cash and cash equivalents                           (860)    (10,593)
Cash and cash equivalents, beginning of period                    860      11,453
                                                             --------    --------
Cash and cash equivalents, end of period                     $     --    $    860
                                                             ========    ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                     - 5 -
<PAGE>

JLC LEARNING CORPORATION                                                   DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

1.    Nature of the Business

      JLC Learning Corporation (JLC or the Company), doing business as Jostens
      Learning, is a leading provider of technology-based educational programs
      to school districts for kindergarten through twelfth grade JLC is a
      wholly-owned subsidiary of Software Systems Corporation (SSC), a
      wholly-owned subsidiary of JLC Holdings, Inc. (Holdings).

      JLC operates in the education software industry and has maintained a
      leadership position among a multitude of providers. JLC's products and
      services include full integrated software systems, standalone CD ROM
      delivery, connection to the Internet and a full service offering,
      including installation, teacher training, onsite and remote diagnostics
      and maintenance.

      JLC focuses its market efforts in the educational channel, with sales and
      service coverage in the United Stares and several U.S. territories and is
      exploring opportunities in international markets. The Company's selling
      and distribution efforts include a direct sales force, telemarketing and
      catalog sales.

      For the years ended December 31, 1998 and 1997, the Company reported a
      $7,477 and a $56,204 net loss, respectively. In addition, the Company is
      in violation of certain financial covenants in connection with its Senior
      Subordinated Debt, and has failed to make quarterly interest payments due
      on December 31, 1997 and for each of the four quarters in 1998 on this
      debt. Accordingly, the entire amount outstanding under the Senior
      Subordinated Debt has been classified as a current liability. The Company
      has retained outside consultants to render advice regarding various
      alternatives available to the Company. These efforts have resulted in the
      Company restructuring its operations in July 1998 (see Note 19) and the
      development by the Company of a strategy to address the Company's current
      financial situation. This strategy involves restructuring current debt,
      evaluating raising funds through new investors and improving operating
      performance. There can be no assurance that the Company will obtain the
      financing, or achieve the cost reductions required for the Company to
      continue its operations. These financial statements do not include any
      adjustments that might result form the outcome of this uncertainty.

2.    Summary of Significant Accounting Policies

      Cash and Cash Equivalents

      The Company considers all highly liquid financial instruments with
      maturities of three months or less at date of purchase to be cash
      equivalents.

      Inventories

      Inventories are stated at the lower of cost or market. Cost is determined
      on the first-in, first-out (FIFO) basis.

                                      - 6 -
<PAGE>

JLC LEARNING CORPORATION                                                   DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

2.    Summary of Significant Accounting Policies (Continued)

      Software Development Costs

      The Company, in accordance with Statement of Financial Accounting
      Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to
      Be Sold, Leased, or Otherwise Marketed," capitalizes software development
      costs by project commencing when technological feasibility is established
      and concluding when the product is ready for release. Software development
      costs are amortized on a straight-line basis over five years or the
      expected life of the product, whichever is less. The Company periodically
      evaluates the net realizable value of capitalized software development
      costs based on factors such as budgeted sales, product development cycles
      and management's market emphasis. Research and development costs are
      charged to expense when incurred.

      Intangible Assets

      Intangible assets include goodwill. Goodwill represents the excess of the
      purchase price over the fair value of assets acquired and is being
      amortized over seven years. Impairment of intangible assets, if any, is
      measured periodically on the basis of whether anticipated undiscounted
      operating cash flows generated by the acquired businesses will recover the
      recorded net goodwill balances over the remaining amortization period.

      Investments in Equity Securities

      The Company classifies its investments in marketable securities as
      available-for-sale. Accordingly, investments are recorded at fair value
      with unrealized gains or losses, net of the related tax effect, excluded
      form income and reported as a separate component of stockholders' equity
      (deficit) until realized. A loss included in other expense of $2,157 was
      realized on investments in 1997 due to what was considered a nontemporary
      decline in fair value. During 1998, pursuant to a business combination
      involving the Company's investee, the investment which was written down to
      zero in 1997 was exchanged for shares of a publicly traded company. The
      unrealized gain of $314 at December 31, 1998 and 1997 unrealized gain of
      $314 at December 31, 1998 reflects the market value of this investment.
      There were no realized gains or losses in 1998.

      Deferred Financing Fees

      Deferred financing fees are direct costs paid by the Company in connection
      with their revolving credit agreement (see Note 7). These costs are being
      amortized over the term of the related debt Amortization for the years
      ended December 31, 1998 and 1997 approximated $286 and $1,322,
      respectively. Included in amortization for the year ended December 31,
      1997 were accelerated amortization charges of $1,047.

      Fixed Assets

      Fixed assets are recorded at cost and depreciated over the estimated
      useful lives of the related assets. Depreciation is provided principally
      on the straight-line method for financial reporting purposes and on
      accelerated methods for income tax purposes. Leasehold improvements are
      depreciated over the shorter of their useful life or the lease term.

                                      - 7 -
<PAGE>

JLC LEARNING CORPORATION                                                   DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

2.    Summary of Significant Accounting Policies (Continued)

      Revenue Recognition

      The Company adopted the provisions of Statement of Position 97-2 (SOP
      97-2) "Software Revenue Recognition," as amended by Statement of Position
      98-4. Deferral of the Effective Date of Certain Provisions of SOP 97-2,"
      effective January 1, 1998 SOP 97-2 supersedes Statement of Position 91-1,
      "Software Revenue Recognition," and delineates the accounting for software
      product and maintenance revenue. Under SOP 97-2, the Company recognizes
      revenue for hardware and software sales upon shipment of the product
      provided collection of the resulting receivable is deemed probable.
      Revenue from service contracts, instruction and user training and
      post-contract customer support is recognized ratably over the period of
      the related contract. Deferred revenue represents the Company's
      obligation to perform under signed contracts.

      For contracts with multiple obligations (e.g. deliverable and
      undeliverable products, maintenance and other services,) the Company
      allocates revenue to each component of the contract based on objective
      evidence of its fair value, which is specific to the Company, or for
      products not being sold separately, the price established by management.
      The Company recognizes revenue allocated to undelivered products when the
      criteria for product revenue set forth above are met.

      Advertising

      Advertising costs are expensed as incurred. Advertising expense totaled
      $705 and 1,832 for the years ended December 31, 1998 and 1997,
      respectively.

      Income Taxes

      The Company accounts for income taxes in accordance with SFAS 109,
      "Accounting for Income Taxes," which requires the recognition of deferred
      tax liabilities and assets for the expected future tax consequences of
      temporary differences between the carrying amounts and the tax basis of
      assets and liabilities. A valuation allowance is required to offset any
      net deferred tax assets if, based upon the available evidence, it is more
      likely than not that some or all of the deferred tax asset will not be
      realized.

      Use of Estimates

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from these
      estimates.

      Comprehensive Income

      The Company adopted SFAS No 130, "Reporting Comprehensive Income" for the
      year ended December 31, 1998. SFAS 130 requires the Company to measure and
      disclose all elements of comprehensive income that result from recognized
      transactions and other events in the financial statements. Accordingly,
      the Company has reported unrealized gains on marketable securities as a
      separate component of stockholders' deficit.

                                      - 8 -
<PAGE>

JLC LEARNING CORPORATION                                                   DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

3.    Inventories

      Inventories are as follows

                                                     ----------------------
                                                          December 31,
                                                     ----------------------
                                                      1998            1997
                                                     ------         -------
      Finished products                              $  836         $  862
      Materials and supplies                            175            188
                                                     ------         -------
                                                     $1,011          1,050
                                                     ------         -------

4.    Software Development Costs

      Software development costs are as follows

                                                     ----------------------
                                                          December 31,
                                                     ----------------------
                                                       1998          1997
                                                     --------      --------
      Capitalized software costs                     $ 39,713      $ 39,713
      Less accumulated amortization                   (37,023)      (34,834)
                                                     --------      --------
                                                     $  2,690      $  4,879
                                                     --------      --------

      Amortization of capitalized computer software development costs are
      included in cost of products sold and aggregated $2,189 and $24,751 for
      the years ended December 31, 1993 and 1997, respectively. Included in
      amortization of capitalized computer software development costs for the
      year ended December 31, 1997 were accelerated amortization charges of
      $17,269 for the reduction of certain capitalized costs to their net
      realizable value due to a change in the Company" product focus.
      Accelerated amortization charges in 1998 were not material.

5.    Intangible Assets

      Intangible assets are as follows:

                                                     ----------------------
                                                          December 31,
                                                     ----------------------
                                                      1998            1997
                                                     ------          ------
      Goodwill, Ideal                                $1,178          $1,178
      Less accumulated amortization                    (759)           (514)
                                                     ------          ------
                                                     $  959          $1,204
                                                     ------          ------

      Goodwill amounts at December 31, 1998 and 1997 are a result of the
      Company's acquisition of Ideal Learning, Inc. (Ideal) which took place in
      1995.

      Amortization expense related to intangible assets was $245 and $3,035 for
      the years ended December 31, 1998 and 1997, respectively. Included in
      amortization for the year ended December 31, 1997 were accelerated
      amortization charges of approximately $2,415. These charges were a result
      of an impairment of the trade name, workforce in place, and goodwill
      assets, which had been established as a result of the original acquisition
      of the Company by Holdings, due to a change in the Company's product
      focus.

                                      - 9 -
<PAGE>

JLC LEARNING CORPORATION                                                   DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

6.    Fixed Assets

      Fixed assets are comprised of the following

                                                                December 31,
                                            Depreciable    --------------------
                                               Life         1998         1997
                                            -----------   -------       -------
          Computer equipment                1 to 3 years  $ 2,914       $ 8,644
          Warehouse equipment               1 to 3 years       60           181
          Leasehold improvements            3 to 5 years      252           349
          Other furniture and fixtures      2 to 7 years    2,012         3,298
                                                          -------       -------
                                                            5,238        12,472
          Less accumulated depreciation                    (3,148)       (9,327)
                                                          -------       -------
                                                          $ 2,090       $ 3,145
                                                          -------       -------

      Depreciation expense aggregated $1,591 and $3,532 for the years ended
      December 31, 1998 and 1997, respectively. In 1998 the Company wrote off
      $7,852 of fully depreciated fixed assets which are no longer in use.

7.    Revolving Credit Agreement

      On June 29, 1995, the Company entered into a revolving credit agreement
      with a maximum loan availability of $40,000, including up to $3,000 of
      letters of credit (the Loan Facility). Borrowings outstanding under this
      agreement at December 31, 1997 were $8,500. The original termination date
      for the revolving line of credit was the last business day of June 2000,
      however in March 1998, the Company paid all outstanding amounts under this
      agreement and terminated the Loan Facility.

      In March 1998, the Company entered into a new loan facility which includes
      a new revolving line of credit agreement with a maximum loan availability
      of $20,000, including up to $2,000 of letters of credit and a term loan of
      $7,500 (see Note 9). Advances on the line of credit are limited to the
      lesser of 75% of eligible billed accounts plus 40% of eligible unbilled
      accounts or $2,000, whichever is less, and the amount collected on
      accounts by the Company for a defined period immediately preceding the
      advance. Loans under this agreement are secured by 100% of all capital or
      other equity interests, as well as accounts receivable, inventory, fixed
      assets, intangibles and contract rights. Interest is computed at 0.0875%
      to 2.75%, depending on the amount outstanding, plus the prime lending rate
      as most recently announced by Norwest Bank Minnesota, NA and at a minimum,
      a rate of 9%. At December 31, 1998 the minimum rate was being used. The
      agreement described above contains certain restrictive covenants, which
      includes requiring the Company to meet certain profitability levels and to
      maintain a certain tangible net worth. The new line of credit agreement
      matures in March 2001. Borrowings outstanding under this line of credit
      agreement at December 31, 1998 were $2,238. The fair value of the line of
      credit obligation at December 31, 1998 approximates book value.

                                     - 10 -
<PAGE>

JLC LEARNING CORPORATION                                                   DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

8.    Senior Subordinated Notes

      On June 29, 1995, the Company entered into a senior subordinated note
      purchase agreement whereby the Company borrowed a total of $17,000 from
      two lending institutions under note agreements which bear interest at
      12.25% and mature on the last business day of June 2002 Interest is
      payable quarterly. The notes are secured by the same collateral as the
      $20,000 revolving credit agreement (see Note 7) and are guaranteed by
      Holdings.

      The agreements require the Company to meet certain operating ratios and
      limits. The Company failed to meet certain covenants during the years
      ended December 31, 1998 and 1997. In addition, the Company failed to make
      quarterly interest payments due on December 31, 1997 and for each of the
      four quarters in 1998. Accordingly, amounts outstanding under the senior
      subordinated notes have been classified as current liabilities at December
      31, 1998 and 1997. The fair value of the Senior Subordinated notes at
      December 31, 1998 is not estimable.

      In connection with the issuance of the note agreements, the lending
      institutions each received warrants to acquire a specified number of
      shares of Holdings Common Stock. The value ascribed to the warrants of
      approximately $1,260 was recorded as a discount from the face value of the
      debt and was being amortized over the term of the Senior Subordinated
      Notes. During 1997, the Company accelerated the amortization on the
      warrants due to an impairment in the value.

      During 1998, a holder of a portion of the Company's Senior Subordinated
      notes transferred all of its interest in the notes to a third party. All
      terms and conditions of the original note agreement remained the same. The
      new note holder is an affiliate of the outside consultant that is
      assisting in exploring and obtaining additional funding for the Company
      (see Note 13).

9.    Term Note Payable to Bank

      In March 1998, in connection with a new loan facility (see Note 7) the
      Company obtained a term loan in the amount of $7,500, which matures in
      March 2000. The term loan is secured by 100% of all capital or other
      equity interests, as well as accounts receivable, inventory, fixed assets,
      intangibles and contract rights. The term loan bears interest at 13.0% up
      to February 1, 1999 and at 15% thereafter. The loan agreement contains
      certain restrictive covenants which are consistent with those described in
      Note 7. The fair value of the term loan at December 31, 1998 approximates
      book value.

10.   Lease Obligations, Commitments and Contingencies

      The Company has operating leases for office and warehouse space that
      include remaining noncancelable minimum rental commitments as follows:

                                     - 11 -

<PAGE>

JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

10.   Lease Obligations, Commitments and Contingencies (Continued)

         Year ending December 31                                      Amount
                                                                     --------
         1999                                                        $  3,485
         2000                                                           3,159
         2001                                                           2,098
         2002                                                           1,370
         2003                                                             600
                                                                     --------
         Total minimum lease payments                                  10,712
         Total minimum noncancelable sublease rentals                    (330)
                                                                     --------
                                                                     $ 10,382
                                                                     ========

      Of the $10,382 minimum rental commitments net of sublease rentals, $1,005
      has been accrued in the accompanying balance sheet at December 31, 1998 as
      they represent excess space liabilities a portion of which are a result of
      the Company's restructuring activities (see Note 19).

      Rent expense for all operating leases aggregated $2,136 and $3,506, net
      of sublease rentals of $447 and $647, for the years ended December 31,
      1998 and 1997, respectively.

      The Company is a party to litigation arising in the normal course of
      business. Management regularly analyzes current information and, as
      necessary, provides accruals for probable liabilities on the eventual
      disposition of these matters. Management believes that the effect on the
      Company's results of operations and financial position, if any, for the
      disposition of these matters, will not be material.

11.   Royalty Agreements

      At December 31, 1998 the Company had a minimum guaranteed royalty
      commitment under a software license agreement of $900 and $450 for the
      years ended December 31, 1999 and 2000, respectively, which have been
      accrued in the accompanying balance sheet at December 31, 1998

      In June 1998, JLC restructured a significant software license agreement
      with a third party JLC returned investment securities valued at $2,285 by
      the third party and also accepted reduced rights under the license
      agreement in order to settle $5,500 in minimum future royalty obligations
      which JLC owed. JLC retained the right to sell product from this third
      party through 2001. JLC has remaining prepaid royalties with respect to
      this license agreement of $2,700 with a net carrying value of $1,420 as of
      December 31, 1998 to be amortized on a units-of-production basis.

12.   Income Taxes

      Due to losses incurred from operations, the Company has no provision for
      income tax for the years ended December 31, 1998 and 1997

                                     - 12 -
<PAGE>

JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

12.   Income Taxes (Continued)

      Significant components of the deferred tax balances are

<TABLE>
<CAPTION>
                                         December 31, 1998       December 31, 1997
                                        --------------------    --------------------
                                                      Non-                    Non-
                                         Current     current     Current     current
                                         Assets      Assets      Assets      Assets
                                        --------    --------    --------    --------
        <S>                             <C>         <C>         <C>         <C>
        Depreciation and amortization   $     --    $ 14,478    $     --    $ 15,080
        Net operating loss carryovers         --      21,730          --      18,940
        Accrued expenses                     689          --         273         102
        Other                                 53          16         130          16
        Valuation allowance                 (741)    (36,223)       (403)    (34,138)
                                        --------    --------    --------    --------
                                        $     --    $     --    $     --    $     --
                                        ========    ========    ========    ========
</TABLE>

      In assessing the realizability of its deferred tax assets, the Company
      considers whether it is more likely than not that some or all of such
      assets will be realized. As a result of historical operating losses, the
      Company has fully reserved its net deferred tax assets as of December 31,
      1998 and 1997. The Company will consider release of the valuation
      allowance once profitable operations have been sustained.

      As of December 31, 1998, the Company had net operating loss carryforwards
      of approximately $63,900, which will begin to expire in 2010. Past and
      future transactions in the Company's stock could result in restrictions on
      the Company's ability to utilize its net operating loss carryforwards
      pursuant to Section 382 (g) of the Internal Revenue Code.

13.   Related Party Transactions

      The Company benefited from a management and advisory services agreement
      between Holdings and an affiliate of Holdings' shareholders. Out-of-pocket
      expenses were paid to this affiliate of $25 and $50 during the years ended
      December 31, 1998 and 1997, respectively.

      In conjunction with the issuance of the Class A Preferred Stock, the
      Company entered into a consulting arrangement with an investor. The
      arrangement provided for $500 per year to be paid to the investor for
      consulting services through November 1999. At December 31, 1998 and 1997,
      prepaid consulting fees of $417 and $458, respectively, were included in
      prepaid expenses and the Company incurred consulting expenses of $499 and
      $459 for the years ended December 31, 1998 and 1997, respectively,
      relating to this arrangement. Amounts due to this investor for consulting
      fees at December 31, 1998 and 1997 are $1,400. The current portion of
      these amounts at December 31, 1998 and 1997 are $750 and $850,
      respectively, and are included in due to related parties.

                                     - 13 -
<PAGE>

JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

13.   Related Party Transactions (Continued)

      In addition to the consulting arrangement, the Company entered into a
      sales and marketing agreement with this investor whereby the Company would
      sell product to the investor at a discount. Approximately $354 and $736 in
      sales were made to the investor during the years ended December 31, 1998
      and 1997, respectively. Included in accounts receivable at December 31,
      1998 and 1997, was $314 and $349, respectively, from sales to this
      investor.

      In June 1998, the Company delivered a promissory note to this investor to
      repurchase securities sold to the investor in December 1996. The note
      accrues interest at 10% with principal and accrued interest payable on
      April 15, 2001. The balance as of December 31, 1998 was $2,251 which is
      included in the non current portion of due to related party on the
      accompanying balance sheet. As of December 31, 1997, $500 was accrued and
      included in due to related parties relating to this same agreement.

      At December 31, 1998 and 1997 the Company had amounts due to its former
      parent relating to the settlement of intercompany transactions of $205 and
      $382, respectively. Of the amounts due to Jostens at December 31, 1998 and
      1997, $205 and $220, respectively, were included in due to related
      parties.

      During 1998, the Company re-engaged a third party consultant to explore
      additional investment alternatives. Later during 1998, an affiliate of
      this consultant replaced a Senior Subordinated Note holder. Fees paid to
      this affiliate for the year ended December 31,1998 were $647 (see Note 8).

14.   Mandatorily Redeemable Preferred Stock

      On December 19, 1996, the Company issued 10,000 shares of $.01 par value
      Class B Preferred Stock and recorded the stock at $10,000 less issuance
      costs of approximately $900, its fair value on date of issuance. These
      shares represent all of the authorized shares of the Class B Preferred
      Stock. The Company is required to redeem all outstanding shares of the
      Class B Preferred Stock, at a redemption price of $1,000 per share plus
      any accrued and unpaid dividends, by December 19, 2008. Holders of Class B
      Preferred Stock have no voting rights, are entitled to a preferential
      distribution of $1000 per share plus accrued and unpaid dividends in the
      event of a liquidation, and are entitled to annual dividends of $100 per
      share until the Company redeems the stock. At December 31, 1998 and 1997
      accrued dividends of $2,000 and $1,000 are included in stockholders'
      equity, respectively. The stock will be accreted to its redemption value
      through charges to accumulated deficit.

15.   Stockholders' Deficit

      On November 1, 1996, the Company issued 20,000 shares of $.01 par value
      Class A Preferred Stock for $20,000 less issuance costs of $1,835. In
      conjunction with the Class A Preferred Stock, $100 was paid to Holdings
      for a warrant to purchase a specified number of shares of Holdings Common
      Stock. Concurrent with the sale of the warrant, Holdings contributed the
      proceeds received to the Company.

15.   Stockholders' Equity (Continued)

                                     - 14 -
<PAGE>

JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

      The authorized redeemable preferred stock and common stock of the Company
      consists of 20,000 shares of $.01 par value Class A Preferred Stock and
      120,565,000 shares of $.001 par value Class A Common Stock. At December
      31, 1998 and 1997, 1,000 shares of the Class A Common Stock were issued
      and outstanding. All outstanding shares of Class A Common Stock are held
      by SSC. At December 31, 1998 and 1997, all 20,000 shares of the Class A
      Preferred Stock were issued and outstanding. Holders of Class A Common
      stock are entitled to one vote per share. Holders of Class A Preferred
      Stock have no voting rights. In the event of a liquidation of the Company,
      holders of Class A Preferred Stock are entitled to a preferential
      distribution of $1,000 per shares plus accrued and unpaid dividends.
      Distribution amounts in excess of the Class A and Class B preferred stock
      distribution preference are to be distributed ratably to all of the Class
      A common stockholders. The Company, at its option, may redeem all the
      shares of Class A Preferred Stock at a redemption price of $1,000 per
      share plus any accrued and unpaid dividends. Holders of Class A Preferred
      Stock are entitled to annual dividends of $100 per share.

      Included in the paid-in capital of the Company is $40,000 in debt payable
      by SSC to the Company's former parent, as part of the purchase
      consideration. Such debt is not payable by the Company, guaranteed by the
      Company, nor subject to repayment from the proceeds of any future equity
      transactions of the Company.

16.   Unallocated Purchase Consideration

      In conjunction with the acquisition of the Company by Holdings on June
      29,1995, warrants and an exchangeable note issued to the Company's former
      parent allowed the former parent to acquire up to a 30.7% interest in
      Holdings. Accordingly, 69.3% of the purchase consideration was allocated
      to the assets acquired and liabilities assumed at their respective fair
      values, with the remainder allocated at Jostens' book value as of the date
      of acquisition. The application of the purchase method resulted in an
      allocation of the excess purchase consideration over historical carryover
      basis of Jostens ("unallocated purchase consideration) of approximately
      $17,981).

