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                                                                    EXHIBIT 4.10

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                    PREFERRED SECURITIES GUARANTEE AGREEMENT

                                     BETWEEN

                               CALPINE CORPORATION

                                       AND

                            WILMINGTON TRUST COMPANY

                                   DATED AS OF

                                 August 9, 2000

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                GUARANTEE AGREEMENT, dated as of August 9, 2000, executed and
delivered by Calpine Corporation, a Delaware corporation (the "Guarantor"), and
Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the HIGH TIDES (as defined herein) of Calpine Capital Trust III,
a Delaware statutory business trust (the "Trust").

                WHEREAS pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of August 9, 2000, executed by the Guarantor, as
Depositor, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Property Trustee, and the Administrative Trustees named therein, the
Trust is issuing 5450,000,000 ($517,500,000 including the over-allotment option)
aggregate liquidation amount of its 5% Convertible Preferred Securities,
Remarketable Term Income Deferred Equity Securities (HIGH TIDES)(SM),
liquidation amount $50 per security (the "HIGH TIDES") and $14,000,000
($17,500,000 including the over-allotment option) aggregate liquidation amount
of its Common Securities, liquidation amount $50 per security (the "Common
Securities" and collectively with the HIGH TIDES, the "Trust Securities")
representing undivided beneficial interests in the assets of the Trust and
having the terms set forth in the Declaration;

                WHEREAS the Trust Securities will be issued by the Trust and the
proceeds thereof will be used to purchase the Convertible Subordinated
Debentures due August 1, 2030 (the "Debentures") of the Guarantor which will be
deposited with Wilmington Trust Company as Property Trustee under the
Declaration, as trust assets; and

                WHEREAS as incentive for the Holders to purchase HIGH TIDES, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the HIGH TIDES the Guarantee Payments (as
defined herein) and to make certain other payments on the terms and conditions
set forth herein.

                NOW, THEREFORE, in consideration of the purchase by each Holder
of HIGH TIDES, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the HIGH TIDES.

                                    ARTICLE I

                                   Definitions

                SECTION 1.01. Definitions. As used in this Guarantee Agreement,
the terms-set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Declaration as in effect on the date hereof.

                "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person; provide , however, that the Trust
shall be deemed not to be an Affiliate of the Guarantor. For the purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; the terms "controlling" and "controlled" have meanings correlative to
the foregoing.

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                "Common Securities" shall have the meaning specified in the
first recital of this Guarantee Agreement.

                "Debentures" shall have the meaning specified in the second
recital of this Guarantee Agreement.

                "Debt" means (i) the principal of and premium, if any, and
unpaid interest on indebtedness for money borrowed, (ii) purchase money and
similar obligations, (iii) obligations under capital leases, (iv) guarantees,
assumptions or purchase commitments relating to, or other transactions as a
result of which the Guarantor is responsible for the payment of such
indebtedness of others, (v) renewals, extensions and refunding of any such
indebtedness, (vi) interest or obligations in respect of any such indebtedness
accruing after the commencement of any insolvency or bankruptcy proceedings and
(vii) net obligations associated with derivative products such as interest rate
and currency exchange contracts, foreign exchange contracts, commodity contracts
and similar arrangements.

                "Declaration" shall have the meaning specified in the first
recital to this Guarantee Agreement.

                "Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Guarantee Agreement; provided,
however, that, except with respect to a default in payment of any Guarantee
Payments, the Guarantor shall have received notice of default from the Guarantee
Trustee and shall not have cured such default within 60 days after receipt of
such notice.

                "Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the HIGH TIDES, to the
extent not paid or made by or on behalf of the Trust: (i) any accrued and unpaid
Distributions required to be paid on the HIGH TIDES, to the extent the Trust
shall have funds on hand available therefor at such time, (ii) the applicable
Redemption Price, with respect to the HIGH TIDES called for redemption by the
Trust to the extent the Trust shall have funds on hand available therefor at
such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Trust, unless Debentures are distributed to the Holders of
the HIGH TIDES or all the HIGH TIDES are redeemed, the lesser of (a) the
aggregate of the liquidation amount of $50 per HIGH TIDES plus accrued and
unpaid Distributions on the HIGH TIDES to the date of payment (the "Liquidation
Distribution") to the extent the Trust shall have funds on hand available to
make such payment at such time and (b) the amount of assets of the Trust
remaining available for distribution to Holders of the HIGH TIDES upon
liquidation of the Trust after satisfaction of liabilities to creditors of the
Trust as required by applicable law.

                "Guarantee Trustee" means Wilmington Trust Company, a Delaware
banking corporation, until a Successor Guarantee Trustee has been appointed and
has accepted such appointment pursuant to the terms of this Guarantee Agreement
and thereafter means. each such Successor Guarantee Trustee.

                "Guarantor" shall have the meaning specified in the first
paragraph of this Guarantee Agreement.

                "HIGH TIDES" shall have the meaning specified in the first
recital of this Guarantee Agreement.

                "Holder" means any holder, as registered on the books and
records of the Trust, of any HIGH TIDES; provided, however, that in determining
whether the holders of the requisite percentage of HIGH TIDES have given any
request, notice, consent or

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waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee
Trustee, or any Affiliate of the Guarantor or the Guarantee Trustee.

                "Indenture" means the Indenture dated as of August 9, 2000 as
amended or supplemented, between the Guarantor and Wilmington Trust Company, as
trustee, relating to the issuance of Debentures.

                "List of Holders" has the meaning specified in Section 2.02(a).

                "Majority in liquidation amount of the HIGH TIDES" means, except
as provided in the terms of the HIGH TIDES or by the Trust Indenture Act, a vote
by the Holder(s), voting separately as a class, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid distributions to
the date upon which the voting percentages are determined) of all then
outstanding HIGH TIDES.

                "Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer, President or a
Vice President, and by the Treasurer, an Associate Treasurer, an Assistant
Treasurer, the Controller, the Secretary or an Assistant Secretary of such
Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement (other than pursuant to Section 2.04) shall include:

                (a) a statement that each officer signing the Officers'
        Certificate has read the covenant or condition and the definitions
        relating thereto;

                (b) a brief statement of the nature and scope of the examination
        or investigation undertaken by each officer in rendering the Officers'
        Certificate;

                (c) a statement that each officer has made such examination or
        investigation as, in such officer's opinion, is necessary to enable such
        officer to express an informed opinion as to whether or not such
        covenant or condition has been complied with; and

                (d) a statement as to whether, in the opinion of each officer,
        such condition or covenant has been complied with.

                "Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

                "Responsible Officer" when used with respect to the Guarantee
Trustee means any officer assigned to its corporate trust office, including any
vice president, assistant vice president, assistant treasurer, assistant
secretary or any other officer of the Guarantee Trustee customarily performing
functions similar to those performed by any of the ABOVE DESIGNATED OFFICERS,
and having direct responsibility for the administration of this GUARANTEE
AGREEMENT, and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.

                "Senior Debt" means (i) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by the Company, (ii) all
obligations to make net payment pursuant to the terns of financial instruments,
such as (a) securities contracts and foreign currency exchange contracts, (b)
derivative instruments, such as swap agreements (including interest rate and
foreign exchange rate swap agreements), cap

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agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity futures contracts and commodity
options contracts, and (c) similar financial instruments; except, in the case of
(i) above, such indebtedness and obligations that are expressly stated to rank
junior in right of payment to, or p 4d pass in right of payment with, the
Debentures, (iii) and indebtedness or obligations of others of the kind
described in (i) and (ii) above for the payment of which the Company is
responsible or liable as guarantor or otherwise and (iv) deferrals, renewals or
extensions of any such Senior Debt; provided, however, that Senior Debt shall
not be deemed to include (a) any Debt of the Company which, when incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, was without recourse to the Company, (b) trade accounts
payable in the ordinary course of business, which will not constitute debt for
purposes of the HIGH TIDES, (c) any Debt of the Company to any of its
subsidiaries, except to the extent incurred for the benefit of third parties,
(d) Debt to any employee of the Company and (e) Debt that expressly provides
that it is not senior in right of payment to the HIGH TIDES.

                "Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee under Section
4.01.

                "Trust" shall have the meaning specified in the first paragraph
of this Guarantee Agreement.

                "Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb), as amended, and the rules and regulations
promulgated thereunder.

                "Trust Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.

                                   ARTICLE II

                               Trust Indenture Act

                SECTION 2.01. Trust Indenture Act; Application. (a) This
Guarantee Agreement is, or upon qualification under the Trust Indenture Act will
be, subject to the provisions of the Trust Indenture Act that are required to be
part of this Guarantee Agreement, which are incorporated by reference in and
made part of this Guarantee Agreement and shall, to the extent applicable, be
governed by such provisions. This Guarantee Agreement will not be qualified
under the Trust Indenture Act except upon the effectiveness of the Shelf
Registration Statement.

                (b) Until such time as this Guarantee Agreement is qualified
under the Trust Indenture Act, the parties hereto agree that the provisions of
Sections 310-317, inclusive, of the Trust Indenture Act shall be incorporated
herein by reference, subject to the provisions of this Guarantee Agreement and
to the extent that any provision of this Guarantee Agreement limits, qualifies
or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.

                SECTION 2.02. Lists of Holders of Securities. (a) The Guarantor
shall provide the Guarantee Trustee (i) within 14 days after each record date
for payment of Distributions, a list, in such form as the Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the HIGH TIDES
("List of Holders") as of such record date, provided that the Guarantor shall
not be obligated to provide such List of Holders at any time the List of Holders
does not differ from the most recent List of Holders given to the Guarantee
Trustee by the Guarantor on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request fort List of Holders
as of a date no more than 14 days before such List of Holders is given to the
Guarantee Trustee.

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                (b) The Guarantee Trustee shall comply with its obligations
under Section 311(a), 311 (b) and 312(b) of the Trust Indenture Act.

                SECTION 2.03. Reports by the Guarantee Trustee Within 60 days
after March 15 of each year, commencing March 15, 2001, the Guarantee Trustee
shall provide to the Holders of the HIGH TIDES such reports as are required by
Section 313(a) of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the other requirements of Section 313 of the Trust Indenture
Act.

                SECTION 2.04. Periodic Reports to The Guarantee Trustee The
Guarantor shall provide to the Guarantee Trustee such documents, reports and
information as required by Section 314 of the Trust Indenture Act (if any) and
the compliance certificate required by Section 314(a)(4) of the Trust Indenture
Act in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act, provided that such certificate shall be delivered no later
than 120 days after the end of each fiscal year of the Guarantor.

                SECTION 2.05. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with such conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by any officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.

                SECTION 2.06. Events of Default: Waiver. The Holders of a
Majority in _ liquidation amount of the HIGH TIDES may, by vote, on behalf of
all the Holders, waive' any past Event of Default and its consequences. Upon
such waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Guarantee Agreement, but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent therefrom.

                SECTION 2.07. Event of Default: Notice. (a) The Guarantee
Trustee shall, within 20 days after the occurrence of an Event of Default,
transmit by mail, first class postage prepaid, to the Holders, notices of all
Events of Default known to the Guarantee Trustee, unless such Events of Default
have been cured before the giving of such notice; provided, that, except in the
case of a default in the payment of a Guarantee Payment, the Guarantee Trustee
shall be protected in withholding such notice if and so long as the Board of
Directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Guarantee Trustee in good faith determine that the
withholding of such notice is in the interests of the Holders.

                (b) The Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless a Responsible Officer of the Guarantee Trustee
shall have received written notice of such Event of Default from the Guarantor
or a Holder.

                SECTION 2.08. Conflicting Interests. The Declaration and the
Indenture shall be deemed to be specifically described in this Guarantee
Agreement for the purposes of clause (i) of the first proviso contained in
Section 310(b) of the Trust Indenture Act.

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                                   ARTICLE III

                        Powers, Duties and Rights of the
                                Guarantee Trustee

                SECTION 3.01. Powers and Duties of the Guarantee Trustee (a)
This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit
of the Holders, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder exercising his or her rights pursuant to
Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.

                (b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall be entitled to enforce this Guarantee Agreement for the
benefit of the Holders.

                (c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.06), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

                (d) No provision of this Guarantee Agreement shall be construed
to relieve the Guarantee Trustee from liability for its own negligent action,
its own negligent failure to act or its own wilful misconduct, except that:

                (i) prior to the occurrence of any Event of Default and after
        the curing or waiving of all such Events of Default that may have
        occurred:

                    (A) the duties and obligations of the Guarantee Trustee
                  shall be determined solely by the express provisions of this
                  Guarantee Agreement, and the Guarantee Trustee shall not be
                  liable except for the performance of such duties and
                  obligations as are specifically set forth in this Guarantee
                  Agreement; and

                    (B) in the absence of bad faith on the part of the Guarantee
                  Trustee, the Guarantee Trustee may conclusively rely, as to
                  the truth of the statements and the correctness of the
                  opinions expressed therein, upon any certificates or opinions
                  furnished to the Guarantee Trustee and conforming to the
                  requirements of this Guarantee Agreement; but in the case of
                  any such certificates or opinions that by any provision hereof
                  or of the Trust Indenture Act are specifically required to be
                  furnished to the Guarantee Trustee, the Guarantee Trustee
                  shall be under a duty to examine the same to determine whether
                  or not they conform to the requirements of this Guarantee
                  Agreement;

                (ii) the Guarantee Trustee shall not be liable for any error of
        judgment made in good faith by a Responsible Officer of the Guarantee
        Trustee, unless it

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        shall be proved that the Guarantee Trustee was negligent in ascertaining
        the pertinent facts upon which such judgment was made;

                (iii) the Guarantee Trustee shall not be liable with respect to
        any action taken or omitted to be taken by it in good faith in
        accordance with the direction of the Holders of not less than a Majority
        in liquidation amount of the HIGH TIDES relating to the time, method and
        place of conducting any proceeding for any remedy available to the
        Guarantee Trustee, or exercising any trust or power conferred upon the
        Guarantee Trustee under this Guarantee Agreement; and

                (iv) no provision of this Guarantee Agreement shall require the
        Guarantee Trustee to expend or risk its own funds or otherwise incur
        personal financial liability in the performance of any of its duties or
        in the exercise of any of its rights or powers.

                SECTION 3.02. Certain Rights of Guarantee Trustee. (a) Subject
to the provisions of Section 3.01:

                (i) The Guarantee Trustee may conclusively rely and shall be
        fully protected in acting or refraining from acting upon any resolution,
        certificate, statement, instrument, opinion, report, notice, request,
        direction, consent, order, bond, debenture, note, other evidence of
        indebtedness or other paper or document reasonably believed by it to be
        genuine and to have been signed, sent or presented by the proper party
        or parties.

                (ii) Any direction or act of the Guarantor contemplated by this
        Guarantee Agreement shall be sufficiently evidenced by an Officers'
        Certificate unless otherwise prescribed herein.

                (iii) Whenever, in the administration of this Guarantee
        Agreement, the Guarantee Trustee shall deem it desirable that a matter
        relating to compliance by the Guarantor with any of its obligations
        contained in this Guarantee Agreement be proved or established before
        taking, suffering or omitting to take any action hereunder, the
        Guarantee Trustee (unless other evidence is herein specifically
        prescribed) may, in the absence of bad faith on its part, request and
        conclusively rely upon an Officers' Certificate (with respect to the
        Guarantor) which, upon receipt of such request from the Guarantee
        Trustee, shall be promptly delivered by the Guarantor.

                (iv) The Guarantee Trustee may consult with legal counsel of its
        selection, and the advice or opinion of such legal counsel with respect
        to legal matters shall be full and complete authorization and protection
        in respect of any action taken, suffered or omitted to be taken by it
        hereunder in good faith and in accordance with such advice or opinion.
        Such legal counsel may be legal counsel to the Guarantor, the Guarantee
        Trustee or any of its Affiliates and may be one of its employees. The
        Guarantee Trustee shall have the right at any time to seek instructions
        concerning the administration of this Guarantee Agreement from any court
        of competent jurisdiction.

                (v) The Guarantee Trustee shall be under no obligation to
        exercise any of the rights or powers vested in it by this Guarantee
        Agreement at the request or direction of any Holder, unless such Holder
        shall have provided to the Guarantee Trustee such security and indemnity
        reasonably satisfactory to it, against the costs, expenses (including
        attorneys' fees and expenses) and liabilities that might be incurred by
        it in complying with such request or direction, including such
        reasonable advances as may be requested by the Guarantee Trustee;
        provided, a that nothing contained in this Section 3.02(a)(v) shall be
        taken to relieve the Guarantee

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        Trustee, upon the occurrence of an Event of Default, of its obligation
        to exercise the rights and powers vested in it by this Guarantee
        Agreement and use the same degree of care and skill in the exercise
        thereof as a prudent person would exercise or use under the
        circumstances in the conduct of his or her own affairs.

                (vi) The Guarantee Trustee shall not be bound to make any
        investigation into the facts or matters stated in any resolution,
        certificate, statement, instrument, opinion, report, notice, request,
        direction, consent, order, bond, debenture, note, other evidence of
        indebtedness or other paper or document, but the Guarantee Trustee, in
        its discretion, may make such further inquiry or investigation into such
        facts or matters as it may see fit.

                (vii) The Guarantee Trustee may execute any of the trusts or
        powers hereunder or perform any duties hereunder either directly or by
        or through its agents or attorneys, and the Guarantee Trustee shall not
        be responsible for any misconduct or negligence on the part of any such
        agent or attorney appointed with due care by it hereunder.

                (viii) Whenever in the administration of this Guarantee
        Agreement the Guarantee Trustee shall deem it desirable to receive
        instructions with respect to enforcing any remedy or right or taking any
        other action hereunder, the Guarantee Trustee (A) may request
        instructions from the Holders, (B) may refrain from enforcing such
        remedy or right or taking such other action until such instructions are
        received and (C) shall be fully protected in acting in accordance with
        such instructions.

                (b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.

                SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the
Guarantee Trustee and its directors, officers, agents and employees for, and to
hold them harmless against, any and all loss, damage, claim, liability or
expense incurred without negligence or bad faith on the part of the Guarantee
Trustee, arising out of or in connection with the acceptance or administration
of this Guarantee Agreement, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The Guarantor shall be
entitled to participate in the defense of any action arising hereunder and, to
the extent it may wish, assume the defense thereof, with counsel satisfactory to
the Guarantee Trustee (who shall not, except with the consent of the Guarantee
Trustee, be counsel to Guarantor). Upon assuming such defense, the Guarantor
shall not be liable for any legal or other expenses subsequently incurred by the
Guarantee Trustee in connection with the defense thereof, other than reasonable
costs of investigation. The Guarantor shall not, without the prior written
consent of the Guarantee Trustee, effect any settlement of any pending or
threatened action in respect of which the Guarantee Trustee is or could have
been a party and indemnity could have been sought hereunder by the Guarantee
Trustee unless such settlement (i) includes an unconditional release of the
Guarantee Trustee from all liability on any claims that are the subject matter
of such action and (ii) does not include a statement as to, or an admission of,
fault, culpability or a failure to act by or on behalf of the Guarantee Trustee.
The Guarantee Trustee will not claim or exact any lien or charge on any
Guarantee Payments as a result of any amount due to it under this

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Guarantee Agreement. This indemnity shall survive the termination of this
Guarantee Agreement or the resignation or removal of the Guarantee Trustee.

                SECTION 3.04. Compensation and Expenses. The Guarantor agrees to
pay to the Guarantee Trustee from time to time reasonable compensation for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust) and to reimburse the Guarantee Trustee upon request for all reasonable
expenses, disbursements and advances (including the reasonable fees and expenses
of its attorneys and agents) incurred or made by the Guarantee Trustee in
accordance with any provision of this Guarantee Agreement, except any such
expense, disbursement or advance as may be attributable to its negligence or bad
faith. The obligations of the Guarantor under this Section shall survive the
termination of this Guarantee Agreement and the resignation or removal of the
Guarantee Trustee.

