Artistic Greetings Inc – ‘PREM14A’ on 1/26/98

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Preliminary Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Solicitation Material -- Merger    118    663K 
                          or Acquisition                                         

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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

   Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934

Filed by the Registrant  /X/                                                    

Filed by a Party other than the Registrant  / /                                 

Check the appropriate box:                                                      

/X/  Preliminary Proxy Statement                                                

/ /  Confidential, for Use of the Commission Only (as permitted by Rule         
14a-6(e)(2))                                                          

/ /  Definitive Proxy Statement                                                 

/ /  Definitive Additional Materials                                            

/ /  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

ARTISTIC GREETINGS INCORPORATED 
(Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------- 
(Name of Person(s) Filing Proxy Statement if other than the Registrant) 

Payment of Filing Fee (Check the appropriate box):                              

/ /  No fee required.                                                           

                                                        [Enlarge/Download Table]

/X/  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.                      
                                                                                                   
                                                                           PROPOSED                
                                           NUMBER    PER SHARE MERGER       MAXIMUM       AMOUNT OF
          TITLE OF SECURITIES             OF SHARES    CONSIDERATION    AGGREGATE VALUE  FILING FEE
Common Stock, $.10 par value............  5,843,406      $    5.70        $33,307,414     $   6,662

/ /  Fee paid previously with preliminary materials.                            

/ /  Check box if any part of the fee is offset as provided by Exchange Act Rule
  0-11(a)(2) and identify the filing for which the offsetting fee was paid
    previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.                   

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ARTISTIC GREETINGS INCORPORATED 
ONE KOMER CENTER
ELMIRA, NEW YORK 14902

[           ], 1998                                                             

DEAR STOCKHOLDER:                                                               

  You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Artistic Greetings Incorporated, a Delaware corporation   
(the "Company"), to be held on [        ], 1998, at 10:00 a.m., Eastern time, at
[          ], New York, New York, for the following purposes:                   

  1. To consider and vote upon a proposal (the "Merger Proposal") to
    approve and adopt the Agreement and Plan of Merger (the "Merger Agreement"),
attached as Annex I to the accompanying Proxy Statement, dated as of    
   December 21, 1997, among MDC Communications Corporation, an Ontario, Canada
corporation ("MDC"), AGI Acquisition Co., a Delaware corporation and a  
 wholly-owned subsidiary of MDC ("Newco"), and the Company, and to approve
consummation of the merger of Newco with and into the Company (the      
"Merger"), pursuant to which (a) the Company will be the surviving      
 corporation and will become a wholly-owned subsidiary of MDC and (b) each
    outstanding share of common stock, par value $0.10 per share (the "Shares"),
    of the Company (other than stock of the Company owned by the Company, MDC or
 any of their respective subsidiaries) will be converted into the right to
receive $5.70 in cash (the "Merger Consideration"), without interest.   
Consummation of the transactions contemplated by the Merger Agreement is
conditioned upon consummation of the Asset Sale described below.        

      2. To consider and vote upon a proposal (the "Asset Sale Proposal") to
approve and adopt the Asset Purchase Agreement (the "Asset Purchase     
    Agreement"), attached as Annex II to the accompanying Proxy Statement, dated
 as of December 21, 1997, between Artistic Direct Incorporated, a New York
 corporation ("ADI"), and the Company, and to approve the sale (the "Asset
 Sale") of certain assets relating to the personalized product and catalog
  businesses of the Company (the "P&C Businesses") for the consideration set
   forth therein and the assumption of certain liabilities relating to the P&C
Businesses, on the terms and conditions more fully described therein.   
Consummation of the transactions contemplated by the Asset Purchase     
Agreement is conditioned upon consummation of the Merger.               

        3. To consider a proposal to adjourn the Special Meeting if necessary to
    permit further solicitation of proxies in the event there are not sufficient
votes at the time of the Special Meeting to approve and adopt the Merger
    Agreement and the Asset Purchase Agreement and to approve the Merger and the
Asset Sale.                                                             

  4. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.           

In the event the Stockholders of the Company (i) vote in favor of the   
proposal to approve and adopt the Merger Agreement and approve consummation of  
the Merger but vote against the proposal to approve and adopt the Asset Purchase
Agreement and approve consummation of the Asset Sale or (ii) vote in favor of   
the proposal to approve and adopt the Asset Purchase Agreement and approve      
consummation of the Asset Sale but vote against the proposal to approve and     
adopt the Merger Agreement and approve consummation of the Merger, neither      
transaction will be consummated. Subject to certain conditions, holders of      
approximately 45% of the Shares of the Company have agreed with MDC to vote     
their Shares in favor of approval and adoption of the Merger Agreement, the     
Merger, the Asset Purchase Agreement and the Asset Sale.                        

    The items of business to be considered at the Special Meeting are more fully
described in the proxy statement (the "Proxy Statement") and Notice of Special  
Meeting of Stockholders accompanying this letter. Details of the Merger         
Agreement, the Merger, the Asset Purchase Agreement, the Asset Sale and other   
important information concerning the Company appear in the accompanying Proxy   
Statement. Please give this material your careful attention.                    

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For the reasons set forth in the attached Proxy Statement, the Board of 
Directors of the Company, based on the unanimous recommendation of the two      
non-interested directors and of a special committee of the Board of Directors,  
has approved the Merger Agreement and the Asset Purchase Agreement and          
consummation of the Merger and the Asset Sale and has determined that the Merger
is fair and in the best interests of the Company and its Stockholders and       
recommends a vote by the Stockholders of the Company for approval and adoption  
of the Merger Agreement and the Asset Purchase Agreement and approval of        
consummation of the Merger and the Asset Sale. Consummation of the transactions 
contemplated by the Merger Agreement is conditioned upon consummation of the    
Asset Sale.                                                                     

   Accordingly, whether or not you plan to attend the Special Meeting, we urge
you to complete, sign and date the accompanying proxy card and return it in the 
enclosed postage-prepaid envelope. You may revoke your Proxy in the manner      
described in the accompanying Proxy Statement at any time before it has been    
voted at the Special Meeting. If you attend the Special Meeting, you may vote in
person even if you have previously returned your proxy card. Your prompt        
cooperation is greatly appreciated.                                             

Sincerely,                                                                      
Thomas C. Wyckoff                                                               
Assistant Secretary                                                             
Elmira, New York                                                                
[           ], 1998                                                             

   THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED 
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.               

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ARTISTIC GREETINGS INCORPORATED 
ONE KOMER CENTER
ELMIRA, NEW YORK 14902

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 
TO BE HELD [           ], 1998

TO THE STOCKHOLDERS OF                                                          
ARTISTIC GREETINGS INCORPORATED:                                                

NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders (the  
"Special Meeting") of Artistic Greetings Incorporated, a Delaware corporation   
(the "Company"), will be held at [         ], New York, New York, on            
[           ], 1998, at 10 a.m., Eastern time, for the following purposes:      

   1.  To consider and vote upon a proposal (the "Merger Proposal") to
    approve and adopt the Agreement and Plan of Merger (the "Merger Agreement"),
attached as Annex I to the accompanying Proxy Statement, dated as of    
   December 21, 1997, among MDC Communications Corporation, an Ontario, Canada
corporation ("MDC"), AGI Acquisition Co., a Delaware corporation and a  
 wholly-owned subsidiary of MDC ("Newco"), and the Company, and to approve
consummation of the merger of Newco with and into the Company (the      
"Merger"), pursuant to which (a) the Company will be the surviving      
 corporation and will become a wholly-owned subsidiary of MDC and (b) each
    outstanding share of common stock, par value $0.10 per share (the "Shares"),
    of the Company (other than stock of the Company owned by the Company, MDC or
 any of their respective subsidiaries) will be converted into the right to
receive $5.70 in cash (the "Merger Consideration"), without interest.   
Consummation of the transactions contemplated by the Merger Agreement is
conditioned upon consummation of the Asset Sale described below.        

       2.  To consider and vote upon a proposal (the "Asset Sale Proposal") to
approve and adopt the Asset Purchase Agreement (the "Asset Purchase     
    Agreement"), attached as Annex II to the accompanying Proxy Statement, dated
 as of December 21, 1997, between Artistic Direct Incorporated, a New York
 corporation ("ADI"), and the Company, and to approve the sale (the "Asset
 Sale") of certain assets relating to the personalized product and catalog
  businesses of the Company (the "P&C Businesses") for the consideration set
   forth therein and the assumption of certain liabilities relating to the P&C
Businesses, on the terms and conditions more fully described therein.   
Consummation of the transactions contemplated by the Asset Purchase     
Agreement is conditioned upon consummation of the Merger.               

      3.  To consider a proposal to adjourn the Special Meeting if necessary
to permit further solicitation of proxies in the event there are not    
    sufficient votes at the time of the Special Meeting to approve and adopt the
   Merger Agreement and the Asset Purchase Agreement and to approve the Merger
and the Asset Sale.                                                     

   4.  To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.           

In the event the Stockholders of the Company (i) vote in favor of the   
proposal to approve and adopt the Merger Agreement and approve consummation of  
the Merger but vote against the proposal to approve and adopt the Asset Purchase
Agreement and approve consummation of the Asset Sale or (ii) vote in favor of   
the proposal to approve and adopt the Asset Purchase Agreement and approve      
consummation of the Asset Sale but vote against the proposal to approve and     
adopt the Merger Agreement and approve consummation of the Merger, neither      
transaction will be consummated. Subject to certain conditions, holders of      
approximately 45% of the Shares of the Company have agreed with MDC to vote     
their Shares in favor of approval and adoption of the Merger Agreement, the     
Merger, the Asset Purchase Agreement and the Asset Sale.                        

    Only Stockholders of record at the close of business on [           ], 1998,
will be entitled to notice of, and to vote at, the Special Meeting.             

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All Stockholders are cordially invited to attend the Special Meeting in 
person; however, to ensure your representation at the Special Meeting you are   
urged to mark, sign, date and return the enclosed proxy card as promptly as     
possible in the postage prepaid envelope enclosed for that purpose. YOU MAY     
REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AT
ANY TIME BEFORE IT HAS BEEN VOTED AT THE SPECIAL MEETING. ANY STOCKHOLDER       
ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED 
A PROXY.                                                                        

 Under Delaware law, Stockholders of the Company are entitled to appraisal
rights in connection with the Merger.                                           

                                      By Order of the Board of Directors
                     Thomas C. Wyckoff
                       Assistant Secretary

Dated: [           ], 1998                                                      

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TABLE OF CONTENTS 

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                                                                                                            PAGE   
                                                                                                            -----  
                                                                                                                   
INTRODUCTION...............................................................................................       1
  Purpose of the Special Meeting...........................................................................       1
  Voting at the Special Meeting............................................................................       1
  Proxies..................................................................................................       2
  Proxy Solicitation.......................................................................................       2
  Other Matters to Be Considered...........................................................................       2
FORWARD-LOOKING STATEMENTS.................................................................................       2
SUMMARY....................................................................................................       3
SPECIAL FACTORS............................................................................................       7
  Background of the Merger.................................................................................       7
  Recommendation of the Company's Board of Directors.......................................................       9
  Opinion of Financial Advisor.............................................................................      10
  Interests of Certain Persons.............................................................................      13
  Certain Effects of the Consummation of the Merger........................................................      14
  Plans for the Company After the Merger...................................................................      14
  Projections of Future Operations.........................................................................      14
THE MERGER AGREEMENT.......................................................................................      15
THE ASSET PURCHASE AGREEMENT...............................................................................      22
THE STOCKHOLDERS AGREEMENT.................................................................................      25
SECURITY OWNERSHIP OF CERTAIN PERSONS......................................................................      27
SOURCE AND AMOUNT OF FUNDS; EXPENSES.......................................................................      29
PRICE RANGE OF SHARES......................................................................................      29
RIGHTS OF OBJECTING STOCKHOLDERS...........................................................................      30
CERTAIN FEDERAL INCOME TAX CONSEQUENCES....................................................................      33
SELECTED CONSOLIDATED FINANCIAL DATA.......................................................................      35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................      36
BUSINESS OF THE COMPANY....................................................................................      42
CERTAIN INFORMATION CONCERNING MDC AND NEWCO...............................................................      49
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING..............................................................      49
OTHER MATTERS..............................................................................................      49
AVAILABLE INFORMATION......................................................................................      50
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................      51

                                                        [Enlarge/Download Table]
                                                                                        
ANNEX I    --Agreement and Plan of Merger                                               
ANNEX II   --Asset Purchase Agreement                                                   
ANNEX III  --Stockholders Agreement                                                     
ANNEX IV   --Opinion of PaineWebber Incorporated                                        
ANNEX V    --Text of Section 262 of the General Corporation Law of the State of Delaware

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INTRODUCTION

This Proxy Statement is being furnished to the Stockholders of Artistic 
Greetings Incorporated, a Delaware corporation (the "Company"), in connection   
with the solicitation of proxies on behalf of the Board of Directors of the     
Company for use at the Special Meeting of Stockholders of the Company to be held
on [          ], 1998 (the "Special Meeting").                                  

This Proxy Statement and accompanying Notice of Special Meeting of      
Stockholders and form of proxy are being mailed on or about [          ], 1998  
to holders of shares (the "Stockholders") of Common Stock of the Company        
entitled to notice of, and to vote at, the Special Meeting.                     

PURPOSE OF THE SPECIAL MEETING                                                  

  At the Special Meeting, the Stockholders of the Company are being asked to
consider and vote upon the approval of the Merger Proposal and the Asset Sale   
Proposal (each as defined herein). The Merger Proposal involves the merger of   
AGI Acquisition Co., a Delaware corporation ("Newco") and a wholly owned        
subsidiary of MDC Communications Corporation, an Ontario, Canada corporation    
("MDC"), with and into the Company (the "Merger"), in accordance with an        
Agreement and Plan of Merger, dated as of December 21, 1997 (the "Merger        
Agreement"), by and among the Company, MDC and Newco, as a result of which (i)  
the Company will be the surviving corporation and will become a wholly owned    
subsidiary of MDC, and (ii) each outstanding share of common stock, par value   
$0.10 per share (the "Shares") (other than stock of the Company owned by the    
Company, MDC or any of their respective subsidiaries), will be converted into   
the right to receive $5.70 in cash (the "Merger Consideration"), without        
interest. The Asset Sale Proposal involves the asset sale (the "Asset Sale") by 
the Company in accordance with the Asset Purchase Agreement, dated as of        
December 21, 1997 (the "Asset Purchase Agreement"), by and among the Company and
Artistic Direct Incorporated, a New York corporation ("ADI"), as a result of    
which the Company will sell certain assets, and ADI will assume certain         
liabilities, relating to the personalized product and catalog businesses (the   
"P&C Businesses") of the Company. Consummation of the transactions contemplated 
by the Merger Agreement is conditioned upon consummation of the Asset Sale and  
consummation of the transactions contemplated by the Asset Purchase Agreement is
conditioned upon consummation of the Merger.                                    

VOTING AT THE SPECIAL MEETING                                                   

The Board of Directors of the Company has fixed the close of business on
         [  ], 1998 as the record date (the "Record Date") for the determination
of Stockholders entitled to notice of, and to vote at, the Special Meeting.     
Accordingly, only holders of record of the Shares at the close of business on   
the Record Date will be entitled to vote at the Special Meeting. At the close of
business on the Record Date, there were [      ] Shares outstanding and entitled
to vote, held by approximately [    ] Stockholders of record.                   

Pursuant to the General Corporation Law of the State of Delaware (the   
"DGCL"), the affirmative vote of holders of at least a majority of all of the   
outstanding shares of Common Stock is required to approve and adopt the Merger  
Agreement, the Merger, the Asset Sale Agreement and the Asset Sale. At the time 
of entering into the Merger Agreement, MDC entered into a Stockholders Agreement
(the "Stockholders Agreement") with American Greetings Corporation ("AGC") and  
Stuart Komer pursuant to which, subject to certain conditions, AGC and Mr. Komer
agreed with MDC to vote 2,250,000 and 371,786 Shares of the Company,            
respectively, for the Merger Proposal and the Asset Sale Proposal. Such Shares  
constitute approximately 45% of the outstanding Shares. See "THE STOCKHOLDERS   
AGREEMENT."                                                                     

  Any Shares not voted (whether by abstention, broker non-vote or otherwise)
will have the effect of votes "AGAINST" the Merger Proposal and the Asset Sale  
Proposal.                                                                       

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PROXIES                                                                         

Stockholders of the Company are requested to complete, date, sign and   
promptly return the accompanying form of proxy in the enclosed envelope. Shares 
represented by properly executed proxies received by the Company and not revoked
as described in the following paragraph will be voted at the Special Meeting in 
accordance with the instructions contained herein. If instructions are not      
contained therein, proxies will be voted "FOR" approval of the Merger Proposal  
and "FOR" approval of the Asset Proposal.                                       

  Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted (a) by filing with the Assistant       
Secretary of the Company written notice of such revocation bearing a later date 
than the proxy, (b) by duly executing a subsequent proxy relating to the same   
Shares and delivering it to the Assistant Secretary of the Company, or (c) by   
attending the Special Meeting and voting in person. Attendance at the Special   
Meeting will not in and of itself constitute revocation of a proxy. Any written 
notice revoking a proxy should be sent to the attention of Thomas C. Wyckoff,   
Assistant Secretary, Artistic Greetings Incorporated, One Komer Center, P.O. Box
1999, Elmira, New York 14902-1999.                                              

PROXY SOLICITATION                                                              

All expenses of this solicitation, including the cost of preparing and  
mailing this Proxy Statement, will be borne by the Company. No solicitation,    
other than this solicitation, by use of the mails will be made in connection    
with this solicitation. Brokers, nominees, fiduciaries and other custodians have
been requested to forward soliciting material to beneficial owners of Shares    
held of record by them, and such custodians will be reimbursed for their        
expenses.                                                                       

 All information in this Proxy Statement concerning MDC and Newco has been
supplied by MDC. All information in this Proxy Statement concerning ADI has been
supplied by ADI. All other information herein has been supplied by the Company. 

OTHER MATTERS TO BE CONSIDERED                                                  

    It is not anticipated that any matters other than the approval of the Merger
Proposal and the approval of the Asset Sale Proposal will be brought before the 
Special Meeting. The Bylaws of the Company provide that no business may be      
transacted at a special meeting of Stockholders unless it is included in the    
notice of the meeting. However, if any other matter should properly come before 
the meeting, proxies will be voted in the discretion of the persons named in the
enclosed proxy.                                                                 

FORWARD-LOOKING STATEMENT 

   The Company has made forward-looking statements in this document (including
disclosure that are incorporated by reference herein) that are subject to risks 
and uncertainties. Such forward-looking statements involve known and unknown    
risks, uncertainties and other factors that may cause the actual results,       
performances or achievements of the Company, or industry results, to be         
materially different from any future results, performance or achievements       
expressed or implied by such forward-looking statements. Forward-looking        
statements include the information concerning possible or assumed future results
of operations of the Company set forth under "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Plans for the Company After the Merger" and "SPECIAL 
FACTORS--Projections of Future Operations" and those preceded or followed by or 
that include the words "believes," "expects," "anticipates" or similar          
expressions. There can be no assurance that (i) the Company and its Board have  
correctly identified and assessed all of the factors affecting the Company's    
businesses; (ii) the publicly available and other information with respect to   
these factors on which the Company and its Board have based their analyses is   
complete and correct; or (iii) the Company's strategy, and its Board's analyses 
are correct; or (iv) the Company's strategy, which is based in part on these    
analyses, will be successful.                                                   

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SUMMARY 

This summary has been prepared to assist Stockholders of the Company, in
their review of the proposal (the "Merger Proposal"), described in detail in    
this proxy statement (the "Proxy Statement"), to approve the Merger Agreement   
and the Merger of Newco with and into the Company in accordance with the Merger 
Agreement, as a result of which (i) the Company will be the surviving           
corporation and will become a wholly owned subsidiary of MDC, and (ii) each     
outstanding Share of common stock (the "Common Stock") (other than stock of the 
Company owned by the Company, MDC or any of their respective subsidiaries) will 
be converted into the right to receive $5.70 in cash without interest; and to   
assist the Company's Stockholders in their review of the proposal (the "Asset   
Sale Proposal"), described in detail in the attached Proxy Statement, to approve
the Asset Purchase Agreement and the Asset Sale by the Company in accordance    
with the Asset Purchase Agreement, as a result of which the Company will sell   
certain assets, and ADI will assume certain liabilities, relating to the P&C    
Businesses of the Company. Consummation of the transactions contemplated by the 
Merger Agreement is conditioned upon consummation of the Asset Sale and         
consummation of the transactions contemplated by the Asset Purchase Agreement is
conditioned upon consummation of the Merger.                                    