17.   Employee Benefit Plans

      Stock Appreciation Rights Plan

      In February 1999, the Board of Directors adopted the 1998 Stock
      Appreciation Rights Plan (the Plan). Stock Appreciation Rights (SARs) in
      the aggregate of 1,500,000 were created and approximately 1,000,000 SARs,
      at a base value, as determined by the Board of Directors, of $4.00, were
      initially granted to select employees in 1999. These SARs shall vest
      according to the following schedule: 50% on the second anniversary of
      October 1, 1998 and an additional 25% shall vest on each of the third and
      fourth anniversaries of October 1, 1998. The SAR represents the right to
      receive additional compensation equal to the redemption price of the SAR
      based on an enterprise value determined at the sole discretion of the
      Board of Directors. SARs shall be redeemed out of available funds upon
      certain liquidity events, as defined, or at the discretion of the Board of
      Directors.

                                     - 15 -
<PAGE>

JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------

17.   Employee Benefit Plans (Continued)

      Additionally. in connection with signing the Stock Appreciation Rights
      Agreement, employees waive and surrender any rights and interest in
      options previously granted to them under the JLC Holdings, Inc Stock
      Option Plan.

      401(k) Retirement Plan (401(k) Plan)

      The Company has a retirement savings plan covering substantially all
      eligible employees. The 401(k) Plan provides for a 33% matching
      contribution by the Company, limited to eligible contributions by
      employees. The Company's matching contribution to the 401(k) Plan for the
      years ended December 31, 1998 and 1997 were $360 and $442, respectively.

18.   Supplemental Cash Flow Information

      Supplemental disclosures of cash flow information

<TABLE>
<CAPTION>
                                                                   For the year ended
                                                                       December 31,
                                                                    ----------------
                                                                     1998      1997
                                                                    ------   -------
          <S>                                                       <C>      <C>
          Cash paid during the year for interest                    $1,561   $ 2,208
          Cash paid during the year for income taxes                    --        --
          Non-cash financing activity:
             Note payable issued for equity securities
                (see Note 13)                                        2,251        --
             Equity Securities exchanged for Prepaid Royalty
                (see Note 11)                                        2,285        --

</TABLE>

19.   Restructuring

      During July 1998 the Company recorded a restructuring charge of $3,012
      related to the adoption by the Company of a formal action plan for
      restructuring its operations. This restructuring was adopted in an effort
      to establish a more competitive cost structure in response to current
      sales levels.

      In connection with the plan in 1998 the Company paid employee severance
      and benefit costs of approximately $1,400 when it decreased its workforce
      by approximately 90 employees.

      As of December 31, 1998, the remaining accrual associated with this
      restructuring was approximately $1,400. This accrual consists of estimated
      future severance and related obligations of $600, estimated future rent
      obligations associated with excess lease space of $600, and an accrual for
      other related costs of $200.

                                     - 16 -
<PAGE>

                                     [LOGO]

                                  JLC LEARNING
                                   CORPORATION

                              FINANCIAL STATEMENTS

                                 MARCH 31, 1999

<PAGE>

                              LEARNING CORPORATION
                             STATEMENT OF OPERATIONS
                                 (In thousands)

                                        Three months ended   Three mths ended
                                          March 31, 1999       Mar. 31, 1998
                                       --------------------  ----------------
                                        Actual        Plan        Actual
Contract:
   New Sales                              6,980       5,550         4,768
   Renew Sales                            1,274       1,600         1,342

Net Revenue:
   Software                            $  4,729    $  4,947      $  4,167
   Professional Development               2,162       2,416         2,998
   S/W-H/W Support                        5,171       5,268         5,564
   Hardware                               1,238       1,346         1,297
                                       --------    --------      --------
                                         13,300      13,977        14,026
                                       --------    --------      --------

Cost of products sold:
   Software                               1,134       1,345         1,290
   Professional Development               1,717       1,952         2,284
   S/W-H/W Support                        2,504       2,499         3,433
   Hardware                                 871       1,241         1,125
                                       --------    --------      --------
                                          6,286       7,037         8,132
                                       --------    --------      --------
Gross profit:                             7,014       6,940         5,894
                                       --------    --------      --------

Operating expenses:
   Sales and marketing                    4,895       4,906         7,013
   Research & development                 1,739       2,229         2,291
   General & administrative               1,935       1,875         2,207
   Restructuring                             --          --            --
                                          8,569       9,010        11,511
                                       --------    --------      --------
Profit(loss) from operations             (1,555)     (2,070)       (5,617)
Other income (expense)                      404          --            --
Amortization of intangibles                 (61)        (60)          (61)
Interest expense                         (1,309)     (1,058)         (843)
Profit(loss) before inc tax              (2,521)     (3,188)       (6,521)
Income tax expense                           --          --            --
Net proflt(loss)                         (2,521)     (3,188)       (6,521)

Less:
   Depreciation and net amortization        826         887           996
   Gain/Loss on investment                 (392)         --
   Interest                               1,309       1,058           843
   Restructuring                             --          --            --
   Income tax expense                        --          --            --
EBITDA                                 $   (778)   $ (1,243)     $ (4,682)
                                       ========    ========      ========

                            JLC Learning Confidential

<PAGE>

                            JLC LEARNING CORPORATION
                                 BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                March 31, 1999         March 31, 1998
                                                            ----------------------    ----------------
                                                              Actual        Plan            Actual
                                                              ------        ----            ------
                                     Assets
<S>                                                         <C>          <C>              <C>
Currents Assets:
   Cash & cash equivalents                                  $      --    $     500        $      --
   Account receivable, less allowance ($1,293 and $2,407)      18,195       15,559          2,2,876
   Inventories                                                    672          480              491
   Prepaid expenses                                             2,189        3,210            1,634
   Due from related party                                          --           --               --
     Total current assets                                      21,056       19,749           25,002

Other Assets:
   Software development costs                                  39,713       39,713           39,713
   Less accumulated amortization                              (37,456)     (37,445)         (35,341)
     Software development, net                                  2,257        2,268            4,372
   Intangible assets                                            1,718        1,718            1,718
   Less accumulated amortization                                 (820)        (819)            (575)
                                                            ---------    ---------        ---------
   Intangible assets, net                                         898          899            1,143
   Deferred financing fees                                        763          763              784
   Fixed assets                                                 5,290       12,892           12,678
   Less accumulated depreciation                               (3,480)     (11,106)          (9,755)
                                                            ---------    ---------        ---------
     Fixed assets, net                                          1,810        1,786            2,923
                                                            ---------    ---------        ---------
                                                            $  26,784    $  25,465        $  34,224
                                                            =========    =========        =========
                      Liabilities and Stockholders Equity
Current Liabilities:
   Accounts payab4e                                         $   2,829    $   2,053        $   5,445
   Due to related party                                         1,137        1,405            1,070
   Salaries and related items                                   4,182        4,174            5,251
   Deferred revenue                                            16,629       17,144           19,060
   Purchase and restructuring liabilities                         915        1,137              323
   Other accrued liabilities                                    8,569        9,452            8,449
                                                            ---------    ---------        ---------
     Total current liabilities                                 34,261       35,395           39,610
Noncurrent portions of deferred revenue                          1314        1,724            3,328
Noncurrent other accrued liabilities                            2,747        2,748            1,629
Revolving line of credit                                        7,026        4,830            4,740
Term note                                                       7,500        7,500            7,503
Senior subordinated note                                       17,000       17,000           17,000
                                                            ---------    ---------        ---------
    Total liabilities                                          69,848       69,197           73,810
Stockholders' equity:
  Paid-in capital                                              87,302       87,302           86,225
  Unallocated purchase consideration                          (17,981)     (17,981)         (17,981)
  Accumulated deficit                                        (112,385)    (113,053)        (107,830)
                                                            ---------    ---------        ---------
     Total stockholders equity                                (43,064)     (43,732)         (39,586)
                                                            ---------    ---------        ---------
     Total liabilities & stockholders' equity               $  26,784    $  25,465        $  34,224
                                                            =========    =========        =========
</TABLE>

                            JLC Learning Confidential

<PAGE>

                            JLC LEARNING CORPORATION
                             STATEMENT OF CASH FLOWS
                Increase (Decrease) In Cash and Cash Equivalents
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                      Three months ended     Three mths ended
                                                                        March 31, 1999         Mar. 31, 1998
                                                                      ------------------     ----------------
                                                                       Actual      Plan            Actual
                                                                       ------      ----            ------
<S>                                                                   <C>        <C>              <C>
Operating activities:
  Net profit (loss)                                                   $(2,521)   $(3,188)         $(6,521)
    Depreciation and amortization                                         826        887              995
    Amortization of deferred financing fees                                96         96               --
    Change in assets & liabilities:
      (Increase) decrease in accounts and notes receivable              3,682      6,318            6,563
      (Increase) decrease in due from related party                        --         --               (1)
      (Increase) decrease in inventories                                  339        531              559
      (Increase) decrease in prepaid expense                              440         61             (395)
      Increase (decrease) in accounts payable                             151       (625)           2,628
      Increase (decrease) in due to related party                        (318)       (50)              --
      Increase (decrease) in salaries and related items                (1,8Z3)    (1,831)            (136)
      Increase (decrease) in deferred revenue                          (5,034)    (4,109)          (7,133)
      Increase (decrease) in purchase/restructuring liabilities          (582)      (330)            (113)
      Increase (decrease) in other assets/accrued liabilities             (45)       194              (78)
                                                                      -------    -------          -------
                                                                       (4,789)    (2,046)          (3,632)
                                                                      -------    -------          -------
Investment activities:
      Capital expenditures, net                                           (52)      (100)            (206)
      Software development costs                                           --         --               --
                                                                          (52)      (100)            (206)
                                                                      -------    -------          -------
Financing activities:
      Increase (decrease) in due to former parent                          --         --               19
      Increase (decrease) in notes payable to related party                53         54               --
      Increase (decrease) in notes payable                                 --         --            7,503
      Increase (decrease) in revolving line of credit                   4,788      2,592           (3,760)
      (Increase) decrease in financing fees                                --         --             (784)
                                                                        4,841      2,646            2,978
                                                                      -------    -------          -------
Change in cash and cash equivalents                                                  500             (860)
Cash and cash equivalents, beginning of period                             --         --              860
Cash and cash equivalents, end of period                              $    --    $   500          $    --
                                                                      =======    =======          =======
</TABLE>

<PAGE>

                            JLC LEARNING CORPORATION
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>
                                            Paid-in    Additional                  Unallocated
                                Common      Capital     Paid-in      Accumulated     Purchase
                                 Stock      Class B     Capital        Deficit     Consideration     Total
                               ---------   ---------   ---------     ---------     -------------   ---------
<S>                            <C>         <C>         <C>           <C>            <C>            <C>
Balance at December 31, 1998   $      --   $  11,230   $  75,803     $(109,595)     $ (17,981)     $ (40,543)
Adjustment to carrying value          --          19          --           (19)            --             --
     of preferred stock
Net loss for the three months         --          --          --        (2,521)            --         (2,521)
     ended March 31, 1999
Dividends on preferred stock          --         250          --          (250)            --             --
                               ---------   ---------   ---------     ---------      ---------      ---------
Balance at March 31, 1999      $      --   $  11,499   $  75,803     $(112,385)     $ (17,981)     $ (43,064)
                               =========   =========   =========     =========      =========      =========
</TABLE>

                            JLC Learning Confidential
<PAGE>

                                  SCHEDULE 4.06

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
      Active Debtor                               Lienholder                               Status
-------------------------------------------------------------------------------------------------------
<S>                                      <C>                                               <C>
JLC Learning Corp.                       Foothill Capital Corp., as                        Active
9920 Pacific Heights Blvd.               Representative
San Diego, CA 92121                      11111 Santa Monica Blvd., Suite
                                         1500
                                         Los Angeles, CA 90025
</TABLE>

                               JLC - CONFIDENTIAL

<PAGE>

                                  SCHEDULE 4.07

<TABLE>
<CAPTION>
=================================================================================================================
Facility Address                             Lease Termination              Landlord
-----------------------------------------------------------------------------------------------------------------
<S>                                          <C>                            <C>
1. 7878 N. 16th Street                       December 31, 2002              CarrAmerica Realty Corp.
   Suite 100                                                                2720 East Camelback Road
   Phoenix, AZ 85020                                                        Suite 280
                                                                            Phoenix, AX 85016
-----------------------------------------------------------------------------------------------------------------
2. 9920 Pacific Heights Blvd.                March 21, 2001                 Spieker Properties
   Suite 500                                                                9255 Towne Centre Drive
   San Diego, CA 92121                                                      Suite 100
                                                                            San Diego, CA 92121
-----------------------------------------------------------------------------------------------------------------
3. 600 Brickell Avenue                       November 30, 1999              Foram Group, Inc.
   Suite 300U                                                               600 Brickell Avenue
   Miami, FL 33131                                                          Suite 600
                                                                            Miami, FL 33131
-----------------------------------------------------------------------------------------------------------------
4. 3922 Coconut Palm Drive                   September 30, 2003             AP SE Portfolio Partners L.P c/o
   Suite 110                                                                Crocker Realty Mgmt. 433 Plaza
   Tampa, FL  33619                                                         Real, Suite 335 Boca Raton, FL
                                                                            33432
-----------------------------------------------------------------------------------------------------------------
5. 100 Hartsfield Center Parkway             October 31, 2002               SPP Real Estate, Inc.
   Suite 320                                                                10 Glenville Street
   Atlanta, GA 30354                                                        Greenwich, CT 06831
-----------------------------------------------------------------------------------------------------------------
6. 2860 Old Rochester Road                   July 31, 2000                  Donald E. Curtis
   Springfield, IL 62703                                                    715 East Vine Street
                                                                            Springfield, IL 62703
-----------------------------------------------------------------------------------------------------------------
7. 125 Half Mile Road                        November 30, 1999              HQ Red Bank
   Suite 14                                                                 125 Half Mile Road
   Red Bank, NJ 07701                                                       Suite 200
                                                                            Red Bank, NJ 07701
-----------------------------------------------------------------------------------------------------------------
8. 102 Dee Drive                             December 31, 1999              Hillcrest Office Park
   Charleston, WV 25311                                                     One Players Club Drive
                                                                            Charleston, WV 25311
=================================================================================================================
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.08

                                   TRADEMARKS

<TABLE>
<CAPTION>
==================================================================================================
    AUSTRALIA
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
----------------------------------------------------------------------------------------------------=============
                       SERIAL         DATE          (R)          DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>           <C>          <C>          <C>         <C>               <C>
  Compass(TM)          710447        6/12/96                                             Opposed           JLC
                                                                                         --objected
-----------------------------------------------------------------------------------------------------------------
   Compass             761158        5/4/98                                              Opposed           JLC
 Worldware(TM)                                                                            --objected
-----------------------------------------------------------------------------------------------------------------
  Design of            761668        5/8/98        761668       1/25/99      5/8/08      Registered        JLC
   Tree(R)
-----------------------------------------------------------------------------------------------------------------
   JCAT(R)             761159        5/4/98        761159       12/18/98     5/4/08      Registered        JLC
-----------------------------------------------------------------------------------------------------------------
 Tomorrow's            752687        1/14/98       752687       8/31/98      1/14/08     Registered        JLC
  Promise
-----------------------------------------------------------------------------------------------------------------
 Worldware             775431        10/13/98                                            Published         JLC
                                                                                         11/26/98
-----------------------------------------------------------------------------------------------------------------

<CAPTION>
==================================================================================================
     BRUNEI
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
----------------------------------------------------------------------------------------------------=============
                       SERIAL          DATE         (R)          DATE        RENEW         CURRENT        OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>           <C>          <C>          <C>          <C>              <C>
   Compass(TM)         24,314        2/24/98       24,314                                                  JLC
                                                                                          Registered
-----------------------------------------------------------------------------------------------------------------
   Compass(TM)         29,032        2/24/98                                               Pending         JLC
-----------------------------------------------------------------------------------------------------------------
    Compass            29,203        4/2/98                                                Pending         JLC
 Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
    Design of          29,201        4/21/98                                               Pending         JLC
    Tree(TM)
-----------------------------------------------------------------------------------------------------------------
    Design of          29,202        4/21/98                                               Pending         JLC
    Tree(TM)
-----------------------------------------------------------------------------------------------------------------
    JCAT(TM)           29,206        4/21/98                                               Pending         JLC
-----------------------------------------------------------------------------------------------------------------
   Tomorrow's          29,031        2/24/98                                              Published        JLC
    Promise                                                                                1/15/99
-----------------------------------------------------------------------------------------------------------------
  Worldware(TM)        29,894        11/24/98                                              Pending         JLC
-----------------------------------------------------------------------------------------------------------------
    Writing            29,203        4/21/98                                               Pending         JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
    Writing            29,204        4/21/98                                               Pending         JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

<TABLE>
<CAPTION>
==================================================================================================
     CANADA
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
----------------------------------------------------------------------------------------------------=============
                       SERIAL         DATE          (R)          DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>           <C>          <C>          <C>         <C>               <C>
  Compass(TM)          877,358       5/6/98                                              Pending           JLC
-----------------------------------------------------------------------------------------------------------------
   Compass             877,187       5/6/98                                              Pending           JLC
 Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
  Design of            877,186       5/6/98                                              Published         JLC
   Tree(TM)                                                                              12/16/98
-----------------------------------------------------------------------------------------------------------------
   JCAT(TM)            877,359       5/6/98                                              Pending           JLC
-----------------------------------------------------------------------------------------------------------------
 Microsystem           462,173       11/26/80      291,816      6/8/84       6/8/99      Registered        JLC
    80(R)
-----------------------------------------------------------------------------------------------------------------
  System 80(R)         379,418       10/1/74       209,956      10/10/75     10/10/05    Registered        JLC
-----------------------------------------------------------------------------------------------------------------
   Tomorrow's          877,185       5/6/98                                              Pending           JLC
  Promise(TM)
-----------------------------------------------------------------------------------------------------------------
   Worldware           894,386       10/23/98                                            Pending           JLC
-----------------------------------------------------------------------------------------------------------------
    Writing            877,357       5/6/98                                              Pending           JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------

<CAPTION>

==================================================================================================
     FRANCE
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER        STATUS
----------------------------------------------------------------------------------------------------=============
                       SERIAL         DATE          (R)          DATE        RENEW        CURRENT       OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>           <C>          <C>          <C>         <C>          <C>
   Conter                94-         6/7/94        94-523,527   6/7/94       6/7/99      Registered    Jostens
Software(R)            532,527                                                                         Learning
                                                                                                      Corporation
-----------------------------------------------------------------------------------------------------------------

<CAPTION>
==================================================================================================
    HONG
    KONG
--------------------------------------------------------------------------------------------------
    MARK                    APPLICATION               REGISTRATION           OTHER         STATUS
----------------------------------------------------------------------------------------------------=============
                       SERIAL         DATE          (R)          DATE        RENEW        CURRENT       OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>           <C>          <C>          <C>         <C>          <C>
 A+dvantage            9510668       8/23/95       B6072/1998   3/2/95       3/2/02      Pending       Jostens
Worldware(TM)                                                                                          Learning
                                                                                                      Corporation
-----------------------------------------------------------------------------------------------------------------
  Design of            9510667       8/23/95       01298/1997   8/23/95      8/23/02     Registered    Jostens
   Tree(R)                                                                               12/16/98      Learning
                                                                                                      Corporation
-----------------------------------------------------------------------------------------------------------------
  Learning             9311502       9/13/95                                             Pending       Jostens
 First(TM)                                                                                             Learning
                                                                                                      Corporation
-----------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                               TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
==================================================================================================
   INDONESIA
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>            <C>          <C>         <C>          <C>              <C>
  A+dvanage             D95          9/4/95        364704       9/4/95      9/4/05       Registered       JLC
Worldware(R)           15772
-----------------------------------------------------------------------------------------------------------------
 Compass(TM)          D98 2479      2/17/98                                               Pending         JLC
-----------------------------------------------------------------------------------------------------------------
   Compass              D98         4/29/98                                               Opposed         JLC
Worldware(TM)          07733
-----------------------------------------------------------------------------------------------------------------
  Design of          J95 16035       9/7/95        361336       6/5/96      9/7/05       Registered       JLC
  Tree(R)
-----------------------------------------------------------------------------------------------------------------
  JCAT(TM)              D98         4/29/98                                               Pending         JLC
                       07734
-----------------------------------------------------------------------------------------------------------------
  Learning              D95          9/4/95        360510       9/4/95      3/4/05       Registered       JLC
  First(R)             15771
-----------------------------------------------------------------------------------------------------------------
  Tomorrow's          D98 2478      2/17/98                                               Pending         JLC
 Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM)           D98         11/6/98                                               Pending         JLC
                       18917
-----------------------------------------------------------------------------------------------------------------
   Writing              D98         4/29/98                                               Pending         JLC
Expedition(TM)         07732
=================================================================================================================

<CAPTION>
==================================================================================================
    IRELAND
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                   <C>           <C>           <C>           <C>         <C>          <C>               <C>
 Compass(R)           96/3861       6/12/96       173124        6/12/96     6/12/03      Registered        JLC
-----------------------------------------------------------------------------------------------------------------
  Compass             96/2924       7/16/98                                               Pending          JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
  Design of           98/2925       7/16/98                                               Pending          JLC
  Tree(TM)
-----------------------------------------------------------------------------------------------------------------
  Learning                          7/12/96       202178                                                   JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
  Learning            96/4375       7/12/96                                              Published         JLC
Expedition(TM)                                                                            4/8/98
-----------------------------------------------------------------------------------------------------------------
   NCAT(TM)           98/1437       4/15/98                                               Pending          JLC
-----------------------------------------------------------------------------------------------------------------
  Tomorrow's          97/4604      12/19/97                                              Published         JLC
 Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM)                                                                            Requested         JLC
                                                                                          filing
                                                                                         10/7/98
-----------------------------------------------------------------------------------------------------------------
   Writing            96/4376       7/12/96       202179        7/12/96     7/12/06      Registered        JLC
Expedition(R)
=================================================================================================================
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                               TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
==================================================================================================
   MALAYSIA
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                   <C>           <C>           <C>            <C>        <C>          <C>               <C>
  A+dvantage           9175/95       9/5/95                                               Pending          JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
 Compass(TM)          96/08076      7/18/96                                               Pending          JLC
-----------------------------------------------------------------------------------------------------------------
 Compass(TM)          98/05613       5/8/98                                               Pending          JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
 Design of            95/09668      9/14/95       95/09668       9/14/95    9/14/02      Registered        JLC
  Tree(R)
-----------------------------------------------------------------------------------------------------------------
  JCAT(TM)            98/05611       5/8/98                                               Pending          JLC
-----------------------------------------------------------------------------------------------------------------
  Learning            N97/16819     11/21/97                                              Pending          JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
  Tomorrow's          98/00802      1/20/98                                               Pending          JLC
 Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM)         98/13772     11/28/98                                               Pending          JLC
-----------------------------------------------------------------------------------------------------------------
   Writing            97/16816     11/21/97                                               Pending          JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
   Writing            98/05612      5/8/98                                                Pending          JLC
Expedition(TM)
=================================================================================================================

<CAPTION>
==================================================================================================
    SINGAPORE
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                   <C>            <C>           <C>           <C>        <C>          <C>               <C>
  A+dvantage          8443/95        9/4/95                                               Pending          JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
 Compass(TM)          7454/96        7/19/96                                              Pending;         JLC
                                                                                         responded
                                                                                         to office
                                                                                          action
-----------------------------------------------------------------------------------------------------------------
   Compass            3302/98        4/9/98                                               Pending          JLC
Worldware(TM)
=================================================================================================================
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                               TRADEMARKS (CONT'D)

SINGAPORE (Cont'd)
<TABLE>
<CAPTION>
==================================================================================================
    SINGAPORE
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>           <C>           <C>         <C>          <C>               <C>
  Design of           8407/95        9/2/95       8407/95       9/2/95      9/2/08       Registered        JLC
  Tree(R)
-----------------------------------------------------------------------------------------------------------------
  JCAT(TM)            3305/98        4/9/98                                               Pending          JLC
-----------------------------------------------------------------------------------------------------------------
  Tomorrow's         15161/97       12/13/97                                              Pending          JLC
 Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM)        12024/98       12/1/98                                               Pending          JLC
-----------------------------------------------------------------------------------------------------------------
   Writing            3303/98        4/9/98                                               Pending          JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
   Writing           3304/98         4/9/98                                               Pending          JLC
Expedition(TM)
=================================================================================================================