                                   ARTICLE IV

                                Guarantee Trustee

                SECTION 4.01. Guarantee Trustee: Eligibility. (a) There shall at
all times be a Guarantee Trustee which shall:

                (i) not be an Affiliate of the Guarantor; and

                (ii) be a Person that is eligible pursuant to the Trust
        Indenture Act to act as such and has a combined capital and surplus of
        at least $50,000,000, and shall be a corporation meeting the
        requirements of Section 310(a) of the Trust Indenture Act. If such
        corporation publishes reports of condition at least annually, pursuant
        to law or to the requirements of the supervising or examining authority,
        then, for the purposes of this Section and to the extent permitted by
        the Trust Indenture Act, the combined capital and surplus of such
        corporation shall be deemed to be its combined capital and surplus as
        set forth in its most recent report of condition so published.

                (b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.01(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(c).

                (c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act, subject to the
penultimate paragraph thereof.

                SECTION 4.02. Appointment, Removal and Resignation of the
Guarantee Trustee. (a) Subject to Section 4.02(b), in the absence of the
existence of an Event of Default, the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.

                (b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.

                (c) The Guarantee Trustee appointed hereunder shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor

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Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Guarantee Trustee and delivered
to the Guarantor and the resigning Guarantee Trustee.

                (d) Upon the resignation or removal of the Guarantee Trustee,
the Guarantor shall promptly appoint a Successor Guarantee Trustee.

                (e) If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.02 within 30 days after
delivery to the Guarantor of an instrument of resignation or notice of removal
by the Guarantor, the retiring Guarantee Trustee may petition, at the expense of
the Guarantor, any court of competent jurisdiction for appointment of a
Successor Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.

                                    ARTICLE V

                                    Guarantee

                SECTION 5.01. Guarantee. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by or on behalf of the Trust),
as and when due, regardless of any defense, right of set-off or counterclaim
which the Trust may have or assert. The Guarantor's obligation to make a
Guarantee Payment may be satisfied. by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Trust to pay such amounts to the
Holders. The Guarantor shall give written notice to the Guarantee Trustee as
promptly as practicable in the event it makes any direct payment hereunder.

                SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby
waives notice of acceptance of the Guarantee Agreement and, with respect to its
obligations under Section 5.01, hereby waives presentment, demand for payment,
any right to require a proceeding first against the Guarantee Trustee, Trust or
any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.

                SECTION 5.03. Obligations Not Affected. The obligations,
covenants, agreements and duties of the Guarantor under this Guarantee Agreement
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:

                (a) the release or waiver, by operation of law or otherwise, of
        the performance or observance by the Trust of any express or implied
        agreement, covenant, term or condition relating to the HIGH TIDES to be
        performed or observed by the Trust;

                (b) the extension of time for the payment by the Trust of all or
        any portion of the Distributions (other than any extension of time for
        payment of Distributions that results from the extension of any interest
        payment period on the Debentures as so provided in the Indenture),
        Redemption Price, Liquidation Distribution or any other sums payable
        under the terms of the HIGH TIDES or the extension of time for the
        performance of any other obligation under, arising out of, or in
        connection with, the HIGH TIDES;

                (c) any failure, omission, delay or lack of diligence on the
        part of the Holders to enforce, assert or exercise any right, privilege,
        power or remedy

                                       10
<PAGE>   12
         conferred on the Holders pursuant to the terms of the HIGH TIDES, or
         any action on the part of the Trust granting indulgence or extension of
         any kind;

                (d) the voluntary or involuntary liquidation, dissolution, sale
        of any collateral, receivership, insolvency, bankruptcy, assignment for
        the benefit of creditors, reorganization, arrangement, composition or
        readjustment of debt of, or other similar proceedings affecting, the
        Trust or any of the assets of the Trust;

                (e) any invalidity of, or defect or deficiency in, the HIGH
        TIDES;

                (f) the settlement or compromise of any obligation guaranteed
        hereby or hereby incurred; or

                (g) any other circumstance whatsoever that might otherwise
        constitute a legal or equitable discharge or defense of a guarantor, it
        being the intent of this Section 5.03 that the obligations of the
        Guarantor hereunder shall be absolute and unconditional under any and
        all circumstances.

                There shall be no obligation of the Holders to give notice to,
or obtain the consent of, the Guarantor with respect to the happening of any of
the foregoing.

                SECTION 5.04. Rights of Holders. The Guarantor expressly
acknowledges that: (i) this Guarantee Agreement will be deposited with the
Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee
Trustee has the right to enforce this Guarantee Agreement on behalf of the
Holders; (iii) the Holders of a Majority in liquidation amount of the HIGH TIDES
have the right among themselves, the other Holders, if any, and the Guarantee
Trustee to direct the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee in respect of this Guarantee
Agreement or exercising any trust or power conferred upon the Guarantee Trustee
under this Guarantee Agreement, provided, that, subject to Section 3.1, the
Guarantee Trustee shall have the right to decline to follow any such direction
if the Guarantee Trustee being advised by counsel determines that the action or
proceeding so directed may not lawfully be taken or if the Guarantee Trustee in
good faith by its board of directors or trustees, executive committee, or a
trust committee of directors or trustees and/or Responsible Officers of the
Guarantee Trustee shall determine that the action or proceeding so directed
would involve the Guarantee Trustee in personal liability; and (iv) any Holder
may institute a legal proceeding directly against the Guarantor to enforce,
subject to the subordination provisions hereof, its rights under this Guarantee
Agreement, without first instituting a legal proceeding against the Trust or any
other Person.

                SECTION 5.05. Guarantee of Payment. This Guarantee Agreement
creates a guarantee of payment and not of collection. This Guarantee Agreement
will not be discharged except by payment of the Guarantee Payments in full
(without duplication of amounts theretofore paid by the Trust) or upon
distribution of Debentures to Holders as provided in the Declaration.

                SECTION 5.06. Subrogation. The Guarantor shall be subrogated to
all (if any) rights of the Holders against the Trust in respect of any amounts
paid to the Holders by the Guarantor under this Guarantee Agreement and shall
have the right to waive payment by the Trust pursuant to Section 5.01; provided,
w v that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders. Any amounts paid over to
and

                                       11
<PAGE>   13
not subsequently recovered from the Holders pursuant to any insolvency law shall
be deemed to have been applied by the Holders to the Guarantee Payments.

                SECTION 5.07. Independent Obligations. The Guarantor
acknowledges that its obligations hereunder are independent of the obligations
of the Trust with respect to the HIGH TIDES and that the Guarantor shall
(without duplication of amounts paid by or on behalf of the Trust) be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof,
but subject to Section 6.01 hereof.

                                   ARTICLE VI

                           Covenants and Subordination

                SECTION 6.01. Subordination. This Guarantee Agreement will
constitute an unsecured obligation of the Guarantor and will rank subordinate
and junior in right of payment to all Senior Debt of the Guarantor in accordance
with the terms of Article XII of the Indenture, which terms (including the
definitions of all defined terms used therein) are incorporated herein, mutatis
mutandis, by this reference (it being understood and agreed that each notice
from holders of Senior Debt (or their agent or representative) to the Trustee
under the Indenture shall constitute a notice to the Guarantee Trustee
hereunder.

                SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement
shall rank pate passu with any similar guarantee agreements issued by the
Guarantor on behalf of the holders of trust securities issued by a trust created
by the Guarantor similar to Calpine Capital Trust III.

                                   ARTICLE VII

                                   Termination

                SECTION 7.01. Termination. This Guarantee Agreement shall
terminate and be of no further force and effect upon (i) full payment of the
Redemption Price of all HIGH TIDES, (ii) the distribution of Debentures to the
Holders in exchange for all of the HIGH TIDES, (iii) full payment of the amounts
payable in accordance with the Declaration upon liquidation of the Trust or (iv)
distribution of the Guarantor's common stock to the Holders in respect of the
conversion of all of the HIGH TIDES. Notwithstanding the foregoing, this
Guarantee Agreement will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder must repay any sums paid with respect to
HIGH TIDES or this Guarantee Agreement.

                                  ARTICLE VIII

                                  Miscellaneous

                SECTION 8.01. Successors and Assigns. All guarantees and
agreements contained in this Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the HIGH TIDES then outstanding. Except
in connection with a consolidation, merger or sale involving the Guarantor that
is permitted under Article VIII of the Indenture and pursuant to which the
assignee agrees in writing to perform the Guarantor's obligations hereunder, the
Guarantor shall not assign its obligations hereunder.

                                       12
<PAGE>   14
                SECTION 8.02. Amendments. Except with respect to any changes
which do not adversely affect the rights of the Holders in any material respect
(in which case no consent of the Holders will be required), this Guarantee
Agreement may only be amended with the prior approval of the Holders of not less
than a Majority in liquidation amount of the HIGH TIDES. The provisions of
Article XII of the Declaration concerning meetings or consents of the Holders
shall apply to the giving of such approval.

                SECTION 8.03. Notices. Any notice, request or other
communication required or permitted to be given hereunder shall be in writing,
duly signed by the party giving such notice, and delivered, telecopied
(confirmed by delivery of the original) or mailed by first class mail as
follows:

                                       13
<PAGE>   15
                (a) if given to the Guarantor, to the address set forth below or
        such other address, facsimile number or to the attention of such other
        Person as the Guarantor may give notice to the Holders and the Guarantee
        Trustee:

                         Calpine Corporation
                         50 West San Fernando Street
                         San Jose, California 95113

                         Telephone: (408) 995-5115
                         Facsimile No.: (408) 995-0505
                         Attention: Lisa M. Bodensteiner, Esq.

                (b) if given to the Trust, in care of the Guarantor, at the
        Trust's (and the Guarantee Trustee's) address set forth below or such
        other address as the Trust may, at the Trusts's direction, give notice
        to the Holders and the Guarantee Trustee:

                         Calpine Capital Trust III
                         c/o Calpine Corporation
                         50 West San Fernando Street
                         San Jose, California 95113

                         Telephone: (408) 995-5115
                         Facsimile No.: (408) 995-0505
                         Attention: Lisa M. Bodensteiner, Esq.

                         with a copy to:

                         Wilmington Trust Company
                         Rodney Square North
                         1100 North Market Street
                         Wilmington, Delaware 19890
                         Attention: Corporate Trust Administration

                (c) if given to the Guarantee Trustee, at the Guarantee
        Trustee's address set forth below or such other address as the Guarantee
        Trustee may give notice to the Guarantor and the Holders:

                         Wilmington Trust Company
                         Rodney Square North
                         1100 North Market Street
                         Wilmington, Delaware 19890
                         Attention: Corporate Trust Administration

                (d) if given to any Holder, at the address set forth on the
        books and records of the Trust.

                All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such. notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

                SECTION 8.04. Benefit. This Guarantee Agreement is solely for
the benefit of the Holders (subject to the benefits inuring to the holders of
Senior Debt

                                       14
<PAGE>   16
pursuant to the subordination provisions hereof) and is not separately
transferable from the HIGH TIDES.

                SECTION 8.05. Interpretation. In this Guarantee Agreement,
unless the context otherwise requires:

                (a) capitalized terms used in this Guarantee Agreement but not
        defined in the preamble hereto have the respective meanings assigned to
        them in Section 1.01;

                (b) a term defined anywhere in this Guarantee Agreement has the
        same meaning throughout;

                (c) all references to "the Guarantee Agreement" or "this
        Guarantee Agreement" are to this Guarantee Agreement as modified,
        supplemented or amended from time to time;

                (d) all references in this Guarantee Agreement to Articles and
        Sections are to Articles and Sections of this Guarantee Agreement unless
        otherwise specified;

                (e) a term defined in the Trust Indenture Act has the same
        meaning when used in this Guarantee Agreement unless otherwise defined
        in this Guarantee Agreement or unless the context otherwise requires;

                (f) a reference to the singular includes the plural and vice
        versa; and

                (g) the masculine, feminine or neuter genders used herein shall
        include the masculine, feminine and neuter genders.

                SECTION 8.06 Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

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

                            [SIGNATURE PAGE FOLLOWS)

                                       15
<PAGE>   17
                THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.

                                       Calpine Corporation

                                       by /s/ ANN B. CURTIS
                                         ---------------------------------------
                                         Name: Ann B. Curtis
                                         Title: Executive Vice President and
                                                Chief Financial Officer

                                       Wilmington Trust Company, as Guarantee
                                       Trustee,

                                       by
                                         ---------------------------------------
                                         Name:
                                         Title:

<PAGE>   18
                THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.

                                       Calpine Corporation

                                       by
                                         ---------------------------------------
                                         Name:
                                         Title:

                                       Wilmington Trust Company, as Guarantee
                                       Trustee,

                                       by /s/ JAMES D. NESCI
                                         ---------------------------------------
                                         Name: James D. Nesci
                                         Title: Authorized SignerSTOCK PURCHASE AGREEMENT

                                  by and among

                            PHILADELPHIA FOODS, INC.

                                as the "Company"

                     LIBERTY PROCESSING & DISTRIBUTION, INC.

                                   as "Buyer"

                                       and

                                   MARVIN RAAB

                                   as "Seller"

                         Dated as of September 15, 2000

===============================================================================
<PAGE>
                            STOCK PURCHASE AGREEMENT

      This Stock Purchase  Agreement (this  "Agreement"),  dated as of September
15, 2000, is by and among LIBERTY  PROCESSING &  DISTRIBUTION,  INC., a Delaware
corporation  ("Buyer"),  PHILADELPHIA FOODS, INC., a New Jersey corporation (the
"Company"), and MARVIN RAAB, as the sole stockholder of the Company ( "Seller").

                                    RECITALS

      A.    Seller owns all of the issued and  outstanding  capital  stock (the
"Stock") of the Company.

      B. Buyer  desires to purchase from Seller,  and Seller  desires to sell to
Buyer, all of the Stock as of July 1, 2000,  subject to the terms and conditions
of this Agreement.

                                    AGREEMENT

      NOW,  THEREFORE,  in  consideration  of the mutual  covenants and promises
contained herein and for other good and valuable  consideration  the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

      1.1   Defined Terms.  As used herein, the terms below shall have the
following meanings:

      "Accounts  Payable"  means the  accounts  payable of the  Company  and the
Subsidiaries,  including  miscellaneous  and  accrued  expenses  incurred in the
ordinary course of business of such companies as of the Effective Closing Date.

      "Accounts  Receivable"  shall mean the accounts  receivable of the Company
and the Subsidiaries as of the Effective Closing Date.

      "Affiliate"  shall mean any person or entity that controls  another person
or entity,  that  another  person or entity  controls,  or that is under  common
control with another person or entity.  For purposes of the preceding  sentence,
the term "control" means the power,  direct or indirect,  to direct or cause the
direction of the  management  and policies of a person or entity  through voting
securities, contract or otherwise.

      "Ancillary  Documents"  shall  mean the Lease  Agreements,  the Note,  the
Security Agreements,  the Pledge Agreement, the Guarantees and the documents and
instruments  delivered  by the  respective  parties at the  Closing  pursuant to
Article III hereof.

      "Assets" shall mean all properties, assets and rights of any kind, whether
tangible or intangible, real or personal, (a) owned by the Company or any of its
Subsidiaries  and (b) in which the  Company or any of its  Subsidiaries  has any
interest  whatsoever,  other than the  Seller's  office  equipment  indicated on
Schedule 4.6(a).

      "Benefit  Arrangement"  shall  mean  any  employment,  consulting,  bonus,
severance  or other  similar  contract,  arrangement  or policy  and each  plan,
arrangement  (written or oral),  program,  agreement or commitment providing for
insurance   coverage   (including,    without   limitation,   any   self-insured
arrangements),   workers'   compensation,   disability  benefits,   supplemental
unemployment or retirement  benefits,  vacation benefits,  retirement  benefits,
life, health or accident benefits (including, without limitation, any "voluntary
employees' beneficiary  association" as defined in Section 501(c)(9) of the Code
providing  for  the  same  or  other  benefits)  or for  deferred  compensation,
profit-sharing   bonuses,   stock  options,  stock  appreciation  rights,  stock
purchases or other forms of incentive compensation or post-retirement insurance,
compensation  or  benefits  that  (a) is not a  Welfare  Plan,  Pension  Plan or
Multiemployer Plan, (b) is entered into, maintained,  contributed to or required
to be contributed to, as the case may be, by the Company,  any Subsidiary of the
Company or any ERISA  Affiliate,  or under which the Company,  any Subsidiary of
the Company or any ERISA  Affiliate  may incur any  liability and (c) covers any
employee or former employee of the Company, any Subsidiary of the Company or any
ERISA Affiliate.

      "Books and Records" shall mean all books, records,  lists, ledgers, files,
reports,  plans,  drawings and operating records of every kind pertaining to the
Company and its  Subsidiaries  or the Assets,  business,  customers,  suppliers,
distributors  or  Personnel  of the  Company  and its  Subsidiaries,  including,
without  limitation,  (a) all  disk  or tape  files,  printouts,  runs or  other
computer-prepared  information and all computer programs required to access, and
the equipment containing, all such computer-based information,  (b) all product,
business and marketing plans, (c) all environmental  control records and (d) all
sales, maintenance and production records.

      "Break-Up  Fee" shall  mean the sum of Five  Hundred  Thousand  ($500,000)
Dollars, which shall be due and payable in the event that the Demand Note is not
paid when due. The  Break-Up Fee shall be secured by a letter of credit;  if the
letter of credit is not in place  within  five (5)  business  days from the date
hereof,  the  Break-Up  Fee shall be  secured  by the  accounts  receivable  and
inventory owned by LGHI and LFG.

      "Business" shall mean a processor and distributor of kosher meat,  poultry
and groceries.

      "Closing Cash Balance" shall mean the cash balance in the Company's Hudson
United  Bank and Dean  Witter  account  as of the close of  business  on the day
preceding the Closing Date, as certified by said institutions  immediately prior
to Closing.

      "Closing  Date"  shall mean the date that is sixty (60) days from the date
hereof,  or, if the parties hereto shall  mutually agree upon a different  date,
the date upon which they shall have mutually  agreed in writing.  If the parties
do not agree as to a  different  date,  time  shall be of the  essence as to the
Closing Date.

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

      "Contract" shall mean any agreement, contract, lease, note, loan, evidence
of indebtedness,  purchase order,  letter of credit or reimbursement  agreement,
franchise agreement,  undertaking,  license, covenant not to compete, employment
agreement, license, instrument, obligation, commitment, purchase and sales order
and other executory commitment, whether oral or written, express or implied, (a)
to which the Company or any of its  Subsidiaries  is a party or (b) by which the
Company, any of its Subsidiaries or any of the Assets are bound or affected.

      "Deposit Note" shall mean the  Promissory  Note dated hereof in the amount
of the Cash  Payment,  which shall be due and payable no later than 60 days from
the date hereof.

      "EBITDA"  shall mean the Combined  Recast EBITDA  attached as Exhibit A in
the amount of $1,419,000.

      "Effective Closing Date" shall mean July 1, 2000.

      "Employee Plans" shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.

      "Encumbrance"  shall  mean  any  claim,  lien,  pledge,   option,  charge,
easement,   security   interest,   deed  of   trust,   mortgage,   right-of-way,
encroachment,   building  or  use  restriction,   conditional  sales  agreement,
encumbrance or other right of third  parties,  whether  voluntarily  incurred or
arising by operation of law, and includes,  without limitation, any agreement to
give any of the foregoing in the future,  and any contingent sale or other title
retention agreement or lease in the nature thereof.