   The Proxy Statement and the accompanying Notice of Special Meeting and form
of proxy are first being mailed on or about [           ], 1998 to Stockholders 
entitled to notice of and to vote at the Special Meeting of Stockholders of the 
Company to be held on [           ], 1998.                                      

This summary is not intended to be a complete explanation of the matters
relating to the Merger Agreement or the proposed Merger or to the Asset Purchase
Agreement or the proposed Asset Sale and is qualified in all respects by        
reference to the detailed explanation contained in this Proxy Statement and the 
Annexes hereto. Stockholders are urged to review carefully the entire Proxy     
Statement, including the Annexes. Cross references in this summary are to       
captions in the Proxy Statement.                                                

                                                        [Enlarge/Download Table]
                                                                                           
PURPOSE OF SPECIAL MEETING...... To vote upon the Merger Proposal and Asset Sale Proposal. 
                                 See "INTRODUCTION--Purpose of the Special Meeting."       

DATE AND TIME OF SPECIAL                                                                   
  MEETING....................... [           ], 1998 at 10 a.m., Eastern time              

PLACE OF MEETING................ [           ], New York, New York                         

RECORD DATE..................... [           ], 1998                                       

NUMBER OF OUTSTANDING SHARES OF                                                            
  STOCK ENTITLED TO VOTE........ 5,843,406 Shares                                          

APPROXIMATE NUMBER OF OWNERS OF                                                            
  RECORD OF SHARES OF STOCK..... 550                                                       

MERGER TERMS.................... As a result of the Merger, the Company will become a      
                                 wholly owned subsidiary of MDC, and each outstanding Share
                                 will be converted into the right to receive $5.70 per     
                                 Share in cash (the "Merger Consideration"). See "THE      
                                 MERGER AGREEMENT." Consummation of the Merger is          
                                 conditioned upon consummation of the Asset Sale described 
                                 below.                                                    

ASSET SALE TERMS................ In the Asset Sale, the Company will sell certain assets   
                                 and transfer certain liabilities of the Company relating  
                                 to the P&C Businesses to ADI. See "THE ASSET PURCHASE     
                                 AGREEMENT."                                               

INTEREST OF CERTAIN PERSONS..... ADI was formed by certain members of management for the   
                                 purpose of effecting the Asset Sale to ADI. Mr. Stuart    
                                 Komer (the Chairman of the Board of Directors of the      
                                 Company), Mr. Morry Weiss (a member of the Board of       
                                 Directors of the Company) and                             

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                                                        [Enlarge/Download Table]
                                                                                           
                                 Mr. Thomas C. Wyckoff (Chief Operating Officer of the     
                                 Company) will be the principal equity investors in ADI.   
                                 See "SPECIAL FACTORS--Interests of Certain Persons."      
                                 Pursuant to the Asset Purchase Agreement, the Company has 
                                 agreed to pay the costs and expenses of ADI in connection 
                                 with the transactions contemplated by the Asset Purchase  
                                 Agreement, other than certain of the fees and expenses of 
                                 financing sources. See "SOURCE AND AMOUNT OF FUNDS;       
                                 EXPENSES."                                                

VOTING RIGHTS................... The close of business on [           ], 1998 has been     
                                 fixed as the Record Date for determining holders of Common
                                 Stock entitled to notice of and to vote at the Special    
                                 Meeting. Each share of Common Stock outstanding on the    
                                 Record Date is entitled to one vote at the Special        
                                 Meeting. As of the Record Date, 5,843,406 shares of Common
                                 Stock were outstanding and held of record by approximately
                                 550 holders. The presence, in person or by proxy, of the  
                                 holders of a majority of the shares of Common Stock       
                                 entitled to vote at the Special Meeting is necessary to   
                                 constitute a quorum for the transaction of business of the
                                 meeting.                                                  

                                 Any proxy given by a stockholder may be revoked by the    
                                 stockholder at any time, prior to the voting of the proxy,
                                 by delivering a written notice to the Assistant Secretary 
                                 of the Company, by executing and delivering a later-dated 
                                 proxy or by attending the meeting and voting in person.   
                                 Unless contrary instructions are indicated on the proxy   
                                 card, all Shares represented by valid proxies will be     
                                 voted "FOR" the Merger Proposal and "FOR" the Asset Sale  
                                 Proposal. See "INTRODUCTION--Voting at the Special Meet-  
                                 ing."                                                     

REQUIRED VOTE................... The affirmative vote of the holders of a majority of the  
                                 outstanding Shares is required for approval of the Merger 
                                 Proposal and for approval of the Asset Sale Proposal. See 
                                 "INTRODUCTION-- Voting at the Special Meeting."           

VOTING AGREEMENT OF CERTAIN                                                                
  PRINCIPAL STOCKHOLDERS........ AT THE TIME OF ENTERING INTO THE MERGER AGREEMENT, MDC    
                                 ENTERED INTO A STOCKHOLDERS AGREEMENT WITH AGC AND MR.    
                                 KOMER PURSUANT TO WHICH, SUBJECT TO CERTAIN CONDITIONS,   
                                 AGC AND MR. KOMER AGREED TO VOTE 2,250,000 AND 371,786    
                                 SHARES OF COMMON STOCK, RESPECTIVELY, FOR APPROVAL OF THE 
                                 MERGER PROPOSAL AND THE ASSET SALE PROPOSAL. SEE "THE     
                                 STOCKHOLDERS AGREEMENT." SUCH SHARES CONSTITUTE APPROXI-  
                                 MATELY 45% OF THE OUTSTANDING SHARES.                     

EFFECTIVE TIME OF THE MERGER.... The Merger is expected to become effective as of the date 
                                 and time (the "Effective Time") of the filing of an       
                                 appropriate Certificate of Merger with the Secretary of   
                                 State of the State of Delaware, which is anticipated to   
                                 occur as soon as practicable after the approval and       
                                 adoption of the Merger Agreement by the Company's         
                                 Stockholders and the satisfaction or waiver of the other  
                                 conditions to the Merger                                  

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                                                        [Enlarge/Download Table]
                                                                                           
                                 stated in the Merger Agreement, including consummation of 
                                 the Asset Sale. See "THE MERGER AGREEMENT."               

BACKGROUND OF THE MERGER........ For a description of the events leading to the approval   
                                 and adoption of the Merger Agreement and the Asset        
                                 Purchase Agreement by the Board, see "SPECIAL             
                                 FACTORS--Background of the Merger."                       

RECOMMENDATION OF THE COMPANY'S                                                            
  BOARD OF DIRECTORS............ The Company's Board of Directors (the "Board"), based on  
                                 the unanimous recommendation of the two non-interested    
                                 directors of the Company and of a special committee (the  
                                 "Special Committee") of the Board, has approved the       
                                 Merger, the Merger Agreement, the Asset Purchase Agreement
                                 and the Asset Sale, has determined that the Merger is fair
                                 to and in the best interests of the Company's Stockholders
                                 and recommends that the Stockholders vote "FOR" the Merger
                                 Proposal and the Asset Sale Proposal. See "SPECIAL        
                                 FACTORS--Recommendation of the Company's Board of         
                                 Directors."                                               

OPINION OF FINANCIAL ADVISOR.... PaineWebber Incorporated, the Company's financial advisor 
                                 ("PaineWebber"), has delivered to the Board its written   
                                 opinion dated [        ], 1998, a copy of which is        
                                 attached hereto as Annex IV, that, as of such date and on 
                                 the basis of and subject to the matters set forth therein,
                                 the Merger Consideration to be received by the            
                                 Stockholders of the Company, other than AGC, is fair to   
                                 the Stockholders of the Company, other than AGC, from a   
                                 financial point of view. See "SPECIAL FACTORS--Opinion of 
                                 Financial Advisor."                                       

RIGHTS OF OBJECTING                                                                        
  STOCKHOLDERS.................. Under the DGCL, Stockholders who do not vote in favor of  
                                 the Merger and file demands for appraisal prior to the    
                                 stockholder vote on the Merger Agreement, upon the        
                                 consummation of the Merger, have the right to obtain a    
                                 cash payment for the "fair value" of their shares of      
                                 Common Stock. In order to exercise such rights, a         
                                 stockholder must comply with all of the procedural        
                                 requirements of Section 262 ("Section 262") of the DGCL, a
                                 description of which is provided in "Rights of Objecting  
                                 Stockholders" herein and the full text of which is        
                                 attached to this Proxy Statement as Annex V. Such "fair   
                                 value" will be determined in judicial proceedings, the    
                                 result of which cannot be predicted. Failure to take any  
                                 of the steps required under Section 262 may result in a   
                                 loss of such dissenter's rights. See "RIGHTS OF OBJECTING 
                                 STOCKHOLDERS."                                            

CERTAIN U.S. FEDERAL INCOME TAX                                                            
  CONSEQUENCES OF THE MERGER.... The receipt of cash for Shares pursuant to the Merger will
                                 be a taxable transaction to the Stockholders for U.S.     
                                 Federal income tax purposes under the Internal Revenue    
                                 Code of 1986, as amended (the "Code"), and may be a       
                                 taxable transaction for foreign, state and local income   
                                 tax purposes as well. Stockholders should consult their   
                                 own tax advisors regarding the U.S. Federal income tax    
                                 consequences of the Merger, as well as any tax            
                                 consequences under state, local or foreign laws. See      
                                 "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."  

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  A STOCKHOLDER WHO RETURNS A SIGNED PROXY BUT FAILS TO PROVIDE INSTRUCTIONS
AS TO THE MANNER IN WHICH SUCH SHARES ARE TO BE VOTED WILL BE DEEMED TO HAVE    
VOTED TO APPROVE THE MERGER AGREEMENT AND THE MERGER AND THEREFORE TO HAVE      
WAIVED HIS DISSENTERS' RIGHTS. NEITHER A VOTE AGAINST, NOR AN ABSTENTION, NOR A 
FAILURE TO VOTE WITH REGARD TO THE MERGER AGREEMENT AND THE MERGER WILL         
CONSTITUTE A TIMELY WRITTEN OBJECTION TO THE MERGER. SEE "RIGHTS OF OBJECTING   
STOCKHOLDERS" IN THIS PROXY STATEMENT FOR A MORE COMPLETE DISCUSSION OF         
STOCKHOLDERS' APPRAISAL RIGHTS.                                                 

  THE BOARD, BASED ON THE UNANIMOUS RECOMMENDATION OF THE TWO NON-INTERESTED
DIRECTORS AND THE SPECIAL COMMITTEE, RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
MERGER PROPOSAL AND "FOR" THE ASSET SALE PROPOSAL.                              

STOCKHOLDERS ARE URGED TO READ AND CONSIDER CAREFULLY THE INFORMATION   
CONTAINED IN THIS PROXY STATEMENT AND TO CONSULT WITH THEIR PERSONAL FINANCIAL  
AND TAX ADVISORS.                                                               

THIS PROXY STATEMENT AND THE ACCOMPANYING FORM OF PROXY ARE FIRST BEING 
MAILED TO STOCKHOLDERS ON OR ABOUT [           ], 1998.                         

    IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN  
THE PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.                           

 NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN OR MADE, 
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN     
AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT IMPLY THAT THERE HAS 
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE     
COMPANY, MDC, NEWCO OR ADI SINCE THE DATE HEREOF.                               

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SPECIAL FACTORS 

BACKGROUND OF THE MERGER                                                        

   The Company has considered continued growth in its revenues and earnings as
a key objective of its strategic planning, while recognizing the relatively     
high-cost, low-margin nature of its principal businesses and the competitive    
nature of their markets. In that context, and also taking into account the      
shifting mix of the Company's business and other market factors, the Board has  
from time to time reviewed the Company's strategic planning, including the      
possibility of making acquisitions or divestitures of certain of its businesses.
Since the acquisition of Valcheck in May of 1995, the Company has explored      
potential strategic combinations with other industry participants in its        
business lines including, in the summer of 1996, approaching MDC to inquire     
whether MDC was interested in disposing of certain of its businesses.           

 In September 1996, a representative of MDC contacted members of the Board
and made them aware of the interest of MDC in effecting a possible business     
combination with the Company. In response to this contact, and in the context of
a general review of strategic alternatives, certain members of the Board met    
with several financial advisors and selected PaineWebber to serve the Company in
such capacity. The Company also executed a confidentiality agreement with MDC on
October 21, 1996. On October 24, 1996, a meeting of the Board convened to review
the contacts with MDC and discuss with legal counsel and PaineWebber the options
available to the Company. At that meeting representatives of PaineWebber advised
the Board that the Company was engaged in highly competitive businesses in      
relatively slow growth markets, that there was a good fit between the businesses
of the Company and the businesses of MDC, and that a privately negotiated       
purchase was more likely to yield higher value to the Stockholders of the       
Company than a public auction process. At that time the Board authorized        
PaineWebber and management of the Company to prepare certain preliminary        
financial information to deliver to MDC and to communicate to MDC that the      
Company was interested in further discussions concerning a possible business    
combination between MDC and the Company. In early December 1996, PaineWebber    
delivered to MDC certain financial information concerning the Company and       
meetings between management of the Company and management of MDC took place in  
January 1997. In late January 1997, MDC communicated to the Company that it had 
determined not to pursue further discussions regarding a business combination   
with the Company at that time.                                                  

At a Board meeting on February 27, 1997, the Board further discussed    
strategic alternatives available to the Company. At the meeting the Board       
authorized management of the Company to investigate various means of creating   
value for the Stockholders of the Company, including the possibility of a       
management buyout or a sale of the Company. Throughout March and April 1997,    
management of the Company contacted several possible financial and strategic    
buyers of the Company. At the request of one potential strategic buyer,         
management of the Company prepared a management buyout proposal. In late April  
1997, the strategic buyer indicated to management of the Company that it had    
determined not to pursue the management buyout alternative, and the other       
parties approached had previously indicated that they did not wish to engage in 
further discussions.                                                            

On April 30, 1997, the Board reviewed with management recent events and 
discussed strategic alternatives available to the Company. On May 1, 1997, the  
Board authorized the creation of the Special Committee, consisting of Messrs.   
Komer, Edelcup, Goodridge and Weiss, to continue discussions with the potential 
strategic buyer regarding transaction structures other than a management buyout 
and also to seek out other parties who might be interested in effecting a       
business combination with the Company. On May 1, 1997, the Special Committee    
held its first meeting, together with PaineWebber as its financial advisor and  
outside legal counsel. The Special Committee authorized PaineWebber, in         
conjunction with management of the Company, to prepare a memorandum describing  
the Company's businesses and containing financial information concerning the    
Company and to approach, on a confidential basis, strategic and financial       
parties who might be interested in discussions with the Company regarding a     
possible business combination.                                                  

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During May and June of 1997, an offering memorandum was prepared and    
approximately eleven entities were approached regarding potential interest in   
the Company, including both entities which had previously discussed a possible  
business combination with the Company. Three of the entities contacted,         
including MDC, indicated interest in pursuing a possible transaction; the       
remaining entities indicated that, for various reasons, they were not interested
in further discussions with the Company. Throughout June and July, MDC and one  
other potential strategic buyer conducted extensive due diligence of the Company
and held numerous meetings to discuss the prospects of the Company's business   
with members of management. The other third party who had indicated possible    
interest did not participate in due diligence.                                  

    In late July 1997, the two strategic buyers were each provided the form of a
proposed two-step tender offer and merger agreement and were instructed by      
PaineWebber to submit their highest and best offers on or before August 6, 1997.
On August 6, 1997, the Company received a letter of interest from MDC which     
indicated a preliminary valuation of the Company of $25,000,000 to $35,000,000  
or, on a fully diluted basis, a range of approximately $4.80 to $5.95 per Share.
The letter of interest contained certain conditions, especially with regard to  
the P&C Businesses, as to which MDC requested an additional due diligence period
prior to furnishing a firm valuation of the Company. The second strategic buyer 
declined to submit a proposal.                                                  

 When requested by PaineWebber to clarify its letter, MDC delivered to the
Company a replacement letter of interest, dated August 7, 1997, which indicated 
a valuation of the Company at $5.00 per Share, conditional upon MDC's           
satisfaction that the P&C Businesses would generate fiscal 1998 operating       
earnings of $2,000,000 and certain other conditions. The letter also provided   
that in lieu of meeting such condition, MDC's valuation of the Company would be 
$4.25 per Share. The August 7 letter was subject to the same conditions as the  
August 6 letter, as well as a complete due diligence condition and a requirement
that AGC enter into a lock-up agreement.                                        

The Special Committee met on August 8, 1997 to review the status of     
discussions. At the meeting PaineWebber discussed with the Special Committee the
marketing process conducted for the Company as well as the contents of the      
letters from MDC. The Special Committee requested management of the Company to  
prepare a summary of the Company's updated, stand-alone strategic business plan 
for the next three years. The Special Committee did not then elect to pursue any
specific course of action.                                                      

Following the August 8 meeting, members of the Board had numerous       
discussions regarding the letters from MDC, and especially about MDC's expressed
uncertainty about the P&C Businesses. The Board also discussed among themselves 
and with management the Company's updated stand-alone business plan. In late    
August and early September, representatives of the Company discussed with MDC   
the possibility of management of the Company acquiring the P&C Businesses in the
context of a business combination with MDC and the effect that such an          
acquisition would have upon MDC's valuation of the Company. On September 10,    
1997, representatives of MDC informed PaineWebber that MDC would consider a     
transaction involving consideration of $5.60 per Share, subject to              
contemporaneous disposition of the P&C Businesses to management of the Company, 
if the terms included the payment of cash consideration of $9 million and the   
satisfactory resolution of issues regarding assumption of liabilities and       
separation of the Company's businesses. On September 10, 1997, the Special      
Committee convened to review these discussions. At the conclusion of the        
meeting, the Board authorized management and its representatives to continue    
discussions with MDC consistent with the proposal described to the Special      
Committee. Mr. Wyckoff formed ADI on September 25, 1997.                        

On September 30, 1997, in response to recent trading activity in the    
Company's common stock, the Company issued a press release stating that it was  
engaged in discussions regarding a possible sale of the Company.                

During the next month, representatives of the Company, MDC and ADI had  
several discussions regarding the proposed transaction and MDC conducted due    
diligence of the Company. On October 8,                                         

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1997, the Special Committee met to review the status of discussions, including  
the separate sale of the Company's check and P&C Businesses in a tax-efficient  
manner. At this meeting, PaineWebber reviewed with the Special Committee        
analytic methods and preliminary conclusions regarding ranges of value for the  
Company. Discussions among representatives of the Company, MDC and ADI continued
over the next month regarding the proposed transaction. Representatives of ADI  
and MDC conducted preliminary negotiations regarding the assets and liabilities 
to be acquired and assumed pursuant to an asset sale, as well as the amount of  
cash consideration to be paid for the assets, the amount and nature of the      
liabilities to be assumed by ADI, and the nature of any continuing services to  
be provided by ADI to the Company. On October 15, 1997 and November 7, 1997, the
Company advanced $50,000, or a total of $100,000, to ADI for the payment of     
expenses other than legal and accounting fees, which advance was evidenced by   
two promissory notes (the "Notes") from ADI to the Company. ADI also contacted  
financing sources regarding possible financing for the Asset Sale.              

In November and December, representatives of MDC discussed with         
representatives of the Company changing the structure of the transaction to a   
one-step cash merger from a two-step transaction involving a tender offer       
followed by a merger. Recognizing that such a change would result in the        
Company's Stockholders receiving payment for their Shares at a later date,      
representatives of the Company requested that the proposed consideration to be  
paid in the transaction be increased from $5.60 per Share to $5.70 per Share.   
MDC agreed to the suggested increase in the per Share consideration. In         
addition, the representatives of the Company and MDC negotiated regarding the   
terms of the proposed Stockholders Agreement between MDC, AGC and Mr. Komer, as 
well as the circumstances under which a break-up fee would become payable to MDC
by the Company. During this period, representatives of MDC completed their due  
diligence analysis of the Company, MDC and ADI negotiated the economic terms of 
the Asset Purchase Agreement (including the payment of legal and accounting     
expenses of ADI by the Company and the forgiveness of the Notes by the Company  
prior to closing), the Company and ADI negotiated the termination and break-up  
fee provisions of the Asset Purchase Agreement and ADI continued its efforts to 
obtain financing commitments for the acquisition of the P&C Businesses.         

On December 19, 1997, the Special Committee met to review with ADI      
commitment letters for the ADI debt financing. Management of ADI discussed with 
the Special Committee the commitment letter from NationsCredit Commercial       
Corporation ("NationsCredit") as well as commitments from the State of New York 
and other public sector entities, and also discussed the equity structure of    
ADI.                                                                            

Following the Special Committee meeting on December 19, negotiations    
continued among the Company, MDC and ADI resulting in resolution of the         
remaining outstanding issues. On December 21, 1997, the Special Committee and   
the Board met to review the final terms of the proposed Merger Agreement and    
Asset Purchase Agreement. At this meeting, PaineWebber delivered to the Special 
Committee its verbal opinion (later confirmed in writing) that the Merger       
Consideration to be received by the Stockholders of the Company, other than AGC,
pursuant to the Merger was fair to the Stockholders of the Company, other than  
AGC, from a financial point of view. At this meeting, the Board of Directors,   
based on the unanimous recommendation of the two non-interested directors and of
the Special Committee, voted to approve the Merger Agreement, the Merger, the   
Asset Purchase Agreement and the Asset Sale for the reasons set forth below     
under "--Recommendation of the Company's Board of Directors" and to recommend   
that Stockholders vote to approve and adopt the Merger Agreement, the Merger,   
the Asset Purchase Agreement and the Asset Sale.                                