<CAPTION>
==================================================================================================
     TAIWAN
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                   <C>           <C>            <C>         <C>          <C>         <C>           <C>
    Learning          84-44009      8/30/95        739835      12/16/96     12/16/06    Registered      Jostens
    First(R)                                                                                            Learning
                                                                                                      Corporation
=================================================================================================================

<CAPTION>
==================================================================================================
     UNITED
    KINGDOM
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                    <C>          <C>           <C>          <C>          <C>          <C>               <C>
   A+dvantage          2032388      9/1/95        2032388       9/1/95       9/1/05      Registered        JLC
 Worldware(R)
-----------------------------------------------------------------------------------------------------------------
  Compass(R)           2103167      6/12/96       2103167      6/12/96       6/12/06     Registered        JLC
-----------------------------------------------------------------------------------------------------------------
   Compass             2117672      12/5/96       2117672      12/5/96       12/4/06     Registered        JLC
  Management
  System(R)
-----------------------------------------------------------------------------------------------------------------
   Compass             2172297      7/16/98                                               Pending          JLC
 Wor1dware(TM)
-----------------------------------------------------------------------------------------------------------------
  Compass(R)           2103167      6/12/96       2103167      6/12/96       6/12/06     Registered        JLC
=================================================================================================================
</TABLE>

                                JLC -CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                               TRADEMARKS (CONT'D)

UNITED KINGDOM (Cont'd)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                    <C>          <C>           <C>          <C>          <C>         <C>                <C>
    Design of          2031173       8/21/95      2031173      8/21/95      8/21/05     Registered         JLC
    Tree(R)
-----------------------------------------------------------------------------------------------------------------
    Learning           2106235       7/26/96      2106235      7/26/96      7/26/06     Registered         JLC
 Expedition(R)
-----------------------------------------------------------------------------------------------------------------
 Learning First        2033468       9/14/95                                            Abandoned
-----------------------------------------------------------------------------------------------------------------
    NCAT(R)             63913        4/9/98       2163913      4/9/98       4/9/98      Registered         JLC
-----------------------------------------------------------------------------------------------------------------
   Tomorrow's          2152272      11/28/97      2152272      11/28/97     11/28/07    Registered         JLC
   Promise(R)
-----------------------------------------------------------------------------------------------------------------
 Worldware(TM)         2179233       10/9/98                                             Pending           JLC
-----------------------------------------------------------------------------------------------------------------
    Writing            2106237       7/26/96      2106237      7/26/96      9/26/01     Registered         JLC
 Expedition(R)
=================================================================================================================

<CAPTION>
==================================================================================================
     UNITED
     STATES
--------------------------------------------------------------------------------------------------
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>          <C>           <C>          <C>          <C>               <C>
 A Renaissance       74/255,759     3/16/92      1,743,676     12/29/92     12/29/98     Registered        JLC
in Learning(R)
-----------------------------------------------------------------------------------------------------------------
  A+dvantage         74/641,327     3/2/95       2,084,423     7/29/97      7/29/03      Registered        JLC
 Worldware(R)
-----------------------------------------------------------------------------------------------------------------
  ActionMATH         74/641,332     3/2/95       2,014,451     11/5/96      11/5/02      Registered        JLC
    (R)
-----------------------------------------------------------------------------------------------------------------
Brick by Brick       73/567,330     11/7/85      1,411,116     9/30/86      9/30/06      Registered        JLC
    (R)
-----------------------------------------------------------------------------------------------------------------
  Classroom          75/459,879     3/31/98                                               Published        JLC
 Essentials
-----------------------------------------------------------------------------------------------------------------
  Compass(R)         74/439,993     9/24/93      2,053,034     4/15/97      4/15/03      Registered        JLC
-----------------------------------------------------------------------------------------------------------------
   Compass                                                                                 Filing          JLC
   Virtual                                                                                Pending
 Classroom
-----------------------------------------------------------------------------------------------------------------
   Compass           75/173,299     9/27/96        Soon                                   Pending          JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
  Cuentos de         74/592,365    10/31/94      1,923,500     10/3/95      10/3/01      Registered        JLC
  Coqui(R)
-----------------------------------------------------------------------------------------------------------------
Design of Boy,       73/563,285    10/15/85      1,396,585     6/10/86      6/10/06      Registered        JLC
Dog, Wagon(R)
-----------------------------------------------------------------------------------------------------------------
  Design of          73/819,707     8/17/98      1,712,302     9/1/92       9/1/02       Registered        JLC
  Tree(R)
-----------------------------------------------------------------------------------------------------------------
Dragon Tales(R)      74/709,330     7/31/95      2,054,029     4/22/97      4/22/03      Registered        JLC
-----------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                               TRADEMARKS (CONT'D)

UNITED STATES (Cont'd)
<TABLE>
<CAPTION>
==================================================================================================
      MARK                  APPLICATION               REGISTRATION           OTHER         STATUS
--------------------------------------------------------------------------------------------------===============
                       SERIAL         DATE         (R)           DATE        RENEW        CURRENT         OWNER
                         NO.                       NUMBER
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>          <C>           <C>          <C>         <C>              <C>
    First            74/396,268      6/1/93      1,860,732     11/1/94      11/1/00     Registered         JLC
Connections(R)
-----------------------------------------------------------------------------------------------------------------
  Hartley &          74/257,129     3/19/92      1,765,662     4/20/93      4/20/99     Registered         JLC
   Design(R)                                                                renewal
                                                                            pending
-----------------------------------------------------------------------------------------------------------------
 Idea Shaper(R)      74/707,944     7/31/95      2,106,204     10/21/97     10/21/03    Registered         JLC
-----------------------------------------------------------------------------------------------------------------
  IL Design(R)       73/528,796     3/25/85      1,368,933     11/5/85      11/5/05     Registered         JLC
-----------------------------------------------------------------------------------------------------------------
Interpretools(R)     75/180,100     10/11/96     2,198,904     10/20/98     10/20/04    Registered         JLC
-----------------------------------------------------------------------------------------------------------------
   JCAT(R)           74/708,041     7/31/95      2,050,313      4/8/97       4/8/03     Registered         JLC
-----------------------------------------------------------------------------------------------------------------
     JLC             74/042,225     3/26/90      1,636,458      2/26/91      2/26/01    Registered         JLC
 Financial(R)
-----------------------------------------------------------------------------------------------------------------
   Jostens           73/819,706     8/17/89      1,627,668     12/11/90     12/11/00    Registered         JLC
   Learning
Corporation(R)
-----------------------------------------------------------------------------------------------------------------
   Jostens           74/592,366     10/31/94     2,029,506      1/14/97     1/14/03     Registered         JLC
  Learning
 Litenet(R)
-----------------------------------------------------------------------------------------------------------------
   Number            74/709,293      9/1/95      2,029,755      1/14/97     1/14/03     Registered         JLC
Workshop(R)
-----------------------------------------------------------------------------------------------------------------
  Onenet(R)          74/653,702      3/30/95     1,956,376      2/13/96     2/13/02     Registered         JLC
-----------------------------------------------------------------------------------------------------------------
   Shape             74/709,276      8/1/95      1,987,165      7/16/96     7/16/02     Registered         JLC
  Studio(R)
-----------------------------------------------------------------------------------------------------------------
  Storybook          74/709,283      8/1/95      2,108,138      10/28/97    10/28/03    Registered         JLC
   Maker(R)
-----------------------------------------------------------------------------------------------------------------
 System 80(R)        72/350,212      2/2/70       918,463        8/17/71     8/17/01    Registered         JLC
-----------------------------------------------------------------------------------------------------------------
  Take Home                                                                               Filing           JLC
  Connection                                                                             Pending
-----------------------------------------------------------------------------------------------------------------
  T.E.A.C.H.                                                                             Pending         Florida
                                                                                                         Dept. of
                                                                                                          Educ.
-----------------------------------------------------------------------------------------------------------------
  T.E.A.C.H.                                                                             Pending         Florida
     logo                                                                                                Dept. of
                                                                                                          Educ.
-----------------------------------------------------------------------------------------------------------------
  Teacher to         74/644,326      3/10/95     1,990,919       8/6/96      8/6/02     Registered         JLC
   Teacher
 Connection(R)
-----------------------------------------------------------------------------------------------------------------
   TeachNet          75/169,818      9/23/96                                              Opposed          JLC
-----------------------------------------------------------------------------------------------------------------
    THC(R)           74/028,845      2/14/90     1,633,030       1/29/91     1/29/97    Registered         JLC
-----------------------------------------------------------------------------------------------------------------
  Tomorrow's         75/236,856      2/5/97      2,219,515       1/19/99     1/19/09    Registered         JLC
  Promise(R)
-----------------------------------------------------------------------------------------------------------------
   Ufonic(R)         73/463,455      1/31/84     1,332,979       4/30/85     4/30/05    Registered         JLC
-----------------------------------------------------------------------------------------------------------------
   Words on          74/709,329      7/31/95     2,042,802       3/11/97     3/11/03    Registered         JLC
   Wings(R)
-----------------------------------------------------------------------------------------------------------------
   Worldware         75/526,634      7/28/98                                              Pending          JLC
-----------------------------------------------------------------------------------------------------------------
 Write Time(R)       74/709,331      7/31/95     2,042,803       3/11/97     3/11/03    Registered         JLC
=================================================================================================================
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                                   COPYRIGHTS

All copyrights for JLC Learning Corporation are filed in the United States.

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
Advantage Mgmt Sys. 1.1                  March 23, 1998         TX-4-620-089
-------------------------------------------------------------------------------
Advantage Mgmt. Sys. 1.2                 March 23, 1998         TX-4-620-087
-------------------------------------------------------------------------------
Advantage Mgmt. Sys. 2.0                 March 20, 1998         TX-4-613-682
-------------------------------------------------------------------------------
Advantage Mgmt. Sys. 2.1                 March 20, 1998         TX-4-613-679
-------------------------------------------------------------------------------
AIMS 2.2.4 Adv. Instruc. Mgmt. Sys.      March 20, 1998         TX-4-613-680
-------------------------------------------------------------------------------
Compass 2.2 for                          March 23, 1998         TX-4-620-090
Windows/MacIntosh
-------------------------------------------------------------------------------
Compass 2.2 for ILA                      April 7, 1998          TX-4-634-221
-------------------------------------------------------------------------------
Compass 2.3 for                          March 23, 1998         TX-620-094
Windows / MacIntosh
-------------------------------------------------------------------------------
Compass 3.0 for                          March 20, 1998         TX-4-613-681
Windows / MacIntosh
-------------------------------------------------------------------------------
LMS 3.15                                 April 7, 1998          TX-4-634-220
-------------------------------------------------------------------------------
Peer to Peer Install                     September 30, 1998     TX-4-626-266
Compass/Tomorrow's Promise 3.1
-------------------------------------------------------------------------------
Personal Compass 1.0 for Windows/        March 23, 1998         TX-4-620-099
MacIntosh
-------------------------------------------------------------------------------
Worldware 2.0                            March 27, 1998         TX-4-623-250
-------------------------------------------------------------------------------
Worldware 2.01                           March 20, 1998         TX 4-620-084
-------------------------------------------------------------------------------
RIMS I                                   April 7, 1998          TX-4-634-224
-------------------------------------------------------------------------------
RIMS II 1.72 for MAC                     March 27, 1998         TX-4-623-266
-------------------------------------------------------------------------------
Jostens Comprehensive Assessment         March 23, 1998         TX-4-620-091
Tests/Compass
-------------------------------------------------------------------------------
Jostens Comprehensive Assessment         March 23, 1998         TX-4-620-088
Tests/Advantage
-------------------------------------------------------------------------------
Learning Expedition Language Arts        March 27, 1998         TX-4-623-253
-------------------------------------------------------------------------------
Learning Expedition Mathematics          March 27, 1998         TX-4-623-256
Level 1-3
-------------------------------------------------------------------------------
Learning Expedition Mathematics          March 27, 1998         TX-4-623-248
Leval 4-8
-------------------------------------------------------------------------------
Learning Expedition Math Higher          March 27, 1998         TX-4-623-252
Level Activities
-------------------------------------------------------------------------------
Learning Expedition Reading Levels       March 27, 1998         TX-4-623-255
1-3
-------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                                   COPYRIGHTS

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
Learning Expedition Reading Levels       March 27, 1998         TX-4-623-247
4-8
-------------------------------------------------------------------------------
Learning Expedition Written              March 27, 1998         TX-4-623-251
Expression
-------------------------------------------------------------------------------
Learning First Elementary                March 23, 1998         TX-4-620-095
Mathematics
-------------------------------------------------------------------------------
Learning First Skills and                March 23, 1998         TX-4-620-102
Employability Skills
-------------------------------------------------------------------------------
Learning First Foundations in            March 27, 1998         TX-4-623-259
Mathematics
-------------------------------------------------------------------------------
Learning First Middle School             March 27, 1998         TX-4-623-258
Mathematics
-------------------------------------------------------------------------------
Learning First Foundations in Reading    March 27, 1998         TX-4-623-260
-------------------------------------------------------------------------------
Learning First New Edition:              March 23, 1998         TX-4-620-103
Elementary Mathematics
-------------------------------------------------------------------------------
Learning First New Edition:              March 23, 1998         TX-4-623-106
Elementary Reading
-------------------------------------------------------------------------------
Integrated Language Arts - Primary       March 25, 1998         TX-4-623-208
Level
-------------------------------------------------------------------------------
Tomorrow's Promise Biology               March 23, 1998         TX-4-620-092
-------------------------------------------------------------------------------
Tomorrow's Promise Chemistry             March 23, 1998         TX-4-620-096
-------------------------------------------------------------------------------
Tomorrow's Promise Earth Science         March 23, 1998         TX-4-620-097
-------------------------------------------------------------------------------
Tomorrow's Promise Language Arts         March 20, 1998         TX-4-613-670
Level 3
-------------------------------------------------------------------------------
Tomorrow's Promise Language Arts         March 20, 1998         TX-4-613-672
Level 4
-------------------------------------------------------------------------------
Tomorrow's Promise Language Arts         March 20, 1998         TX-4-613-676
Level 5
-------------------------------------------------------------------------------
Tomorrow's Promise Language Arts         March 20, 1998         TX-4-613-674
Level 6
-------------------------------------------------------------------------------
Tomorrow's Promise Language Arts         March 20, 1998         TX-4-613-671
Level 7
-------------------------------------------------------------------------------
Tomorrow's Promise Language Arts         March 20, 1998         TX-4-613-677
Level 8
-------------------------------------------------------------------------------

                                JLC -CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                                   COPYRIGHTS

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
Tomorrow's Promise Language Arts         March 27, 1998         TX-4-623-246
Essay Levels 6-8
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-675
Level K
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-687
Level 1
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-690
Level 2
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-685
Level 3
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-688
Level 4
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-686
Level 5
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-683
Level 6
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-693
Level 7
-------------------------------------------------------------------------------
Tomorrow's Promise Mathematics           March 20, 1998         TX-4-613-689
Level 8
-------------------------------------------------------------------------------
Tomorrow's Promise Physical Science      March 23, 1998         TX-4-620-093
-------------------------------------------------------------------------------
Tomorrow's Promise Problem Solving       March 27, 1998         TX-4-623-245
Strategies 6-8
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level K       March 20, 1998         TX-4-613-697
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level 1       March 20, 1998         TX-4-613-684
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level 2       March 20, 1998         TX-4-613-673
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level 3       March 20, 1998         TX-4-613-696
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level 4       March 20, 1998         TX-4-613-691
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level 5       March 20, 1998         TX-4-613-695
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level 6       March 20, 1998         TX-4-613-692
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level 7       March 20, 1998         TX-4-613-698
-------------------------------------------------------------------------------
Tomorrow's Promise Reading Level 8       March 20, 1998         TX-4-613-694
-------------------------------------------------------------------------------
Tomorrow's Promise Spelling Level 1      March 23, 1998         TX-4-620-098
-------------------------------------------------------------------------------
Tomorrow's Promise Spelling Level 2      March 20, 1998         TX-4-613-678
-------------------------------------------------------------------------------
Action Math                              March 27, 1998         TX-4-623-265
-------------------------------------------------------------------------------
Community Exploration                    April 7, 1998          TX-4-634-223
-------------------------------------------------------------------------------
English Language Development -           March 25, 1998         TX-4-623-213
Primary
-------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                                   COPYRIGHTS

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
Steps to English Language                March 25, 1998         TX-4-623-215
Development - Beginner Level
-------------------------------------------------------------------------------
Steps to English Language                March 25, 1998         TX-4-623-214
Development -
Intermediate/Advanced
-------------------------------------------------------------------------------
Explorations in Science, Earth,          March 27, 1998         TX-4-623-267
Physical, Biology
-------------------------------------------------------------------------------
Friday Afternoon                         April 7, 1998          TX-4-634-222
-------------------------------------------------------------------------------
Learning With Literature                 March 23, 1998         TX-4-620-101
-------------------------------------------------------------------------------
Literature Based Mathematics             March 27, 1998         TX-4-623-257
-------------------------------------------------------------------------------
Middle School Mathematics                March 23, 1998         TX-4-620-100
-------------------------------------------------------------------------------
Reading Skills Collection Reading All    April 7, 1998          TX-4-634-226
Around You
-------------------------------------------------------------------------------
Reading Skills Collection Read to        April 7, 1998          TX-4-634-227
Imagine
-------------------------------------------------------------------------------
Reading Skills Collection Reading for    April 7, 1998          TX-4-634-228
Meaning
-------------------------------------------------------------------------------
Reading Skills Collection Read to        April 7, 1998          TX-4-634-229
Think
-------------------------------------------------------------------------------
Spanish Language Arts                    March 27, 1998         TX-4-623-264
-------------------------------------------------------------------------------
Stems                                    April 7, 1998          TX-4-634-225
-------------------------------------------------------------------------------
Tapestry                                 March 27, 1998         TX-4-623-244
-------------------------------------------------------------------------------
Writing Expedition 1.1 for               March 20, 1998         TX-4-613-669
Mac / Windows
-------------------------------------------------------------------------------
8th Grade Math Course Outline            March 27, 1998         TX-1-912-790
-------------------------------------------------------------------------------
Grade 8 Math Support Materials           March 27, 1998         TX-1-920-115
-------------------------------------------------------------------------------
8th Grade Math Teaching Aide             March 27, 1998         TX-1-920-450
-------------------------------------------------------------------------------
Integrated Classroom Learning
System
-------------------------------------------------------------------------------
Mathematics Documentation                March 27, 1998         TX-1-922-225
-------------------------------------------------------------------------------
Spanish I Teachers' Guide                March 27, 1998         TX-2-680-774
-------------------------------------------------------------------------------
Spanish I: Course Outline, Answer        March 27, 1998         TX-2-686-570
Keys, Worksheets, Tests
-------------------------------------------------------------------------------
ICLS: Spanish Courseware Sample          March 27, 1998         TX-2-723-547
-------------------------------------------------------------------------------
Language Arts 3: Teachers' Guide         March 27, 1998         TX-2-671-312
-------------------------------------------------------------------------------

                                JLC -CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                                   COPYRIGHTS

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
Language Arts 3 Course Outline,          March 27, 1998         TX-2-671-313
Answer Keys, Worksheets, Tests
-------------------------------------------------------------------------------
Calculus: Teachers' Guide                March 27, 1998         TX-2-125-878
-------------------------------------------------------------------------------
Calculus: Course Outline, Answers        March 27, 1998         TX-2-125-879
Keys, Worksheets, Tests
-------------------------------------------------------------------------------
Calculus: I C L S courseware sample      March 27, 1998         TX-2-172-445
-------------------------------------------------------------------------------
Algebra I: Teachers' Guide               March 27, 1998         TX-2-178-697
-------------------------------------------------------------------------------
Algebra I: Support materials sample      March 27, 1998         TX-2-178-698
-------------------------------------------------------------------------------
Algebra I: Integrated classroom          March 27, 1998         TX-2-179-056
learning system: course outline,
answer keys, worksheets, tests
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-289-047
System: Mathematics: Grade 7:
Support materials sample
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-289-047
System: Trig/Analysis: Teachers'
Guide
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-289-049
System: Trig/Analysis: Course
outline, answer keys, worksheets, tests
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-289-050
System: Mathematics: Grade 7: course
outline, answers keys, worksheets,
tests
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-289-051
System: Mathematics: Grade 7:
Teachers' Guide
-------------------------------------------------------------------------------
Geometry: course outline, answer keys    March 27, 1998         TX-2-311-453
worksheets, tests
-------------------------------------------------------------------------------
Geometry: Teachers' Guide                March 27, 1998         TX-2-311-454
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-326-534
System: Algebra II, Teachers' Guide
-------------------------------------------------------------------------------
Trigonometry/math analysis: support      March 27, 1998         TX-2-326-535
material's sample
-------------------------------------------------------------------------------
Algebra II: support material sample      March 27, 1998         TX-2-345-457
-------------------------------------------------------------------------------
Algebra II: course outline, answer       March 27, 1998         TX-2-351-931
keys, worksheets, tests
-------------------------------------------------------------------------------
Geometry: support material sample        March 27, 1998         TX-2-400-824
-------------------------------------------------------------------------------

                                JLC -CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                                   COPYRIGHTS

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
ICLS courseware sample: Language         March 27, 1998         TX-2-582-332
Arts 6
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-582-333
System, Language Arts 6: course
outline, answer keys, worksheets, tests
-------------------------------------------------------------------------------
ICLS courseware sample: Language         March 27, 1998         TX-2-582-334
Arts
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-582-335
Systemk Language Arts 5: course
outline, answer keys, worksheets, test
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-582-336
System: Language Arts 5: Teachers'
Guide
-------------------------------------------------------------------------------
Integrated Classroom Learning            March 27, 1998         TX-2-582-337
System: Language Arts 6: Teachers'
Guide
-------------------------------------------------------------------------------
Language Arts 4: Teachers' Guide         March 27, 1998         TX-2-582-936
-------------------------------------------------------------------------------
Language Arts 4: course outline,         March 27, 1998         TX-2-582-937
answer keys, worksheets tests
-------------------------------------------------------------------------------
ICLS courseware sample                   March 27, 1998         TX-2-584-925
-------------------------------------------------------------------------------
ICLS courseware sample                   March 27, 1998         TX-2-584-928
-------------------------------------------------------------------------------
Secondary Language Arts: course          March 27, 1998         TX-2-593-770
outline, answer keys, worksheets, tests
-------------------------------------------------------------------------------
Math - Level 5: Teachers' Guide          March 27, 1998         TX-2-671-309
-------------------------------------------------------------------------------
German 1: Teachers' Guide                March 27, 1998         TX-2-671-310
-------------------------------------------------------------------------------
Physics: course outline, answer keys,    March 27, 1998         TX 2-671-315
worksheets, tests
-------------------------------------------------------------------------------
ICLS courseware sample: 6th Grade        March 27, 1998         TX-2-672-548
Math
-------------------------------------------------------------------------------
Physics: Teachers' Guide                 March 27, 1998         TX-2-672-549
-------------------------------------------------------------------------------
German                                   March 27, 1998         TX-2-672-555
-------------------------------------------------------------------------------
Physics                                  March 27, 1998         TX-2-672-556
-------------------------------------------------------------------------------
Math, Level 5                            March 27, 1998         TX-2-672-557
-------------------------------------------------------------------------------
ICLS courseware sample: 4th Grade        March 27, 1998         TX-2-678-479
Math
-------------------------------------------------------------------------------
Math - Level 6: Teachers' Guide          March 27, 1998         TX-2-680-775
-------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                                   COPYRIGHTS