      "Environmental Claims" shall mean all accusations, allegations, notices of
violation,  liens,  claims,  demands,  suits or causes of action for any damage,
including,  without  limitation,  personal injury,  property damage  (including,
without limitation, any depreciation or diminution of property values), lost use
of property or consequential damages,  arising,  directly or indirectly,  out of
Environmental  Conditions or Environmental Laws. By way of example only (and not
by way  of  limitation),  Environmental  Claims  include  (i)  violations  of or
obligations  under any contract related to  Environmental  Laws or Environmental
Conditions  between the Company and any other person,  (ii) actual or threatened
damages  to  natural  resources,  (iii)  claims for  nuisance  or its  statutory
equivalent, (iv) claims for the recovery of response costs, or administrative or
judicial  orders  directing  the  performance  of  investigations,  responses or
remedial  actions under any  Environmental  Laws, (v)  requirements to implement
"corrective  action"  pursuant  to any order or permit  issued  pursuant  to the
Resource  Conservation  and  Recovery  Act,  as  amended  ("RCRA"),  or  similar
provisions of applicable state law, (vi) claims related to Environmental Laws or
Environmental  Conditions  for  restitution,  contribution  or indemnity,  (vii)
fines,  penalties or liens of any kind against property related to Environmental
Laws or Environmental Conditions, (viii) claims related to Environmental Laws or
Environmental  Conditions  for  injunctive  relief or other orders or notices of
violation from federal,  state or local agencies or courts, and (ix) with regard
to any  present or former  employees,  claims  relating to exposure to or injury
from Environmental Conditions.

      "Environmental  Conditions"  shall  mean  the  state  of the  environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water,  any present or potential  drinking  water supply,  subsurface  strata or
ambient  air,  relating  to or arising  out of (i) the use,  handling,  storage,
treatment, recycling,  generation,  transportation,  release, spilling, leaking,
pumping,  pouring,  emptying,   discharging,   injecting,   escaping,  leaching,
disposal,  dumping or threatened release of Hazardous  Substances by the Company
or any of its Subsidiaries or their  predecessors or successors in interest,  or
by its agents, representatives, employees or independent contractors when acting
in such capacity on behalf of the Company or any of its  Subsidiaries  or (ii) a
violation of Environmental  Laws. With respect to Environmental  Claims by third
parties,  Environmental  Conditions  also  include  the  exposure  of persons to
Hazardous Substances at the work place or the exposure of persons or property to
Hazardous  Substances  migrating from or otherwise  emanating from or located on
any Facilities or Former Properties.

      "Environmental Laws" shall mean all applicable federal,  state,  district,
local and foreign laws, all rules or regulations promulgated thereunder, and all
orders, consent orders,  judgments,  notices,  permits or demand letters issued,
promulgated or entered pursuant thereto,  in each case, relating to pollution or
protection  of the  environment  (including,  without  limitation,  ambient air,
surface  water,  ground water,  land surface or subsurface  strata),  including,
without  limitation,  (i) laws  relating to emissions,  discharges,  releases or
threatened  releases of Hazardous  Substances into the environment and (ii) laws
relating   to   the   identification,   generation,   manufacture,   processing,
distribution,  use, treatment,  storage, disposal,  recovery, transport or other
handling of Hazardous  Substances.  Environmental  Laws shall  include,  without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980,  as  amended  ("CERCLA"),  the Toxic  Substances  Control  Act,  as
amended, the Hazardous Materials Transportation Act, as amended, RCRA, the Clean
Water Act, as amended,  the Safe Drinking  Water Act, as amended,  the Clean Air
Act, as amended, the Atomic Energy Act of 1954, as amended, and the Occupational
Safety and Health Act, as amended.

      "Environmental  Reports"  shall  mean  (i) any and  all  material  written
reports and analyses  prepared by any person employed by Seller,  the Company or
any of its Subsidiaries and (ii) any and all other written reports and analyses,
in each case that are in the possession or control of Seller, the Company or any
of its Subsidiaries  with regard to (x) any  Environmental  Conditions in, on or
about the Facilities or the Former  Properties or (y) compliance by Seller,  the
Company and each of its Subsidiaries with  Environmental Laws with regard to the
past or present business and operations of the Company or any of the Assets.

      "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.

      "ERISA  Affiliate"  shall mean any entity that is (or at any relevant time
was) a member  of a  "controlled  group of  corporations"  with,  under  "common
control"  with, a member of an  "affiliated  service  group" with,  or otherwise
required to be aggregated  with, the Company or any of its  Subsidiaries  as set
forth in Section 414(b), (c), (m) or (o) of the Code.

      "Equity Securities" shall mean (i) shares of capital stock or other equity
securities,  (ii) subscriptions,  calls, warrants, options or commitments of any
kind or character  (including  pre-emptive rights) relating to, or entitling any
person or entity to purchase or otherwise  acquire,  any capital  stock or other
equity  securities  and (iii)  securities  convertible  into or  exercisable  or
exchangeable for shares of capital stock or other equity securities.

      "Facilities" shall mean the real property and related facilities leased by
the  Company  or  any  of  its  Subsidiaries,  including  all  plants,  offices,
manufacturing  facilities,  stores, warehouses and administration buildings, the
addresses of which are indicated on Schedule 4.6(b)(ii).

      "Financial  Statements"  shall mean the  consolidated  tax  returns of the
Company and its  Subsidiaries  as of December 31, 1996,  1997, 1998 and 1999 and
the Combined Recast EBITDA.

      "First Note" shall mean the Secured Promissory Note dated the Closing Date
in the  original  principal  amount of  $3,000,000  made by Buyer and payable to
Seller based on a 15-year payout with monthly  payments and a 10-year balloon on
maturity in the form of Exhibit B.

      "Fixtures  and  Equipment"  shall  mean  all of the  furniture,  fixtures,
furnishings,  machinery, equipment, spare parts, supplies, appliances, vehicles,
leasehold improvements, structures, related capitalized items and other tangible
personal  property  in which  the  Company  or any of its  Subsidiaries  has any
interest.

      "Former  Properties"  shall  mean  all  plants,   offices,   manufacturing
facilities,  stores, warehouses,  administration buildings and all real property
and  related  facilities  owned,  leased  or  operated  by  the  Company  or any
Subsidiary  at any time  prior to the  Closing  Date but not  owned,  leased  or
operated by the Company or any Subsidiary subsequent to the Closing Date.

      "Guarantees"  shall mean the guarantees of the  obligations of Buyer under
the First Note and Second Note dated the Closing Date and executed by LGHI,  the
Buyer, LFG, the Company and the Subsidiaries.

      "Hazardous Substances" shall mean all pollutants, contaminants, chemicals,
industrial materials, wastes, and any other carcinogenic,  ignitable, corrosive,
reactive,  toxic or otherwise hazardous substances or materials (whether solids,
liquids or gases), in each case,  subject to regulation,  control or remediation
under Environmental Laws. By way of example only, the term Hazardous  Substances
includes certain forms of petroleum, urea formaldehyde, flammable, explosive and
radioactive materials,  PCBs, pesticides,  herbicides,  asbestos,  sludge, slag,
acids, metals, solvents and waste waters.

      "Insurance  Policies" shall mean the insurance policies listed on Schedule
4.19.

      "Inventory"  shall  mean  (a) all  stock  in  trade,  merchandise,  goods,
supplies and other products owned by the Company or any of its  Subsidiaries for
resale in the ordinary  course of business to its  customers or otherwise  under
the control of the Company or any of its Subsidiaries or carried on the books of
the Company or any of its  Subsidiaries  for the exclusive use by the Company or
any of its  Subsidiaries  and  (b) all of the raw  materials,  work in  process,
including without  limitation,  inventory in transit and inventory ordered prior
to Closing,  finished goods, wrapping,  supply and packaging items,  promotional
materials and similar items of the Company or any of its Subsidiaries,  wherever
located.

      "Lease  Agreements" shall mean (i) the lease agreement between Raab Family
Partnership,  L.P.  and the  Company  attached  hereto as Exhibit C and (ii) the
lease agreement between Raab Family  Partnership,  L.P. and the Company attached
hereto as Exhibit D.

      "LFG" shall mean Liberty  Food Group,  LLC, a Delaware  limited  liability
company.

      "LGHI" shall mean Liberty Group Holdings, Inc. a Delaware corporation.

      "Losses" shall mean any costs or expenses (including,  without limitation,
reasonable  attorneys'  and other  professional  fees,  investigation  costs and
remediation costs),  judgments,  demands, fees, fines, losses (including but not
limited to losses  resulting from  diminution of value),  liabilities,  actions,
claims,  damages  (including  incidental,  consequential and punitive  damages),
settlements, interest, penalties and assessments of any nature.

      "Material  Adverse Effect,"  "Material Adverse Change" or a similar phrase
shall mean,  with respect to any Person,  any material  adverse change or effect
with respect to: (a) the  business,  operations,  prospects,  assets  (including
intangible assets), liabilities,  condition (financial or otherwise), results of
operations or cash flow of such Person and its Subsidiaries, taken as a whole or
(b) the right or ability of such Person or any of its Subsidiaries to consummate
any of the transactions contemplated hereby to be consummated by such Person.

      "Multiemployer  Plan" shall mean any  "multiemployer  plan," as defined in
Section  4001(a)(3) or 3(37) of ERISA,  that (a) the Company,  any Subsidiary of
the Company or any ERISA Affiliate maintains, administers,  contributes to or is
required  to  contribute   to,  or,  after   September  25,  1980,   maintained,
administered,  contributed  to or was required to contribute  to, or under which
the Company,  any Subsidiary of the Company or any ERISA Affiliate may incur any
liability  and (b) covers any employee or former  employee of the  Company,  any
Subsidiary of the Company or any ERISA Affiliate.

      "Notes" shall mean the First Note and Second Note.

      "Pension Plan" shall mean any "employee  pension  benefit plan" as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan) that (a) the Company,
any  Subsidiary of the Company or any ERISA  Affiliate  maintains,  administers,
contributes  to or is required to contribute to, or, within the five years prior
to the Closing ate, maintained, administered,  contributed to or was required to
contribute to, or under which the Company,  any Subsidiary of the Company or any
ERISA  Affiliate  may incur any  liability and (b) covers any employee or former
employee of the Company, any Subsidiary of the Company or any ERISA Affiliate.

      "Permits"  shall  mean  all  licenses,  permits,  franchises,   approvals,
authorizations, consents or orders of, or filings with, or notifications to, any
governmental or regulatory authority,  whether foreign, federal, state or local,
or any other person,  necessary or desirable for the past or present conduct of,
or relating to the  ownership,  use,  occupancy  or operation of the business or
Assets of the Company or any of its Subsidiaries.

      "Permitted  Encumbrances" shall mean (a) statutory liens for Taxes not yet
due  and  payable,  (b)  statutory  liens  of  landlords,   liens  of  carriers,
warehousemen,  mechanics  and  materialmen  incurred in the  ordinary  course of
business,  consistent with past practice,  for sums not yet due and payable, (c)
liens incurred or deposits made in the ordinary  course of business,  consistent
with past  practice,  in  connection  with workers'  compensation,  unemployment
insurance  and other types of social  security or to secure the  performance  of
tenders,   statutory  obligations,   surety  and  appeal  bonds,  bids,  leases,
government  contracts,  performance  and  return  of  money  bonds  and  similar
obligations  and (d) purchase  money liens  incurred in the  ordinary  course of
business, consistent with past practice.

      "Person"   means  any   individual,   corporation,   partnership,   trust,
association, governmental entity or other entity of any kind whatsoever.

      "Personnel"  shall  mean,  with  respect  to any  Person,  the  directors,
officers and employees of such Person.

      "PF Note" shall mean the note  receivable  from Perry Frank to the Company
in the amount of $100,000.

      "Pledge  Agreement" shall mean the Pledge Agreement dated the Closing Date
executed by the Buyer in the form of Exhibit E attached hereto.

      "Raab-Levitt"  means  Raab-Levitt,  Inc., a New Jersey  corporation and a
wholly-owned Subsidiary directly owned by the Company.

      "RCRA"   shall  have  the   meaning  set  forth  in  the   definition   of
"Environmental Claims" in this Section 1.1.

      "Representative"  shall  mean,  with  respect  to any  Person,  any agent,
consultant or other representative of such Person.

      "Required  Cash Balance"  shall mean the sum of all checks which have been
written by or against the account of the Company or its Subsidiaries  which have
not cleared prior to the Closing Date.

      "Second  Note"  shall mean the Secured  Promissory  Note dated the Closing
Date in the original principal amount of $3,150,000,  as adjusted, made by Buyer
and payable to Seller with monthly  interest  payments with a 10-year balloon on
maturity in the form of Exhibit F. The original  principal  amount of the Second
Note shall be adjusted in accordance with Section 2.1(c) below.

      "Security Agreements" shall mean the Security Agreements dated the Closing
Date executed by the Company, Raab-Levitt, SJL, LFG and the Buyer in the form of
Exhibit G attached hereto.

      "Seller" shall have the meaning set forth in the introductory paragraph of
this Agreement.

      "SJL"  shall  mean  South  Jersey  Live  Poultry,   Inc.,  a  New  Jersey
corporation and a wholly-owned Subsidiary directly owned by the Company.

      "Subsidiary"  shall mean, with respect to any Person, (i) any corporation,
limited  liability  company,  association or other business entity of which more
than 50% of the total voting power of shares of capital stock entitled  (without
regard  to the  occurrence  of any  contingency)  to  vote  in the  election  of
directors,  managers  or  trustees  thereof is at the time owned or  controlled,
directly or indirectly,  by such Person or one or more of the other Subsidiaries
of that Person (or a combination  thereof) and (ii) any partnership (a) the sole
general  partner or the  managing  general  partner of which is such Person or a
Subsidiary  of such  Person or (b) the only  general  partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).

      "Tax(es)"  shall  mean all  taxes,  estimated  taxes,  withholding  taxes,
assessments,  levies,  imposts, fees and other charges,  including any interest,
penalties,  additions to tax or  additional  amounts that may become  payable in
respect  thereof,  imposed  by any  foreign,  federal,  state,  local  or  other
government or taxing authority, including, without limitation, all income taxes,
payroll and employee withholding taxes, unemployment insurance, social security,
sales and use taxes,  value added taxes,  excise taxes,  franchise taxes,  gross
receipts taxes, occupation taxes, real and personal property taxes, stamp taxes,
transfer taxes,  real property transfer gains taxes,  workers'  compensation and
other obligations of the same or of a similar nature.

      "Tax  Refund"  shall  mean the  $24,761.77  tax refund  from the  Internal
Revenue Service due to the Company and state tax refunds  totaling $4,700 due to
the Company.

      "Welfare Plan" shall mean any "employee  welfare  benefit plan" as defined
in Section 3(1) of ERISA that (a) the Company,  any Subsidiary of the Company or
any ERISA  Affiliate  maintains,  administers,  contributes to or is required to
contribute to, or under which the Company,  any Subsidiary of the Company or any
ERISA  Affiliate  may incur any  liability and (b) covers any employee or former
employee of the Company, any Subsidiary of the Company or any ERISA Affiliate.

      1.2 Other Defined Terms.  In addition to the terms defined in the Recitals
to this  Agreement and Section 1.1, the following  terms shall have the meanings
defined for such terms in the Sections set forth below:

      Term                                                  Section
      ----                                                  -------
      "Actions".............................................4.12
      "Affiliated Groups"...................................4.18
      "Buyer Indemnitee"....................................9.3
      "Cash Payment"........................................2.1(b)
      "Closing".............................................3.1
      "Disclosure Schedule".................................Article IV Preamble
      "HSR Act".............................................4.25
      "Indemnified Party"...................................9.5(a)
      "Indemnifying Party"..................................9.5(a)
      "Leased Property".....................................4.6(ii)
      "Proposed Acquisition Transaction"....................6.5(a)
      "Purchase Price"......................................2.1(b)
      "Seller Indemnitee"...................................9.4
      "Stock"...............................................Recital A
      "Tax Returns".........................................4.18

                                   ARTICLE II

                         PURCHASE AND SALE OF THE STOCK

      2.1   Purchase and Sale of the Stock.

      (a)  Transfer of the Stock.  Upon the terms and subject to the  conditions
contained herein, on the Closing Date, but effective as of the Effective Closing
Date,  Seller shall sell,  convey,  transfer,  assign and deliver to Buyer,  and
Buyer shall purchase and accept from Seller, all of the Stock, free and clear of
any and all  Encumbrances.  Seller will pay all stock transfer taxes,  recording
fees and other sales, transfer,  use, purchase,  stamp or similar taxes, if any,
resulting from the transactions contemplated hereby.

      (b)  Consideration  for the  Stock.  Upon the  terms  and  subject  to the
conditions  contained herein, as consideration for the purchase of the Stock, on
the Closing Date Buyer shall (A) pay to Seller (i) a cash payment of  $2,000,000
(the "Cash  Payment") by payment by the Buyer of the Deposit Note,  (ii) the Tax
Refund,  which shall be submitted to the Seller only upon receipt thereof by the
Company, (iii) the PF Note, and (iv) the Company's Closing Cash Balance less the
Required  Cash Balance and (B) deliver to Seller the Notes (each of the items in
(A) and (B) shall hereinafter be referred to as the "Purchase Price").

      (c) Purchase Price  Adjustments.  (i) If the Buyer  determines that (A)(i)
the EBITDA as of December  31, 1999 is less than  $1,219,000,  (ii) the Accounts
Receivable is less than  $2,100,000  (said amount being  exclusive of any contra
accounts),  and/or (iii) the Accounts  Payable minus the $130,000 owed by SJL is
more  than  $880,000  and/or  (B) the  difference  between  (y) the  collectible
accounts  receivable  of the Company and the  Subsidiaries  and (z) the accounts
payable of the Company and the  Subsidiaries  for the period  commencing  on the
Effective  Closing Date through the business date which is immediately  prior to
the Closing Date shall not be less than  $1,000,000,  the Buyer shall notify the
Seller  thereof  prior to the  Closing.  If the Seller  agrees  with the Buyer's
determination,  then the  principal  amount of the Second  Note shall be reduced
dollar for dollar by such amount; if the differential between the amounts of (y)
and (z) is greater  than  $1,000,000,  the  principal  amount of the Second Note
shall be increased by said amount,  provided,  however, that notwithstanding the
foregoing,  (a) if the EBITDA as of December  31, 1999 is less than  $1,219,000,
the  decrease  in  principal  amount of the Second  Note shall not be dollar for
dollar but shall be the amount less than $1,219,000  multiplied by 4 and (b) the
principal  amount of the Second Note shall not be reduced  more than  $1,000,000
even if the  adjustments  provided  in this  Section  exceed  $1,000,000  in the
aggregate. In the event that the Buyer fails to notify the Seller as provided by
this Section  2.1(c) (i) then the principal  amount of the Second Note shall not
change. If the Buyer and Seller cannot agree as to the purchase price adjustment
provided  herein,  such  disagreement  shall not be a reason to  terminate  this
Agreement and not close the  transaction,  but the dispute shall be submitted to
arbitration pursuant to Section 10.14.

(ii) If the Company  determines  that the taxable  income of the Company for the
period  commencing  on January 1, 2000 and ending on  December  31, 2000 is less
than $780,000, the principal amount of the Second Note shall be increased by the
dollar amount of such excess amount  multiplied by the effective Tax rate of the
Company  and  decreased  by such  amount  if the  taxable  income  is more  than
$780,000.  The  Seller  shall have the right,  at his own cost and  expense,  to
inspect the books and records of the Company to determine  the amount of taxable
income of the  Company  and its  Subsidiaries  for said  period as  provided  in
Section 9.1 below.

                                   ARTICLE III

                                     CLOSING

      3.1 Closing.  Upon the terms and conditions set forth herein,  and subject
to Section  10.1,  the  closing of the  transactions  contemplated  herein  (the
"Closing")  shall be held at 10:00 a.m.  local time on the  Closing  Date at the
offices of the  Company,  or on such other  date or at such  other  location  as
mutually agreed by the parties hereto.