   On December 21, 1997, the Company and MDC executed the Merger Agreement and
the Company and ADI executed the Asset Purchase Agreement.                      

RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS                              

   In determining to approve the Merger Agreement and to recommend the Merger,
the Board considered a number of factors, including, without limitation, the    
following:                                                                      

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      (i) the Board's uncertainty regarding the prospects of the Company for
 high-level growth in future revenues and earnings, based upon each of the
    Company's principal businesses operating in relatively low-margin, high cost
   markets which are characterized by increasing competition for market share;

    (ii) the Board's review of the historical market price of the Shares
compared to the price of $5.70 per Share (including such price being a  
premium of approximately 20.0% to the December 19, 1997 Share price and 
   approximately 38.0% to the Share price one day prior to the Company's press
release on September 30, 1997).                                         

(iii) the private marketing process for the Company conducted by  
PaineWebber and management of the Company;                              

        (iv) the lack of third party interest in a business combination with the
Company following the September 30 press release of the Company, which  
    stated that the Company was in negotiations regarding a possible sale of the
Company;                                                                

        (v) the terms of the Merger Agreement, including provisions which permit
   the Company to receive unsolicited offers for the Company and the Company's
   ability to terminate the Merger Agreement to accept an offer that the Board
determines to be more favorable to the Stockholders of the Company; and 

(vi) the Special Committee's receipt of a presentation by       
    representatives of PaineWebber, which included, among other things, the oral
 opinion of PaineWebber (subsequently confirmed in writing) that the $5.70
per Share Merger Consideration to be received by the Stockholders of the
   Company, other than AGC, pursuant to the Merger is fair to the Stockholders
of the Company, other than AGC, from a financial point of view.         

   In determining to approve the Asset Purchase Agreement and to recommend the
Asset Sale, the Board considered a number of factors, including, without        
limitation, the following:                                                      

(i) the Board's understanding that MDC would only enter into a  
    transaction providing Stockholders of the Company consideration of $5.70 per
  Share if the P&C Businesses were separately acquired pursuant to the Asset
Purchase Agreement and as contemplated in the Merger Agreement;         

    (ii) the terms of the Asset Purchase Agreement, including provisions
   which permit the Company to receive unsolicited offers on substantially the
 same basis as the Asset Purchase Agreement, for the P&C Businesses and to
terminate the Asset Purchase Agreement to accept an offer that the Board
determines to be more favorable to the Stockholders of the Company; and 

      (iii) the terms of the Merger Agreement which permit any increase in net
 value received by the Company for the P&C Businesses to be distributed to
Stockholders as an increase in the Merger Consideration.                

The Board did not assign relative weights to the foregoing factors or   
determine that any factor was of particular importance. Rather, the Board viewed
its position and recommendations as being based on the totality of the          
information presented to and considered by it.                                  

OPINION OF FINANCIAL ADVISOR                                                    

As described under "--Background of the Merger," the Company engaged    
PaineWebber to act as its exclusive financial advisor in connection with any    
business combination involving the Company. PaineWebber has delivered to the    
Special Committee its written opinion dated January 26, 1998, that, as of such  
date and on the basis of and subject to the matters set forth therein, the      
Merger Consideration to be received by the Stockholders, other than AGC,        
pursuant to the Merger is fair to the Stockholders, other than AGC, from a      
financial point of view. PaineWebber's opinion is directed to the Special       
Committee and does not                                                          

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constitute a recommendation to any Stockholder of the Company as to how any such
Stockholder should vote on the Merger.                                          

  The full text of the opinion of PaineWebber, dated January 26, 1998, which
sets forth the assumptions made, procedures followed, matters considered and    
limitations on the review undertaken, is attached as Annex IV to this Proxy     
Statement. Stockholders are urged to read such opinion carefully and in its     
entirety. The summary of the PaineWebber opinion set forth in this Proxy        
Statement is qualified in its entirety by reference to the full text of such    
opinion.                                                                        

    The Company retained PaineWebber as its financial advisor in connection with
the Merger. In connection with such engagement, the Special Committee requested 
PaineWebber to render an opinion as to whether or not the proposed Merger       
Consideration (as defined under "INTRODUCTION--Purpose of the Special Meeting") 
to be received by the Stockholders, other than AGC, is fair to the Stockholders,
other than AGC, from a financial point of view.                                 

In connection with the Board's consideration of the Merger Agreement,   
PaineWebber delivered an opinion on December 17, 1997, which was reaffirmed on  
January 26, 1998 (the "Opinion"), to the effect that, as of such date, and based
upon its review and assumptions and subject to the limitations summarized below,
the Merger Consideration to be received by the Stockholders, other than AGC,    
pursuant to the Merger is fair to the Stockholders, other than AGC, from a      
financial point of view. The Opinion was directed to, and prepared at the       
request of and for the information of, the Special Committee and does not       
constitute a recommendation to any Stockholder as to how any such Stockholder   
should vote with respect to the Merger Proposal. It should be understood that   
subsequent developments may affect the conclusions reached in the Opinion.      

 In arriving at its Opinion, PaineWebber, among other things: (i) reviewed
the Company's Annual Reports, Forms 10-K and related financial information for  
the three fiscal years ended December 31, 1996, Forms 10-Q and the related      
unaudited financial information for the nine months ended September 30, 1996 and
1997; (ii) reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the Company (the  
"Projections") which were furnished to PaineWebber by the Company; (iii)        
conducted discussions with members of senior management of the Company          
concerning its businesses and prospects; (iv) reviewed the historical market    
prices and trading activity for the Company's stock and compared them with that 
of certain other publicly traded companies which PaineWebber deemed to be       
relevant; (v) compared the results of operations of the Company with those of   
certain other companies which PaineWebber deemed to be relevant; (vi) reviewed  
the Merger Consideration premium to the historical market prices of the         
Company's stock and compared them to historical transaction stock premiums paid 
by acquirors in transactions of similar value; (vii) reviewed the Merger        
Agreement; and (viii) reviewed such other financial studies and analyses and    
performed such other investigations and took into account such other matters as 
PaineWebber deemed necessary, including PaineWebber's assessment of general     
economic, market and monetary conditions.                                       

In preparing the Opinion, PaineWebber relied on the accuracy and        
completeness of all information that was publicly available, supplied or        
otherwise communicated to PaineWebber by or on behalf of the Company and        
PaineWebber did not assume any responsibility to independently verify such      
information. With respect to the Projections, PaineWebber assumed, with the     
Company's consent, that they were reasonably prepared on bases reflecting the   
best available estimates and good faith judgments of the Company's management as
to the future performance of the Company at the time of such preparation.       
PaineWebber noted that the Projections provided by the Company's management (i) 
for the fiscal year ended December 31, 1997 were significantly greater than the 
actual results for the twelve month period ended September 30, 1997; (ii) had   
been prepared approximately eight months prior to the delivery of the Opinion;  
and (iii) had not been updated since that time. PaineWebber did not undertake an
independent evaluation or appraisal of the assets or liabilities (contingent or 
otherwise) of the Company, nor was PaineWebber furnished with any such          
evaluations or appraisals. PaineWebber also assumed that (i) the                

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purchase method of accounting will be used; and (ii) all material assets and    
liabilities (contingent or otherwise, known or unknown) of the Company are as   
set forth in the consolidated financial statements. The Opinion is based upon   
economic, monetary and market conditions existing on the date thereof. The      
Opinion does not address the relative merits of the Merger Proposal and any     
other transactions or business strategies that may have been discussed by the   
Special Committee as alternatives to the Merger, or the decision of the Special 
Committee to proceed with the Merger. In addition, PaineWebber was not requested
to, and did not, express any opinion as to the fairness, from a financial point 
of view, of the Asset Purchase Agreement. The Company did not place any         
limitations upon PaineWebber with respect to the procedures followed or factors 
considered in rendering the Opinion.                                            

 The following paragraphs summarized the significant analyses performed by
PaineWebber in arriving at the Opinion.                                         

MARKETING PROCESS.  PaineWebber reviewed and analyzed the results of its
marketing process for the Company to potential purchasers. Of the parties       
contacted, only three indicated interest in the Company in the form of a        
non-binding bid. MDC's cash offer received the approval of the Company's Board. 

HISTORICAL STOCK PERFORMANCE.  PaineWebber reviewed the history of the  
trading prices and volume for the Shares of the Company's stock. This stock     
performance review indicated that for the latest twelve months ("LTM") ended    
December 15, 1997, the low and high trading prices were $3.38 and $5.13,        
respectively. PaineWebber also reviewed the following stock price averages prior
to the Company's public announcement on September 30, 1997 that it was in       
discussions regarding a possible merger: (i) latest 10 trading day              
average--$3.63, (ii) latest 30 trading day average--$3.75, (iii) latest 60      
trading day average-- $4.28, and (iv) latest 120 day trading day average--$4.63.

SELECTED COMPARABLE PUBLIC COMPANY ANALYSIS.  Using publicly available  
information, PaineWebber compared selected historical and projected financial,  
operating and stock market performance data of the Company to the corresponding 
data of the Comparable Companies (as defined below). The Comparable Companies   
consisted of Concepts Direct, Inc., Damark International, Inc., Geographics,    
Inc., Hanover Direct, Inc., Lillian Vernon Corporation and Norwood Promotional  
Products, Inc. (collectively, the "Comparable Companies").                      

PaineWebber reviewed, among other information, the Comparable Companies'
multiples of total enterprise value (market value plus total debt and total     
preferred stock less cash and cash equivalents) to (i) LTM net revenue, (ii) LTM
earnings before interest, taxes, depreciation and amortization ("EBITDA") and   
(iii) LTM earnings before interest and taxes ("EBIT"). As of December 15, 1997, 
the Comparable Companies' (i) LTM net revenue multiples ranged from 0.22x to    
1.65x; (ii) LTM EBITDA multiples ranged from 5.8x to 34.2x; and, (iii) LTM EBIT 
multiples ranged from 9.0x to 39.7x. PaineWebber computed the multiples of total
enterprise value to (i) LTM net revenue, (ii) LTM EBITDA and (iii) LTM EBIT     
based on the offer price of $5.70 per share to be 0.38x, 9.0x and 18.0x,        
respectively.                                                                   

PREMIUMS PAID ANALYSIS.  PaineWebber analyzed purchase price per share  
premiums paid by domestic companies in 271 publicly-disclosed cash and stock    
merger transactions involving the purchase of a majority interest announced and 
completed between January 1, 1995 and December 1, 1997 with market values       
between $25.0 million and $100.0 million. This analysis indicated median        
premiums to the target's closing stock price one day, one week and four weeks   
prior to the announcement of the transaction of 20.0%, 24.2% and 30.2%,         
respectively. The implied premiums paid to the Company based on the Merger      
Consideration of $5.70 per share in cash and the Company's share price one day, 
one week and four weeks prior to the Company's public announcement on September 
30, 1997 was 38.0%, 38.0% and 52.0%, respectively.                              

   DISCOUNTED CASH FLOW & PERPETUAL GROWTH ANALYSES.  PaineWebber analyzed the
Company based on discounted cash flow and perpetual growth analyses of the      
projected financial performance of the Company. Such projected financial        
performance was based upon the historical financial results of the              

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Company and the Projections provided by the Company's management. As a result of
the issues related to the Projections as described above, PaineWebber used a    
range of discount rates from 20% to 30% in its discounted cash flow to account  
for the uncertainties inherent in the Projections and weighted this analysis    
less heavily than other analyses performed by PaineWebber. The perpetual growth 
analysis determined the present value of the Company based on an EBITDA         
perpetual growth model utilizing perpetuity growth rates ranging from 1.50% to  
3.00%. The EBITDA perpetuity was discounted using a range of discount rates from
15.25% to 18.25%.                                                               

   The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative methods of financial analyses and
the application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary       
description. Accordingly, PaineWebber believes that its analysis must be        
considered as a whole and that considering any portion of such analysis and of  
the factors considered, without considering all analyses and factors, could     
create a misleading or incomplete view of the process underlying the Opinion. In
its analyses, PaineWebber made numerous assumptions with respect to industry    
performance, general business and economic conditions and other matters, many of
which are beyond the control of the Company. Any estimates contained in these   
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of businesses do not 
purport to be appraisals or to reflect the prices at which businesses may       
actually be sold. Accordingly, such analyses and estimates are inherently       
subject to substantial uncertainty and neither the Company nor PaineWebber      
assume responsibility for the accuracy of such analyses and estimates.          

  The Company selected PaineWebber to be its financial advisor in connection
with the Merger because PaineWebber is a prominent investment banking and       
financial advisory firm with experience in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated              
underwritings, secondary distributions of securities, private placements and    
valuations for corporate purposes.                                              

  Pursuant to an engagement letter between the Company and PaineWebber dated
October 4, 1996, PaineWebber will earn a success fee of $500,000 for rendering  
financial advisory services in connection with the Merger at closing.           
PaineWebber will earn an opinion fee of $200,000 upon rendering an Opinion which
will be credited towards the success fee. In addition, PaineWebber will be      
reimbursed for certain of its related expenses. PaineWebber will not be entitled
to any additional fees or compensation in the event the Merger is not approved  
or otherwise consummated. The Company also agreed, under separate agreement, to 
indemnify PaineWebber, its affiliates and each of its directors, officers,      
agents and employees and each person, if any, controlling PaineWebber or any of 
its affiliates against certain liabilities, including liabilities under federal 
securities laws.                                                                

  In the ordinary course of PaineWebber's business, PaineWebber may actively
trade the securities of the Company and MDC for its own account and for the     
accounts of its customers and, accordingly, may at any time hold long or short  
positions in such securities.                                                   

INTERESTS OF CERTAIN PERSONS                                                    
  Certain members of the Company's management and of the Board may be deemed
to have certain interests in the Merger and in the Asset Sale that are in       
addition to their interests as Stockholders of the Company. The Board was aware 
of these interests and considered them, among other matters, in approving the   
Merger Agreement, the Asset Purchase Agreement and the transactions contemplated
thereby.                                                                        

As a result of the Merger, Messrs. Komer and Joseph A. Calabro (the     
President of the Company) will be entitled to receive, among other things,      
severance payments of approximately $1,200,000 and $340,000, respectively, under
their existing employment agreements and based upon preliminary estimates of the

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Company's performance in 1997. Messrs. Wyckoff, Komer and Weiss will be the     
principal equity investors in ADI. Mr. Komer will also have a consulting        
arrangement with ADI and Mr. Wyckoff will be employed by ADI. The Company has   
agreed to pay certain expenses of ADI incurred in connection with the           
transactions contemplated by the Asset Purchase Agreement, as described under   
"SOURCE AND AMOUNT OF FUNDS; EXPENSES."                                         

CERTAIN EFFECTS OF THE CONSUMMATION OF THE MERGER                               

 As described under "INTRODUCTION--Purpose of the Special Meeting," at the
Effective Time, each outstanding Share will be converted into the right to      
receive the Merger Consideration and the holders of Shares immediately before   
the consummation of the Merger will possess no further interest in, or rights as
Stockholders of, the Company. The Shares have continued to be listed on The     
Nasdaq Stock Market (the "Nasdaq"). Upon consummation of the Merger, the Company
intends to delist the Shares, to terminate the registration of Shares under the 
Exchange Act, thus eliminating the duty of the Company to file reports under the
Exchange Act.                                                                   

PLANS FOR THE COMPANY AFTER THE MERGER                                          

Upon consummation of the Merger, the Company will become a wholly owned 
subsidiary of MDC. MDC will continue to evaluate the business and operations of 
the Company, other than the assets and liabilities transferred to ADI under the 
Asset Purchase Agreement, with a view to enhancing the Company's performance in 
conjunction with MDC's other businesses.                                        

  Upon consummation of the Asset Sale, the assets and certain liabilities of
the Company relating to the P&C Businesses will be transferred to ADI, which    
will continue to operate the P&C Businesses in Elmira, New York.                

PROJECTIONS OF FUTURE OPERATIONS                                                

In June 1997, management of the Company prepared projections of the     
Company's future performance for inclusion in the financial information to be   
distributed to persons interested in a possible business combination with the   
Company, including MDC. These projections were not prepared with a view to      
public disclosure or compliance with published guidelines of the Commission or  
the guidelines established by the American Institute of Certified Public        
Accountants regarding projections. Neither the Company nor its financial advisor
assumes any responsibility for the accuracy of these projections. While         
presented with numerical specificity, these projections are based upon a variety
of assumptions relating to the businesses of the Company, which may not be      
realized and are subject to significant uncertainties and contingencies, many of
which are beyond the control of the Company. There can be no assurance that the 
projections would have been realized, and actual results may vary materially    
from those shown.                                                               

  Set forth below is a summary of the projections. The projections should be
read together with the financial statements of the Company referred to or       
incorporated herein by reference.                                               

ARTISTIC GREETINGS INCORPORATED 
PROJECTED FINANCIAL INFORMATION 
(UNAUDITED) 
(DOLLARS IN MILLIONS) 

                                                        [Enlarge/Download Table]

                                                                                     YEARS ENDED DECEMBER 31,         
                                                                            ------------------------------------------
                                                                                                                      
                                                                              1997       1998       1999       2000   
                                                                            ---------  ---------  ---------  ---------
Revenue.................................................................... $   104.1  $   111.2  $   118.7  $   126.2
Gross Profit1.............................................................. $    63.1  $    67.2  $    71.6  $    76.2
EBITDA..................................................................... $     8.7  $     8.3  $    10.3  $    13.0

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

(1) Excludes depreciation.                                                      

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THE MERGER AGREEMENT

    The following is a summary of certain provisions of the Merger Agreement and
is qualified in its entirety by reference to the Merger Agreement, a copy of    
which is attached hereto as Annex I.                                            

GENERAL.  The Merger Agreement provides for the submission of the Merger
Proposal to the Company's Stockholders as promptly as practicable after the     
consummation of the Merger. The closing of the Merger will take place at 10:00  
a.m. on a date to be specified by MDC or Newco. The Merger shall become         
effective when the Certificate of Merger, executed in accordance with the       
relevant provisions of the DGCL, are accepted for record by the Secretary of    
State of the State of Delaware (the time of such filing being referred to as the
"Effective Time").                                                              

  THE MERGER.  The Merger Agreement provides that following the satisfaction
or waiver of the conditions described below under "Conditions to the Merger" and
in accordance with the DGCL, at the Effective Time Newco will be merged with and
into the Company, and each then outstanding Share (other than Shares owned by   
the Company or by any subsidiary of the Company and Shares owned by MDC, Newco  
or their affiliates or held by Stockholders, if any, who are entitled to and who
properly exercise dissenters' rights under the DGCL) will be converted into the 
right to receive an amount in cash equal to the merger consideration per Share  
paid pursuant to the Merger, without interest.                                  

   CONDITIONS TO THE MERGER.  The Merger Agreement provides that the Merger is
subject to the satisfaction or waiver of the following conditions by the        
Company, MDC and Newco: (1) the expiration or termination of any waiting period 
(and any extension thereof) applicable to the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and (2) no       
temporary restraining order, preliminary or permanent injunction or other order 
issued by any court of competent jurisdiction or other legal restraint or       
prohibition preventing the consummation of the Merger shall be in effect;       
PROVIDED, HOWEVER, that each of the Company, Newco and MDC shall have used its  
best efforts to prevent the entry of any such injunction or other order and to  
appeal as promptly as possible any injunction or other order that may be        
entered.                                                                        

    CONDITIONS OF THE COMPANY.  The Merger Agreement provides that the Merger is
subject to the satisfaction or waiver of the following conditions by the        
Company: (1) the approval of the Merger Agreement and the adoption of the Merger
by the affirmative vote or consent of the holders of a majority of the          
outstanding Shares in accordance with applicable law and the Company's          
Certificate of Incorporation; (2) there shall not have occurred any event or    
circumstances that has had or is reasonably likely to have a Material Adverse   
Effect, which is defined as any change or effect that is or is reasonably likely
to be materially adverse to the business, operations, assets, financial         
condition or results of operations of the Company, on the Company; (3) all      
representations and warranties of the Company under the Merger Agreement which  
are qualified as to materiality shall be true and correct in all respects and   
all representations and warranties of the Company under the Merger Agreement    
that are not qualified as to materiality shall be true and correct in all       
material respects on and as of the Effective Time; (4) the Company shall have   
performed in all material respects all covenants and agreements required to be  
performed by it prior to the Effective Time, and (5) MDC shall have received a  
certificate signed on behalf of the Company by its chief executive officer to   
the effect set forth in clauses (3) and (4) above.                              