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
German 1: course outline, answer         March 27, 1998         TX-2-686-566
keys, worksheets, tests
-------------------------------------------------------------------------------
ICLS courseware sample: 5th Grade        March 27, 1998         TX-2-686-567
Math
-------------------------------------------------------------------------------
Math - Level 6: course outline, answer   March 27, 1998         TX-2-686-568
keys, worksheets, tests
-------------------------------------------------------------------------------
Math - Level 4: course outline, answer   March 27, 1998         TX-2-686-569
keys, worksheets, tests
-------------------------------------------------------------------------------
Mathematics: Grade 4: Teachers'          March 27, 1998         TX-2-686-571
Guide
-------------------------------------------------------------------------------
ICLS Spanish 1: courseware sample        March 27, 1998         TX-2-723-547
-------------------------------------------------------------------------------
ICLS courseware sample: Language         March 27, 1998         TX-2-455-456
Arts 3 Ideal Learning: a preschool
curriculum for home use/created by
Brett W. Rogers
-------------------------------------------------------------------------------

                              TRANSFER FROM HARTLEY

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
Homonyms                                 September 14, 1998     TX-1-919-673
-------------------------------------------------------------------------------
Antonyms/Synonyms                        September 14, 1998     TX-1-923-273
-------------------------------------------------------------------------------
Consonants                               September 14, 1998     TX-1-923-274
-------------------------------------------------------------------------------
Vowels Tutorial                          September 14, 1998     TX-1-923-582
-------------------------------------------------------------------------------
Number Words Level 2                     September 14, 1998     TX-1-925-907
-------------------------------------------------------------------------------
Create Your Own - Vocabulary             September 14, 1998     TX-1-926-180
French
-------------------------------------------------------------------------------
Adjectives                               September 14, 1998     TX-1-926-189
-------------------------------------------------------------------------------
Student Word Study                       September 14, 1998     TX-1-926-372
-------------------------------------------------------------------------------
Super Wordfind                           September 14, 1998     TX-1-926-444
-------------------------------------------------------------------------------
Create Intermediate                      September 14, 1998     TX-1-926-933
-------------------------------------------------------------------------------
Create Vocabulary                        September 14, 1998     TX-1-926-934
-------------------------------------------------------------------------------

                                JLC -CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                         TRANSFER FROM HARTLEY (CONT'D)

-------------------------------------------------------------------------------
Product Name                             Date Filed/Issued      Copyright Number
------------                             -----------------      ----------------
-------------------------------------------------------------------------------
Create Your Own - Vocabulary             September 14, 1998     TX-1-927-484
Spanish
-------------------------------------------------------------------------------
Print Your Own - Bingo                   September 14, 1998     TX-1-928-566
-------------------------------------------------------------------------------
Vocabulary Controlled                    September 14, 1998     TX-1-928-661
-------------------------------------------------------------------------------
Presidents Physical Fitness              September 14, 1998     TX-1-928-664
-------------------------------------------------------------------------------
Letter Recognition                       September 14, 1998     TX-1-928-811
-------------------------------------------------------------------------------
Create Your Own - Elementary             September 14, 1998     TX-1-929-475
-------------------------------------------------------------------------------
Parent Reporting                         September 14, 1998     TX-1-929-605
-------------------------------------------------------------------------------
Fact Sheets                              September 14, 1998     TX-1-931-540
-------------------------------------------------------------------------------
Word - a - Tech                          September 14, 1998     TX-1-940-789
-------------------------------------------------------------------------------
Create Your Own - CCD Lessons            September 14, 1998     TX-1-956-151
-------------------------------------------------------------------------------
Metric Skills I & II                     September 14, 1998     TX-1-951-715
-------------------------------------------------------------------------------
Adverbs                                  September 14, 1998     TX-1-965-834
-------------------------------------------------------------------------------
Wordsearch                               September 14, 1998     TX-1-965-935
-------------------------------------------------------------------------------
The Medalist Series: Continents          September 14, 1998     TX-2-012-225
-------------------------------------------------------------------------------
Vowels                                   September 14, 1998     TX-2-013-525
-------------------------------------------------------------------------------
Prescriptive Math Drill                  September 14, 1998     TX-2-023-375
-------------------------------------------------------------------------------
Analogies Tutorial I and II              September 14, 1998     TX-2-025-231
-------------------------------------------------------------------------------
Chariots, Cougars, and Kings             September 14, 1998     TX-2-025-232
-------------------------------------------------------------------------------
Kittens, Kids and a Frog                 September 14, 1998     TX-2-025-233
-------------------------------------------------------------------------------
Scuffy and Friends                       September 14, 1998     TX-2-025-234
-------------------------------------------------------------------------------
The Medalist Series: Presidents          September 14, 1998     TX-2-025-245
-------------------------------------------------------------------------------
Analogies Advanced I and II              September 14, 1998     TX-2-026-237
-------------------------------------------------------------------------------
The Medalist Series: Women in            September 14, 1998     TX-2-026-763
History
-------------------------------------------------------------------------------
Famous Scientists                        September 14, 1998     TX-2-026-764
-------------------------------------------------------------------------------
Number Words Level 1                     September 14, 1998     TX-2-026-823
-------------------------------------------------------------------------------
Create You Own - Spell It                September 14, 1998     TX-2-027-287
-------------------------------------------------------------------------------
Perplexing Puzzles                       September 14, 1998     TX-2-027-420
-------------------------------------------------------------------------------
Temperature Experiments                  September 14, 1998     TX-2-029-315
-------------------------------------------------------------------------------
Create Your Own - Medalists              September 14, 1998     TX-2-029-641
-------------------------------------------------------------------------------
Chemical Elements                        September 14, 1998     TX-2-029-797
-------------------------------------------------------------------------------
The Medalist Series: States              September 14, 1998     TX-2-029-798
-------------------------------------------------------------------------------
Integers/Equations I & II                September 14, 1998     TX-2-030-245
-------------------------------------------------------------------------------
Match Espanol                            September 14, 1998     TX-2-030-375
-------------------------------------------------------------------------------
Reading For Meaning Level 1 Fairy        September 14, 1998     TX-2-030-397
Tales and Rhymes
-------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                         TRANSFER FROM HARTLEY (CONT'D)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Product Name                                        Date Filed/Issued             Copyright Number
----------------------------------------------------------------------------------------------------
<S>                                                 <C>                           <C>
Compound Words and Contractions                     September 14, 1998            TX-2-030-398
----------------------------------------------------------------------------------------------------
Early Skills                                        September 14, 1998            TX-2-030-399
----------------------------------------------------------------------------------------------------
Expanded Notation                                   September 14, 1998            TX-2-031-150
----------------------------------------------------------------------------------------------------
Expanded Notation                                   September 14, 1998            TX-2-031-151
----------------------------------------------------------------------------------------------------
Fact or Opinion                                     September 14, 1998            TX-2-031-425
----------------------------------------------------------------------------------------------------
Cause and Effect                                    September 14, 1998            TX-2-031-444
----------------------------------------------------------------------------------------------------
Match Francais                                      September 14, 1998            TX-2-031-613
----------------------------------------------------------------------------------------------------
Figurative Language I and II                        September 14, 1998            TX-2-031-654
----------------------------------------------------------------------------------------------------
The Medalist Series: Black Americans                September 14, 1998            TX-2-033-164
----------------------------------------------------------------------------------------------------
Binary Math                                         September 14, 1998            TX-2-038-700
----------------------------------------------------------------------------------------------------
Create Your Own -- Lessons                          September 14, 1998            TX-2-038-794
----------------------------------------------------------------------------------------------------
What's First? What's Next?                          September 14, 1998            TX-2-057-107
----------------------------------------------------------------------------------------------------
Sense or Nonsense                                   September 14, 1998            TX-2-057-108
----------------------------------------------------------------------------------------------------
Little Riddles                                      September 14, 1998            TX-2-057-109
----------------------------------------------------------------------------------------------------
Word Families II                                    September 14, 1998            TX-2-057-11O
----------------------------------------------------------------------------------------------------
U.S. History                                        September 14, 1998            TX-2-057-111
----------------------------------------------------------------------------------------------------
Harper and Sellers -- A Guide to the                September 14, 1998            TX-2-080-883
Classics: Macbeth
----------------------------------------------------------------------------------------------------
Harper and Sellers -- A Guide to the                September 14, 1998            TX-2-081-007
Classics: The Adventures of Huckleberry Finn
----------------------------------------------------------------------------------------------------
Reading For Meaning Level 2: Fairy                  September 14, 1998            TX-2-159-771
Tales and Rhymes
----------------------------------------------------------------------------------------------------
Double 'N' Trouble                                  September 14, 1998            TX-2-180-698
----------------------------------------------------------------------------------------------------
Word Ladders                                        September 14, 1998            TX-2-212-911
----------------------------------------------------------------------------------------------------
Capitalization Practice and Test                    September 14, 1998            TX-2-219-871
----------------------------------------------------------------------------------------------------
Print Your Own Bingo Plus                           September 14, 1998            TX-2-240-339
----------------------------------------------------------------------------------------------------
Create Your Own Lessons Advanced                    September 14, 1998            TX-2-242-832
----------------------------------------------------------------------------------------------------
Shakespeare                                         September 14, 1998            TX-2-243-374
----------------------------------------------------------------------------------------------------
Opposites                                           September 14, 1998            TX-2-247-992
----------------------------------------------------------------------------------------------------
Milt's Math Drills                                  September 14, 1998            TX-2-249-310
----------------------------------------------------------------------------------------------------
Drawing Conclusions and Problem                     September 14, 1998            TX-2-258-394
Solving
----------------------------------------------------------------------------------------------------
Verb Usage III                                      September 14, 1998            TX-2-279-559
----------------------------------------------------------------------------------------------------
Verb Usage I                                        September 14, 1998            TX-2-315-676
----------------------------------------------------------------------------------------------------
Brick by Brick Level I Building Usage               September 14, 1998            TX-2-369-842
Skills
----------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                         TRANSFER FROM HARTLEY (CONT'D)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Product Name                                        Date Filed/Issued             Copyright Number
----------------------------------------------------------------------------------------------------
<S>                                                 <C>                           <C>
Brick by Brick Level 2 Building Usage               September 14, 1998            TX-2-370-451
Skills
----------------------------------------------------------------------------------------------------
Brick by Brick Level I Building                     September 14, 1998            TX-2-373-860
Comprehension
----------------------------------------------------------------------------------------------------
Brick by Brick Level 4 Building Usage               September 14, 1998            TX-2-375-505
Skills
----------------------------------------------------------------------------------------------------
Brick by Brick Level 2 Building                     September 14, 1998            TX-2-378-720
Vocabulary
----------------------------------------------------------------------------------------------------
Brick by Brick Level 4 Building                     September 14, 1998            TX-2-384-016
Comprehension
----------------------------------------------------------------------------------------------------
Vocabulary Dolch                                    September 14, 1998            TX-2-398-411
----------------------------------------------------------------------------------------------------
Brick by Brick Level 5 Building                     September 14, 1998            TX-2-400-368
Comprehension
----------------------------------------------------------------------------------------------------
</TABLE>

                               TRANSFER FROM IDEAL

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Product Name                                        Date Filed/Issued             Copyright Number
----------------------------------------------------------------------------------------------------
<S>                                                 <C>                           <C>
Calculus: Teacher's Guide                           Transfer Application          TX-2-125-878
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Calculus: Outline, Answer Keys,                     Transfer Application          TX-2-125-879
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Calculus: Support Materials Sample                  Transfer Application          TX-2-172-445
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra I: Teacher's Guide                          Transfer Application          TX-2-178-697
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra I: Support Materials Sample                 Transfer Application          TX-2-178-698
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra I: Outline, Answer Keys,                    Transfer Application          TX-2-179-056
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                          TRANSFER FROM IDEAL (CONT'D)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Product Name                                        Date Filed/Issued             Copyright Number
----------------------------------------------------------------------------------------------------
<S>                                                 <C>                           <C>
Mathematics Grade 7: Support                        Transfer Application          TX-2-289-047
Materials Sample                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Trigonometry/Math Analysis:                         Transfer Application          TX-2-289-048
Teacher's Guide                                     Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Trigonometry/Math Analysis:                         Transfer Application Pending  TX-2-289-049
Outline, Answer Keys, Worksheets, Tests             as of June 18, 1998
----------------------------------------------------------------------------------------------------
Mathematics Grade 7: Outline,                       Transfer Application          TX-2-289-05O
Answer Keys, Worksheets, Tests                      Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Mathematics Grade 7: Teacher's                      Transfer Application          TX-2-289-051
Guide                                               Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Geometry: Course Outline, Answer                    Transfer Application          TX-2-311-453
Keys, Worksheets, Tests                             Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Geometry: Teacher's Guide                           Transfer Application          TX-2-311-454
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra II: Teacher's Guide                         Transfer Application          TX-2-326-534
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Trigonometry / Math Analysis:                       Transfer Application          TX-2-326-535
Support Materials Sample                            Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra II: Support Materials Sample                Transfer Application          TX-2-345-457
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra II: Outline, Answer Keys,                   Transfer Application          TX-2-351-931
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Geometry: Support Materials Sample                  Transfer Application          TX-2-400-824
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                          TRANSFER FROM IDEAL (CONT'D)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Product Name                                        Date Filed/Issued             Copyright Number
----------------------------------------------------------------------------------------------------
<S>                                                 <C>                           <C>
ICLS Courseware Sample Language Arts 6              Transfer Application          TX-2-582-332
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 6 Course Outline, Answer Keys,        Transfer Application          TX-2-582-333
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Language Arts 5             Transfer Application          TX-2-582-334
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Language Arts 5             Transfer Application          TX-2-582-334
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 5: Course Outline, Answer Keys,       Transfer Application          TX-2-582-335
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 5: Teacher's Guide                    Transfer Application          TX-2-582-336
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 6: Teacher's Guide                    Transfer Application          TX-2-582-337
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 4: Teacher's Guide                    Transfer Application          TX-2-582-936
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 4: Course Outline, Answer Keys,       Transfer Application          TX-2-582-937
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Secondary Language Arts     Transfer Application          TX-2-584-925
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Language Arts 4             Transfer Application          TX-2-593-770
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Secondary Language Arts: Course Outline, Answer     Transfer Application          TX-2-686-566
Keys, Worksheets, Tests                             Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 5: Teacher's Guide                    Transfer Application          TX-2-671-309
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                          TRANSFER FROM IDEAL (CONT'D)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Product Name                                        Date Filed/Issued             Copyright Number
----------------------------------------------------------------------------------------------------
<S>                                                 <C>                           <C>
German I: Teacher's Guide                           Transfer Application          TX-2-671-310
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Physics: Course Outlines, Answer Keys,              Transfer Application          TX-2-671-315
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: 6th Grade Math              Transfer Application          TX-2-672-548
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Physics: Teacher's Guide                            Transfer Application          TX-2-672-549
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: German                      Transfer Application          TX-2-672-555
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Physics                     Transfer Application          TX-2-672-556
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 5: Course Outline, Answer Keys,       Transfer Application          TX-2-672-557
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: 4th Grade Math              Transfer Application          TX-2-678-479
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 6: Teacher's Guide                    Transfer Application          TX-2-680-775
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
German 1: Course Outline, Answer Keys,              Transfer Application          TX-2-686-566
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: 5th Grade Math              Transfer Application          TX-2-686-567
                                                    Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 6: Course Outline, Answer Keys,       Transfer Application          TX-2-686-568
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 4: Course Outline, Answer Keys,       Transfer Application          TX-2-686-569
Worksheets, Tests                                   Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                          TRANSFER FROM IDEAL (CONT'D)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Product Name                                        Date Filed/Issued             Copyright Number
----------------------------------------------------------------------------------------------------
<S>                                                 <C>                           <C>
Mathematics Grade 4: Teacher's Guide                Transfer Application
                                                    Pending as of June 18, 1998   TX-2-686-571
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Language Arts 3             Transfer Application
                                                    Pending as of June 18, 1998   TX-2-739-191
----------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                    MATERIAL OPPOSITION TO COMPANY TRADEMARKS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   Mark                                                     Reg. Date    Sections
   Serial No.                             App.     Pub.        and     8 & 15 Decl.   Reg.
                 Country       Class      Filed    Date       Number       Due       Renewal               Remarks
-----------------------------------------------------------------------------------------------------------------------------------
<S>              <C>        <C>           <C>      <C>      <C>        <C>           <C>       <C>
1. CLASSROOM     United     16-catalogs   3/31/98  1/26/99
   ESSENTIALS    States     featuring                                                          JLC: Opposer
   75/459,879               educational
                            products,                                                          Cease and Desist letter sent to It's
                            namely,                                                            Academic of Illinois, Inc. on
                            software,                                                          6/29/98 for its mark SCHOOL
                            instruction                                                        ESSENTIALS
                            manuals,
                            activity                                                           Request for Extension of Time to
                            guides;                                                            file a Notice of Opposition filed
                            educational                                                        on 6/18/99 (granted until 7/25/98).
                            hooks,
                            booklets and                                                       It's Academic demonstrates prior
                            workbooks                                                          rights in its mark on 7/16/98, and
                                                                                               opposition matter is concluded.

                                                                                               Matter Closed
------------------------------------------------------------------------------------------------------------------------------------
2. COMPASS      Australia   9-computer    06/12/96                                             Pending
                            software;
   710447                   management                                                         Cited Marks
                            system
                            software                                                           JLC's application under
                            which                                                              deferment since 1/5/98 pending
                            delivers                                                           the disposition of two cited
                            curriculum                                                         applications owned by
                            and                                                                Streamline Pty Ltd. for the marks
                            instructions                                                       CORPORATE COMPASS for use
                            to students                                                        in connection with computer
                            and teachers                                                       software.

                                                                                               Matter Pending
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                         JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

               MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   Mark                                                     Reg. Date    Sections
   Serial No.                             App.     Pub.        and     8 & 15 Decl.   Reg.
                 Country       Class      Filed    Date       Number       Due       Renewal               Remarks
-----------------------------------------------------------------------------------------------------------------------------------
<S>              <C>        <C>           <C>      <C>      <C>        <C>           <C>       <C>
3. COMPASS      Indonesia   9-computer    2/17/98                                              Pending
   D98 2479                 software for
                            managing                                                           JLC: Opposed
                            instruction
                            programs for                                                       Opposition filed by Kompass
                            educational                                                        International Neuenschwander S.A.
                            courseware                                                         (a French Corporation) on 8/28/98
                            and curriculum                                                     for its mark KOMPASS in several
                                                                                               classes, including International
                                                                                               Class 9.

                                                                                               Kompass International
                                                                                               Neuenschwander denies consent to
                                                                                               register mark on 9/16/98.

                                                                                               Rebuttal to Kompass International
                                                                                               Neuenschwander's Opposition filed
                                                                                               on 11/3/98.

                                                                                               Per foreign associate, application
                                                                                               is now under substantive review;
                                                                                               foreign associate confirms on
                                                                                               4/7/99 that the rebuttal to Kompass
                                                                                               International Neuenschwander's
                                                                                               opposition will be considered
                                                                                               during the substantive review
                                                                                               process. If the rebuttal is
                                                                                               successful and the application is
                                                                                               approved after examination, the
                                                                                               application will proceed to
                                                                                               registration.

                                                                                               Matter Pending
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

               MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   Mark                                                     Reg. Date    Sections
   Serial No.                             App.     Pub.        and     8 & 15 Decl.   Reg.
                 Country       Class      Filed    Date       Number       Due       Renewal               Remarks
-----------------------------------------------------------------------------------------------------------------------------------
<S>              <C>        <C>           <C>      <C>      <C>        <C>           <C>       <C>
4. COMPASS     Singapore    9-computer                  07/19/96                               Pending
   7454/96                  software;
                            management                                                         Cited Marks
                            system
                            software                                                           Kompass International
                            which                                                              Neuenschwander S.A.'s marks
                            delivers                                                           cited against JLC's application.
                            curriculum                                                         Arguments to overcome citations
                            and                                                                filed on 1/12/99.
                            instructions
                            to students                                                        Matter Pending
                            and teacher
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

               MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   Mark                                                     Reg. Date    Sections
   Serial No.                           App.      Pub.         and     8 & 15 Decl.   Reg.
                Country       Class     Filed     Date        Number       Due       Renewal               Remarks
-----------------------------------------------------------------------------------------------------------------------------------
<S>             <C>        <C>          <C>       <C>       <C>        <C>           <C>       <C>
5. COMPASS       United    9-computer   12/05/96  10/01/97  12/5/96      12/4/03     12/5/06   Registered
   MANAGEMENT   Kingdom    software;                        2117672    (compulsory)
   SYSTEM                  computer                                                            JLC: Opposer
                           software for
   2117672                 program                                                             Opposition filed by Reed
                           management                                                          Business Information Systems on
                                                                                               12/24/97 for its marks KOMPASS
                                                                                               in Classes 9, 16 and 35; and
                                                                                               REEDBASE COMPASS in Class 42.

                                                                                               Reed Business Information Systems
                                                                                               withdraws opposition on 11/98 per
                                                                                               successfully completed coexistence
                                                                                               agreement (condition: restriction of
                                                                                               identification of goods).

                                                                                               Matter Closed
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

               MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   Mark                                                     Reg. Date    Sections
   Serial No.                             App.     Pub.        and     8 & 15 Decl.   Reg.
                 Country       Class      Filed    Date       Number       Due       Renewal               Remarks
-----------------------------------------------------------------------------------------------------------------------------------
<S>              <C>        <C>           <C>      <C>      <C>        <C>           <C>       <C>
6. COMPASS     Australia    9-computer                                                         Pending
   WORLDWARE                software
                            directed to                                                        Cited Marks
   761158                   teachers and
                            students for                                                       JLC's application under deferment
                            accessing a                                                        since 9/98 pending the
                            global                                                             disposition of two cited applications
                            computer                                                           owned by Streamline Pty Ltd. For the
                            network                                                            marks CORPORATE COMPASS for use in
                                                                                               connection with computer software.

                                                                                               Matter Pending
-----------------------------------------------------------------------------------------------------------------------------------
7. IDEA SHAPER   United     9-computer    07/31/95          10/21/97                           Registered
   74/707,944    States     software that                   2,106,204
                            teaches and                                                        JLC: Opposer
                            facilitates
                            the                                                                Cease and Desist letter sent to
                            processing of                                                      Don Johnson Incorporated on
                            learning                                                           9/22/97 for its mark IDEA
                                                                                               BUILDER.

                                                                                               Opposition filed 10/22/97 - no answer
                                                                                               to opposition filed by Don Johnson
                                                                                               Incorporated.

                                                                                               Judgment by Default entered, and
                                                                                               registration of IDEA BUILDER refused.

                                                                                               Matter Closed
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

               MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   Mark                                                     Reg. Date    Sections
   Serial No.                           App.      Pub.         and     8 & 15 Decl.   Reg.
                Country       Class     Filed     Date        Number       Due       Renewal               Remarks
-----------------------------------------------------------------------------------------------------------------------------------
<S>             <C>        <C>          <C>       <C>       <C>          <C>         <C>       <C>
8. JCAT        United      9-computer   07/31/95  1/14/97   04/08/97     4/8/03      4/8/07    Registered
   74/708,041  States      programs                         2,050,313
                           that                                                                Cease and Desist Matter
                           administer                                                          (initiated by JLC).
                           diagnostic
                           and                                                                 Cease and Desist letter sent to
                           prescriptive                                                        Sensenet, Inc. on 9/14/98.
                           tests,
                           primarily in                                                        Sensenet, Inc. responds by
                           language                                                            asserting dissimilarity of goods,
                           arts and                                                            and reports that Digital
                           mathematics                                                         Equipment Corp. is using the
                           for                                                                 exact mark JCAT for Java-based
                           educational                                                         Collaborative Active Textbooks.
                           purposes                                                            Provide JLC with a referral
                                                                                               attorney because GCW[ILLEGIBLE]
                                                                                               represents Digital Equipment
                                                                                               Corp. No recent report from
                                                                                               client.