      3.2  Deliveries  at Closing.  To effect the sale and purchase of the Stock
referred to in Section 2.1(a) and the delivery of the Purchase Price referred to
in Section 2.1(b), at the Closing: (a) Seller shall deliver to Buyer the various
certificates,  instruments  and documents  referred to in Section 8.7 and cancel
the Demand  Note;  (b) Buyer shall  deliver to Seller the various  certificates,
instruments  and documents  referred to in Section 7.3; (c) Seller shall deliver
to Buyer stock certificates representing all of the Stock, free and clear of any
and all Encumbrances, duly endorsed in blank or accompanied by stock powers duly
executed  in  blank,  in  proper  form for  transfer,  together  with any  other
documents and  instruments,  as shall be necessary or appropriate to warrant and
vest in Buyer good and marketable right, title and interest in and to the Stock;
and (d) Buyer shall deliver to Seller the Purchase Price by (i)  transferring to
Seller the  aggregate  amount of the Cash  Payment and the Closing  Cash Balance
less the amount of the Required Cash Balance,  and (ii) delivering to Seller the
Notes, the Security Agreements and the Pledge Agreement.

      3.3 Other  Closing  Matters.  Each of the  parties  shall  take such other
actions  required  hereby to be performed by it prior to or on the Closing Date,
including,  without limitation,  satisfying the conditions set forth in Articles
VII and VIII. In addition,  on or prior to the Closing  Date,  Seller shall take
all additional steps as may be necessary or desirable to put Buyer in possession
of, and in operational control of, the Assets.

                                   ARTICLE IV

                   REPRESENTATIONS AND WARRANTIES OF SELLER

      As an  inducement  to Buyer to enter into this  Agreement,  Seller  hereby
makes,  as of the  date  hereof  and  as of  the  Closing  Date,  the  following
representations  and  warranties  to Buyer,  except as otherwise  set forth in a
written disclosure  schedule (the "Disclosure  Schedule") executed by Seller and
delivered to Buyer prior to the date hereof, a copy of which is attached hereto,
that sets forth the exceptions to the representations  and warranties  contained
in this Article IV and certain other  information  called for by this  Agreement
(unless  otherwise  specified,  each reference in this Agreement to any numbered
schedule  is a  reference  to the  numbered  schedule  that is  included  in the
Disclosure Schedule):

      4.1   Ownership of the Stock; Authorization of Seller.
            ------------------------------------------------

      (a)  Ownership.  Seller owns of record and  beneficially  1,000  shares of
Stock, representing all of the issued and outstanding shares of capital stock of
the Company,  free and clear of any and all  Encumbrances.  Upon consummation of
the  transactions  provided for in this  Agreement in accordance  with the terms
hereof,  Buyer will be the owner of such shares of Stock,  free and clear of any
and all Encumbrances.

      (b)  Authorization.  Seller is a natural person over eighteen years of age
and has all  necessary  right,  power,  capacity  and  authority  to execute and
deliver this  Agreement and the Ancillary  Documents to which he is a party,  to
consummate the transactions  contemplated  hereby and thereby and to perform his
obligations hereunder and thereunder,  and no other action on the part of Seller
is necessary to  authorize  the  execution,  delivery  and  performance  of this
Agreement  or  any  such  Ancillary   Document  and  the   consummation  of  the
transactions  contemplated hereby and thereby.  This Agreement and the Ancillary
Documents  to which Seller is a party have been duly  executed and  delivered by
Seller and are valid and  binding  obligations  of Seller,  enforceable  against
Seller in  accordance  with their  respective  terms  (except to the extent that
enforcement   may  be  affected  by   applicable   bankruptcy,   reorganization,
insolvency,  fraudulent  conveyance and similar laws affecting creditors' rights
and  remedies  generally  and by general  principles  of equity,  regardless  of
whether enforcement is sought at law or in equity).

      (c) Except as set forth on Schedule 4.1, no permits, approvals or consents
of or notifications  to (i) any governmental  entities or (ii) any other persons
or entities  are  necessary  in  connection  with the  execution,  delivery  and
performance  by Seller of this  Agreement  and any Ancillary  Documents,  or the
consummation by Seller of the transactions contemplated hereby and thereby.

      4.2   Organization; Capitalization of the Company.

      (a) Organization.  The Company is duly organized,  validly existing and in
good  standing  under the laws of the State of New  Jersey,  has full  corporate
power and authority to conduct its Business as it is now being  conducted and to
own, operate and lease the Assets.  The Company is duly qualified to do business
as a foreign  corporation and is in good standing in each  jurisdiction in which
such  qualification is necessary under applicable law as a result of the conduct
of its business or the ownership of its properties.  Each  jurisdiction in which
the Company is  qualified to do business as a foreign  corporation  is listed on
Schedule  4.2(a),  and the  Company  does not own or lease  property or have any
employees in any jurisdiction  other than its jurisdiction of incorporation  and
such jurisdictions listed on Schedule 4.2(a). The Company has delivered to Buyer
true, correct and complete copies of the Certificate of Incorporation (certified
by the  Secretary  of  State  of the  state  of its  incorporation)  and  Bylaws
(certified  by an officer or  director  of the  Company) of the Company (in each
case,  as amended to date).  The Company is not in default under or in violation
of any provision of its Certificate of Incorporation or Bylaws. The minute books
of the Company  contain the complete  and correct  copies of the minutes of each
meeting and each action by written  consent of the Company's Board of Directors,
committees  thereof or shareholders and the stock ledger of the Company contains
a complete and correct record of all issuances and transfers of capital stock of
the Company.  Schedule 4.2(a) contains a complete and correct list of all of the
officers and directors of the Company and each Subsidiary.

      (b) Capitalization. The Company's authorized capital stock consists solely
of 5,000 shares of Common Stock,  no par value, of which 1,000 shares are issued
and outstanding.  All of such  outstanding  shares have been duly authorized and
are validly issued and outstanding,  fully paid and non-assessable,  were issued
and sold  pursuant  to,  and  within  the  limitations  (if any)  contained  in,
appropriate and effective consents of each governmental  authority from whom any
such consent was required and were not issued in violation of any  preemptive or
other similar  rights.  There are no (i)  outstanding  Equity  Securities of the
Company or (ii)  commitments or obligations of any kind or character for (A) the
issuance of Equity  Securities of the Company or (B) the repurchase,  redemption
or other acquisition of any Equity Securities of the Company.

      (c)   Voting   Trusts;   Proxies;   Etc.   There   are   no   shareholder
agreements,  voting trusts,  proxies or other agreements or understandings with
respect to or concerning the Equity Securities of the Company.

      4.3  Authorization.  The Company  has all  necessary  corporate  power and
authority  to, and has taken all  corporate  action  necessary  to,  execute and
deliver this  Agreement and the Ancillary  Documents to which it is a party,  to
consummate the transactions  contemplated  hereby and thereby and to perform its
obligations hereunder and thereunder,  and no other corporate proceedings on the
part of the Company are  necessary  to  authorize  the  execution,  delivery and
performance  of  this  Agreement  or  any  such  Ancillary  Document,   and  the
consummation of the transactions contemplated hereby and thereby. This Agreement
and the  Ancillary  Documents to which it is a party have been duly executed and
delivered by the Company and are valid and binding  obligations  of the Company,
enforceable  against  the  Company in  accordance  with their  respective  terms
(except to the extent that enforcement may be affected by applicable bankruptcy,
reorganization,  insolvency,  fraudulent  conveyance  and similar laws affecting
creditors'  rights and remedies  generally and by general  principles of equity,
regardless of whether enforcement is sought at law or in equity).  Except as set
forth on Schedule 4.3, no permits,  approvals or consents of or notifications to
(i) any  governmental  entities  or (ii)  any  other  persons  or  entities  are
necessary in connection  with the  execution,  delivery and  performance  by the
Company of this Agreement and any Ancillary  Documents,  or the  consummation by
the Company of the transactions contemplated hereby and thereby.

      4.4   Subsidiaries.

      (a) Ownership; Capitalization. The Company's only Subsidiaries are SJL and
Raab-Levitt,   and  the  Company  has  no  equity  ownership  or  membership  or
partnership interest, investments in, outstanding loans or advances to, or other
interests in, any other person or entity. The Company is the beneficial owner of
all of the outstanding  shares of capital stock of each of its Subsidiaries,  in
each case free and clear of any and all Encumbrances. The authorized, issued and
outstanding  capital  stock,  and the  record  ownership  of all such  shares of
capital  stock,  of each  Subsidiary  of the Company is as set forth on Schedule
4.4(a). All of the outstanding shares of capital stock of each Subsidiary of the
Company have been duly authorized and are validly issued and outstanding,  fully
paid and  non-assessable,  were  issued  and sold  pursuant  to,  and within the
limitations (if any) contained in,  appropriate  and effective  consents of each
governmental  authority from whom such consent was required, and were not issued
in violation of any pre-emptive or other similar rights.  Except as set forth on
Schedule  4.4(a),  there  are  no  (i)  outstanding  Equity  Securities  of  any
Subsidiary  of the Company or (ii)  commitments  or  obligations  of any kind or
character  for (A) the issuance of Equity  Securities  by any  Subsidiary of the
Company or (B) the  repurchase,  redemption or other  acquisition  of any Equity
Securities  of  any  Subsidiary  of  the  Company.   There  are  no  shareholder
agreements,  voting trusts,  proxies or other agreements or understandings  with
respect to or concerning the Equity Securities of any Subsidiary of the Company.

      (b)  Organization.  Each  Subsidiary  of the  Company  is duly  organized,
validly  existing and in good standing under the laws of its respective state of
incorporation and has full corporate power and authority to conduct its business
as it is presently  being  conducted  and to own,  operate and lease its Assets.
Each  Subsidiary  of the Company is duly  qualified  to do business as a foreign
corporation  and  is in  good  standing  in  each  jurisdiction  in  which  such
qualification  is necessary  under  applicable law as a result of the conduct of
its business or the ownership of its properties,  except where the failure to be
so qualified and in good standing  would not have a Material  Adverse  Effect on
such  Subsidiary.  Each  jurisdiction in which each Subsidiary of the Company is
qualified to do business as a foreign  corporation is listed on Schedule 4.4(b),
and  no  Subsidiary  owns  or  leases  property  or  has  any  employees  in any
jurisdiction other than its jurisdiction of incorporation and such jurisdictions
listed on Schedule 4.4(b).  The Company has delivered to Buyer true, correct and
complete  copies of the certificate or articles of  incorporation  (certified by
the Secretary of State of the state of its  incorporation) and bylaws (certified
by an  officer  of the  Company)(in  each  case,  as  amended  to  date) of each
Subsidiary  of the Company.  No Subsidiary of the Company is in default under or
in violation of any provision of its certificate or articles of incorporation or
bylaws.

      (c)  Authorization.  Each  Subsidiary  of the  Company  has all  necessary
corporate power and authority to, and has taken all corporate  action  necessary
to,  consummate the  transactions  contemplated  hereby,  and no other corporate
proceedings  on the part of any  Subsidiary  of the  Company  are  necessary  to
authorize the consummation of the transactions contemplated hereby.

      4.5 Absence of Certain  Changes or Events.  Since January 1, 2000, (i) the
Company  and its  Subsidiaries  have been  operated  in the  ordinary  course of
business, consistent with past practice, (ii) there has been no Material Adverse
Change in or with  respect  to the  Company  and (iii) to the  knowledge  of the
Company and Seller,  (A) there has been no threatened  Material  Adverse  Change
with respect to the Company,  and (B) no event or development  has occurred that
could be expected  to result in a Material  Adverse  Change with  respect to the
Company.  Without limiting the generality of the foregoing,  except as set forth
below or as listed on Schedule 4.5,  since January 1, 2000,  neither the Company
nor any Subsidiary of the Company has:

      (a) sold,  assigned,  leased,  transferred  or  otherwise  disposed of any
Assets,  material  singly or in the aggregate,  other than sales of Inventory in
the  ordinary  course of  business,  to persons  who are not  Affiliates  of the
Company or any Subsidiary of the Company;

      (b) (i) except in the ordinary course of business,  canceled,  terminated,
amended,  modified or waived any material  term of any Contract to which it is a
party or by which it or any of the  Assets is  bound,  providing  for  aggregate
annual revenues to the Company and its  Subsidiaries in excess of $5,000 or (ii)
entered  into or  amended  any  Contract  (A) by or to which it or its Assets or
businesses are bound or subject,  except in the ordinary course of business,  or
(B)  pursuant  to which it agrees to  indemnify  any person or to  refrain  from
competing with any person;

      (c) (i) increased the compensation  payable or to become payable to any of
its directors or officers  (including  severance  payments),  (ii) increased the
base  compensation  payable or to become payable to any of the Personnel  (other
than directors or officers),  except for normal periodic  increases in such base
compensation in the ordinary course of business,  consistent with past practice,
(iii) increased the sales commission rate payable or to become payable to any of
the Personnel (other than directors or officers),  (iv) granted, made or accrued
any loan,  bonus, fee,  incentive  compensation  (excluding sales  commissions),
service award or other like benefit,  contingently  or otherwise,  to or for the
benefit of any of the Personnel,  except  pursuant to the Employee Plans, or (v)
adopted or amended any Employee  Plan,  or caused or suffered any addition to or
modification thereof;

      (d)  made any  capital  expenditure,  or  commitment  to make any  capital
expenditure,  or executed,  or committed to execute,  any lease or any option to
lease any assets or incurred any  liability  therefor in excess of $5,000 in the
aggregate;

      (e) made any  payments or given any other  consideration  to  customers or
suppliers,  other than  payments  under,  and in  accordance  with the terms of,
Contracts in effect on the date hereof or in the ordinary course of business;

      (f) (i) changed its  accounting  methods,  principles or practices or (ii)
revalued any portion of its Assets, properties or businesses, including, without
limitation,  any  write-down  of the value of  inventory  or other assets or any
write-off of notes or accounts receivable,  other than in the ordinary course of
business in a manner consistent with past practice;

      (g) (i) suffered any damage,  destruction  or loss (whether or not covered
by insurance)  affecting its business or any of the Assets that exceeded  $5,000
in any one  instance or (ii) been  notified  by any  supplier or customer of the
Business  that such party does not intend to continue  doing  business  with the
Company;

      (h) (i)  incurred  indebtedness  for  borrowed  money or entered  into any
commitment to borrow money or (ii) incurred any  obligations for any performance
bonds, payment bonds, bid bonds, surety bonds, letters of credit,  guarantees or
similar instruments that exceeded $5,000 in the aggregate;

      (i) paid,  discharged  or  satisfied  any  liability  other  than any such
payment,   discharge  or  satisfaction  in  the  ordinary  course  of  business,
consistent with past practice;

      (j) (i) acquired (by merger,  consolidation,  acquisition of stock,  other
securities or assets or  otherwise),  (ii) made a capital  investment  in, (iii)
made a loan,  advance or  agreement  to loan or advance to, or (iv)  guaranteed,
assumed,  endorsed or  otherwise as an  accommodation  became  responsible  for,
liabilities  or  indebtedness  for borrowed  money of, (A) any person or (B) any
portion of the assets of any person that  constitutes  a division  or  operating
unit of such person;

      (k)   mortgaged   or  pledged,   or   otherwise   made  or  suffered  any
Encumbrance on any Asset;

      (l) canceled,  waived or released any right or claim (or series of related
rights or claims)  involving in excess of $5,000  individually or $10,000 in the
aggregate;

      (m)   settled or agreed to settle any litigation or other Action;

      (n)    adopted a plan of  liquidation  or  resolutions  providing for the
liquidation,  dissolution,  merger,  consolidation or other  reorganization  of
the Company or any of its Subsidiaries; or

      (o)   entered into any Contract to do any of the foregoing.

      4.6   Title to Assets; Absence of Liens and Encumbrances; Etc.

      (a)  General.  The  Company and its  Subsidiaries  own or lease all Assets
necessary for the conduct of their Business as now conducted.  All of the Assets
have been maintained in accordance with normal industry practice and are in good
operating  condition  and repair  (subject  to normal  wear and tear).  Schedule
4.6(a) sets forth the Assets owned by SJL and  Raab-Levitt.  Seller  agrees that
any  checks  written  prior to the  Closing  Date  which  have not  cleared  the
Company's  bank  account  (i.e.,  have not been paid) prior to the Closing  Date
shall be the sole  responsibility  of Seller.  Accordingly,  Seller  agrees that
notwithstanding  anything  contained  herein to the contrary,  Seller (ii) shall
leave no less than the Required Cash Balance in the Company's account located at
Hudson  United  Bank on the  Closing  Date and (ii) shall pay,  no later than 24
hours upon demand by the Company or any Affiliate thereof, any checks which have
not been paid prior to the Closing  Date and the  Required  Cash  Balance is not
sufficient to satisfy such payment.

      (b)   Real Property

            (i)   Neither the Company nor any  Subsidiary  of the Company  owns
or ever owned any real property.

            (ii)  Schedule  4.6(b)(ii)  sets forth all leases  pursuant to which
Facilities  are  leased by the  Company or any  Subsidiary  of the  Company  (as
lessee),  true and correct  copies of which have been  delivered to Buyer.  Such
leases constitute all leases,  subleases or other occupancy  agreements pursuant
to  which  the  Company  or any  Subsidiary  of the  Company  occupies  or  uses
Facilities.  The  Company  or a  Subsidiary  of the  Company  has good and valid
leasehold  title to, and enjoys  peaceful  and  undisturbed  possession  of, all
leased property described in such leases (the "Leased Property"), free and clear
of any and  all  Encumbrances  other  than  any  Permitted  Encumbrances  not in
violation of the terms of the lease  therefor.  With respect to each such parcel
of Leased Property, (A) there are no pending or, to the knowledge of the Company
and Seller,  threatened condemnation proceedings relating to, or any pending or,
to the knowledge of the Company and Seller, threatened Actions relating to, such
Leased  Property,  (B) none of the  Company,  any  Subsidiary  of the Company or
Seller or, to the  knowledge  of Seller  and the  Company,  any third  party has
entered into any sublease, license, option, right, concession or other agreement
or  arrangement,  written  or oral,  granting  to any person the right to use or
occupy such Leased Property or any portion  thereof or interest  therein and (C)
none of the Company,  any  Subsidiary  of the Company or any Seller has received
notice of any pending or threatened special  assessment  relating to such Leased
Property or otherwise  has any  knowledge of any pending or  threatened  special
assessment relating thereto.

      (c)  Personal  Property.  All Fixtures and  Equipment  and other  personal
property of the Company and its Subsidiaries are in good operating condition and
repair  (ordinary  wear and tear  excepted),  and neither of the Company nor any
such  Subsidiary has received any notice that it is in violation of any existing
statute, law or any health, safety or other ordinance, code, rule or regulation.
Each of the Company and each of its Subsidiaries  owns outright and has good and
marketable  title to all Fixtures and Equipment and all other personal  property
owned by it,  free and clear of any and all  Encumbrances  other than  Permitted
Encumbrances.  Except as set forth on Schedule 4.6(c),  none of the Fixtures and
Equipment or other  personal  property of the Company or any  Subsidiary is held
under any lease,  security agreement,  conditional sales contract or other title
retention or security  arrangement  or is located  other than on the premises of
the Company. Each of the Company and each Subsidiary of the Company has good and
valid  leasehold  title to all Fixtures  and  Equipment  and all other  personal
property  leased  by it  from  third  parties,  free  and  clear  of any and all
Encumbrances other than Permitted Encumbrances.