   CONDITIONS OF MDC AND NEWCO.  The Merger Agreement provides that the Merger
is subject to the satisfaction or waiver of the following conditions by MDC and 
Newco: (1) all conditions under the Asset Purchase Agreement shall have been    
satisfied or waived and the transactions contemplated thereby shall have been   
consummated; (2) all representations and warranties of MDC and Newco under the  
Merger Agreement which are qualified as to materiality shall be true and correct
in all respects and all representations and warranties of MDC and Newco under   
the Merger Agreement that are not qualified as to materiality shall be true and 
correct in all material respects on and as of the Effective Time; and           

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(3) MDC and Newco shall have performed in all material respects all covenants   
and agreements required to be performed by each of them prior to the Effective  
Time.                                                                           

There can be no assurance that all conditions to the Merger will be     
satisfied.                                                                      

    TERMINATION OF THE MERGER AGREEMENT.  The Merger Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval of    
matters presented in connection with the Merger by the Stockholders of the      
Company:                                                                        

(1) by mutual written consent of the Company, Newco and MDC;            

(2) by either the Company, Newco or MDC if any court of competent       
jurisdiction in the United States or Canada or other United States or Canadian  
governmental body shall have issued a final order, injunction, decree or ruling 
or taken any other final action restraining, enjoining or otherwise prohibiting 
the Merger and such order, injunction, decree, ruling or other action is or     
shall have become nonappealable; PROVIDED that this right to terminate the      
Merger Agreement shall not be available to any party which has not used its     
reasonable best efforts to cause any such order, injunction, decree, ruling or  
other action to be lifted;                                                      

(3) by either MDC and Newco or the Company if the Stockholders of the   
Company fail to adopt and approve the Merger Agreement, the Asset Purchase      
Agreement, the Merger and the transactions contemplated by the Merger Agreement 
and the Asset Purchase Agreement at the Special Meeting and any adjournment     
thereof, by the requisite vote, which is the approval of a majority of the      
outstanding shares of Common Stock (the "Requisite Vote");                      

   (4) by the Company if a corporation, partnership, person or other entity or
group shall have made a bona fide offer not solicited in violation of the Merger
Agreement that the Board by a majority vote determines in its good faith        
judgment and in the exercise of its fiduciary duties (i), based upon the advice 
of the Financial Advisor, is more favorable to the Company's Stockholders than  
the Merger and (ii), based upon the written advice of outside counsel, must not 
make or must withdraw or modify its recommendation of the Merger in order to    
avoid breaching its fiduciary duties under applicable law; PROVIDED,            
HOWEVER,that such termination under this clause shall not be effective (i)      
unless MDC or Newco does not, within five business days of receipt of the       
Company's notification of its intention to enter into a definitive agreement    
with respect to a superior proposal, make an offer that the Board by a majority 
vote determines in its good faith judgment and in the exercise of its fiduciary 
duties, based upon the advice of PaineWebber, is at least as favorable to the   
Company's Stockholders as the superior proposal and (ii) until the Company has  
made payment of the full fee and expense reimbursement required by the Merger   
Agreement;                                                                      

(5) by MDC and Newco, if (i) there shall have been a breach of any      
representation or warranty on the part of the Company that is or will have a    
Material Adverse Effect on the Company or which materially adversely affects the
ability of the Company to consummate the Merger, (ii) there shall have been a   
breach of any covenant or agreement on the part of the Company which is or will 
result in a Material Adverse Effect on the Company or materially adversely      
affects the ability of the Company to consummate the Merger, which shall not    
have been cured prior to the earlier of (A) 10 days following notice of such    
breach and (B) two business days prior to the Closing Date, (iii) the Company   
shall engage in negotiations with any entity or group (other than MDC or Newco) 
that has proposed a Third Party Acquisition (as defined below), (iv) the Board  
(A) shall have withdrawn or modified in a manner adverse to Newco its approval  
or recommendation of the Merger Agreement or the Merger or shall have           
recommended another offer or transaction or shall have adopted any resolution to
effect any of the foregoing or (B), in response to any tender or exchange offer 
for more than 20% of the outstanding Common Stock, shall not have recommended   
rejection of such tender offer or exchange offer within the time periods        
specified by applicable law, or shall have adopted any resolution to effect any 
of the foregoing; (v) the existing Asset Purchase Agreement shall have become   
terminable by the Company and the Company shall not have entered into a         
substitute Asset Purchase Agreement with another party within two Business Days;
or (vi) the Company                                                             

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shall have failed to mail this Proxy Statement as promptly as practicable after 
the clearance thereof by the SEC or the Company has failed to include in this   
Proxy Statement the Board's recommendation of the Merger;                       

(6) by the Company if (i) there shall have been a breach of any         
representation or warranty on the part of MDC or Newco which materially         
adversely affects (or materially delays) the consummation of the Merger or (ii) 
there shall have been a material breach of any covenant or agreement on the part
of MDC or Newco and which materially adversely affects (or materially delays)   
the consummation of the Merger which shall not have been cured prior to the     
earliest of (A) ten days following notice of such breach and (B) two business   
days prior to the Closing Date; or                                              

(7) by MDC and Newco or the Company if the Merger shall not have been   
consummated on or before the date that is five months from the date of the      
Merger Agreement; PROVIDED that this right to terminate the Merger Agreement    
shall not be available to any party which has not used its reasonable best      
efforts to cause the Merger to be consummated.                                  

    FEES AND EXPENSES.  The Merger Agreement provides that the Company shall pay
to MDC upon demand an amount of $600,000 (the "Liquidated Damages") if (1) MDC  
and Newco terminate the Merger Agreement pursuant to clause (5) of "Termination 
of the Merger Agreement" and within 18 months thereafter the Company enters into
an agreement with respect to a Third Party Acquisition, or a Third Party        
Acquisition occurs, involving any party (or any affiliate thereof) (x) with whom
the Company (or its agents) had negotiations with a view to a Third Party       
Acquisition, (y) to whom the Company (or its agents) furnished information with 
a view to a Third Party Acquisition or (z) who had submitted a proposal or      
expressed an interest in a Third Party Acquisition, in the case of each of      
clauses (x), (y) and (z) after the date hereof and prior to such termination; or
(2) MDC and Newco terminate the Merger Agreement pursuant to clause (5) of      
"Termination of the Merger Agreement," and within 18 months thereafter a Third  
Party Acquisition shall occur involving a consideration for Shares (including   
the value of any stub equity) in excess of the Merger Consideration; or (3) (A) 
the Company terminates the Merger Agreement pursuant to clause (4) of           
"Termination of the Merger Agreement" or (B) MDC and Newco or the Company       
terminate the Merger Agreement pursuant to clause (3) of "Termination of the    
Merger Agreement" or (C) MDC and Newco terminate this Agreement pursuant to     
clause (5) of "Termination of the Merger Agreement," the Company shall pay to   
MDC and Newco either prior to termination in the case of the event described in 
this section or within one business day following the execution and delivery of 
such agreement or such occurrence or termination, as the case may be, in the    
case of the event described in this paragraph, a fee, in cash, of $1,300,000,   
plus reasonable, documented out-of-pocket third party expenses of MDC and Newco 
incurred in connection with the transactions contemplated hereby, PROVIDED,     
HOWEVER, that the Company in no event shall be obligated to pay more than one   
such $1,300,000 fee with respect to all such agreements and occurrences and such
termination.                                                                    

"Third Party Acquisition" means the occurrence of any of the following  
events (i) the acquisition of the Company by merger or otherwise by any person  
(which includes a "person" as such term is defined in Section 13(d)(3) of the   
Exchange Act) or entity other than MDC, Newco or any affiliate thereof (a "Third
Party"); (ii) the acquisition by a Third Party of more than 30% of the total    
assets of the Company (other than pursuant to the Asset Purchase Agreement);    
(iii) the acquisition by a Third Party of 30% of more of the outstanding Shares;
(iv) the adoption by the Company of a plan of liquidation or the declaration or 
payment of an extraordinary dividend; or (v) the repurchase by the Company or   
any of its subsidiaries of more than 20% of the outstanding Shares, other than a
repurchase which was not approved by the Company or publicly announced prior to 
the termination of the Merger Agreement and which is not part of a series of    
transactions resulting in a change of control.                                  

CONDUCT OF BUSINESS BY THE COMPANY.  The Merger Agreement provides that 
during the period from the date of the Merger Agreement to the earlier of the   
Effective Time and the appointment or election of Newco's designees to the Board
of Directors of the Company pursuant to the terms of the Merger                 

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Agreement (such earlier time, the "Control Time"), the Company shall, and shall 
cause its subsidiaries to, conduct its operations according to its ordinary and 
usual course of business consistent with past practice, and will use all        
commercially reasonable efforts to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain       
satisfactory relationships with suppliers, distributors, customers and others   
having business relationships with it and will take no action which would       
adversely affect its ability to consummate the Merger or the other transactions 
contemplated by the Merger Agreement. Without limiting the generality of the    
foregoing, and except as otherwise expressly provided in the Merger Agreement or
the Asset Purchase Agreement, prior to the Effective Time, the Company will not,
without the prior written consent of MDC and except as disclosed in a letter to 
MDC delivered at the time of execution of the Merger Agreement:                 

(a) amend its Restated Certificate of Incorporation (or other applicable
charter document) or By-Laws;                                                   

   (b) authorize for issuance, issue, sell, deliver, grant any options for, or
otherwise agree or commit to issue, sell or deliver any shares of any class of  
capital stock of the Company or any securities convertible into or exchangeable 
or exercisable for shares of any class of capital stock or any other ownership  
interest (including, but not limited to, stock appreciation rights or phantom   
stock) of the Company, other than pursuant to and in accordance with the terms  
of the Common Stock Equivalents outstanding on the date of the Merger Agreement 
and listed on Schedule 3.13 of the Merger Agreement;                            

  (c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or  
property or any combination thereof) in respect of its capital stock or         
purchase, redeem or otherwise acquire any shares of its own capital stock;      

(d) (i) create, incur, assume, maintain or permit to exist any long-term
debt or any short-term debt for borrowed money other than under existing lines  
of credit and except for short-term debt incurred in the ordinary course of     
business and consistent with past practice; (ii) assume, guarantee, endorse or  
otherwise become liable or responsible (whether directly, contingently or       
otherwise) for the obligations of any other person; or (iii) make any loans,    
advances or capital contributions to, or investments in, any other person in    
excess of $50,000 in the aggregate (other than investments in marketable        
securities made in the ordinary course of business of the Company and consistent
with past practice);                                                            

(e) except as may be required by law, enter into, adopt or amend or     
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock     
equivalent, stock purchase agreement, pension, retirement, deferred             
compensation, employment, severance or other employee benefit agreement, trust, 
plan, fund or other arrangement for the benefit or welfare of any current or    
former director, officer or employee in any manner, or (except for normal       
increases in salary or wages of employees who are not officers of the Company in
the ordinary course of business consistent with past practice that, in the      
aggregate, do not result in a material increase in benefits or compensation     
expense to the Company, and as required under existing agreements) increase in  
any manner the compensation or fringe benefits of any current or former         
director, officer or employee or grant any severance or termination pay or pay  
any benefit not required by any plan, agreement, trust, fund, policy and        
arrangement as in effect as of the date of the Merger Agreement;                

(f) except for sales of inventory in the ordinary course of business and
consistent with past practice, sell, transfer, lease or otherwise dispose of, or
encumber, or agree to sell, transfer, lease, or otherwise dispose of or         
encumber, any assets, properties, real, personal or mixed not in excess of      
$50,000 individually;                                                           

   (g) enter into any agreements, commitments or contracts, except agreements,
commitments or contracts either (i) for the purchase, sale or lease of goods or 
services in the ordinary course of business and consistent with past practice or
(ii) which do not, individually, relate to the making of payments or the        
provision of services for consideration in excess of $50,000 over the term of   
any such agreement, commitment or contract;                                     

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(h) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an agreement  
with respect to, any plan of liquidation or dissolution, any acquisition (by    
merger, consolidation or acquisition of assets or securities or any disposition 
of any assets or securities) of any corporation, partnership or other business  
organization or division thereof or any change in its capitalization, or any    
entry into a material contract or any amendment or modification of any material 
contract or any release or relinquishment of any material contract rights not in
the ordinary course of business and consistent with past practice or modify or  
amend the contracts between the parties referred to in the letter referred to   
above;                                                                          

  (i) except as previously approved by the Board of Directors of the Company
prior to the date of the Merger Agreement and as identified to MDC prior to the 
date of the Merger Agreement, authorize or commit to make capital expenditures  
in any calendar month in excess of $100,000; PROVIDED, HOWEVER, that amounts not
authorized or committed in any calendar month may be carried forward to future  
calendar months;                                                                

    (j) permit any material insurance policy naming the Company as a beneficiary
or a loss payee to be canceled, terminated or materially altered;               

    (k) maintain its books and records in a manner not in the ordinary course of
business and consistent with past practice; (l) enter into any hedging, option, 
derivative or other similar transaction;                                        

(m) change any assumption underlying, or method of calculating, any bad 
debt, contingency, provision or other reserve;                                  

(n) pay, discharge or satisfy any claims, liabilities or obligations    
(absolute, accrued, contingent or otherwise), other than the payment, discharge 
or satisfaction of liabilities in the ordinary course of business and consistent
with past practice;                                                             

    (o) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting practices or       
principles used by it;                                                          

(p) make any material tax election or settle or compromise any material 
federal, state, local or foreign tax liability;                                 

(q) settle or compromise any pending or threatened suit, action or claim
which is material;                                                              

(r) collect receivables or pay payables or purchase inventory or make   
shipments to customers, other than in the ordinary course of business consistent
with past practice;                                                             

 (s) modify the amount spent on advertising for the Company as a whole and
the allocation between each of the check business and the P&C Businesses from   
the schedule related thereto previously delivered by the Company to MDC; or     

  (t) agree to do any of the foregoing or any action which would make any of
the representations or warranties of the Company contained in the Merger        
Agreement untrue and incorrect as of the date when made if such action had then 
been taken.                                                                     

BOARD OF DIRECTORS.  The Merger Agreement provides that prior to the    
Effective Time, the Company shall take all commercially reasonable efforts to   
deliver to MDC the resignation of such directors of the Company as MDC shall    
specify, effective at the Effective Time.                                       

    STOCK OPTIONS.  The Merger Agreement provides that prior to the consummation
of the Merger, the Board shall use its best efforts to cause the terms of all   
outstanding stock options heretofore granted under any stock option plan of the 
Company (collectively, the "Stock Plans") to be adjusted to provide that, at the
Effective Time, each stock option outstanding immediately prior to the          
consummation of the Merger shall be canceled and the holder thereof shall be    
entitled to receive as soon as practicable thereafter from the Company in       
consideration for such cancellation a cash payment of an amount equal to (i) the
excess, if                                                                      

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any, of (A) the Merger Consideration over (B) the exercise price per share of   
Common Stock subject to such stock option, multiplied by (ii) the number of     
shares of Common Stock for which such stock option shall not theretofore have   
been exercised.                                                                 

Prior to the consummation of the Merger, the Board of Directors (or, if 
appropriate, any committee administering the Stock Plans) shall adopt such      
resolutions or take such actions as are commercially reasonable, subject, if    
necessary, to obtaining consents of the holders thereof, to carry out the terms 
of the Merger Agreement and to provide that, on and after the Effective Time, no
officer, director or employee of the Company shall have any right to acquire any
interest in, any equity security of the Company or any of its subsidiaries.     

 INDEMNIFICATION.  For six years after the Effective Time, MDC shall cause
the Surviving Corporation to indemnify, defend and hold harmless the present and
former directors and officers of the Company, determined as of the Effective    
Time, against all losses, claims, damages, expenses or liabilities              
(collectively, "Costs") (but only to the extent such costs are not otherwise    
covered by insurance or are not promptly paid by insurance) arising out of      
actions or omissions or alleged actions or omissions occurring at or prior to   
the Effective Time to the extent permitted or required under applicable law and 
the Company's Restated Certificate of Incorporation and By-Laws in effect at the
date hereof (to the extent consistent with applicable law).                     

For a period of three years after the Effective Time, the Surviving     
Corporation shall use its best efforts to cause to be maintained in effect the  
current policies of directors' and officers' liability insurance maintained by  
the Company (PROVIDED that the Surviving Corporation may substitute therefor    
policies of at least the same coverage and amounts containing terms and         
conditions which are no less advantageous) with respect to claims arising from  
facts or events which occurred before the Effective Time to the extent          
available; PROVIDED, HOWEVER, that the Surviving Corporation shall not be       
obligated to make annual premium payments for such insurance to the extent such 
premiums exceed 150% of the annual premiums paid as of the date hereof by the   
Company for such insurance (which the Company represents and warrants to be not 
more than $60,000).                                                             

    Pursuant to the Merger Agreement, MDC agreed to guarantee each and every one
of the obligations of the Surviving Corporation set forth in the foregoing two  
paragraphs.                                                                     

  REASONABLE NOTIFICATION.  The Merger Agreement provides that, on the terms
and subject to the conditions of the Merger Agreement, the Company shall give   
prompt notice to MDC of any notice of, or other communication relating to, a    
default or event which, with notice or lapse of time or both, would become a    
default, received by the Company subsequent to the date of the Merger Agreement 
and prior to the Effective Time, under any contract material to the business,   
operations, assets or financial condition of the Company to which the Company is
a party or is subject. Each of the Company and MDC shall give prompt notice to  
the other party of (a) any notice or other communication from any third party   
alleging that the consent of such third party is or may be required in          
connection with the Merger or other transactions contemplated hereby, (b) the   
occurrence or existence of any event which would, or could with the passage of  
time or otherwise, make any representation or warranty made by such party       
contained in the Merger Agreement untrue or (c) any failure of such party to    
comply with or satisfy any covenant, condition or agreement to be complied with 
or satisfied by it of the Merger Agreement; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to the Merger Agreement shall not limit or otherwise     
affect the remedies available hereunder to the party receiving such notice.     

    PROCEDURE FOR AMENDMENT, EXTENSION OR WAIVER.  The Merger Agreement provides
that it may be amended by action taken by the Company, MDC and Newco at any time
before or after approval of the Merger by the Stockholders of the Company (if   
required by applicable law) but, after any such approval, no amendment shall be 
made which requires the approval of such Stockholders under applicable law      
without such approval. The Merger Agreement may not be amended except by an     
instrument in writing                                                           

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signed on behalf of the parties hereto. At any time prior to the Effective Time,
each party thereto may (i) extend the time for the performance of any of the    
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained in the Merger       
Agreement or in any document, certificate or writing delivered pursuant thereto 
or (iii) waive compliance by the other party with any of the agreements or      
conditions contained therein. Any agreement on the part of either party thereto 
to any such extension or waiver shall be valid only if set forth in an          
instrument in writing signed on behalf of such party. The failure of either     
party to the Merger Agreement to assert any of its rights thereunder shall not  
constitute a waiver of such rights.                                             

 REPRESENTATIONS AND WARRANTIES.  In the Merger Agreement, the Company has
made customary representations and warranties to MDC and Newco with respect to, 
among other things, its organization, capitalization, financial statements,     
public filings, conduct of business, employee benefit plans, labor relations and
employment matters, compliance with laws, real property, commission filings,    
insurance, related party matters, subsidiaries, tax matters, litigation, vote   
required to approve the Merger Agreement, undisclosed liabilities, information  
supplied, the absence of any material adverse changes in the Company since      
December 31, 1996, inapplicability of state takeover statutes, the opinion of   
the Company's financial advisor and brokers, fees and expenses, intellectual    
property, environmental matters and contracts. The representations and          
warranties in the Merger Agreement expire on the day of the closing (the        
"Closing") of the Merger Agreement.                                             

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THE ASSET PURCHASE AGREEMENT

The following is a summary of the material terms of the Asset Purchase  
Agreement. This summary is not a complete description of the terms and          
conditions thereof and is qualified in its entirety by reference to the Asset   
Purchase Agreement, a copy of which is attached hereto as Annex II.             

THE ASSET PURCHASE.  Upon the terms and subject to the conditions of the
Asset Purchase Agreement, at the Closing, ADI will purchase from the Company    
certain assets and assume certain liabilities of the Company relating to its P&C
Businesses, including, without limitation, all related intangible assets, going-
concern value and goodwill, as well as the real property (the "Real Property")  
and leased property (the "Leased Property") of the Company (collectively, the   
"Assets") (such transactions being referred to herein as the "Asset Sale").     