                                                                                               Matter Pending
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

               MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   Mark                                                     Reg. Date    Sections
   Serial No.                           App.      Pub.         and     8 & 15 Decl.   Reg.
                Country       Class     Filed     Date        Number       Due       Renewal               Remarks
-----------------------------------------------------------------------------------------------------------------------------------
<S>             <C>        <C>          <C>       <C>       <C>          <C>         <C>       <C>
9. TEACHNET    United      9-computer   09/23/96  Due                                          Pending
   (stylized)  States      software for           07/22/98
                           use in                                                              Cited Marks
   75/169,818              connection
                           with                                                                JLC's application suspended on
                           curriculum                                                          1/29/98 pending disposition of
                           management                                                          cited application TEACHERNET
                           for teaching                                                        owned by Highlights for
                           English and                                                         Children, Inc. for magazines,
                           Spanish                                                             pamphlets and newsletters
                           Language                                                            concerning the field of education.
                           Arts to
                           students and                                                        Matter Pending
                           user
                           manuals
                           sold as a unit
                           therewith.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

               MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
    Mark                                                     Reg. Date    Sections
    Serial No.                           App.      Pub.         and     8 & 15 Decl.   Reg.
                Country       Class     Filed     Date        Number        Due       Renewal               Remarks
-----------------------------------------------------------------------------------------------------------------------------------
<S>             <C>        <C>          <C>       <C>       <C>          <C>         <C>       <C>
10. WRITE TIME  United     9-computer   07/31/95  12/17/96  03/11/97     03/11/03    3/11/07   Registered
                States     software for                     2,042,803
    74/709,331             use in                                                              JLC: Opposer
                           improving
                           the writing                                                         Request for Extension of Time to
                           skills of                                                           file a Notice of Opposition filed
                           primary                                                             on 9/20/96 for the mark
                           school                                                              WRITING TIME owned by
                           students                                                            Harriet Jean Azemove.

                                                                                               Cease and Desist letter sent to
                                                                                               Harriet Jean Azemove on 10/18/96.

                                                                                               Coexistence agreement proposed
                                                                                               11/21/96.

                                                                                               No further record of outcome in
                                                                                               file, but JLC's mark WRITE TIME was
                                                                                               registered on 3/11/97.

                                                                                               Matter Closed
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                       MATERIAL INBOUND LICENSE AGREEMENTS

<TABLE>
<CAPTION>
=================================================================================================================================
    Company              Contract Type         Product Licensed            JLC Product           IP owned          Royalty
                                                                                                    by
                                                                                                 Company
=================================================================================================================================
<S>                      <C>               <C>                          <C>                        <C>     <C>
Academic Systems         Distribution      Algebra - intro, intermed,   Interactive                Yes     40% of gross sales
                                           coll Interactive Math        Mathematics
                                                                        PreAlgebra 1&2
                                                                        Algebra 1&2
---------------------------------------------------------------------------------------------------------------------------------
Academic Systems         Distribution      RIMS, JLC notebook in        Notebook                   Yes     N/A
                                           ASC Mediated Learning
                                           System
---------------------------------------------------------------------------------------------------------------------------------
Aptex                    Distribution      Vital Tools                  Vital Tools                Yes     65% of net $178.75
                                                                                                           minimum
---------------------------------------------------------------------------------------------------------------------------------
Bank Street College of   License           Wordbench                    Wordbench
Ed.                                                                     Secondary Learner          Yes     .05% per product
---------------------------------------------------------------------------------------------------------------------------------
BBN                      Development       Algebra product              Algebra Wordbench          JLC     15% of net
---------------------------------------------------------------------------------------------------------------------------------
CA DOE                   License           Phys.Sci                     Mid Scl Sci                JLC     10% per product
---------------------------------------------------------------------------------------------------------------------------------
Comptons                 Development       Multi-media encyclopedia     Tom.'s Promise             Yes     Version 1-3 20%
                                                                        Elementary Learner                 Version 4.25%
---------------------------------------------------------------------------------------------------------------------------------
Dade County              Development                                    ELD                        JLC     8% to state of FL 2%
                                                                                                           Dade
---------------------------------------------------------------------------------------------------------------------------------
Edunetics                License           Rediscover Science           Mid Sch Sci                Yes     40% of gross
---------------------------------------------------------------------------------------------------------------------------------
First Byte               License           Voice or speech property     Assorted Project           Yes     $60/network
                                                                                                           $25/la[ILLEGIBLE]
---------------------------------------------------------------------------------------------------------------------------------
FL DOE                                     ESOL curriculum for teacher  T.E.A.C.H.                  Yes     15% of net
                                           training
---------------------------------------------------------------------------------------------------------------------------------
Learning Company         License           CWP Center, Writing          Tomorrow's                         Standalone $45/copy
                                           Center, Student Writing      Promise                    Yes     networked $899/copy
                                           Center
---------------------------------------------------------------------------------------------------------------------------------
Lernout & Haupsie        License           Spell checker grammar        Writing Expedition          Yes    Writing Exped. 3.5%
                                           Checker                      Steps to ELD                       copy ($3.35/copy
                                           Thesaurus                    Elem/Mid Learner                   min.) 2.5%/copy
                                           Grammar checker              Elem/Mid Learner                   ($10/copy min.)
                                           thesaurus
---------------------------------------------------------------------------------------------------------------------------------
Proximity                Tool license      Linguistic technology        Elem Lrnr Steps            Yes     Qty/Spell/Dictionary
                                                                                                           1-8: $25/$30.00
                                                                                                           9-12: $33/$39.60
                                                                                                           13-16: $41/$49.20
                                                                                                           17-20: $49/$58.80
                                                                                                           21-24: $57/$68.40
                                                                                                           25-32: $73/$87.60
                                                                                                           33-40: $81/$97.00
                                                                                                           41+: $89/106.80
=================================================================================================================================
</TABLE>

                               JLC - CONFIDENTIAL

<PAGE>

                  MATERIAL INBOUND LICENSE AGREEMENTS (CONT'D)

<TABLE>
<CAPTION>
==================================================================================================================================
    Company              Contract Type         Product Licensed            JLC Product       IP owned          Royalty
                                                                                                by
                                                                                             Company
==================================================================================================================================
<S>                      <C>               <C>                          <C>                    <C>     <C>
       Sensei            License           Algebra, intro to Algebra    Secondary Learner      Yes     15% of sales receipts
      Software
----------------------------------------------------------------------------------------------------------------------------------
       Sensei            License           Geometry, intro to Geometry  Secondary Learner      Yes     15% of sales receipts
      Software
----------------------------------------------------------------------------------------------------------------------------------
    Western/GBFE         License           GBE, stories, dictionary     GBE, ILA Story         Yes     greater of 12.25% of
                                                                        Books, Story Book              net billings or 70%
                                                                        Maker, Story Book              of JLC price for GBE
                                                                        Maker Deluxe- (SBD)            4% of net for SBD
==================================================================================================================================
</TABLE>

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                      MATERIAL OUTBOUND LICENSE AGREEMENTS

                            Distribution Agreements:

1.    Publication and Distribution Agreement entered into by and between JLC
      Learning Corporation and Addison Wesley Longman Limited on December 8,
      1997. Amendment One to this Agreement was entered into on December 18,
      1998. Amendment Two to this Agreement was entered into on March 12, 1999.
      In connection with the work contemplated under Amendment Two, JLC and AWL
      entered into a confidentiality Agreement with Biobras, an independent
      contractor. Amendments Three and Four were entered into on May 28, 1999.
      The Publication and Distribution Agreement grants rights to the products
      listed below.

      Current Release                      Past Releases
      ---------------                      -------------

      Compass                              Advantage
      Worldware                            Algebra 1
      JCAT                                 Children's Writing and
      Tomorrow's Promise Math              Publishing
      Tomorrow's Promise Reading           Comptons Encyclopedia
      Tomorrow's Promise Language Arts     Early Learning Program
      Tomorrow's Promise Science           ELD
       Earth Science                       Elementary New Edition Math
       Biology                             Elementary New Edition
       Chemistry                           Reading
       Physics                             Elementary School Program
      Writing Expedition                   Geometry
      Spelling                             Idea Shaper (included w/ELD)
                                           ILA
                                           JCAT
                                           Learning Expedition
                                           Learning First
                                           Middle School Expansion
                                           Middle School Program
                                           New Edition Math
                                           Secondary Expansion Program
                                           Secondary School Program
                                           Spanish Language Arts
                                           Spanish Language Expansion
                                           The Writing Center

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                      MATERIAL OUTBOUND LICENSE AGREEMENTS

2.    International Development and Distribution Agreement entered into by and
      between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
      20, 1998. Amendment One to this Agreement was entered into on February 28,
      1998. A Letter of Amendment and Subdistribution Agreement are currently
      under negotiation. The International Development and Distribution
      Agreement grants rights to the products listed below.

      Current Release                      Past Releases
      ---------------                      -------------

      Compass                              Action Math
      Worldware                            Algebra I
      JCAT                                 Comptons Encyclopedia
      Tomorrow's Promise Math              Early Learning Program
      Tomorrow's Promise Reading           ELD
      Tomorrow's Promise Language Arts     Elementary New Edition Math
      Tomorrow's Promise Science           Elementary New Edition
       Earth Science                       Reading
       Biology                             Elementary School Program
       Chemistry                           Geometry
       Physics                             Idea Shaper (included w/ELD)
      Writing Expedition                   ILA
      Spelling                             JCAT
                                           Learning Expedition
                                           Learning First
                                           Life and Employability Skills
                                           Middle School Expansion
                                           Middle School Program
                                           New Edition Math One Net
                                           Secondary Expansion Program
                                           Secondary School Program
                                           The Writing Center

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                      MATERIAL OUTBOUND LICENSE AGREEMENTS

Customer Agreements:

      Note: Not listed in this Schedule are Customer Agreements, which use the
      form of agreement customary at the time those agreements were executed;
      however, those agreements may differ in regard to price discounts, service
      commitments and other miscellaneous terms. The agreements with customers
      that are listed below do not use the standard form of agreement and
      contain terms which may be deemed material or unusual.

      1.    West Virginia Department of Education

      2.    The School Board of Dade County, Florida

      3.    Center Grove Community School Corporation, Indiana

      4.    Duneland School Corporation, Indiana

      5.    School City of East Chicago, Indiana

      6.    Grand Rapids Public Schools, Michigan

      7.    Godwin Heights Public Schools, Michigan

      8.    Goshen Community School District, Indiana

      9.    Lockhardt Independent School District, Texas

      10.   La Porte Community School District, Indiana

      11.   Loogootee Community School District, Indiana

      12.   Michigan City Area Schools, Indiana

      13.   New Albany-Floyd Consolidated School Corporation, Indiana

      14.   West Allegheny School District, Pennsylvania

      15.   Zion Elementary School District #6, Illinois

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                              JLC SOFTWARE LICENSE
                    Catalog Resellers of Standalone Products

The attached lists provide the names and addressees of catalog resellers and
preview centers of JLC Learning Corporation standalone products.

------------------------------------------------------------------------
Dan Homer                              Patsy Gettens
Augmentative Communication             Basic Computer Learning
2808 Moon Clinton Road                 20130 Center Ridge Road
Moon Township, PA 15108                Rocky River, OH 44116
------------------------------------------------------------------------
Ann Marie Winchester                   Jan Smith
Basic Computer Learning                Bound To Stay Bound Books, Inc.
20130 Center Ridge Road                1880 West Morton
Rocky River, OH 44118                  Jacksonville, IL 62650
------------------------------------------------------------------------
Robert Blackwood                       Rose Stairs
Cerberus Association Inc.              Computer Centerline (CCL)
33 Comstock Hill Road                  1500 Broad Street
Norwalk, CT 08850-1506                 Greensburg, PA 15601
------------------------------------------------------------------------
Mike Fitzpatrick                       Denise Nason
Computer Inventory Control/School      Cox Subscriptions
World Soft                             411 Marcia Drive
3109 Forbes Avenue                     Goldsboro, NC 27530
Pittsburgh, PA 15213
------------------------------------------------------------------------
Michelle Nuzzo                         Don Latta C.P.R. Software
Custom Computer Specialist             84 Colbome Street
48 Mall Drive                          P.O. Box 431
Commack, NY 11725                      Brantford, Ontario N3T5N3
------------------------------------------------------------------------
Tina Bailey                            Marilyn Morgan
Daly Computers Inc.                    DISC Educational Technology
1245 Mountain Church Road              2501-B Ten-Ten Road
Middleton, MD 21789                    Apex, NC 27502
------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
James Long                                    Alan Shafer
Educational Record Center                     Elcom Services Group
3233 Burnt Mill Drive, Suite 100              111 Sinclair Street
Wilmington, NC 28403                          Bristol, PA 19007
--------------------------------------------------------------------------------
Perri Kersh
Hach & Associates, Computers for Kids         Peggy Eaker
P.O. Box 11754                                Hart, Inc.
4994 B Indiana                                320 New Stock Road
Winston Salem, NC 27116-1754                  Asheville, NC 28804
--------------------------------------------------------------------------------
Marie Hervey                                  Lori North
Interactive Educational Software & Video      Holcomb's Education Resource
16 Ada Lane                                   5 Boston Harbor Court
Cortland Manor, NY 10566-6339                 O'Fallon, MO 63366
--------------------------------------------------------------------------------
Connie Martin                                 Jason Sellback
Kidsource                                     Ismart
2645 N. Main Street                           6679-H Santa Barbara Road
High Point, NC 27265-9517                     P.O. Box 1037
                                              Elkridge, MD 21075
--------------------------------------------------------------------------------
Suzanne Dempster                              Ed Kosack
Learning Center                               Kunz Inc.
2750 S. State Street                          1630 Sulphur Spring road
Ann Arbor, MI 48104                           Baltimore, MD 21227-2539
--------------------------------------------------------------------------------
Tom Homer                                     Jean Blakely
Learning Technology Group Inc.                Learning Edge
320 N. Washington Street                      111 Route 303
Rochester, NY 14625                           Tappan, NY 10983
--------------------------------------------------------------------------------
Robert E. Lamy                                Julie Shaw
Logisoft Computer Products                    Library Video Company
6605 Pittsford-Palmyra Road W-2               7 East Wynnewood Road
Fairport, NY 14450                            Wynnewood, PA 19098
--------------------------------------------------------------------------------
Elaine Vazzana                                Anthony Hazel
New Media Schoolhouse, Inc.                   New Media Schoolhouse, Inc.
P.O. Box 505, 69 Westchester Avenue           P.O. Box 505
Pound Ridge, NY 10578                         69 Westchester Avenue
                                              Pound Ridge, NY 10576
--------------------------------------------------------------------------------