      (d) Inventories.  No Inventory is stored at any location other than at the
Facilities,  except  as  shown on  Schedule  4.6(d).  The  values  at which  the
Inventory is shown on Schedule  4.6(d) have been  determined in accordance  with
the  normal  valuation  policy  of  the  Company,   each  consistently   applied
throughout,  with  adequate  provisions  or  adjustments  for excess  Inventory,
slow-moving  Inventory and Inventory  obsolescence and shrinkage.  The Inventory
consists,  and will as of the Closing Date consist, only of items of quality and
quantity commercially usable in the ordinary course of business.

      4.7.  Contracts and Commitments.

      (a) Schedule 4.7 sets forth a complete and accurate  list of all Contracts
to which the  Company  or any of its  Subsidiaries  is a party or is bound,  and
Seller has delivered to Buyer a true copy of each such Contract.

      (b) Absence of Breaches  or  Defaults  in  General.  With  respect to each
Contract (i) there is no default by the Company or any of its Subsidiaries  and,
to the best knowledge of the Company,  by any other party to any Contract;  (ii)
such  Contract  is valid,  binding and  enforceable  against the Company and its
Subsidiaries, and to the knowledge of the Company and Seller, against each other
party  thereto  (except  to the  extent  that  enforcement  may be  affected  by
applicable  bankruptcy,  reorganization,  insolvency,  fraudulent conveyance and
similar laws affecting  creditors' rights and remedies  generally and by general
principles of equity,  regardless of whether  enforcement is sought at law or in
equity);  (iii)  no  action  has  been  taken  by  the  Company  or  any  of its
Subsidiaries  and no event has  occurred  that,  with notice or lapse of time or
both, would permit termination,  modification or acceleration by a party thereto
other than the Company or any of its Subsidiaries under any Contract, and to the
knowledge of the Company and Seller, no action has been taken by any party other
than the Company or any of its Subsidiaries and no event has occurred that, with
notice or lapse of time or both,  would  reasonably  be  expected  to permit the
termination,  modification  or  acceleration  by  the  Company  or  any  of  its
Subsidiaries  under any  Contract;  and (iv)  neither  the  Company,  any of its
Subsidiaries  nor,  to the  knowledge  of  the  Company,  any  other  party  has
repudiated any term thereof or threatened to terminate,  cancel or not renew any
such Contract.

      4.8 Permits. The Company and its Subsidiaries have all Permits required to
conduct their business as now being conducted or proposed to be conducted and to
own and  operate  the  Assets  and the  Facilities.  Schedule  4.8 sets  forth a
complete and accurate list of all such  Permits.  All such Permits are valid and
in full force and effect and the Company and its  Subsidiaries are in compliance
with, and have not violated, any such Permits. No notice to, declaration, filing
or  registration  with, or Permit from, any domestic or foreign  governmental or
regulatory body or authority,  or any other person or entity,  is required to be
made or obtained by the Company or any of its  Subsidiaries  in connection  with
the execution, delivery or performance of this Agreement and the consummation of
the transactions contemplated hereby.

      4.9  No  Conflict  or  Violation.  Neither  the  execution,  delivery  and
performance of this Agreement or any Ancillary Documents to which the Company or
any Subsidiary is a party nor the consummation of the transactions  contemplated
hereby and  thereby  will  result in (i) a  violation  of any  provision  of its
certificate  or  articles  of  incorporation  or bylaws,  (ii) a breach of, or a
default  (or an  event  that,  with  notice  or  lapse  of time or  both,  would
constitute  a  default)  under,  or the  creation  of any  right of any party to
accelerate,  modify,  terminate or cancel, any term or provision of any material
Contract, Permit, authorization or concession to which it is a party or by which
any Assets are bound,  (iii) a conflict with or violation of any statute,  rule,
regulation,  ordinance, code, order, permit, judgment, writ, injunction,  decree
or award binding upon Seller,  the Company or any of its  Subsidiaries  or their
respective  Assets,  (iv) its being  required to obtain any  consent,  waiver or
approval  or  authorization  of,  or to  deliver  notice  to,  any  person,  (v)
impairment  of any right of the  Company  or any of its  Subsidiaries  under any
Contract or Permit or (vi) an  imposition  of any  Encumbrance,  restriction  or
charge on the Business of the Company or any of its Subsidiaries or on the Stock
or any of the Assets.

      4.10 Consents and Approvals. No consent,  waiver,  agreement,  approval or
authorization of, or declaration, filing, notice or registration to or with, any
foreign,  United States federal or any state or local governmental or regulatory
authority  is required  to be made or obtained by Seller,  the Company or any of
its  Subsidiaries in connection with the execution,  delivery and performance of
this Agreement and the Lease Agreements and the consummation of the transactions
contemplated hereby and thereby, other than those consents, waivers, agreements,
approvals, authorizations, declarations, filings, notices or registrations, that
have been, or will be prior to the Closing Date,  obtained or made, all of which
are set forth on Schedule 4.10.  The Assets of the Company and its  Subsidiaries
are transferable and assignable without the waiver of any right of first refusal
of any other person or entity being  obtained,  and there exist no  preferential
rights of  purchase  with  respect  to any of the  Assets of the  Company or its
Subsidiaries in favor of any Person.

      4.11 Financial Statements;  Earnings. The Company has heretofore delivered
to  Buyer  the  Financial  Statements.  The  Financial  Statements  (i)  are  in
accordance  with the  accounting  and  financial  records of the Company and its
Subsidiaries  and  (ii)  fairly  and  accurately  present  in all  respects  the
consolidated assets,  liabilities (including,  without limitation, all reserves)
and financial  position of the Company and its Subsidiaries as of the respective
dates thereof and the consolidated  results of operations and cash flows for the
periods then ended. The accounting and financial  records of the Company and its
Subsidiaries have been prepared and maintained  consistently  applied throughout
the periods indicated,  and sound bookkeeping  practices.  Seller represents and
warrants that the EBITDA for the year ended  December 31, 1999 shall not be less
than $1,419,000.

      4.12  Litigation.  Except  as set  forth  on  Schedule  4.12,  there is no
allegation or charge and there is no action, order, writ,  injunction,  judgment
or decree outstanding or any claim, suit, litigation, proceeding, labor dispute,
arbitration,  governmental audit or investigation  (collectively,  "Actions") of
any nature,  civil,  criminal,  regulatory  or  otherwise,  in law or in equity,
pending  or,  to  the  knowledge  of  the  Company  and  Seller,  threatened  or
anticipated against, related to or affecting Seller (and related to the Company,
any of its Subsidiaries or the Assets), or the Company,  any of its Subsidiaries
(or against any of the  officers,  directors or key  employees of the Company or
its Subsidiaries with respect to their business or business activities on behalf
of  the  Company  or  its  Subsidiaries)  or the  Assets,  or  the  transactions
contemplated  hereby.  Neither the Company nor Seller are aware of any basis for
any claim that might result in any Action,  not set forth on Schedule  4.12. The
Company and its  Subsidiaries  are not  subject to or involved in any  judgment,
ruling,  writ,  injunction,  order or decree of any court,  arbitral tribunal or
governmental  agency.  Neither  the Company  nor any of its  Subsidiaries  is in
default  with  respect  to any  Action.  All  contingent  or  unasserted  claims
regarding  the  Company and its  Subsidiaries  known to any Seller are listed on
Schedule 4.12.

      4.13  Liabilities.   Neither  the  Company  nor  any  Subsidiary  has  any
liabilities, obligations or commitments of any nature (whether known or unknown,
absolute  or  contingent,  liquidated  or  unliquidated,  due or to become  due,
accrued or unaccrued,  matured or unmatured)  (collectively,  "Liabilities") and
there is no basis for any present or future  charge,  complaint,  action,  suit,
proceeding, hearing,  investigation,  claim or demand against the Company or any
of its  Subsidiaries  giving  rise to any such  Liability,  other  than  current
Liabilities  incurred  since  January  1,  2000 in the  ordinary  course  of the
business,  consistent with past practice (none of which relates to any breach of
Contract,  breach of warranty,  tort,  infringement  or violation of law or that
arose out of any Action); as of the date of this Agreement and as of the Closing
Date,  such  Liabilities,  do  not  and  shall  not  exceed  $690,000.00  in the
aggregate.  None  of  the  Liabilities  described  in  the  preceding  sentence,
individually or in the aggregate,  is or would be material to the Company or any
of  its  Subsidiaries.  To  Seller's  knowledge,  there  are  no  circumstances,
conditions,  events  or  arrangements  that  may  hereafter  give  rise  to  any
Liabilities that would have a Material  Adverse Effect.  The accounts payable of
the  Company  and its  Subsidiaries  as of July  31,  2000 is not  greater  than
$650,000.

      4.14 Compliance with Law. Each of the Company and its Subsidiaries (i) has
not violated and is in  compliance  with,  (ii) has filed in a timely manner all
reports and  documents  it is required  to file (and the  information  contained
therein was correct and complete in all material  respects) under, and (iii) has
possession  of all records and  documents  it is required to retain  under,  all
applicable laws, statutes, ordinances,  regulations,  codes, rules and orders of
any foreign, federal, state or local government and any federal, state, local or
foreign  court  or  other   governmental   agency,   department,   authority  or
instrumentality,  and any judgment,  decision,  decree, award, writ, injunction,
requirement or order of any court or governmental agency, department,  authority
or  instrumentality,  relating to the Assets and its  operations  and  Business,
except to the extent that such violations, failures to comply, failures to file,
misstatements  of information or failures to possess would not, singly or in the
aggregate,  be reasonably likely to result in losses, costs, expenses,  damages,
liabilities or obligations (including,  without limitation,  fines and penalties
in excess of  $5,000).  None of the  Company or any of its  Subsidiaries  or any
Seller has  received any notice to the effect  that,  or otherwise  been advised
that, it is not in compliance with any such statutes, regulations, codes, rules,
judgments,  decisions, decrees, orders, ordinances,  awards, writs, injunctions,
requirements  or any other laws, and the Company and Seller have no knowledge of
any currently existing circumstances that would reasonably be expected to result
in a violation of any of the foregoing.

      4.15 No Brokers. Other than S. Freedman and Company, Inc. whose fees shall
be paid solely by Seller, none of Seller, the Company or any of their respective
officers, directors, employees, stockholders or Affiliates have employed or made
any agreement with any broker,  finder or similar agent or any person or firm to
pay,  and no  such  intermediary,  including  EQ  Corporation  or any  Affiliate
thereof,  is entitled to, any finder's  fee,  brokerage  fees or  commission  or
similar payment in connection with the transactions  contemplated hereby. Seller
represents  and warrants  that no claim has been made by EQ  Corporation  or any
Affiliate  thereof for any fees or expenses in  connection  with a  contemplated
transaction  with the Seller or the Company  and any Losses as a result  thereof
shall be the sole responsibility of the Seller.

      4.16 Intellectual Property. The Company and its Subsidiaries do not own or
license any patents,  trademarks,  trade names,  service  marks,  service names,
brands, logos, copyrights, formulas, brand names or trade secrets.

      4.17  Employee Plans.

      (a)  Disclosure;  Delivery  of  Copies  of  Relevant  Documents  and Other
Information.  Schedule  4.17  contains a complete  list of all  Employee  Plans.
Neither the Company,  any  Subsidiary  nor any ERISA  affiliate  has any plan or
commitment,  whether legally binding or not, to establish any new Employee Plan,
or to modify or terminate  any Employee  Plan (except to the extent  required by
law),  nor has any intention to do any of the  foregoing  been  communicated  to
Employees. True and complete copies of each of the following documents have been
delivered  by the Company to Buyer:  (i) each Welfare Plan and each Pension Plan
(and, if applicable,  related trust agreements) and all amendments thereto,  all
summary  plan  descriptions,  summary of material  modifications  (as defined in
ERISA) and a complete  description of any Welfare Plan and any Pension Plan that
is not in writing,  (ii) all  Benefit  Arrangements  that cover any  employee or
former  employee  of the  Company  or any of  its  Subsidiaries  and a  complete
description of any Benefit  Arrangement  that is not in writing,  (iii) the most
recent  determination  letter  issued by the  Internal  Revenue  Service and any
opinion  letter issued by the  Department of Labor with respect to each Employee
Plan (other than a Multiemployer Plan) and each voluntary employees' beneficiary
association as defined under Section  501(c)(9) of the Code,  (iv) for the three
most recent plan years,  Annual Reports on Form 5500 Series required to be filed
with any governmental  agency for each Employee Plan, (v) all actuarial  reports
prepared for the last three plan years for each Employee Plan; (vi) all material
communications to any Employee or Employees  relating to each Employee Plan; and
(vii) with respect to each Employee Plan that is funded,  the most recent annual
and periodic accounting of Employee Plan assets.

      (b) (i) No Employee Plan is now, or ever has been,  subject to the minimum
funding standards of Section 412 of the Code or Section 302 of ERISA or Title IV
of  ERISA;  nor has the  Company  or any  Subsidiary  or  ERISA  Affiliate  ever
maintained or  contributed to or incurred any liability with respect to any such
a plan.

            (ii) At no time  since  September  25,  1980  has the  Company,  any
subsidiary or any ERISA Affiliate  contributed to or been required to contribute
to, or incurred any withdrawal  liability (within the meaning of Section 4201 of
ERISA) to any Multiemployer Plan.

            (iii) Each Employee Plan has been  maintained in compliance with its
terms and, both as to form and operation, complies in all material respects with
any  terms  prescribed  by  any  and  all  statutes,  laws,  orders,  rules  and
regulations  that are  applicable  to such  Employee  Plan,  including,  without
limitation,  ERISA and the  Code.  Except as set  forth on  Schedule  4.17,  the
employment of all persons  presently  employed or retained by the Company or any
of its Subsidiaries is terminable at will.

            (iv) No liability  has been or will be incurred by the Company,  any
Employee Plan or any ERISA Affiliate  (either directly or indirectly,  including
as a result of an indemnification obligation),  under or pursuant to Titles I or
IV of ERISA or the penalty, excise tax or joint and several liability provisions
of the  Code  relating  to any  Employee  Plan,  that  has or  will  create  any
obligation  by, or result in any liability to, any Employee Plan, the Company or
any of its  Subsidiaries  or Buyer or any employee  benefit plan  established or
contributed  to by Buyer,  and to the  knowledge of Seller and the  Company,  no
event, transaction or condition exists or has occurred that could result in such
liability to, or  obligation  of, any Employee  Plan,  the Company or any of its
Subsidiaries, or following the Closing, Buyer.

            (v)  The  execution  of,  and   performance   of  the   transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent  events) (X) constitute an event under any Employee
Plan, trust or loan that will or may result in any payment (whether of severance
pay  or  otherwise),   acceleration,   forgiveness  of  indebtedness,   vesting,
distribution,  increase in benefits or  obligation to fund benefits with respect
to  any  Employee,  or  (Y)  result  in  the  triggering  or  imposition  of any
restrictions or limitations on the right of the Company or the Buyer to amend or
terminate  any  Employee  Plan and receive the full amount of any excess  assets
remaining or resulting from such amendment or termination, subject to applicable
taxes.  No  payment or benefit  which  will or may be made by the  Company,  any
Subsidiary,  the Buyer or any of their respective affiliates with respect to any
Employee will be  characterized  as an "excess  parachute  payment,"  within the
meaning of Section 280G(b)(1) of the Code.

            (vi)  With  respect  to each  Pension  Plan that is  intended  to be
qualified under Section 401 (a) (or 403 (a), as appropriate)  and 501 (a) of the
Code,  each such Pension Plan is so qualified  and has from  inception,  been so
qualified  and  the  Company  or  its  Subsidiaries   have  received   favorable
determination  letters  from the  Internal  Revenue  Service  that say that each
Pension Plan and each related trust agreement, annuity contract or other funding
instrument  that  covers or has covered  employees  or former  employees  of the
Company  or any of its  Subsidiaries,  is  qualified  and  tax-exempt  under the
provisions of Code Sections 401(a) (or 403(a),  as appropriate) and 501(a),  and
since the date of such  determination,  no event or condition  has occurred that
would adversely affect such determination.

            (vii) Neither the Company,  any subsidiary  nor any ERISA  Affiliate
(X) maintains or  contributes  to any Employee Plan which  provides,  or has any
liability to provide,  life  insurance,  medical,  severance  or other  employee
welfare  benefits  to  any  Employee  upon  his  retirement  or  termination  of
employment,  except as may be required by Section  4980B of the Code; or (Y) has
ever  represented,  promised or contracted  (whether in oral or written form) to
any  Employee  (either  individually  or to  Employees  as a  group)  that  such
Employee(s) would be provided with life insurance,  medical,  severance or other
employee  welfare  benefits upon their  retirement or termination of employment,
except to the extent required by Section 4980B of the Code.

            (viii) Neither the Company nor any ERISA  Affiliate has incurred any
liability  with  respect to any  Welfare  Plan that is a  "multiemployer  plan,"
defined in Section  3(37) of ERISA,  under the terms of such Welfare  Plan,  any
collective  bargaining  agreement or otherwise  resulting  from any cessation of
contributions,  cessation of obligation to make  contributions  or other form of
withdrawal from such Welfare Plan.

            (ix) Validity and  Enforceability.  Each Welfare Plan, Pension Plan,
related  trust  agreement,  annuity  contract or other  funding  instrument  and
Benefit  Arrangement  is legally  valid and binding and in full force and effect
and may be amended,  terminated or otherwise  discontinued  without liability to
the Company, any Subsidiary or ERISA Affiliate.

            (x) No Amendments.  Neither the Company nor any ERISA  Affiliate has
any  announced  plan or legally  binding  commitment  to create  any  additional
Employee Plans that are intended to cover  employees or former  employees of the
Company or any of its  Subsidiaries or to amend or modify any existing  Employee
Plan.

            (xi)  Insurance  Contracts.  Neither  Seller nor any  Employee  Plan
(other than a "multiemployer  plan," as defined in Section 3(37) of ERISA) holds
as an  asset  of  any  Employee  Plan  any  interest  in any  annuity  contract,
guaranteed  investment  contract or any other  investment or insurance  contract
issued  by  an   insurance   company   that  is  the   subject  of   bankruptcy,
conservatorship or rehabilitation proceedings.

            (xii)  Payments.  As of the  Closing  Date,  no  former  or  current
Personnel or  Representative  of either the Company or the  Subsidiaries  of the
Company are owed any monies or other compensation, whether as any special bonus,
fee or commission or otherwise.

            (xiii) The Company and each Subsidiary and ERISA Affiliate have made
all payments with respect to all periods through the date hereof,  and will make
a pro-rata  payment for the period  ending as of the Closing  Date, in each case
which are required by each  Employee  Plan,  each related  trust or by law to be
made to, or with respect to each Employee Plan.

            (xiv) No  Employee  Plan is  under  audit  or  investigation  by the
Internal  Revenue  Service,  the  Department  of  Labor or the  Pension  Benefit
Guaranty Corporation, and to the knowledge of Seller the Company, any Subsidiary
or any ERISA Affiliate, no such audit or investigation is pending or threatened.

            (xv) Welfare Plan Funding.  With respect to each Welfare  Plan,  all
claims  incurred  (including  claims  incurred  but not  reported)  by Employees
thereunder  for which the  Company  is, or will  become,  liable are (X) insured
pursuant to a contract of insurance whereby the insurance company bears any risk
of loss with respect to such claims;  (Y) covered under a contract with a health
maintenance  organization  (an  "HMO")  pursuant  to  which  the HMO  bears  the
liability for such claims, or (Z) reflected as a liability or accrued for on the
Books and Records of the Company.

            (xvi)  Controlled  Group  Liability.  The Company has no  liability,
contingent or otherwise, to, or with respect to any Benefit Arrangement, Welfare
Plan or Pension Plan (other than the Employee Plans which are listed on Schedule
4.17, which is now or previously has been sponsored, maintained, contributed to,
or required to be contributed to, by any Subsidiary or any ERISA Affiliate.