   PURCHASE PRICE.  In consideration of the transfer to ADI of the Assets, ADI
shall on the Closing Date (a) deliver to the Company $9,000,000 (the "Purchase  
Price") by wire transfer of immediately available funds, into an account of the 
Company designated to ADI at least two Business Days prior to the Closing Date  
(PROVIDED that at the election of the ADI, up to $250,000 of the Purchase Price 
may be satisfied by delivery to the Company of a junior subordinated promissory 
note) and (b) assume the Assumed Liabilities. The Purchase Price shall be       
subject to adjustment for: (i) capital expenditures on property, plant and      
equipment (other than routine maintenance and servicing) in excess of $100,000  
per calendar month during the period from the date of the Asset Purchase        
Agreement through the Closing Date, provided that to the extent that in any     
calendar month less than $100,000 is so expended, such difference may be carried
forward to future calendar months; (ii) the positive difference between (A) Mr. 
Komer's Severance Payment (as defined in the Asset Purchase Agreement) that     
would have been due Mr. Komer if the transactions contemplated by the Merger    
Agreement had occurred prior to December 31, 1997, and (B) Mr. Komer's Severance
Payment payable at the time of the Merger and (C) $333,333; and (iii) any       
indemnification payments made by the parties pursuant to the Asset Purchase     
Agreement.                                                                      

ASSUMED LIABILITIES.  In addition to payment of the Purchase Price, ADI 
shall assume at the Closing, and subsequently in due course pay, honor and      
discharge, (i) all the obligations, debts and liabilities of the Company arising
out of or relating to the P&C Businesses or the Assets, (ii) the employment     
related liabilities as set forth in the Asset Purchase Agreement, (iii) all     
environmental liabilities of the Company, (iv) the obligations, debts and       
liabilities set forth in the Asset Purchase Agreement, (v) contingent and       
unknown liabilities arising out of or relating primarily to the P&C Businesses, 
the Real Property or the Leased Property, accruing before, on or after the      
Closing Date, (vi) the liabilities listed on the balance sheet of the Company to
the extent set forth in the Asset Purchase Agreement, (vii) liabilities which   
related to both the P&C Businesses and the businesses of the Company other than 
the P&C Businesses (the "Joint Liabilities") to the extent provided in the Asset
Purchase Agreement and as shall be set forth in the Asset Purchase Agreement,   
and (viii) the allocable share of Joint Employee Liabilities set forth in the   
Asset Purchase Agreement, determined on the basis of FTE (full time employee)   
equivalents (collectively, the "Assumed Liabilities"). The Company shall retain 
and ADI shall not assume any of the Company's obligations, debts and liabilities
set forth in the Asset Purchase Agreement and any other obligations, debts and  
liabilities other than the Assumed Liabilities (the "Excluded Liabilities").    

    INDEMNIFICATION.  On and after the Closing Date, the Company shall indemnify
and hold ADI and its affiliates harmless against and in respect of all actions, 
claims, suits, demands, judgments, costs and expenses (including reasonable     
attorneys' fees of ADI) (collectively, "Damages") relating to (i) the Excluded  
Liabilities, (ii) the ownership or operation of the Excluded Assets by the      
Company or any other person following the Closing Date, (iii) the Merger        
(whether arising from a claim made by a stockholder of the Company or otherwise)
(iv) the representation by the Company regarding broker fees set forth in the   
Asset Purchase Agreement or (v) the obligations of the Company regarding AGI    
employees, including, without limitation, employee benefit plans and employment 
liabilities, as set forth in the Asset Purchase Agreement. The indemnification  
provided for in the Asset Purchase Agreement shall terminate and be of          

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no further force and effect two years from the Closing Date. The Company shall  
not be liable pursuant to the Asset Purchase Agreement for any amounts which in 
the aggregate exceed $9,000,000.                                                

   On and after the Closing Date, ADI shall indemnify and hold the Company and
its affiliates harmless against and in respect of all Damages relating to (i)   
the Assumed Liabilities, (ii) the ownership or operation of the P&C Businesses  
or the Assets by ADI or any other person following the Closing Date, (iii) the  
representation by ADI regarding broker's fees set forth in the Asset Purchase   
Agreement, (iv) the Deferred Contracts to the extent provided in the Asset      
Purchase Agreement, or (v) the obligations of ADI regarding the Company         
employees, including, without limitation, employee benefit plans and employment 
liabilities, as set forth in the Asset Purchase Agreement. ADI shall not be     
liable pursuant to the Asset Purchase Agreement for any amounts, which in the   
aggregate exceed $9,000,000.                                                    

  CONDITIONS TO THE ASSET PURCHASE AGREEMENT.  The respective obligations of
each party to effect the Asset Sale are subject to the fulfillment or written   
waiver at or prior to the Closing Date of the condition that no Governmental    
Entity or court of competent jurisdiction shall have enacted, issued,           
promulgated, enforced or entered any law, rule, regulation, executive order,    
decree, injunction or other order (whether temporary, preliminary or permanent) 
which is then in effect and has the effect of prohibiting the Asset Sale,       
PROVIDED that, in the case of any such decree, injunction or other order, each  
of the parties shall have used reasonable best efforts to prevent the entry of  
any such injunction or other order and to appeal as promptly as practicable any 
decree, injunction or other order that may be entered.                          

The obligation of the Company to effect the Asset Sale is subject to the
fulfillment at or prior to the Closing of the following additional conditions;  
PROVIDED that the Company may waive in writing any of such conditions in its    
sole discretion: (1) ADI shall have performed in all material respects each of  
its agreements contained in the Asset Purchase Agreement required to be         
performed on or prior to the Closing, and each of the representations and       
warranties of ADI contained in the Asset Purchase Agreement shall be true and   
correct on and as of the Closing Date as if made on and as of such date; (2) ADI
shall have furnished to the Company a certificate, dated the Closing, signed by 
the appropriate officers of ADI, certifying to the effect that to their best    
knowledge, the conditions set forth in (1) above; (3) ADI shall have made       
delivery of the Purchase Price; (4) ADI shall have executed and delivered the   
Assumption Agreement covering the Assumed Liabilities; (5) all conditions       
precedent to the consummation of the Merger (or any merger pursuant to any      
successor merger agreement) shall have been satisfied or waived and the parties 
thereto are ready, willing and able to consummate such transaction immediately  
after the consummation of the transactions contemplated hereby.                 

    The obligation of ADI to effect the Asset Sale is subject to the fulfillment
at or prior to the Closing of the following additional conditions, PROVIDED that
ADI may waive in writing any such conditions in its sole discretion: (1) the    
Company shall have performed in all material respects each of its agreements    
contained in the Asset Purchase Agreement required to be performed on or prior  
to the Closing and each of the representations and warranties of the Company    
contained in the Asset Purchase Agreement shall be true and correct on and as of
the Closing as if made on and as of such date; (2) the Company shall have       
furnished to ADI a certificate, dated the Closing, signed by the appropriate    
officers of the Company, certifying to the best of their knowledge, the         
conditions set forth in (1) above have been satisfied; (3) there shall not have 
occurred any Material Adverse Change with respect to the P&C Businesses between 
the date hereof and the Closing Date; (4) the Company shall have executed and   
delivered the Bill of Sale and Assignment covering the Assets set forth in the  
Annexes to the Asset Purchase Agreement and the Assumed Contracts and Leased    
Property Lease Agreements in the Annexes to the Asset Purchase Agreement; (5)   
the Company shall have executed and delivered the Warranty Deed covering the    
Real Property relating to the Real Property; (6) the Company shall have executed
and delivered the Limited Liability Company Agreement conveying the trademarks  
and other intellectual property rights to be conveyed; (7) ADI shall have       
obtained title commitments for title insurance on the Real Property; (8) the    
Company shall have endorsed and delivered the title certificates to the Assets  
described in the Annexes to the Asset Purchase Agreement; and (9) the Company   
shall have executed and delivered the Trademark                                 

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Assignment Agreement conveying the trademarks to be conveyed as described on the
Annexes to the Asset Purchase Agreement.                                        

TERMINATION.  The Asset Purchase Agreement may be terminated at any time
prior to the Closing Date as follows: (a) by the mutual written consent of the  
Company and ADI; (b) by the Company or ADI if any court of competent            
jurisdiction in the United States or other United States governmental body shall
have issued a final order, injunction, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the transactions         
contemplated thereby, and such order, injunction, decree, ruling or other action
is or shall have become nonappealable, PROVIDED that the right to terminate the 
Asset Purchase Agreement shall not be available to any party which has not used 
its reasonable best efforts to cause any such order, injunction, decree, ruling 
or other action to be lifted; (c) by either the Company or ADI if the           
Stockholders of the Company fail to adopt and approve the Asset Purchase        
Agreement and the Merger Agreement and the transactions contemplated by the     
Asset Purchase Agreement and the Merger Agreement at the special meeting        
contemplated by the Merger Agreement by the Requisite Vote; (d) by the Company  
if a corporation, partnership, person or other entity or group shall have made a
bona fide offer not solicited in violation of the Asset Purchase Agreement that 
the Board by a majority vote determines in its good faith judgment and in the   
exercise of its fiduciary duties is more favorable to the Company's Stockholders
than the transactions contemplated hereby; PROVIDED, HOWEVER, that such         
termination shall not be effective until the Company has made payment to ADI of 
the full fee and expense reimbursement required by the Asset Purchase Agreement;
(e) by ADI, if (i) there shall have been a breach of any representation or      
warranty on the part of the Company that is or will have a Material Adverse     
Effect on the P&C Businesses or which materially adversely affects the ability  
of the Company to consummate the transactions contemplated hereby or (ii) there 
shall have been a breach of any covenant or agreement on the part of the Company
which is or will result in a Material Adverse Effect on the Company or the P&C  
Businesses or materially adversely affects the ability of the Company to        
consummate the transactions contemplated thereby, which shall not have been     
cured prior to the earlier of (A) 10 days following notice of such breach and   
(B) two Business Days prior to the Closing Date or (iii) the Board shall have   
withdrawn or modified in a manner adverse to ADI its approval or recommendation 
of the Asset Purchase Agreement or shall have adopted any resolution to effect  
the foregoing; (f) by the Company if (i) there shall have been a breach of any  
representation or warranty on the part of ADI which materially adversely affects
(or materially delays) the consummation of the transaction contemplated thereby 
or (ii) there shall have been a material breach of any covenant or agreement on 
the part of ADI and which materially adversely affects (or materially delays)   
the consummation of the transaction contemplated hereby which shall not have    
been cured prior to the earliest of (A) 10 days following notice of such breach 
and (B) two Business Days prior to the Closing Date; or (g) by the Company or   
ADI if the Merger Agreement shall have been terminated unless the Company shall 
have entered into another merger agreement substantially in the form of the     
Merger Agreement and approved by the Board of Directors of the Company.         

CERTAIN PAYMENTS.  (i) If ADI terminates the Asset Purchase Agreement as
described above in clause (e) of "Termination" and within 12 months thereafter  
the Company enters into an agreement with respect to a Third Party Acquisition, 
or a Third Party Acquisition occurs, involving any party (or any affiliate      
thereof) (x) with whom the Company (or its agents) had negotiations with a view 
to a Third Party Acquisition, (y) to whom the Company (or its agents) furnished 
information with a view to a Third Party Acquisition or (z) who had submitted a 
proposal or expressed an interest in a Third Party Acquisition, in the case of  
each of clauses (x), (y) and (z) after the date hereof and prior to such        
termination; or (ii) ADI terminates the Asset Purchase Agreement as described   
above in clause (e) of "Termination," and within 18 months thereafter a Third   
Party Acquisition shall occur involving a consideration in excess of the        
Purchase Price; or (iii) the Company terminates the Asset Purchase Agreement as 
described above in clause (d) of "Termination," the Company shall pay to ADI    
either prior to termination in the case of the event described in clause (iii)  
above or within one Business Day following the execution and delivery of such   
agreement or such occurrence or termination, as the case may be, in the case of 
an event described in the                                                       

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Asset Purchase Agreement $360,000 plus the unreimbursed, reasonable documented  
out-of-pocket third party expenses of ADI incurred in connection with the       
transactions contemplated by the Asset Purchase Agreement as liquidated damages 
immediately upon such termination (the "Termination Fee"), in cash; PROVIDED,   
HOWEVER, that the Company in no event shall be obligated to pay more than one   
such Termination Fee with respect to all such agreements and occurrences.       

   THIRD PARTY ACQUISITION means the acquisition by any person (which includes
a "person" as such term is defined in Section 13(d)(3) of the Securities        
Exchange Act of 1934) or entity other than ADI of all or a material portion of  
the Assets or the P&C Businesses.                                               

THE STOCKHOLDERS AGREEMENT

MDC, AGC and Mr. Komer entered into the Stockholders Agreement.         

The following is a summary of the material terms of the Stockholders    
Agreement. This summary is not a complete description of the terms and          
conditions thereof and is qualified in its entirety by reference to the         
Stockholders Agreement, a copy of which is attached hereto as Annex III.        

   COVENANTS OF EACH STOCKHOLDER.  Each Stockholder has agreed that during the
period commencing on the date of the Stockholders Agreement and continuing until
the termination of the Stockholders Agreement, each Stockholder, severally and  
not jointly, agrees as follows: (a) at any meeting of Stockholders of the       
Company called to vote upon the Merger, the Merger Agreement, the Asset Purchase
or the Asset Purchase Agreement or at any adjournment thereof or in any other   
circumstances upon which a vote, consent or other approval with respect to the  
Merger, the Merger Agreement, the Asset Purchase or the Asset Purchase Agreement
is sought, such Stockholder shall vote (or cause to be voted) the subject Shares
in favor of the Merger and the Asset Purchase, the adoption by the Company of   
the Merger Agreement and the Asset Purchase Agreement and the approval of the   
terms thereof and each of the other transactions contemplated by the Merger     
Agreement and the Asset Purchase Agreement; (b) at any meeting of Stockholders  
of the Company or at any adjournment thereof or in any other circumstances upon 
which the Stockholder's vote, consent or other approval is sought, the          
Stockholder shall vote (or cause to be voted) the Subject Shares against (i) any
merger agreement or merger (other than the Merger Agreement and the Merger),    
consolidation, combination, sale of a material amount of assets (other than the 
Asset Purchase Agreement and the Asset Purchase), reorganization,               
recapitalization, dissolution, liquidation or winding-up of or by the Company or
any other takeover proposal (collectively, "Takeover Proposal"), (ii) any action
or agreement that would result in a breach of any covenant, representation or   
warranty or any other obligation or agreement of the Company under the Merger   
Agreement, the Asset Purchase Agreement or the Stockholders Agreement or (iii)  
(x) any material amendment of the Company's certificate of incorporation or     
by-laws, (y) any change in a majority of the persons who constitute the Board of
Directors of the Company or (z) any other proposal or transaction involving the 
Company, which is intended or could reasonably be expected to impede, frustrate,
prevent, delay or nullify (A) the ability of the Company to consummate the      
Merger or the Asset Purchase or (B) any of the transactions contemplated by the 
Stockholders Agreement, the Asset Purchase Agreement or the Merger Agreement.   
Each Stockholder further agreed not to commit or agree to take any action       
inconsistent with the foregoing; (c) each Stockholder, severally and not        
jointly, agreed not to (i) offer to sell, sell, transfer, encumber, pledge,     
assign or otherwise dispose of (including by gift) (collectively, "Transfer"),  
or enter into any contract, option or other arrangement with respect to or      
consent to the Transfer of, the Subject Shares or any interest therein to any   
person other than pursuant to the terms of the Merger, (ii) except as           
contemplated hereby, grant any proxies or powers of attorney with respect to the
Subject Shares, deposit any Subject Shares into a voting trust or enter into any
voting arrangement with respect to the Subject Shares, or any interest in the   
foregoing, except with MDC or Newco, (iii) take any action that would make any  
representation or warranty of such Stockholder contained herein untrue or       
incorrect or have the effect of preventing or disabling the Stockholder from    
performing such Stockholder's obligations under the Stockholders Agreement or   
(iv) commit or agree to take any of the foregoing actions; (d) each Stockholder 

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irrevocably waived any rights of appraisal or rights to dissent from the Merger 
that the Stockholder may have; (e) each Stockholder agreed with, and covenants  
to, MDC that the Stockholder shall not request that the Company register the    
transfer (book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Subject Shares, unless such transfer is made in         
compliance with the Stockholders Agreement. In the event of a stock dividend or 
distribution, or any change in the Common Stock by reason of any stock dividend 
or distribution, or any change in the Common Stock by reason of any stock       
dividend, split-up, recapitalization, combination, exchange of shares or the    
like, the term "Subject Shares" shall be deemed to refer to and include the     
Subject Shares as well as all such stock dividends and distributions and any    
shares into which or for which any or all of the Subject Shares may be changed  
or exchanged and the Purchase Price shall be accordingly adjusted. Each         
Stockholder shall be entitled to receive any cash dividend paid by the Company  
during the term of the Stockholders Agreement until the Subject Shares are      
canceled in the Merger or purchased under the Stockholders Agreement; (f) each  
Stockholder, severally and not jointly, shall not, nor shall it authorize or    
permit any partner, officer, director or employee of, or any investment banker, 
attorney or other advisor or representative of, such Stockholder to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Takeover   
Proposal (as defined in the Merger Agreement) or (ii) participate in any        
discussions, conversations, negotiations or other communications regarding, or  
furnish to any person any information with respect to, or otherwise cooperate in
any way, assist or participate in, facilitate or encourage any effort or attempt
by any other person or entity, to seek to do any of the foregoing or take any   
other action to facilitate any inquiries or the making of any proposal that     
constitutes, or is likely to lead to, any Takeover Proposal; PROVIDED, HOWEVER, 
that the foregoing shall not restrict a Stockholder who is also a director of   
the Company from taking actions in such Stockholder's capacity as a director to 
the extent and in the circumstances permitted by Section 4.02 of the Merger     
Agreement. Each Stockholder, in its capacity as such, will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing.          

  TERMINATION.  Other than as provided therein, the covenants and agreements
contained in the Stockholders Agreement will terminate and no party shall have  
any rights or obligations under the Stockholders Agreement and the Stockholders 
Agreement shall become null and void and have no further effect upon the        
earliest of (a) the Effective Time, and (b) the date on which the Merger        
Agreement is terminated pursuant to Section 6.01 thereof.                       

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SECURITY OWNERSHIP OF CERTAIN PERSONS 

   The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of January 21, 1998, by (1) each
beneficial owner of more than 5% of the outstanding Common Stock of the Company,
(2) each Director of the Company, (3) the Executive Officers of the Company, and
(4) all Directors and Executive Officers of the Company as a group. The Company 
believes that each of the following persons has sole investment and voting power
in respect of his/her/its shares owned except as otherwise noted.               

                                                        [Enlarge/Download Table]

                                                             NUMBER OF SHARES    PERCENTAGE OWNERSHIP       
NAME                                                          OF COMMON STOCK     OF COMMON STOCK(1)        
-----------------------------------------------------------  -----------------  -----------------------     
                                                                                                            
                                                                  2,250,000(2)              35.5%           
American Greetings Corporation.............................                                                 
  One American Road                                                                                         
  Cleveland, OH 44144                                                                                       
                                                                    509,746(3)               8.4%           
Stuart Komer...............................................                                                 
  One Komer Center                                                                                          
  Elmira, NY 14902                                                                                          
Joseph A. Calabro..........................................          35,000(4)             *                
Norman S. Edelcup..........................................           8,000                *                
Lyndon E. Goodridge........................................           7,000                *                
Irving I. Stone............................................           1,500(5,6)            *               
Morry Weiss................................................           3,364(6)             *                
Thomas C. Wyckoff..........................................          40,540(7)             *                
Robert T. McDonough........................................          10,650(8)             *                
All Directors and Executive Officers of the Company as a            664,950(3,         ,9)             10.4%
  group (10 persons).......................................                                                 

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

*   Indicates less than 1% of the Company's issued and outstanding shares.      

(1) Percentages have been calculated assuming, in the case of each person, the  
    exercise of all options that are currently or will become exercisable within
 the next 60 days by each such person, but not the exercise of any options
 owned by any other person listed. The calculation of percentage ownership
   for all Directors and Executive Officers as a group assumes the exercise of
    all options that are currently or will become exercisable within the next 60
days by each such person.                                               

(2) For a description of certain arrangements between the Company and AGC, see  
below.                                                                  

(3) Includes options to purchase 133,960 shares that are currently or will      
become exercisable by Mr. Komer within the next 60 days and 4,000 shares
owned by Mr. Komer's wife.                                              

(4) Includes options to purchase 25,000 shares that are currently or will become
exercisable by Mr. Calabro within the next 60 days.                     

(5) These shares are held in the Judith Stone Weiss Trust for the benefit of Mr.
Stone, who has sole voting and investment power with respect to these   
shares.                                                                 

(6) Does not include the 2,250,000 shares of Common Stock owned by AGC.         