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Jay Johnston                           Bob McAllster
PC Micro Dealers Co-op, Inc.           Omega Films Limited
3042 Remington Avenue                  3501 McNicoll Avenue, Unit #7
Baltimore, MD 21211                    Scarborough, Ontario, Canada M1V2N3
--------------------------------------------------------------------------------
Julie Schwaller                        Jack Balkind
School Specialty Supply                Plymouth Rock Associates
1000 Bluemound Drive                   28 Kristin Road
Appleton, WI 54914                     Plymouth, MA 02360
--------------------------------------------------------------------------------
Jose Naranjo                           Paul Carter
Softchoice                             Softchoice
1273 Dufferin Street, Suite 110        173 Dufferin Street
Toronto, ON CANADA M6K 1Y9             Suite 110
                                       Toronto, ON CANADA M6K 1Y9
--------------------------------------------------------------------------------
Pamel Ring                             Rod Galtin
Software In a Week                     Software Express
13-15 E. Deer Park Drive, #101         4128-A South Boulevard
Gaithersburg, MD 20877                 Charlotte, NC 28209
--------------------------------------------------------------------------------
Rebecca Holden                         Alan Wyand
Teacher's Pet                          Spectrum Educational Supplies
233 Mount Pisgah Road SW               125 Mary Street
Supply, NC 28482                       Aurora, ONT L4G 1G3
--------------------------------------------------------------------------------
Jerome Pelstrom                        Susan Rodgers
Acorn Media                            Tiger Corp. Direct
25132 Adelanto Drive                   1100 Perimeter Park, Suite 118
Laguna Niguel, CA 92677                Morrisville, NC 27560
--------------------------------------------------------------------------------
Moses Gonzalez                         Shawn Walsh
Binet International                    Amarillo Computers
122 Escondido Avenue, #101             201 J Westgate Parkway
Vista, CA 92084                        Amarillo, TX 79121
--------------------------------------------------------------------------------
Glen Blomgren                          Gary Temoin
Christa McAuliffe Academy              CES Inc.
3601 W. Washington Avenue              1160 Yew Avenue
Yakima, WA 98903                       Blaine, WA 98230
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
David Hoffman                             Leslie Bahn
CompUSA                                   CompUSA
300 W. 3rd Street, Suite 1509             3617 W. Hillsboro Avenue
Fort Worth, TX 76102                      Tampa, FL 33614
--------------------------------------------------------------------------------
Teresa Mew                                Bill Young
Core Curriculum Technologies              Compuware
101-3738 North Fraser Way                 47-098 Halemanu Place
Burnaby, B.C., CANADA V5J 5K8             Kaneohe, HI 96744
--------------------------------------------------------------------------------
Susan Tigo                                Sharl Henson
Edmark Corporation                        Dynamic Computer Solutions
6287 185th Avenue NE                      5648 SW 29th
Redmond, WA 98073-3218                    Topeka, KS 66614
--------------------------------------------------------------------------------
Bob Fowler                                Dennis Hilsgen
Educational Techniques & Technologies     EdTech
1416 50th Street, Suite 9                 2872 7th Street North
Lubbock, TX 79414                         St. Cloud, MN 56303
--------------------------------------------------------------------------------
Beverly Alford                            Linda Caruso
ETC                                       Educational Technology Group
4620 50th Street, Suite 9                 12200 Northwest Freeway, Suite 340
Lubbock, TX 79414                         Houston, TX 77092
--------------------------------------------------------------------------------
Jean Fowler                               Allison Veal
ET&T                                      ETI
1214 C Stonehollow                        5003 Tacoma Mall Boulevard, Suite 103
Kingwood, TX 77339-2029                   Tacoma, WA 98409-7139
--------------------------------------------------------------------------------
Sheron Long                               Caroline Penner
Hampton Brown                             For The Love of Learning
26385 Carmel Rancho Boulevard             9090-51 Avenue
Carmel, CA 93923                          Edmonton, AB T8E 5X4
--------------------------------------------------------------------------------
Wayne Clark                               Tom Neuman
Image Media Inc.                          ICP Educational Resources
Unit 3, 8755 Ash Street                   2011 E. Renee Drive
Vancouver, BC V6P 6T3                     Phoenix, AZ 85024
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Byron Killen                              Jack Sheppard
Killen Management Systems                 Jack E. Sheppard & Associates
615 N. O'Connor, Suite 9                  901 Fairway Road
Irving, TX 75061                          Waco, TX 74712
--------------------------------------------------------------------------------
Julie Hill                                Trakash Joshi
Multiple Zones International              Microsync
707 South Grady Way                       848 SW Maplecrest Court, Suite B7
Renton, WA 98055-3233                     Portland, OR 97219
--------------------------------------------------------------------------------
Susan Heimann                             Eldon Williams
Page One                                  Nasco West
11018 Montgomery NE                       4825 Stoddard Road
Albuquerque, NM 87111                     Modesto, CA 95358
--------------------------------------------------------------------------------
Maxwell Simpson                           Happy Vondohlen
Projected Learning Programs Inc.          PCI Educational Publishing
7508 N. Broadway Extension, Suite 505     P.O. Box 34270
Oklahoma City,OK 73116                    San Antonio, TX 78265-4270
--------------------------------------------------------------------------------
Domingo Castameda                         Colleen K. Hess
Software Spectrum                         SchoolVision, Inc.
2140 Merritt Drive                        P.O. Box 90
Garland, TX 75041                         1102 Petroleum Drive
                                          Abilene, TX 79604-0090
--------------------------------------------------------------------------------
James Rogers                              Terri Cook
Technology For Education, Inc.            Teachware
2300 Lexington Avenue South, #125         P.O. Box 890238
St. Paul, MN 55120                        Oklahoma City, CA 73189-0238
--------------------------------------------------------------------------------
Joyce Cutler                              Mike Quigley
The Reading and Computer Place            Texas Courseware
14752 Beach Boulevard, #200               26730 1-45 N
La Mirada, CA 90638                       Spring, TX 77388
--------------------------------------------------------------------------------
Weniee Huang                              Bobbie Gibel
US Tech                                   Tierra Del Oro
1236 San Jacinto Mall                     5931 North Oracle, Suite 221
Baytown, TX 77521                         Tucson, AZ 85704
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Fred Ventura                              Greg Parks
Ventura Educational Systems               Ventura Educational Systems
910 Ramona Avenue, Suite E                9810 Ramona Avenue, Suite E
Grover Beach, CA 93433                    Grover Beach, CA 93433
--------------------------------------------------------------------------------
Craig Baron                               Amber Powell
Academic Advantage                        Virtual Softnet Canada Inc.
241 Willow Avenue                         201-1290 Broad Street
Deerfield, IL 60015                       Victoria, B.C. Canada V8W 2A5
--------------------------------------------------------------------------------
Mike Bozeman                              Al Rosen
Alasoft, Inc.                             Academic Software
2168 Pelham Parkway, Suite 4              595 Colonial Park Drive
Pelham, AL 35124                          Roswell, GA 30075
--------------------------------------------------------------------------------
Debi Badgley                              Joyce Bassett
Bell Industries, Graham Division          Alboes Computers And Supplies
5604 Fortune Cr. South, Suites G-N        6298 Veterans Parkway, Suite 3F
K - 12 Sales                              Columbus, GA 31909
Indianapolis, IN 48241
--------------------------------------------------------------------------------
Tom Haight                                Jana Harrell
Classroom Technology                      Bell Industries, Graham Division
118 Barrington Commons, Ste. 218          5604 Fortune Circle South, Ste. G-N
Barrington, IL 60010                      Indianapolis, IN 46241
--------------------------------------------------------------------------------
Horacio Sanchez                           Andrew Gordon
Computer Services & Consulting            Clearvue
1603 S. Michigan Avenue, Suite 110        6465 North Avondale Avenue
Chicago, IL 60616                         Chicago, IL 60631
--------------------------------------------------------------------------------
Richard Patchin                           Elaine Joggerst
Delta Systems Co., Inc.                   Crimson Multimedia Distribution, Inc.
1400 Miller Parkway                       1118 33rd Street NE
McHenry, IL 60050                         Ceder Rapids, IA 52402
--------------------------------------------------------------------------------
Rebecca Herchman                          Dan Wechsler
DP Solutions                              Discovery
617 North Timberland Drive                1880 Old Okeechobee Road, Suite 106
Lufkin, TX 75901                          West Palm Beach, FL 33409
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Aubrey Corley                            Mimi Gavagan
Educational Materials Specialists, Inc.  Educational Computer Workshop
577 Hwy 51 North, Suite C                9507 Pamlico Lane
P.O. Box 1198                            Great Falls, VA 22066
Ridgeland, MS 39158
--------------------------------------------------------------------------------
Linda Andersen                           Lori McCaughey
Lab Resources                            K-12 Micromedia Publishing
W275 N2755 Oak Street                    16 McKee Drive
Pewaukee, WI 53072                       Mahwah, NJ 07430
--------------------------------------------------------------------------------
Jay Forman                               Rick Amill
Logical Choice, Inc.                     Learning Supplements
3100 Breckinridge Boulevard, #130        25 Hidden Meadow Road
Duluth, GA 30136                         Weston, CT 06883
--------------------------------------------------------------------------------
Steve Gibus                              Delores Lennox
Magg Software                            Mac Center
2593 Yellow Star Street                  3343 W. Commercial Boulevard, Suite 100
Woodridge, IL 60517                      Ft. Lauderdale, FL 33309
--------------------------------------------------------------------------------
Becky Wright                             Dave Myers
NASCO                                    Micro Age
901 Janesville Avenue                    2020 N. Central Avenue
Fort Atkinson, WI 53538                  Phoenix, AZ 85004
--------------------------------------------------------------------------------
Nancy Tran                               David Tarver
Net One Consulting                       National School Products
680 N. Lakeshore Drive, Suite 114        101 E. Broadway
Chicago, IL 60611                        Maryville, TN 37804
--------------------------------------------------------------------------------
Parry Cavanna                            Steve Dickinson
S&P Enterprises                          New SVE Inc.
2 Christopher Road                       6465 North Avondale Avenue
Branford, CT 06405                       Chicago, IL 60631
--------------------------------------------------------------------------------
Jan Binney                               Norma Rewis
Speech Bin, The                          School Media Associates
1985 25th Avenue                         2700 N.E. Expressway, C-800
Vero Beach, FL 32960                     Atlanta, GA 30345
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Bruce Brown                                Debbie Seeley
World Class Learning Materials, Inc.       Valpar International Corp.
111 Kane Street                            2450 West Ruthrauff Road, Suite 180
Baltimore, MD 21224                        Tucson, AZ 85705
--------------------------------------------------------------------------------
Dianne Wright                              Mike Short
Yesl Learning Center                       Wyse Connecting Point
4132 Elida Road                            1409 S. Defiance Street
Lima, OH 45807                             P.O. Box 157
                                           Archbold, OH 43502
--------------------------------------------------------------------------------
Ann Fitspatrick                            Dominika Spetsmann
Cambridge Development Lab                  Cambridge Development Lab
86 West Street                             88 West Street
Waltham, MA 02154                          Waltham, MA 02154
--------------------------------------------------------------------------------
Cheryl Narum                               Susan Lopez
CCV-Soft Warehouse                         Educational Resources
5602 36th Street South                     1550 Executive Drive
Advertising                                Elgin, IL 60121-1900
Fargo, ND 58104
--------------------------------------------------------------------------------
Kim Connoly                                Amy Sunderlaage
ESI (Educational Software Institute)       Forest Technologies
4213 South 94th Street                     765 Industrial Drive
Omaha, NE 68127                            Cary, IL 60013
--------------------------------------------------------------------------------
Lily Toback                                Donna Villena
Melzner Inc.                               Learning Services
4771 Boston Post Road                      3895 E. 19th Avenue
Pelham, NY 10803                           P.O. Box 10636
                                           Eugene, Oregon 97440-2636
--------------------------------------------------------------------------------
Dave Maurer                                Jeff Tompkins
Scantron Quality Computers                 Scantron Quality Computers
20200 Nine Mile Road                       20200 Nine Mile Road
St. Claire Shores, MI 48080                St. Clair Shores, MI 48080
--------------------------------------------------------------------------------
Ira Feigelman                              Annat Rouben
SmartSource LLC                            Westwood Computers & Networking
12 B West Main Street                      1821 Pontius Avenue
Elmsford, NY 10523                         Los Angeles, CA 90025
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Madalaine Pugliese                      Ms. Shirley Crehn
Assistive Technology Project            Bucks County Intermediate, Unite 22
28 Lord Road, Suite 125                 705 Shady Retreat Road
Marlborough, MA 01752                   Doylestown, PA 18901
--------------------------------------------------------------------------------
Ms. Judy Timms                          Jackie Nunn
Carolina Computer Access Center         Center for Technology In Education
Metro School - 700 E. 2nd Street        2500 E. Northern Parkway
Charlotte, NC 28202-2826                Baltimore, MD 21214
--------------------------------------------------------------------------------
Ms. Marge Joslin                        Karen Spurrier
Clinton County ISD                      Eastern Panhandle Tech Access Ct., Inc.
4179 South U.S. 27                      P.O. Box 987
St. Johns, MI 48879                     Charles town, WV 25414
--------------------------------------------------------------------------------
Dr. Judith Brenneke                     Ms. Gerry Soloman
Educational Computer Consortium of      Information Technology Evaluation
Ohio                                    Services
4300 Bayard Road                        301 N. Wilmington Street
South Euclid, OH 44121                  Raleigh, NC 27601-2825
--------------------------------------------------------------------------------
Mr. James Cassin                        Ms.Denise Simard
IU9IMS Technology Education Center      Learning Ind. Through Computers, Inc.
119 Mechanic Street                     28 E. Ostend Street, Suite 140
Smethport, PA 16749                     Baltimore, MD 21230
--------------------------------------------------------------------------------
Ms. Elleen Barnett                      Alan Field
Lesley College Instructional Computing  Mass. Special Tech Access Center
30 Mellen Street                        71 Arsenal Street
Cambridge, MA 02138-2790                Watertown, MA 92172-2638
--------------------------------------------------------------------------------
Ms. Kathleen Murphy                     David Benson
Montgomery County Intermediate Unit     Northeast Educational Television of Ohio
1605 E. West Main Street                1750 Campus Center Drive
Norristown, PA 19403-3290               Kent, OH 44240
--------------------------------------------------------------------------------
Mr. Harry Gretcher                      Ms. Lana Gossin
Physically Impaired Assoc. of Michigan  Resource Center for Independent Living
1023 South U.S. 27, Suite B31           401 - 409 Columbia Street
St. Johns, MI 48879                     P.O. Box 210
                                        Utica, NY 13501-0210
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Larry Pogue                             Mr. Steve Snyder
Solta Learning Center                   Summit Co. School Instr. Tech. Center
150 East Sixth Street                   420 Washington Avenue, Ste. 200
Franklin, OH 45004                      Cuyahoga Falls, OH 44221
--------------------------------------------------------------------------------
Mr. Norman Sterchele                    Ms. Debra McGarvey
SYSU College of Education               Technology Resources for Education
226 Brown Hall - SVSU                   1979 Central Avenue
University Center, MI 48710             Albany, NY 12205
--------------------------------------------------------------------------------
Ms. Gail Ross McBride                   Board of Jewish Education
The Education Cooperative               426 West 58 Street
160 Grove Street                        New York, NY 10019
Wellesley, MA 02181
--------------------------------------------------------------------------------
BOCES Regional Information Center       Carbon Lehigh Intermediate Unit #21
32 Warren Avenue                        4750 Orchard Road
Tarrytown, NY 10591                     Schnecksville, PA 18078-2597
--------------------------------------------------------------------------------
Educational Resource Center             Info Tech. Educ. for the Commonwealth
Norwich Univ. - Vermont College         Penn State - 210 Rider Bldg. II
Montpelier, VT 05602                    227 W. Beaver Avenue
                                        University Park, PA 16801
--------------------------------------------------------------------------------
Oswego County Teacher Center            Mary Travillian
Oswego Co. BOCES - Rt. 64               AEA 6, Div. of Media Services
Mexico, NY 13114                        212 West Ingeldue
                                        Marshaltown, IA 50158
--------------------------------------------------------------------------------
Dr. Joseph Bellucci                     Velma Bazan
Regional Computer Resource Center       Alaska Services for Enabling Tech.
Wilkes Univ - 187 S. Franklin Street    P.O. Box 6485
Wildes-Barre, PA 18766                  Sltka, AK 99835
--------------------------------------------------------------------------------
Syracuse Teacher Center                 Jan Hecht
501 Park Street                         Adaptive Tech Lab/Southern CT State
Syracuse, NY 13203                      501 Crescent Street
                                        New Haven, CT 06515
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Dennis Hullinger                          Ms. Judy Roy
Alpine School Dist - Peterson School      Bimingham ATA Center
169 N. 1100 East                          206 13th Street South
American Fork, UT 84003                   Birmingham, AL 35233-1317
--------------------------------------------------------------------------------
Joyce Kenrs                               Lisa Wahl
Assistive Tech. Training & Info Center    Center for Accessible Technology
3354 Pine Hill Drive - P0 2441            2547 8th Street, 12-A
Vincennes, IN 47591                       Ship Address: 2525 8th Street
                                          Berkley, CA 94710-2572
--------------------------------------------------------------------------------
Ms. Beth McKinney-Whitlock                Melody Ram
Blue Grass Tech. Ctr. for People          Computer Access Center
w/Disabilities                            5901 Green Valley Circle #320
169 North Limestone Street                Culver City, CA 90230
Lexington, KY 40507
--------------------------------------------------------------------------------
Ms. Barbara Lindar                        Carol Adams
Center for Enabling Technology            Computer CITE
622 Rt. 10 West, Suite 22B                215 E. New Hampshire Street
Whippany, NJ 07981                        Orlando, FL 32804
--------------------------------------------------------------------------------
Craig Boogaard                            Star Heger
Computer Center for Citizens              Computing & Telecomputing Services
w/Disabilities                            400 E. 8th Avenue
2056 South 1100 East                      Ellensbeng, WA 98926-7581
Salt Lake City, UT 84108
--------------------------------------------------------------------------------
Mary Fisher                               Elizabeth Keller
Alameda Co. Office of Ed. - Preview       Aloha Special Technology Access Center
Center                                    710 Green Street
313 West Winton Avenue - Room 120         Honolulu, HI 96813-2119
Hayward, CA 94544-1198
--------------------------------------------------------------------------------
Fred Fiedler                              Ann Fuller
Alliance for Technology Access            Armstrong Atlantic State University
2175 E. Francisco Blvd., Suite L          11935 Abercorn Street
San Rafael, CA 94901                      Savannah, GA 31419-1997
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDLLE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

------------------------------------------------------------------------------
Bev Appel                               Mr. Ray Mitchell
Computer Learning & Information Centre  Education Resource Center
4646 Sarcee Road SW                     2832 E. Flamingo Road
Calgary, AB, CN T3E7B8                  Las Vegas, NV 89121
------------------------------------------------------------------------------
Denise Peters                           Mark Finstrom
Cooperating School Districts/Ed. Tech   Education Technology Alliance
1460 Craig Road                         1300 Mendola Heights Road
St. Louis, MO 63146                     Mendota Heights, MN 55120
------------------------------------------------------------------------------
Raylen Fenfrow                          Jan Quinlan
Educational Service Center, Region VI   Educational Service Center #13
3332 Montgomery Road                    200 S. Frederick
Huntsville, TX 77340                    Rontou, IL 61866
------------------------------------------------------------------------------
Chris Franklin                          Louis Simington
Education Technology Center             E. Tennessee Special Tech. Access Center
620 Union Drive - Union Bldg. 123       3525 Emory Road NW
Indianapolis, IN 46202-5167             Powell, TN 37849
--------------------------------------------------------------------------------
Susan Jones                             Jim Geary
Ed. Tech Ctr & Ctr for Excellence in    FDLRS
Special Ed.                             5555 SW 93rd Avenue
University of SC - Wardlaw Bldg Rm 274  Miami, FL 33165
Columbia, SC 29208
--------------------------------------------------------------------------------
Judy Kitz                               Bill Jackson
FCIT Univ. S. FL/College of Education   FDLRS - Collier Co. Public Schools
4202 E. Fowler, EDU 208B                3708 Estey Avenue
Tampa, FL 33620                         Naples, FL 33942
--------------------------------------------------------------------------------
Randy Graff                             Sally Wood
FDLRS                                   Great River Preview Center
1825 Dunn Avenue                        1200 University, P.O. Box 1085
Daytona Beach, FL 32114                 Burlington, IA 52601
--------------------------------------------------------------------------------
Diane Johnson                           Mr. Cecil McDermont
FL Diagnostic & Learning Resources      IMPAC Learning Systems
Center                                  501 Woodlane Drive, Suite 122
3955 West Pensacola Street              Little Rock, AR 72201
Tallahassee, FL 32304
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
John Hilliard                               Toni Strickland
Illinois Resource Center                    JDSB/PAEC Preview Center
1855 Mt. Prospect Road                      2701 Technology Circle
Des Plaines, IL 60018                       Marianna, FL 32448
--------------------------------------------------------------------------------
Marty Karlin                                Andrea Reid
Jackson ESD Center for Ed. Technology       Kingwood Speech Pathology
101 N. Grape Street                         1110 Kingwood Drive, Suite 200
Medford, OR 97501                           Kingwood, TX 77339
--------------------------------------------------------------------------------
Donna Ross                                  Barb Besch
Key Largo School                            Lakeland AEA 3 Media Center
104801 Overseas Highway                     Hwy 18 and 2nd Street
Key Largo, FL 33037                         Cylinder, IA 50528
--------------------------------------------------------------------------------
Wendy Goldstein                             Parul Sharrai
Lake Co. Educational Service Center         Living Independence Network Corp.
19525 West Washington Street                1002 Shoshone Street East
Grayslake, IL 60030                         Twin Falls, ID 83301
--------------------------------------------------------------------------------
Lynn Lary                                   Ms. Janice LaChance
Lane Education Service District             Maine Parent Federation
1200 Hwy. 99 North                          P.O. Box 2067
Eugene, OR 97402                            Augusta, ME 04338-2067
--------------------------------------------------------------------------------
Mr. Dennis Kunces                           John Russell
Maine DOE Preview Center                    Natrona Co. School Dist. Software
23 State House Station                      Preview Lab
Augusta, ME 04333-0023                      970 N. Glen Road, Casper, WY 82601
--------------------------------------------------------------------------------
Jon Harding                                 Ms. LaVone Rodrigue
Missouri Tech. Center for Special Ed.       Nicholis State University
UMKC School of Education, Room 24           P.O. Box 2035
5100 Rockhill Road                          Thibodaux, LA 70310
Kansas City, MO 64110
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Mr. Joe LeDuc                             Stacy Avery
Neb. Dept. of Education Tech. Center      Northwide ISD (Northside Instructional
301 Centinnial Mall South - P0 94987      Technology)
Lincoln, NE 68509-4987                    6632 Bandera Road, Building D
                                          San Antonio, TX 78238
--------------------------------------------------------------------------------
Jerry Schnabel                            Mary Brillante
Northern Trails Area Education Agency     Orange Co. Public Schools - Educators
Northern Trails AEA Box M                 Resource Ctr.
Clear Lake, IA 50428                      445 W. Amelia Street
                                          Orlando, FL 32801
--------------------------------------------------------------------------------
Ron Toma                                  Mr. Roger Holt
OASIS, School Group                       Parents, Let's Unite for Kids
189 Lunalilo Road - 2nd Floor             1500 North 30th Street
Honolulu, HI 96285                        MSU-B/SPED Bldg. Room 267
                                          Billings, MT 59101-0298
--------------------------------------------------------------------------------
Janet Peters                              Joe Reed
PACER Center, Inc.                        Reion 18 ESC Preview Center
4826 Chicago Avenue South                 2811 LAFROCE P.O. Box 60580
Minneapolis, MN 55417-1098                Midland, TX 79701
--------------------------------------------------------------------------------
Lorraine Durrell                          Don Melody
Radford Univ. Teaching Resources Ctr.     Region VII ESC
P.O. Box 6999 - Tyler Avenue              2230 North Edwards - P0 1894
Walter Hall - 2nd Floor                   Mt Pleasant, TX 75456
Radford, VA 24142
--------------------------------------------------------------------------------
Marcia Rogers                             Ms. Judy Headley
Region VII Education Service Center       Santa Barbara Co. Ed. Office
818 E. Main                               4400 Cathedral Oak Road
Kilgone, TX 75662                         Santa Barbara, CA 93160
--------------------------------------------------------------------------------
Steve Simoneau                            Mr. Mike Anderson
Region XIV Education Center               SOUZA Center
1850 Highway 351                          708 S. Miller Street
Abilene, TX 79601                         Santa Maria, CA 93454
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

-------------------------------------------------------------------------------
Jane Fahey                                Mary Ann Ambrase
South Cook Educational Service Center     SW Cooperative Foundation Asst.
800 Governor's Highway                    Technology
Flossmoor, IL 60422                       6020 West 151st Street
                                          Oak Forest, IL 60452
-------------------------------------------------------------------------------
Ann Black                                 Roxanne Cortright
Special Education Technology Center       Team of Advocates for Special Kids
508 North Sprague                         100 W. Cerritos
Ellensburg, WA 98926                      Anaheim, CA 92805-6546
-------------------------------------------------------------------------------
Nancy Mashberg                            Carolyn McGonegill
Tampa General Rehab Center R-214          Tech - Able
P.O. Box 1289                             1112 - A Bret Drive
Tampa, FL 33601                           Conyers, GA 30207-4323
-------------------------------------------------------------------------------
Ms. JoAnne Castellano                     Bob Kibler
Tech Connection Assistive Tech.           Technology Access Center of Middle
 Solutions                                Tennessee
35 Haddon Avenue                          2222 Metro Center Blvd., Fountain Sq.,
Shrewsbury, NJ 07702-4007                 Suite 126
                                          Nashville, TN 37228
-------------------------------------------------------------------------------
Andres Hernandez                          Jamie Judd-Wall
Technical Aids & Assistance for the       Technology and Inclusion
Disabled Ctr.                             P.O. Box 150878
1950 W Roosevelt Road                     Austin, TX 78715-11878
Chicago, IL 60608
-------------------------------------------------------------------------------
Mr. Michael Baruch                        Dr. Gary G. Bitler
Technology Access Center                  Technology Learning & Research Lab
12110 Clayton Road                        ASU Box 870111
St. Louis, MO 63131-2599                  Temple, AZ 85287-0111
-------------------------------------------------------------------------------
Glenda Anderson                           Kathy Reed
Technology Assistance for Special         Technology Resource Solutions
Consumers                                 for People
P.O. Box 443                              1710 West Schilling Road
Huntsville, AL 35804                      Salina, KS 67401
-------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Charlotte Nelson                          Kellie Bell
Technology Resources for Special People   Technology Resource Center
3023 Canterbury                           3920 Woodland Heights Road
Salina, KS 67401                          Little Rock, AR 72212
--------------------------------------------------------------------------------
Lisa Fultz                                Mary Uhlir
The Star Center                           Tech. Access Ctr. of Tuscon, Inc.
60 Lynoak Cove                            4710 E. 29th Street, P.O. 13178
Jackson, TN 38305                         Tucson, AZ 85732-3178
--------------------------------------------------------------------------------
Connie Fell                               Jane Quemeville
TIES Training Center                      Tidewater Center for Technology Access
2665 Long Lake Road, Suite 250            Special Education Annex
St. Paul, MN 55113                        960 Windsor Oaks Boulevard
                                          Virginia Beach, VA 23462
--------------------------------------------------------------------------------
Kathy Katz                                Jan Daughtery
UCF/DOE Institutional Tech. Resource      T.E.A.C.H. Center
Univ. of Central FL - College of Ed.      10201 Horton
ED 106                                    Shawnee Mission, KS 66207
Orlando, FL 32816-1250
--------------------------------------------------------------------------------
Mary Tucker                               Mr. Joe Capitanio
United Cerebral Palsy of Idaho, Inc.      UNF College of Ed. Learning Lab.
5530 West Emerald                         4587 St. Johns Bluff Road
Boise, ID 83706                           Jacksonville, FL 32224
--------------------------------------------------------------------------------
Kris Held                                 Ms. Jeanne Gallimore
Wisconsin Instructional Tech Resource     Western KY. Center for
1008 Winther Hall                         Accessible Living
Whitewater, WI 53190                      1304-U Chestnut Street, P.0. Box 266
                                          Murray, KY 42701
--------------------------------------------------------------------------------
CESA #10                                  Chris Castille
725 W. Park Avenue                        Arizona Dept. of Education
Chippewa Falls, WI 54729                  1900 West Thomas
                                          Phoenix, AZ 85015
--------------------------------------------------------------------------------
Computer Learning Resource Center         CESA #3 SWICC Program
405 Third Avenue South                    1300 Industrial Drive
Saskatoon, Sask, CN S7K 1M7               Fennimore, WI 53809
-------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)
                Catalog Resellers of Standalone Products (CONT'D)

--------------------------------------------------------------------------------
Educational Service Center #11            Ctr. for Adaptive Tech. & Education
210 South Lafayette, P.O. Box 488         731 Park Avenue
Macomb, IL 61455                          Mandeville, LA 70448-4918
--------------------------------------------------------------------------------
Instructional Comp. Data Proc. Center     EnTech
432 West Third                            301 York Street
Witchita, KS 67203                        Louisville, KY 40203
--------------------------------------------------------------------------------
Lincoln Schools Technology Center         Language, Speech & Hearing Center
59041 "O" Street                          1356 Plummer Street
Lincoln, NE 68510                         Northridge, CA 91330
--------------------------------------------------------------------------------
Northwest ESD 189                         Manzanilla Assistive Technology Center
205 Stewart Road                          Univ. of Mexico RIATT
Mt. Vernon, WA 98273                      2080 Central Avenue, Suite 107
                                          Albuquerque, NM 87131
--------------------------------------------------------------------------------
Oklahoma Assistive Technology Center      Panhandle Assistive Technology Center
1122 N.E. 13th Street, WB400              212 North Fourth Avenue, #137
Oklahoma City, OK 73117                   San Point, ID 83864
--------------------------------------------------------------------------------
SACC Assistive Technology                 SHIP Resource Center
2975 N. Sycamore Drive                    329 West Craig Place
P.O. Box 1325                             San Antonio, TX 78212
Simi Valley, CA 93065
--------------------------------------------------------------------------------
San Diego Co. Tech. Consortium            Technology Preview Center
6401 Linda Vista Road, #215               1080 LaBaron Drive, Room 8
San Diego, CA 92111-7399                  Miami Springs, FL 33166
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                      THIRD PARTY RIGHTS TO JLC SOURCE CODE

1.    Settlement Agreement and Release entered into by and between Golden Books
      Family Entertainment, Inc., formerly known as Western Publishing, Inc.,
      and JLC Learning Corporation on October 28, 1998, modifying the Agreement
      between Western Publishing Company, Inc. and JLC Learning Corporation
      entered into on February 22, 1991.

2.    Product Supply and License Agreement entered into by and between JLC
      Learning Corporation and Sylvan Learning Systems Inc., on November 1,
      1996.

3.    West Virginia Basic Skills Computer Education Contract #01-A entered into
      by and between JLC Learning Corporation and the West Virginia Department
      of Education on June 14, 1990.

4.    Publication and Distribution Agreement entered into by and between JLC
      Learning Corporation and Addison Wesley Longman Limited on December 8,
      1997. Amendment One to this Agreement was entered into on December 18,
      1998. Amendment Two to this Agreement was entered into on March 12, 1999.
      Amendments Three and Four were entered into on May 28, 1999. The Agreement
      contains a provision providing for limited distribution rights to Sylvan
      Learning Systems Inc.

5.    International Development and Distribution Agreement between JLC Learning
      Corporation and Educational Trend Sdn. Bhd. on March 20, 1998. Amendment
      One to this Agreement was entered into on February 28, 1998. A Letter of
      Amendment and Subdistribution Agreement are currently under negotiation.