      4.18  Tax Matters.

      (a) Filing of Tax Returns.  The Company (and, if  applicable,  each of its
Subsidiaries)  and each affiliated,  combined,  consolidated or unitary group of
which the Company or any of its  Subsidiaries  is or has been a member (each, an
"Affiliated Group") has timely filed with the appropriate taxing authorities all
returns, reports,  statements and forms required to be filed in respect of Taxes
("Tax Returns") through December 31, 1999. All such Tax Returns are complete and
accurate in all material respects. Except as set forth on Schedule 4.18, neither
the Company nor any  Subsidiary  of the  Company  nor any  Affiliated  Group has
requested any  extension of time within which to file any Tax Return,  which Tax
Return has not yet been filed.  The Company has delivered to Buyer  complete and
accurate  copies of the Company's  federal,  state and local Tax Returns for the
years 1996, 1997, 1998 and 1999.

      (b) Payment of Taxes.  All Taxes (whether  accrued or estimated) for which
the  Company  or any  Subsidiary  of the  Company is liable  (including  but not
limited to all Taxes that the Company or any Subsidiary is obligated to withhold
from amounts paid or payable to or benefits conferred upon employees,  creditors
or other third parties),  in respect of periods (or portions  thereof) ending on
or before  December  31, 1999,  have been timely  paid,  and the Company and its
Subsidiaries  do not have any  liability  for Taxes in excess of the  amounts so
paid with respect to such periods.

      (c) Audits,  Investigations or Claims. No deficiencies for Taxes have been
claimed,  proposed  or assessed  by any taxing or other  governmental  authority
against the Company,  any  Subsidiary  of the Company or any  Affiliated  Group.
Schedule  4.18 sets forth a complete  list of (i) all Tax  Returns  filed by the
Company or any  Subsidiary  that have been  examined or audited by any  federal,
state or local taxing  authority during the five (5) years preceding the date of
this Agreement, and (ii) all adjustments resulting from each such examination or
audit.  There are no  pending  or, to the  knowledge  of Seller or the  Company,
threatened, audits, investigations or claims for or relating to any liability of
the Company or any of its Subsidiaries in respect of Taxes.

      (d)   Liens.  There are no liens or  Encumbrances  for Taxes  (other than
for current Taxes not yet due and payable) on the Assets.

      (e) Safe Harbor  Lease  Property.  None of the Assets is property  that is
required  to be  treated  as being  owned by any other  person  pursuant  to the
so-called safe harbor lease provisions of former Section 168(f)(8) of the Code.

      (f) Security for Tax-Exempt  Obligations.  None of the Assets  directly or
indirectly  secures any debt the interest on which is  tax-exempt  under Section
103(a) of the Code.

      (g)   Tax-Exempt  Use  Property.  None of the Assets is  "tax-exempt  use
property" within the meaning of Section 168(h) of the Code.

      (h)   Foreign  Person.  Seller  is a  United  States  person  within  the
meaning of the Code.

      (i) Tax  Election.  All  elections  with  respect to Taxes  affecting  the
Company or any  Subsidiary of the Company as of the date hereof are set forth on
Schedule  4.18.  None  of the  Company  or any  Subsidiary  of the  Company  has
consented at any time under Section 341(f)(1) of the Code to have the provisions
of Section 341(f)(2) of the Code apply to any disposition of any Assets. None of
the Company or any  Subsidiary of the Company has agreed to make, or is required
to make, any adjustment  under Section 481(a) of the Code, by reason of a change
in accounting method or otherwise.

      (j)   Tax  Sharing  Agreements.  There are no tax sharing  agreements  or
similar   arrangements  with  respect  to  or  involving  the  Company  or  any
Subsidiary of the Company.

      (k)  Affiliated  Group.  Except as set forth on Schedule 4.18, the Company
has not been a member  of an  affiliated  group  that has  filed a  consolidated
return or any group that has filed a combined  consolidated  or unitary state or
local return,  and neither the Company nor any Subsidiary of the Company has any
liability  for  Taxes of any  person  under  Section  1.1502-6  of the  Treasury
Regulations,  or any similar provision of state,  local or foreign Tax law, as a
transferee,  successor, indemnitor or guarantor, by contract or otherwise, other
than the group of which currently the Company is the parent and the Subsidiaries
are the members.

      (l) Partnerships. Neither the Company nor any Subsidiary of the Company is
a party to any joint venture,  partnership or other arrangement or contract that
is treated as a partnership for federal income tax purposes.

      4.19 Insurance. Schedule 4.19 contains a complete and accurate list of all
policies or binders for business interruption,  fire, liability, title, worker's
compensation,  product  liability,  errors  and  omissions  and  other  forms of
insurance  maintained  by the  Company  and  each  Subsidiary  of  the  Company,
specifying the insurer,  the insured,  the policy number or covering note number
with respect to binders,  the amounts of  coverage,  the  expiration  date and a
description  of each pending claim  thereunder.  Such  insurance  provides,  and
during  its term has  provided,  coverage  to the  extent  and in the manner (a)
adequate for the conduct of the business of the Company and its Subsidiaries and
(b) as may be required by law and by any and all  Contracts to which the Company
or any  Subsidiary of the Company is a party.  All such policies and binders are
in full force and effect on the date hereof.

      4.20 Accounts Receivable. The accounts receivable as set forth on Schedule
4.20  represent  and will  represent  bona fide  claims of the  Company  and its
Subsidiaries  against  third-party debtors for arms' length sales made, services
performed  or other  charges  for valid  consideration  arising on or before the
Closing Date and will require no additional performance by the Company or any of
its  Subsidiaries  to render them valid after the Closing  Date.  Said  accounts
receivable are subject to no defenses, counterclaims or rights of setoff and are
fully  collectible  in the  ordinary  course of  business  consistent  with past
practice and in accordance  with their terms at their recorded  amounts  without
any costs in  collection  efforts  therefor.  As of July 31, 2000,  the accounts
receivable of the Company and the Subsidiary,  exclusive of the contra accounts,
is not less than $2,100,000.

      4.21  Affiliate  Transactions.  Schedule  4.21  contains an  accurate  and
complete  list of all  Contracts,  arrangements,  understandings,  transfers  of
assets or  liabilities  or other  commitments  or  transactions  relating to the
Business or the Assets,  whether or not entered into in the  ordinary  course of
business,  to or by which the Company or any  Subsidiary of the Company,  on the
one hand,  and the Seller or any Affiliate of the Seller,  on the other hand, is
or has been a party or  otherwise  bound or affected at any time during the past
two years.  Each  Contract,  arrangement,  understanding,  transfer of assets or
liabilities or other  commitment or transaction  set forth or required to be set
forth on Schedule  4.21 was on terms and  conditions as favorable to the Company
or applicable  Subsidiary  as would have been  obtainable by it at the time in a
comparable  arms'-length  transaction  with a person  other  than  Seller  or an
Affiliate  of  Seller.  Seller  covenants  and  agrees  that all  Contracts  and
transactions  indicated on Schedule 4.21 shall continue in full force and effect
on  substantially  the same terms for no less than three years after the Closing
Date.

      4.22  Compliance with Environmental Laws.

      (a) Except as set forth on Schedule 4.22, the Company and its Subsidiaries
are currently in compliance in all respects with all Environmental Laws.

      (b) Except as set forth on Schedule 4.22, there are no existing or, to the
knowledge of Seller and the Company,  potential Environmental Claims against the
Company or any  Subsidiary  of the  Company,  nor has any of them  received  any
notification  or  knowledge  of any  allegation  of  any  actual,  or  potential
responsibility  for, or any inquiry or  investigation  regarding,  any disposal,
release  or  threatened  release  at any  location  of any  Hazardous  Substance
generated or transported by the Company or any Subsidiary of the Company.

      (c) Except as set forth on Schedule 4.22, (i) no underground tank or other
underground storage receptacle for Hazardous  Substances is currently located on
the  properties  of the Company or any  Subsidiary of the Company and there have
been no releases of any Hazardous  Substances from any such  underground tank or
related piping and (ii) there have been no releases  (i.e.,  any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing, or dumping) of Hazardous Substances in
quantities exceeding the reportable quantities as defined under federal or state
law by the  Company  or any  Subsidiary  of the  Company  on,  upon or into  the
properties  of the Company or any  Subsidiary  of the Company,  other than those
authorized by Environmental Laws,  including,  without  limitation,  the Permits
required thereunder.

      d) Except as set forth on  Schedule  4.22,  there are no PCBs or  asbestos
located at or on the properties of the Company or any Subsidiary of the Company.

      (e) Except as set forth on Schedule  4.22,  there are no consent  decrees,
consent orders,  judgments,  judicial or administrative orders,  agreements with
(other than Permits) or  Encumbrances  by, any  governmental  authority or quasi
governmental  entity relating to any Environmental Laws that regulate,  obligate
or bind the Company or any Subsidiary of the Company.

      (f) Except as set forth on Schedule  4.22,  true and correct copies of the
Environmental  Reports,  as well as all  other  written  environmental  reports,
audits or  assessments  that have been  conducted,  either by the  Company,  any
Subsidiary of the Company or any person engaged by the Company or any Subsidiary
of the Company for such purpose,  at any facility owned or formerly owned by the
Company or any Subsidiary of the Company have been delivered to Buyer and a list
of all such reports, audits and assessments is set forth on Schedule 4.22.

      4.23  Banking  Relationships.  Schedule  4.23 sets  forth a  complete  and
accurate description of all arrangements that the Company and each Subsidiary of
the Company has with any banks or other financial institutions providing for any
accounts,  including,  without limitation,  checking accounts, cash contribution
accounts, safe deposit boxes, borrowing arrangements, certificates of deposit or
otherwise,  indicating  in each case account  numbers,  if  applicable,  and the
person or  persons  authorized  to act or sign on behalf of the  Company or such
Subsidiary  in respect  of any of the  foregoing.  No person  holds any power of
attorney or similar authority from the Company or any Subsidiary of the Company.

      4.24 Other  Information.  Assuming  the  "person"  within  which  Buyer is
included,  for purposes of the Hart-Scott-Rodino  Antitrust  Improvements Act of
1976, as amended (the "HSR Act"), does not have total assets or annual net sales
of  $100,000,000  or more, no filing is required under the HSR Act in connection
with the  transactions  contemplated  hereby  as a result  of the  status of the
Company.
      4.25 Processing Recipes;  Vendors.  Schedule 4.25, which shall be provided
at Closing, sets forth a complete and accurate description of all the processing
procedures,  recipes  utilized in Business and a list of all vendors,  suppliers
and customers of the Business.

      4.26  Material  Facts.  No  representation  or  warranty by the Company or
Seller contained in this Agreement or any other written statement,  information,
material or certificate furnished or to be furnished to Buyer pursuant hereto or
in connection with the transactions contemplated hereby by the Company or Seller
contains any untrue  statement  of a material  fact or omits to state a material
fact  necessary  to  make  the  statements   contained  therein  or  herein  not
misleading, when all are taken together as a whole (it being understood that, in
the event of any  inconsistency  between this Agreement and any other  writings,
this  Agreement  shall  control).  Neither  Seller nor the Company  knows of any
information  or fact that has or would  have a  Material  Adverse  Effect on the
Company that has not been disclosed to Buyer.

                                    ARTICLE V

                    REPRESENTATIONS AND WARRANTIES OF BUYER

      Buyer hereby makes the following  representations and warranties as of the
date hereof and as of the Closing Date:

      5.1 Organization of Buyer.  Buyer is duly organized,  validly existing and
in good standing under the laws of the State of Delaware.

      5.2 Authorization.  Buyer has all necessary  corporate power and authority
to enter into this  Agreement  and has taken all corporate  action  necessary to
execute and deliver this Agreement, to consummate the transactions  contemplated
hereby  and  to  perform  its  obligations  hereunder,  and no  other  corporate
proceedings  on the part of Buyer are  necessary  to  authorize  the  execution,
delivery  and  performance  of  this  Agreement  and  the  consummation  of  the
transactions  contemplated hereby and thereby.  This Agreement and the Ancillary
Documents to which it is a party has been duly  executed and  delivered by Buyer
and is a valid and  binding  obligation  of  Buyer,  enforceable  against  it in
accordance with its terms (except to the extent that enforcement may be affected
by applicable bankruptcy, reorganization,  insolvency and similar laws affecting
creditors'  rights and remedies  generally  and by general  principles of equity
(regardless of whether enforcement is sought at law or in equity)).

      5.3 Consents and  Approvals.  Other than those that have been,  or will be
prior to the Closing Date, obtained,  no consent,  approval or authorization of,
or declaration,  filing or registration with, any United States federal or state
governmental or regulatory authority is required to be made or obtained by Buyer
in connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.

      5.4  No  Brokers.  Neither  Buyer  nor  any of  its  officers,  directors,
employees,  stockholders  or Affiliates  has employed or made any agreement with
any  broker,  finder or similar  agent or any person or firm that will result in
the  obligation  of Seller to pay, and no such  intermediary  is entitled to any
finder's fee, brokerage fees or commission or similar payment in connection with
the transactions contemplated hereby.

      5.5  No  Conflict  or  Violation.  Neither  the  execution,  delivery  and
performance of this Agreement and any Ancillary Document to which it is a party,
nor the consummation of the transactions contemplated hereby or thereby by Buyer
will  result in (a) a  violation  of or a  conflict  with any  provision  of the
certificate of  incorporation  or bylaws of Buyer, (b) a breach of, or a default
(or an event that,  with  notice or lapse of time or both,  would  constitute  a
default)  under any term or provision  of, any  contract,  indebtedness,  lease,
commitment,  license,  franchise,  permit,  authorization or concession to which
Buyer is a party, which breach, default or creation of any such right would have
a Material  Adverse  Effect on Buyer or (c) a violation by Buyer of any statute,
rule, regulation,  ordinance, code, order, judgment, writ, injunction, decree or
award, which violation would have a Material Adverse Effect on Buyer.

      5.6  Acquisition  of the Stock.  Buyer is purchasing the Stock for its own
account for investment  and not with a view to, or for sale in connection  with,
any distribution of the Stock. Buyer will not offer to sell or otherwise dispose
of the Stock in violation of any requirements of any applicable  securities laws
or regulations.

      5.7 Other  Information.  Assuming the "person" within which the Company is
included  for  purposes of the HSR Act does not have total  assets or annual net
sales of  $100,000,000  or more,  no  filing  is  required  under the HSR Act in
connection with the transactions  contemplated  hereby as a result of the status
of Buyer.

                                   ARTICLE VI

                  COVENANTS OF BUYER, THE COMPANY AND SELLER

      Each of the Company and Seller and, where applicable, Buyer, covenants and
agrees with each other that from the date hereof through the Closing:

      6.1   Maintenance of Business Prior to Closing.

      (a)  Seller  shall  cause the  Company  and each of its  Subsidiaries  to,
operate its business in the ordinary course,  consistent with past practice, and
not take any  action  inconsistent  therewith  or with the  consummation  of the
transactions  contemplated  hereby.  Without  limiting  the  generality  of  the
foregoing,  Seller shall cause the Company and each of its  Subsidiaries  to (i)
maintain the Assets in their current state of repair,  excepting normal wear and
tear;  (ii)  maintain  the  insurance  covering the Assets in effect on the date
hereof;  (iii)  maintain  the current  business  organization  of the  Company's
business; (iv) use its reasonable best efforts to keep available the services of
the current  Personnel of the Company's  business;  (v) use its reasonable  best
efforts  to  preserve  its  current  business   relationships   with  customers,
suppliers,  distributors  and others having business  dealings with the Company;
(vi) collect accounts receivable and pay accounts payable in the ordinary course
of business,  consistent  with past  practice;  and (vii) comply in all material
respects with all applicable laws.

      (b) Buyer shall not engage in any  practice,  or take,  or fail or omit to
take, any action or enter into any transaction that would cause or result in any
of its representations and warranties set forth in Article V to be untrue at any
time after the date hereof through the Closing Date.

      6.2   Consents

      (a) The Company and Seller shall obtain at the earliest  practicable date,
and prior to the  Closing  Date,  all  consents,  Permits,  waivers,  approvals,
authorizations  and  agreements  of, and promptly to give all notices and effect
all registrations  pursuant to and to make all other filings with or submissions
to,  any  third  parties,  including,   without  limitation,   governmental  and
regulatory  authorities  and  landlords,  necessary or  advisable to  authorize,
approve or permit the  consummation  of the  transactions  contemplated  hereby.
Buyer shall furnish to the Company such  necessary  information  and  reasonable
assistance as the Company may request in connection with their efforts to obtain
such consents, Permits, waivers, approvals, authorizations and agreements and to
prepare  all  necessary  filings  with or  submissions  to,  any third  parties,
including, without limitation, governmental and regulatory authorities.

      (b) It will use all reasonable  efforts to take, or cause to be taken, all
actions and to do, or cause to be done,  all things  necessary  or  advisable to
consummate and make effective the transactions contemplated hereby in accordance
with  the  terms  hereof.  Notwithstanding  anything  in this  Agreement  to the
contrary,  nothing  contained  herein  shall  require  Buyer to  enter  into any
agreement  or  other   arrangement   for  the  financing  of  the   transactions
contemplated  hereby on terms that are not  satisfactory  to Buyer,  in its sole
discretion.

      6.3  Notification  of Certain  Matters.  Between  the date  hereof and the
Closing Date,  each party shall give prompt  written  notice to the other of (i)
the occurrence,  or failure to occur,  of any event which  occurrence or failure
would be  likely to cause  any  representation  or  warranty  contained  in this
Agreement or in any exhibit or schedule hereto,  if made on or as of the date of
such  event or as of the  Closing  Date,  to be untrue or  inaccurate;  (ii) any
Material  Adverse  Change with  respect to such party;  (iii) any failure of any
party or any of its Affiliates,  stockholders or Representatives to comply with,
perform or satisfy any  covenant,  condition or  agreement to be complied  with,
performed by or satisfied by it under this  Agreement or any exhibit or schedule
hereto;  (iv) any event that will  result in, or has a  reasonable  prospect  of
resulting in, the failure to satisfy the conditions  specified in Article VII or
VIII hereof;  (v) any notice of, or other  communication  relating to, a default
(or  event  that,  with  notice  or lapse of time or both,  would  constitute  a
default),  received by the Company or any of its Subsidiaries  subsequent to the
date hereof and prior to the Closing Date, under any material Contract; (vi) any
notice or other  communication from any person alleging that the consent of such
person is or may be required in connection  with the  transactions  contemplated
hereby;  (vii) any  notice or other  communication  from any  foreign,  federal,
state,  county or local  government  or any other  governmental,  regulatory  or
administrative   agency  or  authority  in  connection  with  the   transactions
contemplated hereby;  (viii) any change having a Material Adverse Effect, or the
occurrence  of any  event  that,  so far as can be  foreseen  at the time of its
occurrence,  could result in a change having a Material Adverse Effect;  or (ix)
any matter hereafter  arising that, if existing,  occurring or known at the date
hereof, would have been required to be disclosed to the other parties;  provided
that such disclosure shall not be deemed to cure, or to relieve any party of any
liability  or  obligation  with  respect  to,  any  breach of a  representation,
warranty, covenant or agreement or to satisfy any condition hereunder.