(7) Includes options to purchase 11,200 shares that are currently or will become
  exercisable by Mr. Wyckoff within the next 60 days and 640 shares owned by
Mr. Wyckoff's wife.                                                     

(8) Includes options to purchase 12,800 shares that are currently or will become
exercisable by Mr. McDonough within the next 60 days.                   

(9) Includes all shares referred to above and an aggregate of 10,800 shares that
   are currently or will become exercisable by two other Executive Officers of
the Company, in addition to those named above, within the next 60 days. 

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 Pursuant to a standstill agreement (the "Original Standstill Agreement"),
AGC purchased 2,250,000 shares (as adjusted for a stock split) of the Company's 
Common Stock (the "AGC Shares"), for an aggregate net purchase price of         
$6,450,000. AGC acquired its interest in the Company primarily as an investment.
However, in addition, the Company has agreed to promote certain of AGC's        
greeting card products through its catalogs and AGC may promote certain of the  
Company's personalized products through AGC's retail outlets.                   

On June 16, 1992, the Company and AGC amended the Original Standstill   
Agreement (the "Amended Standstill Agreement") governing the control over the   
AGC Shares.                                                                     

    The Amended Standstill Agreement superceded and terminated in their entirety
both the Original Standstill Agreement, which was among the Company, AGC and Mr.
Komer, and the Voting Trust Agreement of the same date and among the same       
parties, under which the AGC Shares had been held until that date.              

Under the Amended Standstill Agreement, AGC is generally prohibited from
purchasing any additional shares of Common Stock and has agreed to vote the AGC 
Shares only in accordance with the recommendations made to the Company's        
Stockholders by the Board. AGC retains the right to nominate a maximum of two   
Directors to the Board, so long as it owns more than 20% of the outstanding     
shares of Common Stock. It can nominate only one Director if its percentage     
ownership drops to between 10% and 20% of the outstanding shares of Common Stock
and loses these nomination rights entirely if its percentage ownership drops    
below 10%. AGC also has certain anti-dilution rights to enable it to maintain   
its present proportionate ownership of approximately 36% of the outstanding     
shares of Common Stock.                                                         

Additionally, during the term of the Amended Standstill Agreement AGC is
permitted to sell any of the AGC Shares only to the public, either in a         
registered offering or under Rule 144 ("Rule 144") of the Securities Act of     
1933, as amended (the "Act"), subject, however, to the Company's prior right of 
first refusal to purchase any or all of such shares at their then-current market
price. AGC also has certain "demand" and "piggyback" registration rights to     
enable it to have the AGC Shares registered for public sale. Under the Amended  
Standstill Agreement, AGC can acquire the balance of the outstanding shares of  
Common Stock or the Company's assets only in a transaction approved by the Board
(excluding any Directors nominated by AGC).                                     

  Unless earlier terminated, the Amended Standstill Agreement will expire on
December 31, 2000. However, it can be terminated at any time by AGC upon 90 days
notice to the Company. As of April 30, 1996, the Company could have terminated  
the Amended Standstill Agreement at any time upon giving one year's notice to   
AGC and under certain other circumstances. The Amended Standstill Agreement also
can be terminated by either party upon notice given within 90 days following any
termination of a Marketing Agreement (defined below), and automatically         
terminates at such time as AGC's holdings constitute less than 5% of the        
outstanding shares of Common Stock. Within 60 days prior to the effective date  
of any termination of the Amended Standstill Agreement, however, the Company has
the right to purchase all or any part of the AGC Shares at their then-current   
market price, and/or to require AGC to sell all or part of the AGC Shares in a  
registered public offering.                                                     

   Mr. Komer is not a party to the Amended Standstill Agreement. However, in a
letter to AGC dated June 16, 1992, he has agreed that, during the term of the   
Amended Standstill Agreement, any sales of his Company shareholdings will only  
be made through an underwritten public offering or under Rule 144.              

Simultaneously with the signing of the Amended Standstill Agreement, the
Company and AGC also executed a direct mail agreement (the "Marketing           
Agreement") that gives the Company exclusive rights to market and sell by mail  
certain paper products based on AGC's designs through the Company's catalogs,   
order fulfillment and other direct mail marketing programs. This Agreement      
likewise expires on December 31, 2000, unless earlier terminated upon nine      
months advance notice given by either party.                                    

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At the Effective Time of the Merger, the foregoing arrangements shall   
terminate except that ADI will continue to license certain intellectual property
from AGC.                                                                       

SOURCE AND AMOUNT OF FUNDS; EXPENSES

 The total amount of funds required by Newco to purchase all of the Shares
pursuant to the Merger and to pay related fees and expenses is approximately $35
million. Newco will obtain all funds needed for the Merger through a combination
of cash of the Company as a result of the Asset Sale and loans from MDC which   
MDC will initially fund from existing cash reserves and available lines of      
credit.                                                                         

 The total amount of funds required by ADI to consummate the Asset Sale is
approximately $9.55 million and to provide for working capital of ADI is        
approximately $3.0 million. ADI will obtain such funds from: (i) $5.0 million   
from NationsCredit pursuant to the terms of a commitment letter and $3.0 million
under a revolving credit facility from NationsCredit for working capital        
purposes; (ii) additional debt financing of $3.3 million from certain           
governmental and other public entities; and (iii) $1.25 million of cash equity  
contribution from Messrs. Komer, Weiss and Wyckoff.                             

In connection with the transaction, the Company anticipates incurring   
expenses of approximately $225,000, principally consisting of legal and         
accounting fees. In addition, pursuant to the Asset Purchase Agreement, the     
Company has agreed to pay the costs and expenses of ADI in connection with the  
transactions contemplated by the Asset Purchase Agreement, other than the fees  
and expenses of financing sources. ADI has informed the Company that the fees   
and expenses to be so paid by the Company are currently anticipated to be       
approximately $400,000, consisting principally of legal fees. Prior to the      
effectiveness of the Merger, two promissory notes from ADI in favor of the      
Company in the aggregate principal amount of $100,000 will be recharacterized as
an expense of the Company.                                                      

PRICE RANGE OF SHARES 

   The Shares trade on the Nasdaq under the symbol "ARTG". The following table
sets forth, for the fiscal quarters indicated, the high and low sales price per 
Share on Nasdaq. All prices set forth are as reported in published financial    
sources:                                                                        

                                                        [Enlarge/Download Table]

                                                                                    MARKET PRICE            
                                                                              ------------------------      
                                                                                                            
                                                                                 HIGH          LOW          
                                                                                 -----         ---          
1996:                                                                                                       
  First Quarter..............................................................          3            23/8    
  Second Quarter.............................................................          41/16          23/4  
  Third Quarter..............................................................          57/8          33/8   
  Fourth Quarter.............................................................          51 /16          41/4 

1997:                                                                                                       
  First Quarter..............................................................          5            41/4    
  Second Quarter.............................................................          53/16          313/16
  Third Quarter..............................................................          45/8          33/8   
  Fourth Quarter.............................................................          53/8          41/4   

1998:                                                                                                       
  First Quarter (through January 23, 1998)...................................          57/16          51/32 

    On December 19, 1997, the last full trading day prior to the announcement of
the terms of the Merger Agreement and the Asset Purchase Agreement, the reported
closing sales price per Share on Nasdaq was $4.75. On January 23, 1998 the last 
full trading day prior to the filing of this proxy statement, the reported      
closing sales price per share on Nasdaq was $5 7/16. STOCKHOLDERS ARE URGED TO  
OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.                               

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RIGHTS OF OBJECTING STOCKHOLDERS

APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS                                     

The following summary does not purport to be a complete statement of the
provisions of Delaware law relating to the appraisal rights of Stockholders and 
is qualified in its entirety by reference to the provisions of Section 262 of   
the DGCL set forth in full as Annex V to this Proxy Statement.                  

Holders of record of shares of Common Stock (each, a "Share") who comply
with the applicable procedures summarized herein will be entitled to appraisal  
rights under Section 262 of the DGCL. A person having a beneficial interest in  
shares of Common Stock held of record in the name of another person, such as a  
broker or nominee, must act promptly to cause the record holder to follow the   
steps summarized below properly and in a timely manner to perfect appraisal     
rights.                                                                         

   ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A "STOCKHOLDER" ARE TO
THE RECORD HOLDER OF SHARES OF COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE    
ASSERTED. VOTING AGAINST, ABSTAINING FROM VOTING OR FAILING TO VOTE ON APPROVAL 
AND ADOPTION OF THE MERGER AGREEMENT WILL NOT CONSTITUTE A DEMAND FOR APPRAISAL 
WITHIN THE MEANING OF SECTION 262 OF THE DGCL.                                  

    Stockholders who follow the procedures set forth in Section 262 may receive,
in lieu of the $5.70 cash per share of Common Stock to be paid in the Merger, a 
cash payment equal to the "fair value" of their Shares, exclusive of any element
of value arising from the accomplishment or expectation of the Merger, together 
with a fair rate of interest, if any, as determined by the Court of Chancery.   
Such fair value is to be determined by judicial appraisal and could be more     
than, the same as, or less than, the Merger Consideration. The statutory right  
of appraisal granted by Section 262 is subject to strict compliance with the    
procedures set forth below. Failure to follow any of these procedures may result
in a termination or waiver of appraisal rights under Section 262.               

   To be entitled to receive payment of the fair value of the shares of Common
Stock, a stockholder (i) must file a written demand for appraisal of his or her 
shares of Common Stock with the company prior to the voting by Stockholders on  
the Merger Agreement at the Meeting (such demand must reasonably inform the     
Company of the identity of the stockholder and that the stockholder intends     
thereby to demand an appraisal of his or her shares of Common Stock); (ii) must 
not vote his or her shares of Common Stock in favor of approval and adoption of 
the Merger Agreement; and (iii) must have his or her shares of Common Stock     
valued in an appraisal proceeding, as described below. A proxy or vote against  
approval and adoption of the Merger Agreement will not satisfy the requirement  
that a stockholder file a written demand for appraisal as set forth above. The  
requirement of a written demand is separate from, and should not be confused    
with, the requirement that a stockholder not vote in favor of approval and      
adoption of the Merger Agreement. A failure to vote on the Merger Agreement will
not be construed as a vote in favor of approval and adoption of the Merger      
Agreement and will not constitute a waiver of a stockholder's rights of         
appraisal. A stockholder who returns a signed proxy indicating that he or she   
abstains from voting will similarly not waive his or her rights of appraisal.   
However, because a proxy signed and left blank will, unless properly revoked, be
voted in favor of approval and adoption of the Merger Agreement, a stockholder  
who returns a signed proxy left blank will waive his or her rights of appraisal.
Therefore, a stockholder electing to exercise appraisal rights who votes by     
proxy must not leave his or her proxy blank, but must either vote against       
approval and adoption of the Merger Agreement or abstain from voting.           

A holder of shares of Common Stock wishing to exercise such holder's    
appraisal rights must be the record holder of such shares of Common Stock on the
date the written demand for appraisal is made and must continue to hold such    
Shares of record until the Effective Time of the Merger. Accordingly, a holder  
of shares of Common Stock who is the record holder of shares of Common Stock on 
the date the written demand for appraisal is made, but who thereafter transfers 
such Shares prior to the Effective Time of the Merger, will lose any right to   
appraisal in respect of such shares of Common Stock.                            

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Only a holder of record of shares of Common Stock is entitled to assert 
appraisal rights for the shares of Common Stock registered in that holder's     
name. A demand for appraisal should be executed by or on behalf of the holder of
record, fully correctly, as such holder's name appears on such holder's stock   
certificates. If the shares of Common Stock are owned of record in a fiduciary  
capacity, such as by a trustee, guardian or custodian, execution of the demand  
should be made in that capacity, and if the shares of Common Stock are owned of 
record by more than one person as in a joint tenancy or tenancy in common, the  
demand should be executed by or on behalf of all joint owners. An authorized    
agent, including an agent for two or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must identify the 
record owner or owners and expressly disclose the fact that, in executing the   
demand, the agent is agent for such owner or owners. A record holder such as a  
broker who holds shares as nominee for several beneficial owners may exercise   
appraisal rights with respect to the shares held for one or more beneficial     
owners while not exercising such rights with respect to the shares held for     
other beneficial owners; in such case, the written demand should set forth the  
number of shares as to which appraisal is sought, and where no number of shares 
of Common Stock is expressly mentioned the demand will be presumed to cover all 
shares of Common Stock held in the name of the record owner. Stockholders who   
hold their shares of Common Stock in brokerage accounts or other nominee forms  
and who wish to exercise appraisal rights are urged to consult with their       
brokers to determine the appropriate procedures for the making of a demand for  
appraisal by such a nominee.                                                    

If the Merger Agreement is approved and adopted by the Stockholders, the
Company or the Surviving Corporation, as the case may be, will send a notice,   
either before the Effective Time or within ten days thereafter, stating that    
appraisal rights are available to each stockholder who has filed an adequate    
written demand for appraisal with the Company and who has not voted in favor of 
approval and adoption of the Merger Agreement. Within 120 days after the        
Effective Time, the Company or any stockholder seeking appraisal rights may file
a petition in the Court of Chancery demanding a determination of the value of   
the shares of Common Stock of all Stockholders seeking appraisal rights. The    
Company is under no obligation, and has no present intention, to file such a    
petition, and all Stockholders seeking to exercise appraisal rights should      
initiate all necessary action with respect to the perfection of their appraisal 
rights within the time periods and in the manner prescribed in Section 262.     
Within 120 days after the Effective Time, any stockholder who has complied with 
the provisions of Section 262, upon written request, shall be entitled to       
receive from the Company a statement setting forth the aggregate number of      
Shares not voted in favor of approval and adoption of the Merger Agreement and  
with respect to which demands for appraisal have been received and the aggregate
number of holders of such shares of Common Stock. Such written statement must be
mailed to any such stockholder within ten days after his or her written request 
for such a statement is received by the Company or within ten days after        
expiration of the period for delivery of demands for appraisal under Section    
262(d), whichever is later.                                                     

If a petition for appraisal is timely filed, the Court of Chancery will 
conduct a hearing on such petition to determine whether the Stockholders seeking
appraisal rights have complied with Section 262 and have thereby become entitled
to appraisal rights. The Court of Chancery will then determine the fair value of
the shares of Common Stock exclusive of any element of value arising from the   
expectation or accomplishment of the Merger, but including a fair rate of       
interest, if any, to be paid on the amount determined to be the fair value. In  
determining fair value, the Court of Chancery is to take into account all       
relevant factors. Stockholders considering appraisal should bear in mind that   
the fair market value of their Shares determined under Section 262 could be more
than, the same as, or less than, the consideration they will receive pursuant to
the Merger Agreement if they do not seek appraisal of their shares of Common    
Stock, and that the written opinion of PaineWebber set forth as Annex IV hereto 
is not necessarily an opinion regarding fair value under Section 262. The       
Delaware Supreme Court has stated that "proof of value by any techniques or     
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal            
proceedings.                                                                    

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    The Chancery Court will determine the amount of interest, if any, to be paid
upon the amounts to be received by persons whose Shares have been appraised. The
costs of the appraisal proceeding may be assessed against one or more parties to
the proceeding as the Court of Chancery may consider equitable. Upon application
by a stockholder, the Court of Chancery may order all or a portion of the       
expenses incurred by any stockholder in connection with the appraisal           
proceedings (including, without limitation, reasonable attorneys' fees and the  
fees and expenses of experts) to be charged pro rata against the value of all of
the Shares entitled to an appraisal.                                            

 A stockholder will fail to perfect his or her right of appraisal if he or
she (i) does not deliver a written demand for appraisal to the Company prior to 
the vote for approval and adoption of the Merger Agreement, (ii) votes his or   
her Shares in favor of approval and adoption of the Merger Agreement, (iii) does
not file a petition for appraisal within 120 days after the Effective Time, or  
(iv) delivers to the Company both a written withdrawal of his or her demand for 
appraisal and an acceptance of the terms of the Merger Agreement, except that   
any such attempt to withdraw such demand not made within 60 days after the      
Effective Time requires the written approval of the Company. If any stockholder 
who properly demands appraisal of such stockholder's shares of Common Stock     
under Section 262 fails to perfect, or effectively withdraws or loses, such     
stockholder's right to appraisal as provided in (iii) or (iv) above, the shares 
of Common Stock of such stockholder will be converted into the right to receive 
the Merger Consideration receivable with respect to such shares of Common Stock 
in accordance with the Merger Agreement.                                        

  If an appraisal proceeding is properly instituted, such proceeding may not
be dismissed as to any stockholder who has perfected his or her right of        
appraisal without the approval of the Court of Chancery, and any such approval  
may be conditioned on such terms as the Court of Chancery deems just.           

  After the Effective Time, no stockholder who has demanded appraisal rights
will be entitled to vote his or her Shares for any purpose or to receive        
dividends on, or other distributions in respect of, such shares of Common Stock 
(except dividends or distributions payable to Stockholders as of a record date  
prior to the Effective Time).                                                   

   Delaware courts have decided that the statutory appraisal remedy, depending
on factual circumstances, may or may not be a dissenter's exclusive remedy.     
Several decisions by the Delaware courts have held that a controlling           
stockholder of a company involved in a merger has a fiduciary duty to the other 
stockholders which requires that the merger be "entirely fair" to such other    
stockholders. In determining whether a merger is fair to minority stockholders, 
the Delaware courts have considered, among other things, the type and amount of 
consideration to be received by stockholders and whether there was fair dealing 
among the parties. The Delaware Supreme Court stated in WEINBERGER V. UOP, INC.,
457 A.2d 701, 714 (1983), that although the remedy ordinarily available in a    
merger that is found not to be "fair" to minority stockholders is the right to  
appraisal described above, such appraisal remedy may not be adequate "in certain
cases, particularly where fraud, misrepresentation, self-dealing, deliberate    
waste of corporate assets, or gross and palpable overreaching are involved," and
that in such cases the Chancery Court would be free to fashion any form of      
appropriate relief.                                                             

 FAILURE BY A STOCKHOLDER TO FOLLOW THE STEPS REQUIRED BY DELAWARE LAW FOR
PERFECTING RIGHTS OF APPRAISAL MAY RESULT IN THE LOSS OF SUCH RIGHTS. IN VIEW OF
THE COMPLEXITY OF THESE PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW,     
STOCKHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE APPROVAL AND ADOPTION OF   
THE MERGER AGREEMENT AND EXERCISING THEIR RIGHTS UNDER SECTION 262 SHOULD       
CONSULT THEIR LEGAL ADVISORS.                                                   

    All written communications from Stockholders with respect to the exercise of
appraisal rights should be mailed to Artistic Greetings Incorporated, One Komer 
Center, Elmira, New York 14902, Attention: Assistant Secretary.                 

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CERTAIN FEDERAL INCOME TAX CONSEQUENCES 

    The following discussion summarizes certain United States Federal income tax
consequences of the Merger to Stockholders. It is based upon laws, regulations, 
rulings and judicial decisions now in effect. It does not address all aspects of
Federal income taxation that may be relevant to a particular Stockholder in     
light of that Stockholder's personal circumstances, nor does it address Federal 
income tax consequences to types of taxpayers subject to special treatment under
the Federal income tax laws (E.G., life insurance companies, tax-exempt         
organizations, foreign taxpayers, securities dealers, or persons who have       
entered into hedging transactions with respect to the Common Stock or who hold  
the Common Stock as part of a conversion transaction, straddle or otherwise as  
part of an integrated investment), nor does it address any aspect of state,     
local, foreign or other tax laws. It is assumed that the shares of Common Stock 
are held as capital assets (within the meaning of Section 1221 of the Code) by a
United States person I.E., (i) an individual who is a citizen or resident of the
United States; (ii) a corporation, limited liability company, partnership or    
other business entity created in, or organized under, the laws of the United    
States or any state or political subdivision thereof; (iii) an estate the income
of which is subject to United States Federal income taxation regardless of its  
source; or (iv) a trust if a court within the United States is able to exercise 
primary jurisdiction over its administration and one or more United States      
persons have the authority to control all of its substantial decisions.         

  The receipt of cash for Common Stock pursuant to the Merger or pursuant to
the exercise of appraisal rights will be a taxable transaction to a Stockholder 
for Federal income tax purposes under the Code, and also may be a taxable       
transaction under applicable state, local, foreign and other tax laws. In       
general, for Federal income tax purposes, a stockholder will recognize gain (or 
loss) equal to the amount by which the cash received in exchange for the Common 
Stock exceeds (or is exceeded by) the tax basis for such Common Stock. Such gain
or loss generally will be capital gain or loss. In the case of individuals, such
capital gain will be subject to maximum Federal income tax rates of 20% for     
Common Stock held for more than 18 months and 28% for Common Stock held for more
than one year but for not more than 18 months.                                  