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                    CURRENTLY MARKETED AND MATERIAL SOFTWARE
                                    PRODUCTS

Management Systems

Advantage Management System 1.2, 2.1, 2.2
Compass 3.1, 4.0
LMS*
Personal Compass 1.0, 1.1

Assessment Product
Jostens Comprehensive Assessment Tests/Advantage
Jostens Comprehensive Assessment Tests 1.0, 2.0/Compass
Assessment Designer (Compass Tomorrow's Promise 4.0)

Curriculum

Basic Learning System*
Life Skills and Employability Skills
Foundations in Mathematics
Foundations in Reading
Learning First New Edition: Elementary Mathematics*
Learning First New Edition: Elementary Reading*
Tomorrow's Promise Reading with Spanish 1 and 2
Tomorrow's Promise: Biology
Tomorrow's Promise: Chemistry
Tomorrow's Promise: Earth Science
Tomorrow's Promise: Physics
Tomorrow's Promise: Lang. Arts Level 3-8
Tomorrow's Promise: Mathematics Level K-8
Tomorrow's Promise: Reading Level K-8
Tomorrow's Promise: Spelling Level 1
Tomorrow's Promise: Spelling Level 2
English Language Development
GED Expansions (social studies/science)
Integrated Language Arts
Secondary Literacy Expansions
Steps to English Lang. Development-Beginning Level
Steps to English Lang. Development-Intermediate/Advanced
Idea Shaper
Tomorrow's Promise Learning with Literature

                               JLC - CONFIDENTIAL

<PAGE>

Curriculum (Cont'd)

Middle School Science
Spanish Language Arts
Writing Expedition
Project T.E.A.C.H.

Other

JLC Worldware Web site
Worldware Software

Standalone Catalog Reseller Product

Clock
Community Exploration
Friday Afternoon
Learning English Series: Primary
Learning English: Home and Family
Learning English: Neighborhood Life
Math Skills Collection: Complete Set
Math Skills Collection: Decimals and Percents
Math Skills Collection: Measurement
Math Skills Collection: Shapes and Figures
Math Skills Collection: Whole Numbers and Fractions
Reading Skills Collection: Complete Set
Reading Skills Collection: Reading All Around You
Reading Skills Collection: Read to Imagine
Reading Skills Collection: Reading for Meaning
Reading Skills Collection: Read to Think
Write This Way

Third Party Product

Compton's Interactive Encyclopedia
Golden Book Encyclopedia
Interactive Mathematics: Algebra 1 & 2, Pre algebra 1
Storybook Maker
Microsoft Works
Microsoft Encarta
Sunburst Type to Learn
The Student Writing Center
Wordbench

                               JLC - CONFIDENTIAL

<PAGE>

Third Party Standalone Catalog Reseller Product

Casualty Kid
DesignExpress
First Connections: The Golden Book Encyclopedia
Learning English Series
Lyric Language: French
Lyric Language: German
Lyric Language: Japanese
Lyric Language: Spanish
Rhyme Time
Storybook Maker Deluxe
WebExpress

* Sold, not actively marketed.

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

               THIRD PARTY ACCESS OR MODIFICATION RIGHTS TO SOURCE
                            CODE AND RIGHTS TO MODIFY

1.    Publication and Distribution Agreement entered into by and between JLC
      Learning Corporation and Addison Wesley Longman Limited on December 8,
      1997. Amendment One to this Agreement was entered into on December 18,
      1998. Amendment Two to this Agreement was entered into on March 12, 1999.
      In connection with the work contemplated under Amendment Two, JLC and AWL
      entered into a confidentiality agreement with Biobras, an independent
      contractor. Amendments Three and Four were entered into on May 28, 1999.

2.    International Development and Distribution Agreement entered into by and
      between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
      20, 1998. Amendment One to this Agreement was entered into on February 28,
      1998. A Letter of Amendment and Subdistribution Agreement are currently
      under negotiation.

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                 CLAIMS AGAINST COMPANY'S INTELLECTUAL PROPERTY

1.    See "Material Opposition to Company Trademarks" in this schedule.

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                               INFRINGEMENT CLAIMS

1.    American Education Corporation v. JLC Learning Corporation, Case No. CIV
      97-1127R USDC (Western District of Oklahoma). Settled.

2.    Golden Books Publishing Co., Inc. v. Jostens Learning Corp., et al., USDC
      Case No. 96-C-0491 (Eastern District of Wisconsin). Settled.

3.    See also matters disclosed under "Material Opposition to Company
      Trademarks" in this schedule.

                                JLC-CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.08 (CONT'D)

                 CURRENT INFRINGEMENT OF COMPANY'S INTELLECTUAL
                                    PROPERTY

1.    See "Material Opposition to Company Trademarks" in this schedule.

                               JLC - CONFIDENTIAL

<PAGE>

                                  SCHEDULE 4.09

Salaries In Excess of $100,000

--------------------------------------------------------------------------------
   Employee Name                             Job Title
--------------------------------------------------------------------------------
David F. Gildar               Vice President MIS
--------------------------------------------------------------------------------
Curtis A. Hedges              Vice President/Corporate Controller
--------------------------------------------------------------------------------
Susan E. Rago                 Director Product Marketing.
--------------------------------------------------------------------------------
Elaine C. Murphy              Director Product Marketing.
--------------------------------------------------------------------------------
Roger D. Phillips             Director Product Marketing.
--------------------------------------------------------------------------------
Gary M. Columb                Director Customer Support Services
--------------------------------------------------------------------------------
Therese K. Crane              President
--------------------------------------------------------------------------------
Joyce F. Russell              Vice President Senior Finance & Administration
--------------------------------------------------------------------------------
Nancy G. Lockwood             Vice President Senior Product Development
--------------------------------------------------------------------------------
Susan R. Collins              Vice President Senior Professional Development
--------------------------------------------------------------------------------
Michael W. DePasquale         Vice President Senior Sales -- Northern Division
--------------------------------------------------------------------------------
Christopher M. Hayes          Vice President Senior Sales -- Southern Division
--------------------------------------------------------------------------------

Consultant Contract In Excess of $75,000

--------------------------------------------------------------------------------
   Employee Name                             Job Title
--------------------------------------------------------------------------------
John Bender                   Attorney
150 E. 58th Street,
Suite 3401
New York, NY 10155
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.09 (CONT'D)

Severance Obligations in Excess of $50,000

--------------------------------------------------------------------------------
Employee Name                                         Severance Period
--------------------------------------------------------------------------------
David F. Gildar                                       8 Months
--------------------------------------------------------------------------------
Curtis A. Hedges                                      10 Months
--------------------------------------------------------------------------------
Susan E. Rago                                         6 Months
--------------------------------------------------------------------------------
Elaine C. Murphy                                      6 Months
--------------------------------------------------------------------------------
R. Alfred Knechel                                     8 Months
--------------------------------------------------------------------------------
Barbara Epps                                          8 Months
--------------------------------------------------------------------------------
Marilyn B. Comet                                      8 Months
--------------------------------------------------------------------------------
Roger D. Phillips                                     6 Months
--------------------------------------------------------------------------------
Gary M. Columb                                        9 Months
--------------------------------------------------------------------------------
Therese K. Crane                                      1 Year
--------------------------------------------------------------------------------
Joyce F. Russell                                      1 Year
--------------------------------------------------------------------------------
Nancy G. Lockwood                                     1 Year
--------------------------------------------------------------------------------
Susan R. Collins                                      1 Year
--------------------------------------------------------------------------------
Michael W. DePasquale                                 1 Year
--------------------------------------------------------------------------------
Christopher M. Hayes                                  1 Year
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.09 (CONT'D)

                                   SUB LEASES

--------------------------------------------------------------------------------
Sublease Location             Term                  Sublessee
-----------------             ----                  ---------
--------------------------------------------------------------------------------
9920 Pacific Heights Blvd.,   September 1, 1994 -   Pearson Education (formerly
Suite 100                     May 31, 2000          Invest Learning, formerly
San Diego, CA 92121                                 Centec)
--------------------------------------------------------------------------------
9920 Pacific Heights Blvd.,   November 1, 1994 -    Law Office of Stuart Manroel
Suite 250                     May 20, 2001
San Diego, CA 92121
--------------------------------------------------------------------------------
2860 Old Rochester Road       October 15, 1998 -    Standard Mutual Insurance
Springfield, IL  62794        July 31, 1999
                              (month-to-month)
--------------------------------------------------------------------------------
2860 Old Rochester Road       March 1, 1999 -       Combo-Carts
Springfield, IL  62794        month-to-month
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                                 LEASE CONTRACTS

1.    Dell Financial Services Lease No. 004029124-001 by and between JLC
      Learning Corporation and Dell Financial Services on September 28, 1998.

2.    Dell Financial Services Lease No. 007061432-001 by and between JLC
      Learning Corporation and Dell Financial Services LP on March 16, 1999.

3.    Xerox Business Services Document Services Agreement Renewal C, entered
      into by and between JLC Learning Corporation and Xerox Corporation acting
      through Xerox Business Service executed on December 16, 1998 terminating
      on December 31, 2003.

4.    Standard Lease Agreement for Business Customers entered into by JLC
      Learning Corporation and Lucent Technologies, Inc. on December 19, 1998.

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                              CONTRACT FOR SERVICES

1.    Service Agreement entered into by and between Jostens Learning Corporation
      and General Electric Capital Technology Management Services on December
      15, 1994.

2.    Securities Purchase Agreement dated as of November 1, 1996 by and among
      JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
      Sylvan Learning Systems, Inc.

3.    Management and Advisory Agreement by and between JLC Holdings, Inc.,
      Software Systems Corp., JLC Acquisition Corp. and Bain Capital Partners
      IV, L.P. dated as of June 29, 1995.

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                            EVIDENCES OF INDEBTEDNESS

1.    Senior Subordinated 12.25% Note Purchase Agreement among JLC Acquisition,
      Inc., JLC Holdings, Inc., Software Systems Corporation, Chase Manhattan
      Bank, N.A. and Maximum Investments, N.V., dated as of June 29, 1995.

2.    Subordinated Promissory Note between Sylvan Learning Systems, Inc. and JLC
      Learning Corporation issued on June 30, 1998 in the principal amount of
      $2,142,901.36.

3.    Loan and Security Agreement entered into by and between JLC Learning
      Corporation, the Financial Institutions named therein as the Lenders and
      Foothill Capital Corporation on March 30, 1998.

                               JLC - CONFIDENTIAL

<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                 THIRD PARTY GUARANTEES OF COMPANY INDEBTEDNESS

1.    Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
      Acquisition, Inc., JLC Holdings, Inc., Software Systems Corporation, Chase
      Manhattan Bank, N.A. and Maximum Investments, N.V., dated as of June 29,
      1995.

2.    Assignment and Exchange Agreement by and among Pyramid Ventures, Inc.,
      Sylvan Learning Systems, Inc., JLC Learning Corporation and JLC Holdings,
      Inc., dated as of March 31, 1999, and the notes issued pursuant thereto.

3.    Assignment and Exchange Agreement by and among Pyramid Ventures, Inc.,
      General Electric Capital Corporation, G.E. Capital Equity Investments,
      Inc., JLC Learning Corporation, and JLC Holdings, Inc., dated as of March
      31, 1999, and the notes issued pursuant thereto.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                                   INVESTMENTS

1.    Jostens Learning Corporation is a shareholder of 640 preferred shares of
      ESI Inc., d/b/a Elemental Software, a California corporation, with offices
      at 5927 Priestly Drive, Suite 100, Carlsbad, CA, 92008.

2.    Jostens Learning Corporation is a shareholder of 5619 shares of common
      stock in PictureTel Corporation, a Delaware corporation with offices at
      100 Minuteman Road, Andover, MA, 01810. The shares are held in escrow as
      a result of the sale of Starlight Network.

3.    Basics Partnership, a Utah limited partnership formed November 30, 1982.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                                CONTRACTUAL LIENS

1.    Senior Subordinated 12.25% Note Purchase Agreement among JLC Acquisition,
      Inc., JLC Holdings, Inc., Software Systems Corporation, Chase Manhattan
      Bank, N.A. and Maximum Investments, N.V., dated as of June 29, 1995.

2.    Subordinated Promissory Note between Sylvan Learning Systems, Inc. and JLC
      Learning Corporation issued on June 30, 1998 in the principal amount of
      $2,142,901.36.

3.    Loan and Security Agreement entered into by and between JLC Learning
      Corporation, the Financial Institutions named therein and Foothill Capital
      Corporation on March 30, 1998.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                                POWER OF ATTORNEY

1.    Loan and Security Agreement entered into by and between JLC Learning
      Corporation, the Financial Institutions named therein as the Lenders and
      Foothill Capital Corporation on March 30, 1998.

2.    Each United States trademark registration application filed by or on
      behalf of the Company includes a limited power of attorney granting
      counsel to the Company authority to prosecute such trademark application,
      including necessary related transactions with the United States Patent &
      Trademark Office and to receive the certificate of registration.
      Additionally, Brunei, Hong Kong, Indonesia, Ireland, Malaysia, Singapore,
      and Taiwan require and the Company has granted limited powers of attorney
      for prosecution of trademark applications.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                   CONTRACTS WITH REMAINING FUTURE OBLIGATIONS
                    OF MORE THAN $150,000 AS OF MAY 31, 1999

--------------------------------------------------------------------------------
Customer                                    State    Remaining Obligation
--------------------------------------------------------------------------------
Dade County School District                  FL          $351,056.08
--------------------------------------------------------------------------------
Polk County Schools                          FL          $241,057.27
--------------------------------------------------------------------------------
Oklahoma City School District                OK          $299,845.43
--------------------------------------------------------------------------------
Chicago Public Schools                       IL          $239,351.46
--------------------------------------------------------------------------------
Orange Township Board of Education           NJ          $248,221.28
--------------------------------------------------------------------------------
Halifax County School District               VA          $233,868.92
--------------------------------------------------------------------------------
Brighton School District 27J                 CO          $494,723.46
--------------------------------------------------------------------------------
Anderson School District #5                  SC          $149,787.30
--------------------------------------------------------------------------------
Erie City School District                    PA          $212,270.07
--------------------------------------------------------------------------------
Robstown Independent School District         TX          $384,216.25
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)

             CONTRACTS EXTENDING MORE THAN 365 DAYS AND INVOLVING A
                FUTURE OBLIGATION OVER $100,000 AS OF MAY 31,1999

1.

--------------------------------------------------------------------------------
Customer                                       State        Remaining
                                                            Obligation
--------------------------------------------------------------------------------
Anderson School District #5                     SC          $ 149,787.30
--------------------------------------------------------------------------------
Brighton School District 27J                    DO          $ 199,670.46
--------------------------------------------------------------------------------
Canon McMillan School District                  PA          $ 118,603.92
--------------------------------------------------------------------------------
Chicago Public Schools                          IL          $ 321,536.01
--------------------------------------------------------------------------------
Erie City School District                       PA          $ 212,270.07
--------------------------------------------------------------------------------
Halifax County School District                  VA          $ 233,858.92
--------------------------------------------------------------------------------
Orange Township Board of Education              NJ          $ 248,221.28
--------------------------------------------------------------------------------
Polk County Schools                             FL          $ 241,057.27
--------------------------------------------------------------------------------
Rahway Public Schools                           NJ          $ 105,995.22
--------------------------------------------------------------------------------
Robstown Independent School                     TX          $ 384,216.26
District
--------------------------------------------------------------------------------
School Board of Broward County                  FL          $ 129,283.32
--------------------------------------------------------------------------------
School City of East Chicago                     IN          $ 107,200.60
--------------------------------------------------------------------------------

2.    See also "Evidence of Indebtedness", "Lease Contracts" and "Employment
      Agreements" as disclosed in this schedule.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)
                       CONTRACT WITH ANY GOVERNMENT ENTITY

1.    Educational Technology Agreement between JLC Learning Corporation and
      California State Department of Education on February 10, 1989.

2.    Contractual Agreement between School Board of Dade County, Florida and JLC
      Learning Corporation of San Diego entered into on December 20, 1990,
      amended on April 1, 1992, June 29, 1993 and March 11, 1994.

3.    ESOL Curriculum Development Contract between JLC Learning Corporation and
      the Florida Department of Education dated June 22, 1993.

4.    West Virginia Basic Skills Computer Education Contract #01-A between JLC
      Learning Corporation and the West Virginia Department of Education on June
      14, 1990.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)

                   CONTRACTS FOR JOINT VENTURE, PARTNERSHIP OR
                                   INVESTMENT

1.    Basics Partnership, a Utah limited partnership formed November 30, 1982.

2.    Securities Purchase Agreement dated as of November 1, 1996, among JLC
      Holdings, Inc., Software Systems Corp. and Sylvan Learning Systems, Inc.,
      referencing potential participation in At Home Learning Software project.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)

                 DISTRIBUTORS OR SALES REPRESENTATIVES CONTRACTS
           INVOLVING PAYMENT OR RECEIPT OVER $100,000 BY JLC LEARNING
                          CORPORATION IN THE PAST YEAR

1.    Jostens Learning Corporation's Independent Sales Representative Agreement
      dated as of January 1, 1999 with Alternate Solutions, Inc.

2.    Publication and Distribution Agreement entered into by and between JLC
      Learning Corporation and Addison Wesley Longman Limited on December 8,
      1997. Amendment One to this Agreement was entered into on December 18,
      1998. Amendment Two to this Agreement was entered into on March 12, 1999.
      The Agreement contains a provision providing for limited distribution
      rights to Sylvan Learning Systems, Inc. Amendments Three and Four were
      entered into on May 28, 1999.

3.    International Development and Distribution Agreement entered into by and
      between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
      20, 1998. Amendment One to this Agreement was entered into on February 28,
      1998. A Letter of Amendment and Subdistribution Agreement are currently
      under negotiation. The Agreement contains a clause for the provision of
      localized products to Sylvan Learning Systems, Inc.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)

                 CONTRACTS WITH AGGREGATE FUTURE LIABILITY OVER
               $150,000 NOT TERMINABLE BY JLC LEARNING CORPORATION
                         WITH NOTICE OF 60 DAYS OR LESS

1.    Dell Financial Services Lease No. 004029124-001 by and between JLC
      Learning Corporation and Dell Financial Services LP dated September 28,
      1998.

2.    Dell Financial Services Lease No. 007061432-001 by and between JLC
      Learning Corporation and Dell Financial Services LP dated March 16, 1999.

3.    Xerox Business Services Document Services Agreement, Renewal C, entered
      into by and between JLC Learning Corporation and Xerox Corporation acting
      through Xerox Business Service dated December 28, 1998, terminating on
      December 31, 2003.

4.    See also Schedule 4.07, items 1, 2, 5 and 6.

5.    Settlement Agreement between APTEX/HNC and JLC dated May 24, 1999.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)

                     CONTRACTS CONCERNING MATERIAL ASSETS OR
                                   OPERATIONS

1.    See Schedule 4.08 "Material Inbound License Agreements".

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.09 (CONT'D)

Breach or Default

1.    Senior Subordinated 12.25% Note Purchase Agreement among JLC Acquisition,
      Inc., JLC Holdings, Inc., Software Systems Corp., Chase Manhattan Bank,
      N.A. and Maximum Investments, N.V., dated as of June 29, 1995.

2.    Management and Advisory Agreement by and between JLC Holdings, Inc.,
      Software Systems Corp., JLC Acquisition Corp. and Bain Capital Partners
      IV, L.P. dated as of June 29, 1995.

3.    Securities Purchase Agreement dated as of November 1, 1996 by and among
      JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
      Sylvan Learning Systems, Inc., amendments are set forth in schedule 2.04.

Notice of Intent to Terminate or Renegotiate

1.    Service Agreement entered into by and between Jostens Learning Corporation
      and General Electric Capital Technology Management Services on December
      15, 1994. Service Agreement entered into by and between JLC Learning and
      Technology Services Solutions on December 15, 1994.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.13

1.    See Schedule 4.01.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.14

--------------------------------------------------------------------------------
Type of Coverage          Insurance Company           Limits
--------------------------------------------------------------------------------
General Liability Pkg.    Chubb; Federal Insurance    Aggregate $2,000,000
                          Co.                         Personal Property
                                                      $1,000,000
                                                      Business Income $2,500,000
                                                      Property $12,170,000
--------------------------------------------------------------------------------
Automobile                Chubb; Federal Insurance    $1,000,000
                          Co.
--------------------------------------------------------------------------------
Umbrella/Excess           Chubb; Federal Insurance    $20,000,000
                          Co.
--------------------------------------------------------------------------------
Crime                     Kemper; American            $1,000,000
                          Motorists
--------------------------------------------------------------------------------
Workers' Compensation     CIGNA                       $1,000,000
--------------------------------------------------------------------------------
Fiduciary Liability       Chubb; Federal Insurance    $2,000,000
                          Co.
--------------------------------------------------------------------------------
Professional Liability    Media Professional's Gulf   $3,000,000
                          Underwriters
--------------------------------------------------------------------------------
Directors & Officers      National Union Fire         Aggregate $10,000,000
("D&O")                   Insurance Co.               EPLI Limit $2,000,000
--------------------------------------------------------------------------------

All policies expire on September 1, 1999 except D&O which expires December 31,
2001.

Note: In connection with The Rio Grande City Consolidated School District v.
Jostens Learning Corporation case referred to in Schedule 4.16, the insurer has,
by letter dated June 4, 1997, advised the Company that it will provide a defense
of the matter, subject to a reservation of rights based on, inter alia, the fact
that claimant alleges that some of the wrongful acts occurred prior to the
inception date of the policy and the fact that the Company allegedly failed to
follow certain procedures set forth in the policy.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.15

1.    JLC Holdings, Inc. has not paid Delaware franchise taxes for the years
      subsequent to 1996.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.15 (CONT'D)

                               TAX INDEMNIFICATION

1.    Stock Purchase Agreement by and between JLC Holdings, Inc., Software
      Systems Corp., JLC Acquisition, Inc. and Jostens, Inc., dated as of June
      29, 1995.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.15 (CONT'D)

                TAX EXTENSIONS OR WAIVERS AND POWERS OF ATTORNEY

1.    Since the Company's separation from Jostens, Inc., there have been no
      extensions granted for periods after June 29, 1995 other than normal
      filing extension from April 15th to September 15th of each year.

2.    A Power of Attorney has been executed between the Company and its payroll
      service provider (Systems Tax Service/CES) to file payroll tax returns.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.15 (CONT'D)

                          COMPANY AND AFFILIATED GROUP
                            TAX FILING JURISDICTIONS

1.    The jurisdiction where the Company or the affiliated group that includes
      the Company, Software Systems Corp. and JLC Holdings, Inc. joins or has
      joined for any taxable period ending after 1995 in the filing of any
      consolidated, combined or unitary Tax Return are:

      Federal

      Alaska
      Arizona
      California
      Colorado
      Florida
      Guam
      Hawaii
      Idaho
      Illinois
      Iowa
      Kansas
      Maine
      Massachusetts
      Minnesota
      Montana
      Nebraska
      New Hampshire
      New Mexico
      North Dakota
      Oregon
      Utah
      Virginia

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.15 (CONT'D)

                 COMMON PARENT CORPORATION AND OTHER MEMBERS OF
                 THE CONSOLIDATED, COMBINED OR UNITARY TAX GROUP

1.    The affiliate group taxes have been filed under consolidated JLC Holdings,
      Inc. and included JLC Holdings, Inc., Software Systems Corp. and JLC
      Learning Corporation.