      6.4   No Solicitation; Notification.

      (a) No  Solicitation.  From the date of this Agreement  until the Closing,
Seller and the Company shall have the right to,  directly or  indirectly,  enter
into,  solicit,  initiate or continue any discussions or  negotiations  with, or
encourage or respond to any  inquiries or proposals  by, or  participate  in any
negotiations with, or provide any information to, or otherwise  cooperate in any
other way with, any Personwith  respect to any sale of all or any portion of the
Assets  (other  than sales of  Inventory  in the  ordinary  course of  business,
consistent  with past practices) or the business of, or of any shares of capital
stock of, the Company or any of its Subsidiaries,  or any merger, consolidation,
liquidation,  dissolution or similar transaction involving the Company or any of
its Subsidiaries (a "Proposed Acquisition Transaction"),  provided, however that
the  Seller  and the  Company  shall not  consummate  any  Proposed  Acquisition
Transaction unless this Agreement is terminated by the mutual written consent of
the Buyer and the Seller.  Each of the Company and Seller hereby represents that
it is not now engaged in discussions or  negotiations  with any party other than
Buyer with respect to a Proposed Acquisition Transaction. The Company agrees not
to, and agrees to cause each of its Subsidiaries not to, release any third party
from, or waive any provision of, any confidentiality or standstill  agreement to
which the Company or any of its Subsidiaries is a party.

      (b) Notification. Seller and the Company will (i) immediately notify Buyer
(orally  and in  writing)  if any  written  offer is made,  any  discussions  or
negotiations  are sought to be  initiated,  any inquiry,  proposal or contact is
made or any  information is requested  with respect to any Proposed  Acquisition
Transaction,  (ii) notify Buyer of the terms of any proposal that it may receive
in respect of any such  Proposed  Acquisition  Transaction,  including,  without
limitation, the identity of the prospective purchaser or soliciting party, (iii)
provide  Buyer with a copy of any such offer,  if  written,  and (iv) keep Buyer
informed  of  the  status  of  any   negotiations   regarding  any  such  offer.
Notwithstanding the terms of any Proposed Acquisition Transaction,  Seller shall
consummate  the  transactions  contemplated  by this Agreement with the Buyer as
provided herein.

      6.6   Access to Information.

            (a) From the date of this Agreement  until the Closing Date,  Seller
and the Company will give Buyer and its  authorized  Representatives  (including
counsel,  environmental  and other  consultants,  accountants and auditors) full
access during normal business hours to all facilities,  personnel and operations
and to all Books and Records  (other than a list of vendors,  customer lists and
recipes involved with the Business),  will permit Buyer to make such inspections
as it may  reasonably  require  and will  cause  its  officers  and those of its
Subsidiaries  to furnish Buyer with such  financial and operating data and other
information  with respect to the business and  properties of the Company and its
Subsidiaries  as Buyer may from time to time  reasonably  request.  Seller  will
cause the officers,  employees,  agents and  consultants  of the Company and its
Subsidiaries  to keep the  officers  of Buyer  informed as to the affairs of the
Company and its Subsidiaries.

            (c)  Notwithstanding  any  right of Buyer to fully  investigate  the
affairs of the Company and its Subsidiaries,  and  notwithstanding any knowledge
of facts  determined or determinable by Buyer pursuant to such  investigation or
right  of   investigation,   Buyer  has  the  right  to  rely   fully  upon  the
representations, warranties, covenants and agreements of Seller, the Company and
its Subsidiaries contained in this Agreement.

                                   ARTICLE VII

                       CONDITIONS TO SELLER'S OBLIGATIONS

      The  obligations  of Seller to sell the Stock to Buyer on the Closing Date
and to  consummate  the  transactions  contemplated  hereby  are  subject to the
satisfaction,  on or  prior  to the  Closing  Date,  of  each  of the  following
conditions,  any of which may be waived by  Seller in  accordance  with  Section
10.5:

      7.1  Representations,  Warranties and Covenants.  All  representations and
warranties of Buyer  contained in this Agreement and in any Ancillary  Documents
to which it is a party shall be true and correct in all material respects at and
as of the Closing Date as if such  representations  and warranties  were made at
and as of the Closing  Date,  and Buyer  shall have  performed  in all  material
respects all agreements and covenants required hereby or thereby to be performed
by it prior to or at the Closing Date.

      7.2 No Proceedings or Litigation. No Actions by any governmental authority
or other  person shall have been  instituted  or  threatened  for the purpose of
enjoining  or  preventing,  or that  question  the  validity or legality of, the
transactions   contemplated   hereby  and  that  could  reasonably  be  expected
materially  to  damage  Seller  if  the  transactions  contemplated  hereby  are
consummated.

      7.3   Closing  Deliveries.  Seller  shall have  received,  at or prior to
the Closing, the following:

      (a)   the Security  Agreements and related financing  statements executed
by Buyer, the Company, LFG, Raab-Levitt and SJL;

      (b) a certificate  executed by the Secretary of Buyer certifying as of the
Closing  Date  as  to  (i) a  true  and  correct  copy  of  the  Certificate  of
Incorporation of Buyer, (ii) a true and correct copy of the Bylaws of Buyer, and
(iii) a true and correct  copy of the  resolutions  of the board of directors of
Buyer  authorizing the execution,  delivery and performance of this Agreement by
Buyer and the consummation of the transactions contemplated hereby;

      (c) a certificate  executed by and authorized  officer of Buyer certifying
that, as of the Closing Date,  the  conditions set forth in Sections 7.1 and 7.2
have been satisfied;

      (d)   a copy  of the  Certificate  of  Incorporation  of  Buyer  and  all
amendments  thereto,  certified  as of a recent date by the  Secretary of State
of the State of Delaware;

      (e)   a  certificate  of the  Secretary of State of the State of Delaware
certifying as of a recent date the good standing of Buyer in Delaware;

(f)   a  certificate  of the  Secretary  of  State  of the  State  of  Delaware
certifying as of a recent date the good standing of LGHI in Delaware; and

(g)      the Guarantees executed by all the requisite parties.

                                  ARTICLE VIII

                        CONDITIONS TO BUYER'S OBLIGATIONS

      The  obligations  of Buyer to  purchase  the Stock and to  consummate  the
transactions contemplated hereby are subject to the satisfaction, on or prior to
the  Closing  Date,  of each of the  following  conditions,  any of which may be
waived by Buyer in accordance with Section 10.5:

      8.1   Representations, Warranties and Covenants.

      (a) All representations and warranties of Seller and the Company contained
in this  Agreement  and in any  Ancillary  Documents  to which either is a party
shall be true and  correct in all  material  respects  at and as of the  Closing
Date.

      (b) Seller and the Company shall have  performed in all material  respects
all obligations arising under the agreements and covenants required hereby or by
any  Ancillary  Documents  to be  performed by either of them prior to or at the
Closing Date.

      8.2  Consents.  All  consents,  approvals,  waivers and Permits from third
parties and governmental and regulatory  authorities  required to consummate the
transactions set forth herein or contemplated hereby shall have been obtained.

      8.3 No Proceedings or Litigation. No Actions by any governmental authority
or other  person shall have been  instituted  or  threatened  for the purpose of
enjoining  or  preventing,  or that  question  the  validity or legality of, the
transactions   contemplated   hereby  and  that  could  reasonably  be  expected
materially to damage the Company or materially  adversely affect the value of or
Buyer's  right to own,  operate or control  after the Closing,  the Stock or the
Assets,  business  or  operations  of the Company  and its  Subsidiaries  if the
transactions contemplated hereby are consummated.

      8.4 Material  Changes.  Except as specifically  set forth on Schedule 4.5,
since January 1, 2000 (i) there shall have been no Material  Adverse  Change and
(ii) there  shall have been no event or  development  that could be  expected to
result in such a Material Adverse Change.

      8.5  Indebtedness.  All indebtedness for borrowed money of the Company and
its  Subsidiaries  outstanding  on the Closing Date  (together with all interest
accrued thereon and any prepayment premiums,  penalties or fees) shall have been
repaid in full and canceled,  other than as set forth on Schedule 8.5, and Buyer
shall  have  received  evidence  satisfactory  to it of  such  termination.  All
Encumbrances shall be terminated and the relevant holder shall have delivered to
the  Company  and Buyer an  acknowledgment  of  payment  and  release  and other
evidence   satisfactory  to  Buyer  of  such   termination,   cancellation   and
extinguishment of Encumbrances.

      8.6  Resignations.  Each member of the board of directors and each officer
of the Company and of each  Subsidiary of the Company shall have tendered  their
registrations.

      8.7   Closing  Deliveries.  Buyer  shall  have  received,  at or prior to
the Closing, the following:

      (a) a certificate  executed by the Secretary of the Company  certifying as
of the Closing Date as to true and correct copies of the certificate or articles
of  incorporation  and the bylaws of the Company and of each  Subsidiary  of the
Company;

      (b) a certificate  executed by Seller  certifying  that, as of the Closing
Date, the conditions set forth in Article VIII have been satisfied;

      (c) a copy of the  Certificate  of  Incorporation  of the  Company and all
amendments  thereto,  certified as of a recent date by the Secretary of State of
the State of New Jersey;

      (d) a certificate  of the  appropriate  Secretary of State  certifying the
good standing of the Company and of each of its respective  Subsidiaries  in its
state of incorporation and any other states where it is required to be qualified
to do business;

      (e) a waiver of spousal  rights,  in form and  substance  satisfactory  to
Buyer, with respect to the sale of the Stock, executed by Seller's spouse;

      (f) a general release,  in form and substance  reasonably  satisfactory to
Buyer and its  counsel,  subject to the rights of the  Seller  pursuant  to this
Agreement and the Ancillary Documents, dated as of the Closing Date and executed
by Seller,  of any and all claims that Seller may have against the Company,  its
directors, officers, agents or employees;

      (g)  all  documentation   necessary  to  change  the  Company's  and  each
Subsidiary's bank and other depository  accounts and safe deposit  arrangements,
borrowing  authorizations and the persons authorized to sign thereon, as well as
all documentation necessary to change the trustees on all the Employee Plans, to
such names as Buyer shall have designated;

      (h)   physical  possession of all stock records of the Company  certified
as true and correct and complete by the Secretary of the Company;

      (i)   physical  possession of the minute books and corporate  seal of the
Company;

      (j)   an executed copy of both Lease  Agreements,  which shall be in form
and substance satisfactory to Buyer;

(k) physical  possession  of all Books and Records,  tangible  Assets,  Permits,
 policies,  Contracts or other instruments owned by or pertaining to the Company
 and its current or former  Subsidiaries  that are in the  possession  of Seller
 (other than the corporate minute books of the Subsidiaries);

(l)   the  Consulting  Agreement  with  the  Seller  in the form of  Exhibit  G
                                                                     ----------
            attached hereto;

(m) a letter,  in form and substance  satisfactory to Buyer,  from Empire Kosher
Chicken  stating  that it agrees to continue to do business  with the Company so
long as all accounts payable owed by the Company or the Seller are paid in full,
notwithstanding  anything  contained herein to the contrary,  the failure of the
delivery  of said  letter  shall not be a reason for the Buyer to claim that the
Seller is not entitled to the Break-Up Fee; and

(n)   the  opinion of  Angelini,  Viniar &  Freedman,  P.C.  dated the  Closing
Date, substantially in the form of Exhibit H attached hereto.

                                   ARTICLE IX

                 ACTIONS BY SELLER AND BUYER AFTER THE CLOSING

      9.1 Books and  Records.  Seller and Buyer  agree that each will  cooperate
with and make available to the other party,  during normal business  hours,  all
books  and  records,  information  and  Personnel  (without  any  disruption  of
employment)  retained and remaining in existence after the Closing Date that are
necessary in connection with any tax inquiry,  audit,  investigation or dispute,
any litigation or investigation or any other matter requiring any such books and
records, information or Personnel for any reasonable business purpose. The party
requesting access to any such books and records,  information or Personnel shall
bear all of the out-of-pocket  costs and expenses (including without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee benefits)
reasonably  incurred  in  connection  with  providing  access to such  books and
records, information and Personnel.

      9.2 Survival of Representations;  Etc. All statements contained herein and
in all documents and agreements related hereto or contemplated hereby and in the
Disclosure  Schedule and in any certificate or instrument or document  delivered
by or on behalf of the parties  pursuant to this Agreement or in connection with
the transactions  contemplated  hereby shall be deemed to be representations and
warranties  by the parties  hereunder.  The  representations  and  warranties of
Seller contained herein and as provided in the preceding  sentence shall survive
the Closing  until the third  anniversary  of the  Closing  Date,  unless  Buyer
notifies  Seller in writing  prior to such date of any specific  claim or claims
for alleged breach of any such  representation  or warranty,  in which case such
representation  or warranty  shall  survive with respect to such claim until the
final resolution by settlement, arbitration, litigation or otherwise of any such
claim arising from such alleged  breach;  provided that (i) the  representations
and  warranties  contained in Sections  4.1,  4.2,  4.3, 4.4, 4.6 and 4.12 shall
survive  indefinitely and (ii) the representations  and warranties  contained in
Sections 4.17,  4.18 and 4.22 shall survive  through the  applicable  statute of
limitations.  The representations and warranties of Buyer contained herein shall
survive the Closing,  until the third  anniversary  of the Closing Date,  unless
Seller  notifies  Buyer in writing  prior to such date of any specific  claim or
claims for alleged breach of any such representation or warranty,  in which case
such  representation  or warranty shall survive with respect to such claim until
the final resolution by settlement,  arbitration, litigation or otherwise of any
such claim arising from such alleged breach. The covenants and agreements of the
parties  contained  herein  shall  survive the Closing  indefinitely,  except as
provided herein.

      9.3 Seller's Agreement to Indemnify.  Subject to the terms, conditions and
limitations  set forth in this  Article IX, from and after the  Closing,  Seller
shall defend,  indemnify and hold harmless Buyer, its Affiliates  (including the
Company and its Subsidiaries)  and, if applicable,  their respective  directors,
officers,  employees,  attorneys,  representatives  and agents,  and each of the
successors  and assigns of any of the foregoing  (each,  a "Buyer  Indemnitee"),
from and against any Losses  imposed on,  sustained,  incurred or suffered by or
asserted  against  any Buyer  Indemnitee  that  arise out of or result  from any
breach of any of the representations,  warranties,  covenants or agreements made
by Seller in this Agreement, or in any certificate,  exhibit or other instrument
contemplated  by this Agreement and delivered by Seller in connection  herewith,
as well as any Losses arising  directly or indirectly as a result of action by a
third party (on its own initiative  without any guidance or assistance  from the
Buyer) in  connection  with the contra  accounts  (said  agreement by the Seller
shall survive until the applicable  statute of limitations  for each  particular
contra account); provided, however, that Losses resulting from any breach of the
representations  made in Section 4.18  (relating  to Taxes and related  matters)
shall be governed by Section 9.6 and the remedies  therein  shall be  exclusive.
The  indemnity  provided  for in this  Section  9.3 is not  limited  to  matters
asserted by third parties against any Buyer Indemnitee,  but includes claims for
Losses  incurred  or  sustained  by  any  Buyer  Indemnitee  in the  absence  of
third-party claims.

      9.4 Buyer's Agreement to Indemnify.  Subject to the terms,  conditions and
limitations  set forth in this  Article  IX, from and after the  Closing,  Buyer
shall defend,  indemnify and hold harmless  Seller and his  Affiliates,  and, if
applicable, their respective directors, officers, attorneys, representatives and
agents and each of the successors  and assigns of any of the foregoing  (each, a
"Seller  Indemnitee"),  from and  against  any  Losses  imposed  on,  sustained,
incurred or suffered by or asserted against (i) any Seller Indemnitee that arise
out of or  result  from any  breach of any of the  representations,  warranties,
covenants or agreements made by Buyer in this Agreement,  or in any certificate,
exhibit or other  instrument  contemplated  by this  Agreement  and delivered by
Buyer in  connection  herewith  and (ii)  against  the Seller by reason of or in
connection  with a claim of a third party  arising out of any action,  inaction,
event, condition or liability occurring after the Closing Date.

      9.5   Claim Procedures.

      (a) Promptly after receipt by any person of notice of the  commencement of
any action or claim in respect of which such person  (referred  to herein as the
"Indemnified Party") intends to seek indemnification hereunder, such Indemnified
Party  shall  notify  the  other  party  hereto   (referred  to  herein  as  the
"Indemnifying  Party")  thereof in  writing,  and the  Indemnifying  Party shall
notify the  Indemnified  Party in writing  promptly  (but in any event not later
than seven (7) days) after receipt of such notice whether it agrees to undertake
the defense thereof.  Upon its giving such notice,  the Indemnifying Party shall
be  entitled  to assume  control  of the  defense  of such  action or claim with
counsel  reasonably  satisfactory to the Indemnified Party;  provided,  however,
that:

            (i) the  Indemnified  Party shall be entitled to  participate in the
defense of any such action or claim and to employ  counsel at its own expense to
assist in the  handling of such  action or claim,  provided  that,  if the named
parties in  connection  with any such action or claim  (including  any impleaded
parties)  include both an Indemnified  Party and an  Indemnifying  Party and the
Indemnified  Party shall have been  advised by its own counsel that there may be
one or more legal defenses available to it that are different from or additional
to those available to any Indemnifying  Party, then in such case the Indemnified
Party shall have the right (at the expense of the Indemnifying  Party) to assume
control of such defense on its own behalf,  it being understood,  however,  that
the  Indemnifying  Party shall not, in connection  with such action or claim, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel); and

            (ii) without the consent of an Indemnified  Party,  no  Indemnifying
Party shall  consent to the entry of any  judgment or enter into any  settlement
that does not  include  as an  unconditional  term  thereof  the  giving by each
claimant or plaintiff to such Indemnified  Party of a release from all liability
in respect  of such  action or claim or if,  pursuant  to or as a result of such
consent or  settlement,  injunctive or other  equitable  relief would be imposed
against  such  Indemnified  Party or such  judgment or  settlement  could in its
reasonable opinion materially interfere with the business,  operations or assets
of such Indemnified Party.

      (b) If the  Indemnifying  Party does not assume  control of the defense of
such claim in accordance with the foregoing  provisions,  the Indemnified  Party
shall  have the  right  to  defend  such  claim  in such  manner  as it may deem
appropriate at the reasonable cost and expense of the  Indemnifying  Party,  and
the Indemnifying Party will promptly reimburse the Indemnified Party therefor in
accordance with this Article IX;  provided that the Indemnified  Party shall not
be entitled to consent to the entry of any judgment or enter into any settlement
of such claim without the prior written  consent of the  Indemnifying  Party if,
pursuant to or as a result of such consent or  settlement,  injunctive  or other
suitable relief would be imposed against the Indemnifying Party or such judgment
or settlement  could in its  reasonable  opinion  materially  interfere with the
business, operations or assets of the Indemnifying Party.

      (c)  Notwithstanding  the foregoing,  the  Indemnified  Party,  during the
period  the  Indemnifying  Party is  determining  whether to elect to assume the
defense  of a matter  covered  by this  Section  9.5,  may take such  reasonable
actions  (at the expense of the  Indemnifying  Party) as it deems  necessary  to
preserve  any and all rights with  respect to the matter,  without  such actions
being  construed as a waiver of the  Indemnified  Party's  rights to defense and
indemnification  pursuant  to this  Agreement.  No failure to provide any notice
required  by this  Section  9.5  shall  relieve  the  Indemnifying  Party of any
obligation to indemnify the Indemnified  Party  hereunder,  except to the extent
that the Indemnifying Party is actually prejudiced thereby.

      (d) The Indemnifying Party shall pay all costs and expenses, including but
not limited to reasonable  attorneys' fees, incurred by any Indemnified Party in
enforcing its indemnification rights as provided in this Agreement.

      (e) The  indemnification  obligations  of Seller and Buyer,  respectively,
under this Article IX, shall be limited to claims made prior to the last date of
survival thereof referred to in Section 9.2.

      (f)  Characterization  of Payment.  Any indemnity payment made pursuant to
this  Article IX shall be treated  by Buyer and Seller as an  adjustment  to the
Purchase Price.