   The foregoing discussion may not be applicable to Stockholders who acquired
their Common Stock pursuant to the exercise of options or other compensation    
arrangements or who are not citizens or residents of the United States or who   
are otherwise subject to special tax treatment under the Code.                  

Cash payments to Stockholders pursuant to the Merger may be subject to a
back-up withholding tax at a rate of 31% on the gross amount of such payments   
unless the stockholder has complied with certain reporting and/or certification 
procedures. The Letter of Transmittal, which will be sent to the former         
Stockholders of the Company following the Effective Time if the Merger is       
consummated, will include a substitute Form W-9 on which Stockholders can       
provide the information required to avoid the backup withholding provisions of  
federal income tax law. Any amount withheld from a stockholder under the backup 
withholding rules will be allowed as a credit against such stockholder's Federal
income tax liability and may entitle the stockholder to a refund, provided that 
the required information is timely furnished to the Internal Revenue Service.   
Stockholders should consult their tax advisors regarding the application of     
information reporting and backup withholding in their particular circumstances  
and the availability of an exemption therefrom if the Stockholders cannot or do 
not make the certifications required by the substitute Form W-9.                

   THE FOREGOING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH STOCKHOLDER IS URGED  
TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX   
CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER IN VIEW OF THE STOCKHOLDER'S OWN 
PARTICULAR CIRCUMSTANCES.                                                       

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REGULATORY APPROVALS                                                            

  STATE TAKEOVER LAWS.  A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to 
attempts to acquire securities of corporations that are incorporated or have    
assets, stockholders, executive officers or places of business in such states.  
In EDGAR V. MITE CORP., the Supreme Court of the United States held that the    
Illinois Business Takeover Act, which involved state securities laws that made  
the takeover of certain corporations more difficult, imposes a substantial      
burden on interstate commerce and therefore was unconstitutional. In CTS CORP.  
V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States   
held that a state may, as a matter of corporate law and, in particular, those   
laws concerning corporate governance, constitutionally disqualify a potential   
acquirer from voting on the affairs of a target corporation without prior       
approval of the remaining stockholders, provided that such laws were applicable 
only under certain conditions.                                                  

Section 203 of the DGCL limits the ability of a Delaware corporation to 
engage in business combinations with "interested stockholders" (defined as any  
beneficial owner of 15% or more of the outstanding voting stock of the          
corporation) unless, among other things, the corporation's board of directors   
has given its prior approval to either the business combination or the          
transaction which resulted in the stockholder becoming an "interested           
stockholder." The Company has represented in the Merger Agreement that it       
properly approved, among other things, the Merger Agreement and the Merger for  
purposes of Section 203 of the DGCL.                                            

   Based on information supplied by the Company, MDC does not believe that any
other state takeover statutes apply to the Merger. MDC has not currently        
complied with any state takeover statute or regulation. MDC reserves the right  
to challenge the applicability or validity of any state law purportedly         
applicable to the Merger Agreement or the Merger and any action taken in        
connection with the Merger Agreement or the Merger is not intended as a waiver  
of such right. If it is asserted that any state takeover statute is applicable  
to the Merger Agreement or the Merger and an appropriate court does not         
determine that it is inapplicable or invalid as applied to the Merger Agreement 
or the Merger, the Merger will not be consummated.                              

 ANTITRUST.  Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), the Merger may not be consummated until   
notifications have been given and certain information has been furnished to the 
FTC and the Antitrust Division of the Department of Justice (the "Antitrust     
Division") and the applicable waiting period has expired or been terminated. On 
[          ], 1998, the Company and MDC filed Notification and Report Forms     
under the HSR Act with the FTC and the Antitrust Division. On [          ],     
1998, the waiting period under the HSR Act with respect to the Merger expired.  
At any time before or after consummation of the Merger, notwithstanding         
expiration of the waiting period under the HSR Act, the Antitrust Division or   
the FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the consummation  
of the Merger or seeking divestiture of shares acquired by MDC or of substantial
assets of the Company. Private parties may also seek to take legal action under 
the antitrust laws under certain circumstances.                                 

    Based on information available to them, the Company and MDC believe that the
Merger can be effected in compliance with federal and state antitrust laws.     
However, there can be no assurance that a challenge to the consummation of the  
Merger on antitrust grounds will not be made or that, if such a challenge were  
made, the Company and MDC would prevail or would not be required to accept      
certain adverse conditions in order to consummate the Merger.                   

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SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data of the Company set forth below 
(dollars stated in thousands, except per share data) for each of the years in   
the five-year period ended December 31, 1996 have been derived from the         
Company's audited consolidated financial statements for such periods. The       
unaudited financial data as of and for the nine months ended September 30, 1997 
has been prepared on a basis consistent with the audited consolidated financial 
statements and, in the opinion of management of the Company, includes all       
adjustments necessary to present fairly the financial condition and results of  
operations for the period presented. More comprehensive financial information   
for the three-year period ended December 31, 1996 is included in reports on Form
10-K for such years filed by the Company with the Commission, which are         
available as described in "AVAILABLE INFORMATION." The following summary is     
qualified by reference to, and should be read in conjunction with, such audited 
financial statements.                                                           

                                                        [Enlarge/Download Table]

                                                NINE MONTHS                                                               
                                                   ENDED                                                                  
                                               SEPTEMBER 30,                  FISCAL YEAR ENDED DECEMBER 31,              
                                              ----------------  ----------------------------------------------------------
                                                    1997           1996        1995        1994        1993        1992   
                                              ----------------  ----------  ----------  ----------  ----------  ----------
                                                (UNAUDITED)           (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)       
                                                                                                                          
INCOME STATEMENT DATA:                                                                                                    
Net Sales....................................       $70,703        $98,911     $97,042     $91,121     $78,442     $69,763
Net Income(Loss).............................        $1,316         $2,675     $(9,952)      $(426)     $1,163      $3,607
Cash Flows from Operations                                                                                                
  (Net Cash).................................        $1,296        $11,535     $(4,275)    $(1,902)     $2,697      $4,408

BALANCE SHEET DATA:                                                                                                       
Total assets.................................       $34,261        $28,998     $38,654     $37,909     $31,733     $31,996
Current liabilities..........................       $15,264        $12,950     $16,998     $16,852      $9,198      $9,453
Long-term debt...............................        $5,022         $1,034      $9,593      $1,559      $1,848      $2,155
Stockholders' equity.........................       $13,667        $12,288      $9,548     $19,308     $20,295     $19,844

PER SHARE DATA:                                                                                                           
Net income (loss) per share..................         $0.21          $0.42      $(1.57)     $(0.07)      $0.20       $0.60
Ratio of earnings to fixed charges...........        15.32x          5.40x      97.81x       (3.21)x      8.53x        n/a
Book value per common share..................         $2.56          $2.11       $1.64       $3.32       $3.50       $3.39


Weighted average number of shares                                                                                         
  outstanding................................    6,189,735      6,349,318   6,331,688   5,912,136   5,957,569   5,967,453 

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS                                                           
 NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS ENDED SEPTEMBER 30, 1996

    NET SALES.  In the third quarter of 1997, the Company's sales increased 2.7%
to $24,272 from $23,643 in the comparable period of 1996. This increase is      
primarily a result of the increase in check sales described below. Sales in the 
personalized products category decreased 8.0% to $7,725 in the third quarter of 
1997 from $8,395 in the comparable period of the prior year due to the continued
reduction in the purchase by the Company of less responsive mass media          
advertising circulation. Catalog sales increased by 7.1% to $4,091 in the third 
quarter of 1997 from $3,819 in 1996 due to an increase by 4% of catalog         
circulation, additional product offerings and higher page counts in the Personal
Touch-Registered Trademark- catalog. Check sales increased by 10.6% to $11,417  
in the third quarter of 1997, from $10,320 the prior year. The higher check     
sales was primarily attributable to an increase in first-time check orders from 
increased circulation and better response rates in the Company's free standing  
insert media.                                                                   

For the nine months ended September 30, 1997, sales of $70,703 were 3.0%
lower than the $72,901 revenues reported for the comparable 1996 period. Check  
sales grew 4.7% to $34,014 in the nine months of 1997 from $32,500 in the       
comparable prior period. Personalized product sales decreased 8.4% to $25,254 in
the first nine months of 1997 from $27,581 in the first nine months of 1996.    
This decrease resulted from the reduction in the purchase of less responsive    
mass media circulation. Catalog shipments were 2.0% lower at $8,996 through     
September 30, 1997, as compared to $9,175 in 1996, which reflects the effects of
a reduction in mailings in the first quarter of 1997 as the result of           
eliminating less profitable names from the Company's solicitation efforts.      

 COST OF SALES.  The major components of cost of goods sold are materials,
which consist primarily of paper and gift items; direct labor; and manufacturing
overhead.                                                                       

    The cost of materials in the third quarter of 1997 increased 28.5% to $6,522
from $5,075 in the comparable period of 1996, which is a 6.2% increase as a     
percentage of sales between periods. The increase as a percentage of sales      
represents a higher component of material cost allocated for check production   
with the Company's outsourcing partner, as compared to mostly in-house          
manufacturing in the prior comparable period. In the third quarter of 1996, the 
Company engaged in an outsourcing arrangement with The John H. Harland Company  
("Harland") for the manufacturing of all its check-printing requirements (the   
"Outsourcing Agreement"). The increase in check material cost in connection with
the Outsourcing Agreement was offset by less scrap and exchanges in personalized
products and catalog manufacturing, as well as a reduction in manufacturing     
overhead and direct labor expense. The cost of materials for the first nine     
months of 1997 increased 18.4% to $18,405 from $15,538 in the 1996 comparable   
period, which reflects a 4.7% increase as a percentage of sales from year to    
year. The increase as a percentage of sales is due to the reasons outlined above
for the third quarter.                                                          

Direct labor decreased 24.7% to $1,326 in the third quarter of 1997 from
$1,762 in the third quarter of 1996, which represents a decrease of 2.0% as a   
component of sales between periods Direct labor for the first nine months of    
1997 decreased 28.6% to $3,857 from $5,405 in the 1996 comparable periods. This 
represents a decrease of 2.1% as a component of sales between periods.          
Year-to-year reductions in direct labor are directly associated with the        
diminished labor required by the Company as a result of the Outsourcing         
Agreement, as well as an internal reduction of direct labor due to increased    
efficiencies and less exchanges within personalized products and catalog        
manufacturing.                                                                  

    Manufacturing overhead decreased 2.1% to $2,852 in the third quarter of 1997
from $2,913 in the comparable period of 1996, representing a 0.6% decrease as a 
component of sales between periods. Employee benefits were lower in the third   
quarter of 1997 due to lower employment levels attributable                     

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primarily to the Outsourcing Agreement. Finally, depreciation expense decreased 
due to the sale of check-printing equipment in the third quarter of 1996 in     
connection with the Outsourcing Agreement. Manufacturing overhead decreased     
10.9% to $7,833 in the first nine months of 1997 from $8,789 in the comparable  
period of 1996. This represents a decrease of 1.0% as a component of sales      
during that period. The same reasons as outlined above for quarterly            
manufacturing overhead changes apply to the nine-month changes from 1996 to     
1997.                                                                           

SELLING, ADVERTISING, GENERAL, AND ADMINISTRATIVE EXPENSES (SG&A).  The 
three largest components of SG&A expenses are advertising, postage and labor.   

 Advertising expense of $8,152 in the third quarter of 1997 decreased 6.9%
from $8,752 in the comparable period of 1996, which represents a decrease of    
3.4% as a component of sales between periods. Advertising expense decreased 8.6%
to $25,545 in the first nine months of 1997 from $27,936 in the comparable      
period of 1996, which represents a decrease of 2.2% as a component of sales     
between the periods. Advertising expense changes through September 30, 1997     
represent the continuation of the Company's strategy to forego less profitable  
advertising circulation while better leveraging the dollars spent to produce    
higher sales.                                                                   

    Postage and shipping expense in the third quarter of 1997 increased 12.9% to
$2,380 from $2,108 in the comparable period of 1996, which represents a .9%     
increase as a component of sales. The increase in postage is attributable to an 
increase in the cost of check postage, shipping and handling with Harland,      
offset by a decrease in this category for personalized products due to lower    
exchanges and returns. Postage and shipping expense for the first nine months of
1997 increased 1.7% to $6,637 from $6,526 in the comparable period of 1996,     
which represents an increase of .2% as a component of sales. The same reasons as
above for quarterly postage and shipping changes apply to the nine-month changes
from 1996 to 1997.                                                              

Administrative expense increased in the third quarter of 1997 by 0.6% to
$1,987 from $1,975 in the comparable period of 1996, representing an increase of
 .6% as a component of sales. Administrative expense increased in the first nine
months of 1997 by 4.9% to $6,058 from $5,774 in the comparable period of 1996,  
representing an increase of 1.5% as a component of sales. These increases are   
primarily due to increased depreciation from the implementation of a new        
management information computer system, higher professional fees associated with
the Company's discussions regarding the potential sale of the Company as further
described in Item 5 of this Report (the "Discussions"), and non-recurring       
personnel-related expenses.                                                     

    OTHER.  The Company recognized other expense of $474 in the third quarter of
1997, compared to an expense of $461 in the comparable period of 1996. Interest 
expense decreased to $70 in the third quarter of 1997 from $194 in the          
comparable period of 1996. The decrease in interest expense was due to          
reductions in long-term borrowing associated with debt repayment in connection  
with the Outsourcing Agreement. Please also see "Liquidity and Capital          
Resources" for a further description of the Company's debt and cash flow        
position. Net unrealized losses on trading securities were $95 in the third     
quarter of 1997 compared to a gain of $48 in the comparable period of 1996. The 
Company recognized other expense of $626 in the first nine months of 1997,      
compared to an expense of $1,234 in the comparable period of 1996. Year-to-year 
changes through September 30 are due to the same reasons as discussed above.    
Additionally, the Company recognized a loss on the disposal of fixed assets of  
$451.                                                                           

  TAX PROVISION.  A tax provision of $8 was recorded in the third quarter of
1997 as compared to no tax provision recorded in the third quarter of 1996. A   
tax provision was recorded in the third quarter of 1997, reflecting an effective
tax rate of 36%, offset by income tax refunds for previous years of $201. The   
benefit of a net operating loss carry forward was utilized in the third quarter 
of 1996, but due to 1997 expected profitability, a tax provision was required. A
$426 tax provision was recorded in the first nine months of                     

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1997 as compared to no tax provision in the comparable nine months of 1996. The 
reason stated above applies to the year-to-year comparison.                     

 NET INCOME.  For the reasons discussed above, the Company's net income in
the third quarter of 1997 decreased to $571 or $.10 per share, from the prior   
period of $597 or $.09 per share. The Company's net income in the first nine    
months of 1997 decreased to $1,316 or $.21 per share, from a net income of      
$1,699 or $.27 per share, reflecting primarily that the Company paid no taxes in
1996.                                                                           

RESULTS OF OPERATIONS                                                           
1996 VS. 1995                                                               

NET SALES.  In 1996, the Company's net sales increased 1.9% to $98,911  
compared to $97,042 in 1995, as it continued its efforts to develop its         
check-printing activities and increase volume in its catalog operation. Sales   
volume decreased in the personalized name and address product category, which   
consists of labels, MiniPrinters, self-inking stamps and certain other products 
generally sold through mass media channels ("personalized products"), by an     
aggregate of 17.3%, from $44,196 in 1995 to $36,539 in 1996. As in 1995, these  
reductions resulted from discontinuing marginally profitable products and       
advertising initiatives. Check sales increased by 14.0% from $37,806 in 1995 to 
$43,100 in 1996. This growth was primarily the result of the full-year effect in
1996 of the acquisition of the assets of Valcheck Company ("Valcheck"), a       
direct-mail check printing company in the second quarter (the "Valcheck         
Acquisition") of 1995, combined with the growth of higher-margin check          
recorders.                                                                      

  COST OF SALES.  The major components of costs of goods sold are materials,
which consist primarily of paper and gift items; direct labor; and manufacturing
overhead.                                                                       

   The cost of materials in 1996 decreased 3.6% to $21,973 compared to $22,802
in 1995. Lower sales volume in personalized products partially offset           
volume-related increases in material costs for checks and catalogs. Costs of    
materials for personalized products, checks and catalogs decreased as a result  
of savings from additional management focus on manufacturing efficiencies in    
these areas. Material costs decreased 1.3% as a component of net sales between  
years due to the subcontracting of a portion of check personalization and       
fulfillment ("check production") for the first three quarters of 1996, in       
addition to the implementation in the fourth quarter of an agreement with the   
John Harland Company ("Harland") to manufacture 100% of the Company's check     
orders (the "Harland Agreement").                                               

Direct labor was down 19.4% from $8,595 in 1995 to $6,928 in 1996, a    
decrease of 1.9% as a component of net sales. Overall sales volume was higher,  
as discussed above. More than offsetting this factor in the production areas,   
however, was the effect of continued management attention to improving          
manufacturing efficiencies, combined with increased subcontracting of check     
production to Harland, as discussed above. Labor to receive incoming orders was 
higher resulting from the increased mix of check reorders and catalog volume,   
causing higher call volume.                                                     

    Manufacturing overhead increased 6.0% to $11,764 in 1996 compared to $11,101
in 1995, however, such increase only represented a .5% increase as a component  
of net sales during that period. Manufacturing overhead represented by indirect 
labor increased as the manufacturing support and management infrastructure were 
strengthened. Employee benefits expense increased in 1996 primarily as a result 
of the prior conversion of long-term temporary personnel to full-time status in 
the third quarter of 1995.                                                      

   SELLING, ADVERTISING, GENERAL AND ADMINISTRATIVE (SG&A).  The three largest
components of SG&A expenses are advertising, postage and labor.                 

  Advertising expense decreased 22.8% to $37,809 in 1996 compared to $48,978
in 1995, which represents a decrease of 12.3% as a component of net sales.      
Personalized products advertising was down $9,010 from 1995 as marginal programs
were reduced or eliminated. Catalog advertising was up $2,476 in an effort to   
pursue higher-margin growth through increased circulation. Check advertising was
down                                                                            

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$4,705 due to a lower level of free standing insert ("FSI") circulation, mostly 
in the third and fourth quarters of 1996 as compared to 1995, in an effort to   
achieve targeted advertising with higher margin potential. And additional factor
in check advertising which partially offset the lower FSI circulation was the   
increased amortization expense, for all of 1996 as compared to the second half  
of 1995, for annual payments related to an advertising agreement (the           
"Advertising Agreement") with Valassis Communications, Inc. ("Valassis").       

 Postage and shipping expense in 1996 decreased 4.6% to $8,876 compared to
$9,300 in 1995, which represents a decrease of .6% as a component of net sales. 
This decrease in postage and shipping expense occurred despite higher production
volumes and was attributable primarily to a significant reduction in exchanges  
resulting from improved product and process quality.                            

   Other administrative expense was reduced by 2.7% to $7,797 in 1996 compared
to $8,010 in 1995, representing a reduction of .4% as a component of net sales. 
This reduction is substantially the result of decreases in utilities and        
depreciation partially offset by increases in expenses for consulting, legal and
other outside advisors to the Company.                                          

  OTHER.  The Company incurred expense of $1,406 in 1996 compared to expense
of $919 in 1995. Interest expense decreased to $536 in 1996 from $881 in 1995,  
which represents a decrease of .4% as a component of net sales. The decrease in 
interest expense was due to reductions in both long- and short-term borrowing as
the Company applied its strong cash flow from operations to debt reduction.     
Accruals for employee incentive compensation and contributions to the Company   
profit-sharing plan were $992 in 1996, as compared to zero in 1995.             

    TAX PROVISION.  The Company's effective tax benefit rate for 1995 was 21.4%.
In 1995, the Company was not able to recognize, in its tax provision, the full  
benefit for its 1995 loss and credits generated. The Company's tax benefits were
reduced through the application of FAS 109. FAS 109 requires that the Company   
assess the value of the deferred tax assets on its balance sheet. The Company   
was required to establish a valuation allowance in 1995 for the deferred tax    
assets to reduce the value of these assets to a level that was more likely than 
not to be realized. The effect of recording a valuation allowance related to the
Company's 1995 deferred tax assets was to reduce the 1955 tax benefit from the  
statutory rate. The $317 tax benefit recording in 1996 is substantially the     
result of the recognition of tax assets for which a valuation allowance was     
previously recorded. As the Company demonstrated profitability through 1996, a  
portion of the net operating loss carryforward was utilized. The tax benefit of 
this carryforward was not fully recognized in 1995 due to the valuation         
allowance described above. Additionally, based upon the 1996 profitability and  
the profitability expected in the future, the Company has recorded benefits for 
the remaining net operating loss and credit carryforwards.                      