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.15 (CONT'D)

                     COMPANY AND AFFILIATED GROUP TAX FILING
                                  JURISDICTIONS

The jurisdictions where the Company or any affiliated group of which the Company
is or has ever been a member files, is required to file or has been required to
file a Tax Return relating to state and local income, franchise, license,
excise, net worth, property or sales and use taxes or is or has been liable for
any taxes on a "nexus" basis at any time for taxable periods ending after 1995:

All 50 states
District of Columbia
Puerto Rico
Guam

Local Taxes in:

Alabama
   City of Birmingham
   City of Jasper
   Jefferson County
   Walker County

Arizona
   Chandler
   Flagstaff
   Glendale
   Mesa
   Nogales
   Peoria
   Phoenix
   Scottsdale
   Tempe
   Tucson
   Maricopa County

California
   Orange County
   San Diego County

Colorado
   City of Denver

Florida
   Miami Dade County
   Tampa

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.15 (CONT'D)
         COMPANY AND AFFILIATED GROUP TAX FILING JURISDICTIONS (CONT'D)

Indiana
   Johnson
   Marion
   St. Joseph

Kentucky
   Louisville

Louisiana
   Acadia Parish
   Calcasieu Parish
   East Baton Rouge Parish
   Iberia Parish
   Jefferson Parish
   Orleans Parish
   City of New Orleans
   Ouachita Parish
   City of Monroe
   Red River Parish
   Sabine Parish
   Tangipahoa Parish
   Terrebone Parish

Maryland
   Allegany County
   Anne Arundel County
   Baltimore County
   City of Baltimore
   City of Salisbury
   Prince George's County
   St. Mary's County
   Upper Marlboro
   Wicomico County

Michigan
   Detroit

New York
   New York City

Ohio
   Columbus
   Fairfield City
   Independence
   Strongsville City
   Waterville Village

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.15 (CONT'D)
         COMPANY AND AFFILIATED GROUP TAX FILING JURISDICTIONS (CONT'D)

Oklahoma
   Oklahoma City

Pennsylvania
   Boyertown Boro
   Smethport Boro
   Bellevue Boro
   Hummelstown
   Baldwin Boro
   Newberry Township
   Dunmore Boro
   Churchill Boro

South Carolina
   Richland County

Texas
   Carrollton-Farmers
   Branch ISD
   City of Irving
   Coppell ISD
   Dallas

West Virginia
   Charleston

Wyoming
   Newberry Township

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.15 (CONT'D)

              MINIMUM BALANCES AS OF DECEMBER 31, 1997 AFTER GIVING
                        EFFECT TO THE AMENDED TAX RETURNS

1.    Net Operating Loss carryforward of the Company: $48,000,000.00
      (any adjustment under Code Section 108 based on an entity approach).

2.    Deferred gain or loss allocable to the Company or such group arising out
      of any deferred intercompany transaction:       $0.00

3.    Aggregate Tax Basis in Company's assets:        $98,000,000.00

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 4.16

      There is a reasonable possibility that any of the following matters could
be adversely determined. If adversely determined, then individually or in the
aggregate, they could materially adversely effect the Company.

1.    Mayor and City of Baltimore v. Jostens Learning Corporation
      Circuit Court for Baltimore City, Maryland
      Case No. 98-288128

2.    The Rio Grande City Consolidated Independent School District v. Jostens
      Learning Corporation
      US Bankruptcy Court for the Southern District of Texas(1)
      Adversary No. 97-2226-B

3.    Savant Inc. v. Jostens Learning Corporation
      State of Washington Superior Court of King County
      Case No. 98-2030160-KNT

4.    Covenant Violations
      JLC continues to be in breach of certain covenants under its Senior
      Subordinated 12.25% Note Purchase Agreement.

5.    See Schedule 4.08 "Material Opposition to Company Trademarks".

----------

(1) On May 25, 1999, the bankruptcy court remanded the case to the Texas state
court. The Company is assessing whether it will appeal the bankruptcy court's
ruling to the federal district court or, alternatively, ask the bankruptcy court
to reconsider its decision to remand.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.17

                             EMPLOYEE BENEFIT PLANS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                         PLAN                                         PROVIDER
                         ----                                         --------
--------------------------------------------------------------------------------------------
<S>                                                      <C>
1.  401(k) Retirement Savings Plan                       Fidelity Management Trust Co.
--------------------------------------------------------------------------------------------
2.  Preferred Provider Organization - Medical(1)         Self Funded (administered by United
                                                         Health Care)
--------------------------------------------------------------------------------------------
3.  Exclusive Provider Organization - Medical(1)         Self Funded (administered by United
                                                         Health Care)
--------------------------------------------------------------------------------------------
4.  Managed Indemnity Plan A & B                         Self Funded (administered by United
                                                         Health Care)
--------------------------------------------------------------------------------------------
5.  BlueAdvantage PPO(1)                                 Blue Cross/Blue Shield Illinois
--------------------------------------------------------------------------------------------
6.  Preferred Dental Plan(1)                             MetLife
--------------------------------------------------------------------------------------------
7.  Vision Plan(1)                                       Vision Service Plan of Arizona
--------------------------------------------------------------------------------------------
8.  Health Care Reimbursement Account(1)                 Work/Life Benefits
--------------------------------------------------------------------------------------------
9.  Business Travel Accident Insurance                   AIG
--------------------------------------------------------------------------------------------
10. Basic & Supplemental Life Insurance(1)               Reliastar Employee Benefits
--------------------------------------------------------------------------------------------
11. Short Term Disability                                CNA
--------------------------------------------------------------------------------------------
12. Long Term Disability                                 CNA
--------------------------------------------------------------------------------------------
13. Group Home/Auto Insurance                            MetLife
--------------------------------------------------------------------------------------------
14. Employee Assistance Program                          CNA
--------------------------------------------------------------------------------------------
15. Tuition Reimbursement Plan                           Jostens Learning Corporation
--------------------------------------------------------------------------------------------
16. Stock Appreciation Rights Plan                       Jostens Learning Corporation
--------------------------------------------------------------------------------------------
17. Key Management Severance Plan                        Jostens Learning Corporation
--------------------------------------------------------------------------------------------
18. Jostens Learning Severance Policy                    Jostens Learning Corporation
--------------------------------------------------------------------------------------------
19. Key Management Bonus Program (EBITDA)                Jostens Learning Corporation
--------------------------------------------------------------------------------------------
20. Sales Compensation Plans:                            Jostens Learning Corporation

o   Regional Marketing Manager (5 versions)

o   Regional Marketing Executive (6 versions)

o   Senior Regional Marketing Executive (4 versions)
--------------------------------------------------------------------------------------------
</TABLE>

----------
(1)   Extended benefits are offered to disabled employees for the twelve (12)
      months prior to the effective date of COBRA benefits. Employee
      contributions are waived during this twelve month period.

                                JLC CONFIDENTIAL
<PAGE>

--------------------------------------------------------------------------------
                         PLAN                                         PROVIDER
                         ----                                         --------
--------------------------------------------------------------------------------
o   V.P. Regional Marketing Executive (1 version)

o   Area Vice President (2 versions)

o   Senior Vice President (2 versions)

o   Sales Associate (2 versions)

o   Catalog Group

o   Inside Sales

o   Inside Telemarketers

o   Field Marketing
--------------------------------------------------------------------------------

                                JLC-CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.17 (CONT'D)
                               FIXED SALES BONUS

Therese K. Crane
Joyce F. Russell
Nancy G. Lockwood
Susan R. Collins
Gary M. Columb
Michael W. DePasquale
C. Michael Hayes

Sherwin Kimble
Marilyn B. Comet
Jim Buckner
Barbara Epps
R.  Alfred Knechel
Glenn Chapin
Joyce Whitby
Claude Bove
Gary Crary
Curtis A. Hedges
Roger D. Phillips
Elaine C. Murphy
Jeanne Soper

TOTAL:                                       $912,500

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.17 (CONT'D)
                            STOCK APPRECIATION RIGHTS

================================================================================
NAME                             TITLE
--------------------------------------------------------------------------------
Crane, Therese                   President
--------------------------------------------------------------------------------
Russell, Joyce                   Senior Vice President Finance & Admin
--------------------------------------------------------------------------------
Lockwood, Nancy                  Senior Vice President Product Development
--------------------------------------------------------------------------------
Collins, Sue                     Senior Vice President Professional Development
--------------------------------------------------------------------------------
Columb, Gary                     Director, Customer Support Services
--------------------------------------------------------------------------------
DePasquale, Mike                 Senior Vice President Sales-- Northern Division
--------------------------------------------------------------------------------
Hayes, C. Michael                Senior Vice President Sales-- Southern Division
--------------------------------------------------------------------------------
Kimble, Sherwin                  Director, Human Resources
--------------------------------------------------------------------------------
Hedges, Curtis                   Vice President Corporate Controller
--------------------------------------------------------------------------------
Gildar, David                    Vice President MIS
--------------------------------------------------------------------------------
Phillips, Roger                  Vice President Software Engineering
--------------------------------------------------------------------------------
Bove, Claude                     Area Vice President
--------------------------------------------------------------------------------
Buckner, Jim                     Area Vice President
--------------------------------------------------------------------------------
Chapin, Glenn                    Area Vice President
--------------------------------------------------------------------------------
Comet, Marilyn                   Area Vice President
--------------------------------------------------------------------------------
Epps, Barbara                    Area Vice President
--------------------------------------------------------------------------------
Knechel, R. Alfred               Area Vice President
--------------------------------------------------------------------------------
Whitby, Joyce                    Area Vice President
--------------------------------------------------------------------------------
Murphy, Elaine                   Director, Product Marketing
--------------------------------------------------------------------------------
Cooley, Nick                     Director, Field Systems Support
--------------------------------------------------------------------------------
Combs, Pam                       Dirictor, Professional Development
--------------------------------------------------------------------------------
Rago, Sue                        Director, Product Marketing
--------------------------------------------------------------------------------
Allison, Kim                     Director, Quality Assurance
--------------------------------------------------------------------------------
Knerr, Lynn                      Director, Marketing Programs/Promotions
--------------------------------------------------------------------------------
Henson, Ann                      Vice President Strategic Sales Support
--------------------------------------------------------------------------------
Youssi, Dan                      Director, Sales Training
--------------------------------------------------------------------------------
Huck, Dave                       Director, Pricing/Business Admin.
--------------------------------------------------------------------------------
Walker, Jim                      Director, Hardware Services
--------------------------------------------------------------------------------
Rokke, Eric                      Director, Software Engineering
--------------------------------------------------------------------------------
Good, Jim                        Director, Production & Distribution
--------------------------------------------------------------------------------
Rawlings, Mike                   Controller
--------------------------------------------------------------------------------
Roberts, Barbara                 Director, Professional Development Alliances
================================================================================

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.17 (CONT'D)

                       STOCK APPRECIATION RIGHTS (CONT'D)

================================================================================
NAME                            TITLE
--------------------------------------------------------------------------------
Buie, Gail                      Director, Professional Development Sales
--------------------------------------------------------------------------------
Siefert, Linda                  Director, Assessment Services
--------------------------------------------------------------------------------
Harvey, Howard                  Director, Software Engineering II
--------------------------------------------------------------------------------
Vandeveer, Robin                Manager, Product Support
--------------------------------------------------------------------------------
Major, Steve                    Manager, Technical Support
--------------------------------------------------------------------------------
Bienvenu, Sandy                 Regional Marketing Vice President
--------------------------------------------------------------------------------
Hardwick, Jim                   Regional Marketing Executive
--------------------------------------------------------------------------------
Williams, Beth                  Senior Regional Marketing Executive
--------------------------------------------------------------------------------
Altwater, Earl                  Senior Regional Marketing Executive
--------------------------------------------------------------------------------
Geary, Marilyn                  Regional Marketing Executive
--------------------------------------------------------------------------------
Felkins, Maria                  Manager, Product Development Project
--------------------------------------------------------------------------------
Pedone, Tim                     Senior Software Engineer
--------------------------------------------------------------------------------
Canning, Cary                   Director, Product Operations
--------------------------------------------------------------------------------
Marecki, Cheryl                 Director, Documentation/Multimedia Development
--------------------------------------------------------------------------------
Iannuzo, Maria                  Assistant Treasurer
--------------------------------------------------------------------------------
Smith, Dick                     Director, Education & Marketing Research
--------------------------------------------------------------------------------
Ponikvar, Edward                Regional Marketing Executive
--------------------------------------------------------------------------------
Gladwell, Jim                   Director, West Virginia
--------------------------------------------------------------------------------

Total estimated payments of
$1,120,250.00 - $1,520,250.00
================================================================================

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.18

1.    In March of 1999, JLC Learning Corporation's receivable under the Product
      Supply and License Agreement of November 1, 1996, was applied against JLC
      Learning Corporation's obligations to Sylvan under the Securities Purchase
      Agreement dated as of November 1, 1996.

2.    Discontinued the marketing of Vital Tools. A settlement agreement has been
      reached with APTEX/HNC.

3.    Purchase of Cisco catalyst 5509 Router for $52,000.00 (budgeted capital
      item in excess of $25,000 and with a possible total over $100,000).

4.    Introduction of Stock Appreciation Rights Plan.

5.    Approval of Fixed Sales Bonus.

6.    Increases in Compensation for personnel at Director level and above:

--------------------------------------------------------------------------------
EMPLOYEE NAME                    JOB TITLE                        EFFECTIVE
                                                                     DATE
--------------------------------------------------------------------------------
David F. Gildar         Vice President MIS                         1/1/99
--------------------------------------------------------------------------------
Curtis A. Hedges        Vice President Corporate                   1/1/99
                        Controller
--------------------------------------------------------------------------------
David Huck              Director Pricing/Business                  1/1/99
                        Analysis
--------------------------------------------------------------------------------
James L. Walker         Director Hardware Services                 1/1/99
--------------------------------------------------------------------------------
James C. Good           Director Prod & Distribution               1/1/99
--------------------------------------------------------------------------------
Norman E. Cooley        Director Field System                      1/1/99
                        Support
--------------------------------------------------------------------------------
Pamela A. Combs         Director Professional                      1/1/99
                        Development
--------------------------------------------------------------------------------
Barbara Roberts         Director Professional                      1/1/99
                        Development Alliances
--------------------------------------------------------------------------------
Gail Buie               Director Professional                      1/1/99
                        Development Sales
--------------------------------------------------------------------------------
C. Richard Smith        Director Education & Market                1/1/99
                        Research
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.18 (CONT'D)

--------------------------------------------------------------------------------
EMPLOYEE NAME                    JOB TITLE                        EFFECTIVE
                                                                    DATE
--------------------------------------------------------------------------------
Lynn C. Knerr           Director Marketing,                        1/1/99
                        Programs/Promotions
--------------------------------------------------------------------------------
Susan E. Rago           Director Product Marketing                 1/1/99
--------------------------------------------------------------------------------
Elaine C. Murphy        Director Product Marketing                 1/1/99
--------------------------------------------------------------------------------
Cheryl Marecki          Director Documentation/Media               1/1/99
                        Development
--------------------------------------------------------------------------------
J. Michael Birch        Director Product Development               1/1/99
                        Project
--------------------------------------------------------------------------------
Cary A. Canning         Director Product Operation                 1/1/99
--------------------------------------------------------------------------------
Kim Allison             Director Quality Assurance                 1/1/99
--------------------------------------------------------------------------------
Eric Rokke              Director Software Engineering              1/1/99
--------------------------------------------------------------------------------
Howard J. Harvey        Director Software Engineering II           1/1/99
--------------------------------------------------------------------------------
Daniel J. Youssi        Director Sales Training                    1/1/99
--------------------------------------------------------------------------------
Glenn G. Chapin         Vice President Area                        1/1/99
--------------------------------------------------------------------------------
Joyce M. Whitby         Vice President Area                        1/1/99
--------------------------------------------------------------------------------
Claude J. Bove          Vice President Area                        1/1/99
--------------------------------------------------------------------------------
Marilyn B. Comet        Vice President Area                        1/1/99
--------------------------------------------------------------------------------
R. Alfred Knechel       Vice President Area                        1/1/99
--------------------------------------------------------------------------------
Gary L. Crary           Vice President Area                        1/1/99
--------------------------------------------------------------------------------
James R. Buckner        Vice President Area                        1/1/99
--------------------------------------------------------------------------------
Barbara Epps            Vice President Area                        1/1/99
--------------------------------------------------------------------------------
Ann E. Henson           Vice President Strategic Sales             1/1/99
                        Support
--------------------------------------------------------------------------------
Gary M. Columb          Director Customer Support                  1/1/99
                        Services
--------------------------------------------------------------------------------
Sherwin E. Kimble       Director Human Resources                   4/15/99
--------------------------------------------------------------------------------

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.18 (CONT'D)

--------------------------------------------------------------------------------
EMPLOYEE NAME                    JOB TITLE                        EFFECTIVE
                                                                    DATE
--------------------------------------------------------------------------------
Therese K. Crane        President                                  1/1/99
--------------------------------------------------------------------------------
Joyce F. Russell        Vice President Senior Finance &            1/1/99
                        Administration
--------------------------------------------------------------------------------
Nancy C. Lockwood       Vice President Senior Product              1/1/99
                        Development
--------------------------------------------------------------------------------
Susan R. Collins        Vice President Senior                      1/1/99
                        Professional Development
--------------------------------------------------------------------------------

7.    Increases in 1999 EBITDA Opportunity for Personnel at Director level and
      above:

--------------------------------------------------------------------------------
NAME                    TITLE
--------------------------------------------------------------------------------
Dave Huck               Director, Pricing/Business Analysis
--------------------------------------------------------------------------------
Linda Siefert           Director, Assessment Services
--------------------------------------------------------------------------------
Jim Walker              Director, Technical Services & Training
--------------------------------------------------------------------------------
Dan Youssi              Director, Sales Training
--------------------------------------------------------------------------------
Gail Buie               Director, Customer Service
--------------------------------------------------------------------------------
Pam Combs               Director, Customer Service
--------------------------------------------------------------------------------
Barbara Roberts         Director, Customer Service
--------------------------------------------------------------------------------
Sherwin Kimble          Director, Human Resources
--------------------------------------------------------------------------------

8.    An agreement modifying the Foothill Agreement to include an over-advance
      facility of $1.5 million was entered into on May 1, 1999.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.19

                       NON-COMPLIANCE WITH APPLICABLE LAWS

1.    See Schedule 4.01.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.21

1.    Texas Caretaker Project Pilot dated July 23, 1997, entered into by JLC
      Learning Corporation and Sylvan Learning Systems, Inc.

2.    Publication and Distribution Agreement entered into by and between JLC
      Learning Corporation and Addison Wesley Longman Limited on December 8,
      1997. Amendment One to this Agreement was entered into on December 18,
      1998. Amendment Two to this Agreement was entered into on March 12, 1999.
      The Agreement contains a provision providing for limited distribution
      rights to Sylvan Learning Systems, Inc. Amendments Three and Four were
      entered into on May 28, 1999.

3.    International Development and Distribution Agreement entered into by and
      between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
      20, 1998. Amendment One to this Agreement was entered into on February 28,
      1998. A Letter of Amendment and Subdistribution Agreement are currently
      under negotiation. The Agreement contains a clause for the provision of
      localized products to Sylvan Learning Systems, Inc.

4.    Stock Purchase Agreement by and between JLC Holdings, Inc., Software
      Systems Corp., JLC Acquisition and Jostens, Inc. dated as of June 29,
      1995.

5.    Strategic Alliance Agreement dated the date hereof between Sylvan Learning
      Systems, Inc. and JLC Learning Corporation.

6.    See also schedule 2.06, items numbered 8, 9, 13, 14 and 17.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.24

1.    Dell Marketing L.P.

2.    General Electric Capital Corp. (Formerly Ameridata, Inc.)

3.    Tech Data Corp.

4.    Apple Computer, Inc.

5.    Telex Communications, Inc.

6.    Academic Systems Corporation (prepayment of licenses).

7.    Discontinued the marketing of Vital Tools. A settlement agreement has been
      reached with APTEX/HNC.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.25

1.    Terrebonne Parish School District

2.    Tangipahoa Parish School District

3.    Chicago Public Schools

4.    West Allegheny School District

5.    Dade County School District

6.    East Cleveland City School District

7.    Halifax County School District

8.    Galena Park I.S.C.

9.    Polk County Schools

10.   Wilkes County School District

                               JLC - CONFIDENTIAL
<PAGE>

                             SCHEDULE 4.25 (CONT'D)

1.    Dade County complained to JLC Learning Corporation during the summer of
      1998 regarding performance issues. As a result, the guarantee under the
      Operation Safety Net contract was renegotiated and upgraded software was
      provided to the customer.

                               JLC -CONFIDENTIAL
<PAGE>

                                  SCHEDULE 4.27

1.    Jostens Learning Corporation is a shareholder of 640 preferred shares of
      ESI Inc., d/b/a Elemental Software, a California corporation, with offices
      at 5927 Priestly Drive, Suite 100, Carlsbad, CA, 92008.

2.    Jostens Learning Corporation is a shareholder of 5619 shares of common
      stock in PictureTel Corporation a Delaware corporation with offices at 100
      Minuteman Road, Andover, MA , 01810. The shares are held in escrow as a
      result of the sale of Starlight Network.

3.    Basics Partnership, a Utah limited partnership formed November 30, 1982.

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 4.28

      JLC's Year 2000 compliance review is ongoing. The following information is
accurate as of April 1, 1999, and may be amended as a result of ongoing review.

--------------------------------------------------------------------------------
Software Product                     Certification Status
----------------                     --------------------
--------------------------------------------------------------------------------
JLMS/LMS                             Non-compliant*
--------------------------------------------------------------------------------
AIMS 2                               Y2K Ready**
--------------------------------------------------------------------------------
RIMS 1                               Unknown***
--------------------------------------------------------------------------------
RIMS 2                               Y2K Ready with issues****
--------------------------------------------------------------------------------

* Recommendation to users to set clocks back to 1972 during the summer of 1999
to avoid mid-year loss of data. Novell 2.2 which runs this software is
non-compliant. No further plan of correction has been adopted.

** No significant issues found, full test not performed due to age of product
and decrease in sales. No further plan of correction has been adopted.

*** Post release issues being addressed by Product Development. Version 3.4
introduces an error in the program. No further plan of correction has been
adopted except in the case of version 3.4.1

**** Cannot handle cross millennium data. Data must be closed out at the end of
1999. No further plan of correction has been adopted.

Products Not Year 2000 Tested - No plan of correction adopted

Teach Net
Learning Expedition Stand Alone CD
Standalone Software Products (will be tested)
One Net
Lab Net
Apple Hard Disk

                               JLC - CONFIDENTIAL
<PAGE>

                                 SCHEDULE 6.01

1.    In March of 1999, JLC Learning Corporation's receivable under the Product
      Supply and License Agreement of November 1, 1996, was applied against JLC
      Learning Corporation's obligations to Sylvan under the Securities Purchase
      Agreement dated as of November 1, 1996.

2.    Product Supply and License Agreement entered into by and between JLC
      Learning Corporation and Sylvan Learning Systems, Inc. dated as of
      November 1, 1996.

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 6.09

Principles used in amending Tax Returns:

1.    Subsequent payment of contingent liabilities, existing at the Original
      Purchase Date, increase the purchase price and corresponding assets of the
      Company.

2.    Inventory reserves expensed for book purposes are being reversed for tax
      purposes since they were incorrectly expensed on the tax returns.

3.    Asset purchases, incorrectly omitted on tax depreciation schedule, are
      being included in the tax returns.

4.    Software Systems Corp. reduced certain of its Net Operating Losses as a
      result of 1996 prepayment discount related to its obligations under the
      Jostens, Inc. Subordinated Note.

States where Amended Tax Returns for 1995, 1996 and 1997 will be filed:

      California
      Arizona
      Illinois
      Georgia
      Pennsylvania
      Texas
      South Carolina
      New Jersey
      North Carolina
      Indiana

                               JLC - CONFIDENTIAL
<PAGE>

                                  SCHEDULE 7.02

1.    See "Fixed Sales Bonuses" and "Stock Appreciation Rights" as set forth in
      Schedule 4.17.

                               JLC - CONFIDENTIAL

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