      9.6   Tax Indemnification and Other Tax Matters.

      (a) Seller shall  indemnify,  save and hold harmless each Buyer Indemnitee
from and against any and all Losses  incurred in connection  with or arising out
of (i) the inaccuracy or breach of any  representation  or warranty of or by the
Company or Seller  contained  in Section 4.18 and (ii) Taxes with respect to all
Tax periods  ending on or prior to December 31, 1999.  Notwithstanding  anything
contained herein to the contrary,  all Taxes and filings in connection therewith
(other than  corporate  income tax) have been timely paid and/or  filed prior to
the Closing Date.

      (b) In the event that Buyer,  the Company or any Subsidiary of the Company
receives  notice of a claim against the Company or any Subsidiary with regard to
a Tax period that ends prior to December 31, 1999 from any taxing authority, the
Company  shall  promptly  notify  Seller  of  such  claim.  Notwithstanding  the
foregoing,  the  failure to give such  notice  shall not  relieve  Seller of the
obligation to indemnify Buyer,  the Company or any such  Subsidiary,  unless the
failure to provide  such notice  shall  prelude  the contest of such claim.  The
Company shall at Seller's  expense  provide,  as promptly as  practicable,  such
information and assistance as is reasonably necessary in defense of the claim or
audit.

      (c) Buyer or the Company  shall have control over the conduct of any audit
or  other  proceeding  with  respect  to  Taxes  of  the  Company  or any of its
Subsidiaries.

      (d) Buyer and the Company, on the one hand, and Seller, on the other hand,
agree not to enter into any agreement or settlement with a Tax jurisdiction with
respect to any audit or dispute  with  respect to any Tax as to which  Seller is
required to indemnify any Buyer Indemnitee  pursuant to this Section 9.6 without
written consent from the other party, which shall not be unreasonably withheld.

      (e) After the Closing, except as required by law, neither the Company, any
of its  Subsidiaries,  nor Buyer  shall,  without the prior  written  consent of
Seller, (i) file or permit to be filed any amended Tax Return by or on behalf of
the Company and/or any such Subsidiary for any period for which the original Tax
Return was filed before the Closing or (ii) take any other action  affecting the
Company's  and/or any such  Subsidiary's  Taxes for any such  period;  provided,
however,  that the Company or any of its  Subsidiaries or Buyer may take actions
described  in  clauses  (i) or (ii) if it would not hold  Seller  liable for any
Taxes or other  liability  to the extent  such Taxes or other  liability  result
solely from any such action.

9.7  Further  Assurances.  Each of  Buyer,  Seller  and the  Company  shall  use
 commercially  reasonable  efforts  to take  all  actions  and to do all  things
 necessary,   proper  or  advisable  to  consummate   and  make   effective  the
 transactions  contemplated by this Agreement  (including,  without  limitation,
 satisfying the closing  conditions in Articles VII and VIII hereto).  Following
 the  Closing,   Seller  agrees  to  execute  such  documents,   instruments  or
 conveyances  and take such actions as may be  requested by Buyer and  otherwise
 cooperate in a reasonable  manner with Buyer,  its successors and assigns,  its
 Affiliates and their respective  Representatives  in connection with any action
 that may be  necessary  or  advisable  to carry  out the  provisions  hereof or
 transactions contemplated hereby.

9.8 Remedies Cumulative;  Offset. The remedies provided in this Article IX shall
 be cumulative and shall not preclude assertion by any party hereto of any other
 rights or the  seeking  of any other  remedies  against  and the party  hereto.
 Without limiting any remedy  otherwise  available to Buyer under this Agreement
 or at law or equity,  Buyer shall be entitled to offset against any amounts due
 Seller, including, without limitation, any amounts due Seller under the Notes.

9.9 Financial  Information;  Default. The Company agrees that for as long as the
 Notes shall remain  outstanding,  every month,  no later than the  twenty-first
 (21st) day of the month,  Buyer  shall  provide  to Seller  complete  financial
 statements for the Buyer,  Company,  LFG, SJL and Raab-Levitt for the preceding
 month.  The Buyer warrants that the net worth (as determined in accordance with
 generally accepted accounting principles) of all of said companies shall not be
 less than the "Permitted  Value". The Permitted Value shall be the net worth of
 said  companies on the Closing Date as  determined  by JH Cohn LLP prior to the
 Closing.  If the net worth (as determined in accordance with generally accepted
 accounting  principles)  of said  companies  falls  more  than  10%  below  the
 Permitted  Value,  Seller  shall give Buyer notice of the  shortfall  and Buyer
 shall  have  three (3)  months  from  receipt  of the  notice to  correct  such
 deficiency.  If, within three (3) months,  net worth of said companies is still
 below the Permitted Value, such failure shall be deemed a default hereunder and
 under the Ancillary Documents.  Additionally, Seller shall have the right, from
 to time to time, during regular business hours, at Buyer's office, on notice to
 Buyer,  to review the books and  records of the Buyer,  LFG,  Company,  SJL and
 Raab-Levitt;  and (ii) the  Company  shall  not make any  distributions  to its
 stockholders. The provisions of Section 9.9 shall survive the Closing.

                                    ARTICLE X

                                  MISCELLANEOUS

      10.1  Termination.

      (a)   Termination.  This  Agreement  may be  terminated at any time prior
to Closing:

            (i)   By mutual written consent of Buyer and Seller;

            (ii)  By  Seller  if the  Closing  does not occur on or prior to the
                  sixtieth  (60) day from the date hereof  unless the failure of
                  the Closing to occur shall be due to the failure of the Seller
                  to observe  the  covenants  and  agreements  set forth in this
                  Agreement.  If Seller  disputes the reasons for the failure of
                  Closing  to  occur,   the  dispute   shall  be   submitted  to
                  arbitration pursuant to paragraph 10.14;

            (iii) Without  any action on the part of Buyer or Seller,  if on the
                  due date of the Deposit Note said Note is not paid in full; or

            (iv)  By either Buyer or Seller if a court of competent jurisdiction
                  or other governmental  authority or instrumentality shall have
                  issued an order,  decree or  ruling,  or shall  have taken any
                  other action,  having the effect of restraining,  enjoining or
                  otherwise prohibiting the Closing.

      (b)   In the Event of  Termination.  In the event of  termination of this
Agreement:

            (i) Each party shall redeliver all documents,  work papers and other
material of any other party relating to the  transactions  contemplated  hereby,
whether obtained before or after the execution  hereof,  to the party furnishing
the same;

            (ii) No confidential  information received by any party with respect
to the business of any other party or its  Affiliates  shall be disclosed to any
third party, unless required by law;

            (iii) If this Agreement shall be terminated pursuant to Section 10.l
hereof,  all  obligations  of the  parties  hereto  under this  Agreement  shall
terminate  and there  shall be no  liability  of any  party  hereto to any other
party,  and in any event each party  hereto shall bear its own fees and expenses
incurred in connection with the examination, negotiation, preparation, execution
and  performance of this  Agreement and the  transactions  contemplated  hereby,
except as  expressly  provided  in  Section  10.1(b)(iv)  below;  provided  that
notwithstanding  anything contained herein to the contrary,  neither party shall
be relieved  or  released  from any  liabilities  or damages  arising out of its
willful breach of any provision of this Agreement.

            (iv) Notwithstanding  anything contained herein to the contrary,  in
the  event  that  this   Agreement  is   terminated   as  described  in  Section
10.1(a)(iii),  Seller  shall be  entitled  to the  Break-Up  Fee as his sole and
exclusive remedy of the termination of this Agreement.

      10.2  Assignment.  Neither  this  Agreement  nor  any  of  the  rights  or
obligations  hereunder  may be assigned by any party  without the prior  written
consent of all other  parties  to this  Agreement,  except  that  Seller  hereby
consents to the  assignment  by Buyer of its rights  pursuant to this  Agreement
(and all  other  Ancillary  Documents),  in  whole or in part to any  Affiliate,
successor in interest or Subsidiary  of Buyer.  Subject to the  foregoing,  this
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their respective Affiliates,  Representatives,  heirs, legatees,  successors
and  permitted  assigns,  and no other person  shall have any right,  benefit or
obligation hereunder.

      10.3 Notices. All notices, requests, demands and other communications that
are required or may be given under this Agreement  shall be in writing and shall
be deemed to have been duly given when  received if personally  delivered;  when
transmitted  if  transmitted  by Telecopy,  electronic  or digital  transmission
method, upon receipt of telephonic or electronic confirmation;  the day after it
is sent,  if sent for next day  delivery  to a domestic  address  by  recognized
overnight delivery service (e.g., Federal Express); and upon receipt, if sent by
certified or registered  mail,  return  receipt  requested.  In each case notice
shall be sent to:

      If to Seller or to the Company (prior to Closing) , addressed to:

            Marvin Raab
            429 Coolidge Road
            Cherry Hills, New Jersey  08602

      With a copy to:

            Angelini, Viniar & Freedman, L.L.P.
            413 Route 70 East
            Cherry Hills, NJ  08034
            Telecopy No.: 856-429-0020
            Attention:   Richard P. Freedman, Esq.

      If to Buyer or (subsequent to the Closing) to the Company, addressed to:

            Liberty Processing & Distribution, Inc.
            c/o Liberty Group Holdings, Inc.
            11 52nd Street
            Brooklyn, NY  11232
            Telecopy No.: 718-492-3482
            Attention:  Barry Hawk, President

            With a copy to:

            Herrick, Feinstein LLP
            2 Park Avenue
            New York, NY  10016
            Telecopy No.: 212-592-1500
            Attention:  David Lubin, Esq.

or to such other place and with such other copies as either party may  designate
as to itself by written notice to the others.

      10.4 Choice of Law. This Agreement shall be construed and interpreted, and
the rights of the parties  determined,  in accordance with the laws of the State
of New Jersey (without reference to its choice of law provisions).

      10.5 Entire Agreement;  Amendments and Waivers.  This Agreement,  together
with all  exhibits  and  schedules  hereto  and any  other  Ancillary  Documents
(including the Disclosure Schedule),  constitutes the entire agreement among the
parties  pertaining  to the  subject  matter  hereof  and  supersedes  all prior
agreements,  understandings,  negotiations  and  discussions,  whether  oral  or
written,  of the parties.  No amendment,  supplement,  modification or waiver of
this Agreement  shall be binding  unless  executed in writing by the party to be
bound thereby.  No waiver of any of the  provisions of this  Agreement  shall be
deemed or shall  constitute a waiver of any other  provision  hereof (whether or
not  similar),  nor shall such waiver  constitute  a  continuing  waiver  unless
otherwise expressly provided.

      10.6 Multiple Counterparts;  Facsimiles. This Agreement may be executed in
one or more counterparts,  each of which shall be deemed an original, but all of
which  together  shall  constitute  one  and  the  same  instrument.   Facsimile
signatures to this  Agreement  shall be of the same force and effect as original
signatures.

      10.7  Invalidity.  In the  event  that  any one or more of the  provisions
contained  in this  Agreement  or in any other  instrument  referred  to herein,
shall,  for any reason,  be held to be invalid,  illegal or unenforceable in any
respect,  then  to  the  maximum  extent  permitted  by  law,  such  invalidity,
illegality  or  unenforceability  shall not affect any other  provision  of this
Agreement or any other such instrument.

      10.8 Titles. The titles, captions or headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.

      10.9  [Intentionally Omitted].

      10.10  Confidential   Information.   The  parties   acknowledge  that  the
transaction  described  herein  is of a  confidential  nature  and  shall not be
disclosed  except to their  consultants,  advisors,  lenders or other  financial
sources and Affiliates,  or as required by law, or to any prospective transferee
referred  to in  Section  10.2,  until  such time as the  parties  make a public
announcement  regarding the  transaction.  In connection with the negotiation of
this  Agreement,  the  preparation  for  the  consummation  of  the  transaction
contemplated  hereby, and the performance of obligations  hereunder,  each party
acknowledges  that it will have access to confidential  information  relating to
the other  party.  Each party  shall  treat such  information  as  confidential,
preserve the confidentiality  thereof and not disclose such information,  except
to any of the  persons  referred  to in the first  sentence  of this  Section in
connection with the transactions  contemplated hereby, and except as required by
law.

      10.11 Fees and Expenses.  Concurrently with the Closing,  (a) Seller shall
pay all of the fees,  costs and  expenses  incurred  by Seller  and the  Company
incident  to or in  connection  with the  negotiation,  preparation,  execution,
delivery  and  performance  of  this  Agreement  and  the  consummation  of  the
transactions  contemplated  hereby and any transfer  taxes  (including,  without
limitation, with respect to real property, if any) and any sales, use, recording
or other taxes imposed by reason of the transactions contemplated hereby and any
deficiency,  interest or penalty  asserted  with  respect  thereto and (b) Buyer
shall  pay all of the  fees,  costs  and  expenses  incurred  by  Buyer  and its
Affiliates  incident  to or in  connection  with the  negotiation,  preparation,
execution,  delivery and  performance of this Agreement and the  consummation of
the transactions contemplated hereby.

      10.12 Cumulative Remedies.  All rights and remedies of either party hereto
are  cumulative  of each other and of every other right or remedy such party may
otherwise  have at law or in equity,  and the  exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent  exercise of
other rights or remedies.

      10.13   Jurisdiction   and  Consent  to  Service.   Without  limiting  the
jurisdiction or venue of any other court,  each of the parties hereby (i) agrees
that any suit, action or proceeding arising out of or relating to this Agreement
may be  brought  solely  in the state or  federal  courts  of New  Jersey;  (ii)
consents to the exclusive jurisdiction of each such court in any suit, action or
proceeding  relating  to or  arising  out of this  Agreement;  (iii)  waives any
objection  that is may  have to the  laying  of  venue in any  suit,  action  or
proceeding  in any such court;  and (iv) agrees that  service of any court paper
may be made in such manner as may be  provided  under  applicable  laws or court
rules governing service of process.

      10.14 Arbitration. (a) Any controversy, claim or dispute arising out of or
relating  to  this  Agreement  or the  breach,  termination,  enforceability  or
validity hereof,  including without limitation the determination of the scope or
applicability  of the  agreement to arbitrate  set forth in this Section  10.14,
shall be determined  exclusively  by binding  arbitration  in New Jersey,  which
arbitration  shall  be  governed  by  the  rules  of  the  American  Arbitration
Association  (the  "AAA").  There  shall be a  single  arbitrator  who  shall be
mutually selected by the parties.

            (b)  It is the  express  desire  of  the  parties  hereto  that  the
arbitration  hearing  will be held and a  determination  will be rendered by the
arbitrator in as expeditious and economical manner as is feasible.  Thus, if the
subject  matter of the dispute that is submitted to the  arbitrator is addressed
by, or arises in connection with this Agreement,  or any certificate,  schedule,
document  or  other  writing  delivered  pursuant  hereto   (collectively,   the
"Transaction  Documents"),  then no  discovery  shall be  conducted by any party
other than as to the express  provisions  of such  documents  and,  although the
parties  may  file  with  the  arbitrator  such  briefs  and  affidavits  (  the
"Supporting  Documents") as each party hereto may deem appropriate,  the parties
agree to limit their respective  presentations of the dispute at the arbitration
hearing to the Transaction Documents and the Supporting Documents.  Furthermore,
the arbitrator  shall be limited in rendering a determination  of the dispute to
reviewing  the  Transaction  Documents  and  the  Supporting  Documents.  If the
arbitrator  determines  that testimony is required in connection with the review
of the Transaction Documents and the Supporting Documents,  then testimony shall
be taken at the arbitration  hearing, as permitted by the arbitrator,  in his or
her sole discretion.

            (c) No  provision  of, nor the  exercise of any rights  under,  this
Section  10.14  shall  limit the right of any party to request and obtain from a
court of  competent  jurisdiction  in New Jersey  (which  shall  have  exclusive
jurisdiction for purposes of this Section 10.14 (c)) before, during or after the
pendency of any  arbitration,  provisional  or  ancillary  remedies  and relief,
including, but not limited to, injunctive or mandatory relief or the appointment
of a  receiver.  The  institution  and  maintenance  of an  action  or  judicial
proceeding  for, or pursuit of,  provisional  or  ancillary  remedies  shall not
constitute a waiver of the right of any party,  even if it is the plaintiff,  to
submit the  dispute to  arbitration  if such party would  otherwise  have such a
right.  Each of the parties  hereby  submits  unconditionally  to the  exclusive
jurisdiction  of the state and the federal  courts located in New Jersey for the
purposes of this provision,  waives  objection to the venue of any proceeding in
any such  court or that  any such  court  provides  an  inconvenient  forum  and
consents to the service of process  upon it in  connection  with any  proceeding
instituted  under this Section  10.14 (c) in the same manner as provided for the
giving of notice hereunder.

            (d)  Judgment  upon the award  rendered  may be entered in any court
having  jurisdiction.  The parties hereby expressly  consent to the nonexclusive
jurisdiction  of the state and  federal  courts  situated in New Jersey for this
purpose and waive objection to the venue of any proceeding in such court or that
such court provides an inconvenient forum.

            (e)  Each  of  the  parties,  shall,  subject  to the  award  of the
arbitrator,  pay an equal share of the  arbitrators'  fees. The arbitrator shall
have the  power to award  recovery  of all  costs  (including  attorneys'  fees,
administrative fees, arbitrator's fee and court costs) to the prevailing party.

      10.15 WAIVER OF JURY TRIAL.  TO THE FULLEST  EXTENT  PERMITTED BY LAW, THE
PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION  BASED UPON OR ARISING OUT OF THIS  AGREEMENT OR ANY DEALINGS
BETWEEN THEM  RELATING TO THE SUBJECT  MATTER OF THIS  TRANSACTION.  THE PARTIES
HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND THAT MIGHT,  BUT
FOR THIS  WAIVER,  BE  REQUIRED OF ANY OF THE OTHER  PARTIES.  THE SCOPE OF THIS
WAIVER IS INTENDED TO BE  ALL-ENCOMPASSING  OF ANY AND ALL DISPUTES  THAT MAY BE
FILED IN ANY COURT  AND THAT  RELATE TO THE  SUBJECT  MATTER OF THIS  AGREEMENT,
INCLUDING  WITHOUT  LIMITATION,  CONTRACT  CLAIMS,  TORT CLAIMS,  BREACH OF DUTY
CLAIMS,  AND ALL OTHER  COMMON LAW AND  STATUTORY  CLAIMS.  THE  PARTIES  HERETO
ACKNOWLEDGE  THAT THIS WAIVER IS A MATERIAL  INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP,  THAT EACH HAS ALREADY  RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT  AND THAT EACH WILL  CONTINUE  TO RELY ON THE WAIVER IN THEIR  RELATED
FUTURE DEALINGS.  THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED  THIS WAIVER AND  VOLUNTARILY  WAIVES ITS HIS, AS THE CASE MAY BE, JURY
TRIAL  RIGHTS  FOLLOWING   CONSULTATION  WITH  LEGAL  COUNSEL.  THIS  WAIVER  IS
IRREVOCABLE,  MEANING THAT IT MAY NOT BE MODIFIED  EITHER  ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,  RENEWALS,  SUPPLEMENTS
OR  MODIFICATIONS  TO THIS  AGREEMENT  AND TO ANY OTHER  DOCUMENTS OR AGREEMENTS
RELATING TO THE  TRANSACTION  CONTEMPLATED  HEREBY.  IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

       [Remainder of page intentionally omitted; signature pages follow]

<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Stock  Purchase
Agreement to be duly executed on their respective behalves,  by their respective
officers  thereunto  duly  authorized,  all as of the day and year  first  above
written.

                                    COMPANY:

                                    PHILADELPHIA FOODS, INC.

                                    By:  /s/ Marvin Raab
                                    Name:  Marvin Raab
                                    Title:  President

                                     BUYER:

                                    LIBERTY PROCESSING & DISTRIBUTION, INC.

                                    By: /s/ Dennis Lane
                                    Name: Dennis Lane
                                    Title: President

                                     SELLER:

                                    /s/ Marvin Raab
                                    MARVIN RAAB

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