   NET INCOME.  For the reasons discussed above, the Company's 1996 net income
was $2,675 or $0.42 per share, compared to 1995's net loss of $9,952 or $1.57   
per share.                                                                      

RESULTS OF OPERATIONS                                                           
1995 VS. 1994                                                               

NET SALES.  In 1995 the Company's net sales increased 6.5% to $97,042   
compared to $91,121 in 1994, as it continued its efforts to improve             
profitability of core businesses while further developing its check-printing    
activities. Sales decreased in the personalized products category, as well as in
catalog and international categories by an aggregate of 20.5%, from $70,249 in  
1994 to $55,860 in 1995. These reductions resulted from discontinuing marginally
profitable products and advertising initiatives. Check sales more than doubled  
from $17,718 in 1994 to $37,806 in 1995. This growth was primarily the result of
the Valcheck Acquisition in the second quarter and significant increases in     
check advertising from the establishment of the Advertising Agreement.          

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 COST OF SALES.  The major components of cost of goods sold are materials,
which consist primarily of paper and gift items; direct labor; and manufacturing
overhead.                                                                       

    The cost of materials in 1995 increased 26.8% to $22,802 compared to $17,987
in 1994, primarily as a result of the increase in check sales volume, which     
resulted in an increase in the volume of check material purchased. Lower sales  
volume in other product lines partially offset volume-related increases in      
material costs for checks. Costs of materials for personalized products and     
catalogs decreased as a result of savings from additional management focus on   
manufacturing efficiencies in these areas. Finally, material costs increased    
2.6% as a component of net sales between years due to the subcontracting of a   
portion of check personalization and fulfillment.                               

    Direct labor was up 39.0% from $6,182 in 1994 to $8,595 in 1995, an increase
of 2.1% as a component of net sales during that period for two primary reasons. 
First, as discussed above, check-printing volume increased substantially        
requiring an increase in direct labor. Temporary quality problems resulting from
the volume growth also caused a substantial increase in direct-labor hours. The 
second factor for the increase in direct labor was the integration of the       
Valcheck Acquisition and the relocation of production and warehousing activities
to a new facility ("Artistic Plaza"). Employment levels nearly doubled, with    
corresponding higher expense. These increases in direct labor peaked in the     
third quarter and subsequently decreased as a result of reductions in the labor 
force as requirements were reevaluated.                                         

    Manufacturing overhead increased 13.7% to $11,101 in 1995 compared to $9,763
in 1994, however, such increase only represented a .7% increase as a component  
of net sales during that period. Manufacturing overhead represented by indirect 
labor partially offset the increase as a result of cost reductions as overall   
production methods became more efficient. Employee benefits expense increased   
substantially as a result of both overall higher employment levels and the      
conversion of long-term temporary personnel to full-time status. Other          
check-related expenses were higher in 1995 due to inefficiencies resulting from 
the volume growth. Finally, depreciation expense increased by 27.0% from $650 in
1994 to $828 in 1995 as a result of the purchase of Artistic Plaza in the second
quarter, the refurbishment of that facility and the purchase of check-printing  
equipment to support volume increases.                                          

   SELLING, ADVERTISING, GENERAL AND ADMINISTRATIVE (SG&A).  The three largest
components of SG&A expenses are advertising, postage and labor.                 

  Advertising expense increased 15.4% to $48,978 in 1995 compared to $42,441
in 1994, which represents an increase of 3.9% as a component of net sales.      
Although advertising for personalized products, catalog and international       
categories decreased by 16.2% from 1994 due to downsizing efforts to improve    
profitability, such decrease was offset by a more than 200% increase in         
advertising for checks, as the Company took advantage of increased circulation  
availability resulting from the Advertising Agreement.                          

  Postage and shipping expense in 1995 increased 32.0% to $9,300 compared to
$7,046 in 1994, which represents an increase of 1.9% as a component of net      
sales. Such increase was attributable primarily to check volume increases (which
packages are generally heavier and cost more to ship than other product lines)  
and temporary quality problems with an attendant increase in the number of      
exchanges of product at no additional charge to customers.                      

   Other administrative expense was reduced by 2.7% to $8,010 in 1995 compared
to $8,236 in 1994, representing a reduction of 1.6% as a component of net sales.
This reduction was substantially the result of the decrease in salaries and     
wages, with associated reductions in employee benefit costs. Several other      
factors offset one another, including increases in expenses for consulting,     
legal and other outside advisors to the Company to facilitate the business      
restructuring, as well as charges for donations of obsolete inventory, which in 
turn were offset by reductions in travel, office supplies, equipment purchases  
and the elimination of international marketing expense.                         

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   OTHER.  The Company incurred expense of $919 in 1995 compared to expense of
$109 in 1994. Interest expense increased to $881 in 1995 from $339 in 1994,     
which represents an increase of .5% as a component of net sales. The increase in
interest expense was due to higher borrowing to support the expansion of        
facilities and working capital for the growth of the check business.            
Additionally, in June 1995 the Company began to accrete a monthly expense to    
account for the $78 increase in 1995 of the value of the common stock subject to
a put option granted to Valcheck in the Valcheck Acquisition. Finally,          
non-recurring charges were recorded in 1995, reflecting primarily the costs of  
consolidation of several warehouse facilities in the Elmira area.               

   TAX PROVISION.  The Company's effective tax benefit rate for 1995 was 21.4%
compared to an effective 1994 tax benefit rate of 70.2%. In 1994, the Company   
recognized a tax benefit related to its loss, as well as tax benefits for New   
York State investment tax credits on manufacturing equipment, and federal       
rehabilitation and job credits. In 1995, the Company was not able to recognize, 
in its tax provisions, the full benefit for its 1995 loss and 1995 credits      
generated. The Company's tax benefits were reduced through the application of   
FAS 109. FAS 109 requires that the Company assess the value of the deferred tax 
assets on its balance sheet. The Company was required to establish a valuation  
allowance for the deferred tax assets to reduce the value of the deferred tax   
assets to a level that is more likely than not to be realized. The effect of    
recording a valuation allowance related to the Company's 1995 deferred tax      
assets was to reduce the 1995 tax benefit. Therefore, the Company's effective   
tax benefit rate was reduced from 1994 to 1995.                                 

 NET INCOME.  For the reasons discussed above, the Company's 1995 net loss
was $9,952 or $1.57 per share, compared to 1994's net loss of $426 or $0.07 per 
share.                                                                          

LIQUIDITY AND CAPITAL RESOURCES                                                 

Cash and cash equivalents, combined with marketable securities totaled  
$2,108 at September 30, 1997 and $2,999 at December 31, 1996. Total liabilities 
increased by $6,227 to $20,594 at September 30, 1997 from $14,367 at December   
31, 1996, as a result of the Outsourcing Agreement, under which the Company has 
no inventory for its check business but records accounts payable for the cost of
the subcontracted check production. Long-term debt increased to $5,022 at       
September 30, 1997 from $1,034 at December 31, 1996 for the reasons described in
Note 5 to the Condensed Financial Statements. Income tax payable increased to   
$225 as September 30, 1997 from $113 at December 31, 1996. Accounts payable     
increased by 5.3% to $12,472 at September 30, 1997 from $9,847 at December 31,  
1996, as inventories grew to service expected higher volume in the second half  
of the year.                                                                    

Working capital at September 30, 1997 was a negative $2.1 million. The  
Company is operating with a working capital deficit as a result of the          
Outsourcing Agreement, under which the Company has no inventory for its check   
business but records accounts payable for the costs of Harland's check          
production. Cash flows from operating activities in the third quarter of 1997   
were positive by $0.6 million as expected because of the Company's traditionally
higher sales in the third quarter.                                              

The Company has historically met its cash requirements primarily from   
operating activities. An aggregate of $4.5 million in payments were made in June
of 1997, all of which were funded from the Revolver. These payments, in         
combination with negative cash flow of $1.0 million for the second quarter,     
elevated the balance under the Revolver to $4.1 million with availability       
thereunder capped by a borrowing base of $5.6 million. As of July 18, 1997, the 
Company liquidated $1.5 million of its investments to pay down the Revolver. As 
of November 1, 1997, the outstanding balance on the Revolver was $5.4 million,  
with availability capped by a borrowing base of $6.4 million. Operating         
activities are expected to fully fund the Company's cash requirements in the    
fourth quarter.                                                                 

  Management believes that the operating activities of the Company, together
with the line of credit available under its Revolver, will substantially support
its cash requirements for the next twelve months and that sufficient capital    
resources are available to the Company to provide adequate liquidity overall.   
Management is of the opinion that inflation will not have a material effect on  
the operations of the Company. The Company is in compliance under all financial 
and operating covenants of the Revolver.                                        

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BUSINESS OF THE COMPANY 

GENERAL                                                                         

 The Company sells, markets and manufactures domestically a broad range of
personalized products focused on three core business lines (i) personalized bank
checks ("Checks"), (ii) name and address products ("Personalized Products") and 
(iii) gift items (some of which are personalized), greeting cards, apparel and  
household consumable items ("Catalog Items"). The merchandise is sold via free  
standing newspaper inserts ("FSIs"), co-op mailing programs ("Co-ops" and,      
together with FSIs, "Mass Media") and catalogs throughout the United States. The
Company also generates revenues from personalized product and catalog           
fulfillment services ("Fulfillment Services"), package insert programs ("PI     
Programs") and mailing list rentals to other concerns ("List Rentals").         
Additionally, the Company has initiated an advertising and sales campaign over  
the Internet where its interactive, order-capable home page can be found at     
www.artisticgreetings.com. The Company also markets certain of its merchandise  
internationally in countries which include Canada, the United Kingdom (the      
"U.K.") and Australia.                                                          

MARKETING AND PROMOTION                                                         

  The Company's advertising efforts for its Checks and Personalized Products
are focused primarily on Mass Media. An exclusive agreement with Valassis       
Communications, Inc. ("Valassis") provides the Company with a right of first    
refusal to participate in Valassis FSI media publications distributed through   
Sunday newspapers in 55 million homes across the country 48 weeks each year (the
"Advertising Agreement"). The Company considers this exclusive access to its    
customers crucial to geographically and demographically targeting, and          
profitably managing, its customer solicitation efforts. In particular, the      
Valassis relationship enables the Company to target its advertising and measure 
response from customers in regions which have historically produced the highest 
response rates for specific products, as well as determine which regions are    
less suitable for the Company's solicitation efforts.                           

  Since the early 1980's, Artistic has also participated in nationwide Co-op
mailing programs in order to enhance its domestic market penetration. Under     
these programs, printed inserts advertising the Company's products are          
distributed along with inserts of other participating marketers through the     
mail. Additionally, the Company has been advertising in Co-op mailings in Canada
since 1993, PI Programs in the U.K. since the late 1980's, and tested its first 
Co-op mailing program in Australia in 1997.                                     

The Company also distributes its catalog, THE PERSONAL                  
TOUCH-Registered Trademark-, through the mail and in the Company's PI Program.  
The PERSONAL TOUCH CATALOG-Registered Trademark- is a digest-size catalog of low
to middle-priced consumer products that mails monthly, with four distinct       
seasonally thematic merchandise groupings (Spring, Summer, Fall and Holiday).   
More than 90% of the 400,000 PERSONAL TOUCH CATALOG-Registered Trademark-       
customers who have purchased merchandise from the catalog in the last 12 months 
are middle to upper income bracket (average income above $50,000),              
highly-educated females between 25 and 55 years old. The catalog features       
personalized and decorative labels, stationery, greeting cards, gifts, apparel  
and creative accessories. The three major product groupings sold in the catalog 
are: (i) utilitarian paper, labels, home/office paper and productivity tools,   
(ii) licensed character items and (iii) natural-decoratively themed items such  
as flowers, angels and animals.                                                 

    The Company began to advertise its personalized checks on the World Wide Web
in August 1994, long before the current heightened awareness of this medium. The
web pages have had the advantage of showing all available check designs, as well
as all other information and options regarding checks. Artistic has recently    
completed the next step in an ongoing initiative to expand its Internet presence
to include Personalized Products and Catalog Items in addition to Checks, with a
new highly-sophisticated, order-capable Internet server displaying a home page  
at www.artisticgreetings.com.                                                   

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CHECKS                                                                          

    GENERAL.  Artistic Checks-Registered Trademark-, the Company's Check product
line, was initiated in August 1993 and was expanded in May 1995 through the     
acquisition from Valassis of the assets of its direct-mail check operation, The 
Valcheck Company ("Valcheck"), which, like the Company, had been engaged in the 
direct-mail check market (the "Direct-Mail Channel"). The acquisition also added
significantly to the Company's check sales and added nearly one million names to
its customer list. Check sales represented 44% of the Company's 1996 net sales, 
compared with 39% and 19% in 1995 and 1994, respectively. Artistic currently    
subcontracts its check printing through an arrangement with the John H. Harland 
Company ("Harland") at a contractually-determined price per box of checks       
printed. For a further description of this arrangement, see                     
"Manufacturing--Checks."                                                        

   MARKETPLACE.  Management believes that the domestic market for personalized
bank checks in 1996 was approximately $2 billion in sales with checks being sold
through financial institutions (the "Bank Channel") representing 85% or $1.7    
billion and the Direct-Mail Channel representing 15% or $300 million of the     
total. The Company believes that the total market for checks in the United      
States is growing at a 2% to 3% rate annually, which, management believes,      
represents a diminishing per capita usage of checks as electronic banking and   
debit card usage increases, offset by the growth in population of the United    
States. The slow growth of the total check market does not, however, reflect    
negatively on the Direct-Mail Channel which has seen growth rates averaging     
10%-12% per year over the past five years, as consumers continue in increasing  
numbers to recognize the significant favorable price differential, convenience, 
variety of design and high quality of checks offered through the Direct-Mail    
Channel. Management believes sales through the Direct-Mail Channel will continue
to grow for the foreseeable future as direct-mail check companies continue to   
convert customers from the segment represented by the Bank Channel, and that the
Direct-Mail Channel is the fastest growing check market in the world.           

The Direct-Mail Channel is fragmented with a trend toward consolidation 
similar to that evidenced over the past five to seven years in the Bank Channel,
where regional-check marketers and manufacturers took advantage of economies of 
scale by merging with larger companies like Deluxe Corporation ("Deluxe"),      
Harland and Clarke American ("Clarke American"). Management believes that the   
high solicitation costs of new customers in the Direct-Mail Channel favors      
established, direct-mail check purveyors like Artistic over the long-term. This 
advantage results from the costs of acquiring new customers being financed by   
higher-margin check reorders for which the Company incurs virtually no          
advertising expense, thereby increasing profitability and supporting the ongoing
expense of advertising campaigns for first-time customers. The high number of   
check-reorder customers which the Company has established represents a          
competitive advantage over smaller check companies that must purchase initial   
check customers with capital resources not as closely associated with, and      
supported by, the reorder stream. Management believes there exist opportunities 
in the marketplace for established direct-mail check companies like Artistic to 
acquire smaller companies experiencing financial pressures caused by these      
market dynamics. The largest direct-mail check producer in the Direct-Mail      
Channel is Current, Inc., owned by Deluxe, with an estimated 40% share of the   
Direct-Mail Channel in 1996. The Company believes that its sales are approaching
those of its nearest size competitor, Checks In The Mail, a subsidiary of       
Clarke-American, and that both companies are vying for the number two position  
in the Direct-Mail Channel with another approximate 33% share of the Direct-Mail
Channel between them in 1996. Management believes that the remaining share of   
the Direct-Mail Channel is represented by numerous other smaller companies.     

    STRATEGY.  In the Check business, management expects regular and predictable
growth to occur in initial customer orders as advertising continues at levels   
similar to those experienced in 1996, with higher growth in revenue from the    
check-reorder stream as customers acquired previously return to Artistic to     
replenish their check supplies at the Company's low reorder prices. Management  
planned to grow the Company's direct-mail check business in 1997 by managing    
profitably the ratio between first-time orders                                  

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and reorders. The Company is also continuously searching the marketplace for    
acquisition opportunities as a means to build check sales more quickly.         

   BUSINESS CHECKS.  The Company has recently begun a campaign for the sale of
three-to-a-page business and desk checks ("Desk Checks") in its Mass Media      
advertising vehicles. The Company believes that the sale of Desk Checks         
represent 8% of the total check market and that such percentage will continue to
grow as consumers recognize Desk Checks as a convenient and efficient           
alternative to the traditional pocket check. Management believes that by        
offering its customers substantial savings on these products compared to the    
price points available in the Bank Channel, consumers will choose this          
lower-cost, easily accessible and multi-design alternative. The Company offers  
its customers a full line of business checks and other business type products   
through its brochure, which it distributes upon request to its customers who    
contact the Company through its toll free business check hotline advertised in  
its FSI media.                                                                  

PERSONALIZED PRODUCTS                                                           

  GENERAL.  Personalized Products consist primarily of labels, miniprinters,
stamps and other lower-price point items, personalized in high volume for       
millions of the Company's customers. Artistic virtually invented the            
personalized label market and has made it an easily accessible and affordable   
staple of convenience for its millions of customers. The shipment of these      
approximately five million units in 1996 has the additional benefit to the      
Company of providing "ride-along" opportunities for the Company's own           
advertising material, including its catalog, as well as the sale of the space in
those packages to third parties in the Company's PI Program. See "--PI Program."
Personalized Products sales represented 37% of the Company's 1996 net sales,    
compared with 45% and 58% in 1995 and 1994, respectively.                       

Personalized Products include labels, pens, pencils, stationery, calling
cards, self-inking stampers, other stamps, memo pads, keychains, nameplates,    
letter openers, hand embossers, luggage tags and greeting cards. The Company    
also markets personalized products with images such as Looney Toons-TM-, Star   
Trek-TM- and Norman Rockwell-TM- licensed from Warner Brothers, Viacom Consumer 
Products and Curtis Publishing Company, respectively, among others.             

   MARKETPLACE.  Management believes that the approximate domestic market size
for this segment in 1996 was approximately $250 million in sales. Artistic's    
1996 sales of $36.5 million in this segment represented an approximate 15% 20%  
market share, making it a major competitor along with Current and Concepts      
Direct, Inc., among others, in this category. Management believes that the      
Personalized Product market has growth potential of approximately 3%-5% per     
annum, which would tend to minimize the entrance of new participants. There     
exists severe price competition in this product line as the customers' primary  
focus in their purchase decision for these highly consumable products is price. 
The Company, however, has successfully demonstrated that it can distinguish     
itself from other label vendors through its consistent and long-proven service  
levels, quality of product and breadth of design.                               

Success in this segment is driven partially by the ability to utilize   
existing printing technologies and Mass Media marketing techniques to access new
market segments, by leveraging database expertise and by targeting new customers
and repeat buyers. The Company is redesigning the management of its database    
with the assistance of a third-party partner whose expertise and advice the     
Company believes should enable it to more scientifically determine, among other 
things, Artistic's "best" customers across its name lists and allow the Company 
to cross-sell and more carefully deliver its product offerings to such proven   
buyers. See "--List Rentals."                                                   

STRATEGY.  In the Personalized Product business, management expects to  
maintain sales at traditional levels in the United States, while testing the    
international marketplaces in such areas as the U.K., Australia and New Zealand.
The Company's strategy is to attempt to replicate abroad its domestic success   
with the Personalized Products line by focusing on new customers who do not have
readily available access to the simplicity and convenience of labels,           
miniprinters and other personalized products, which the Company                 

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can manufacture and ship quickly and efficiently. An added benefit of the       
international marketplace is the Company's ability to introduce and market its  
Personalized Products at higher price points than are available domestically,   
potentially improving overall Company margins.                                  

CATALOG                                                                         

   GENERAL.  More than ten years ago, the Company began a catalog solicitation
program as a tool to market the Company's Personalized Products and broaden the 
number of products sold, as well as to attract a more upscale market with higher
margin merchandise and to increase its mail-order customer base. The Company    
distributes its catalog through mailings to its own customers, to customers     
whose names are rented from mailing lists and by inclusion of its catalog in    
each of the millions of boxes shipped in the Company's PI Programs each year, as
well as in orders shipped by other catalog and merchandise mailers. In 1996     
Artistic shipped more than 18 million catalogs and expected to distribute as    
many as 15% more in 1997. Catalog sales represented 15% of the Company's 1996   
net sales, compared with 10% and 16% in 1995 and 1994, respectively.            

    MARKETPLACE.  Management believes that the direct mail, Catalog Items market
has annual sales in excess of $800 million. With an approximate 1.75% market    
share, the Company is a relatively small competitor but believes it has         
significant growth opportunities in this market. Management believes that gift  
and merchandise companies compete in three distinct demographic segments:       
low-middle; upper-middle; and upper. Artistic's PERSONAL TOUCH                  
CATALOG-Registered Trademark- targets primarily upper-middle level income       
customers, defined as those with household incomes higher than $50,000.         

STRATEGY.  In the Catalog Items business the Company is expecting sales 
growth and improved margins from its newly refocused PERSONAL TOUCH             
CATALOG-Registered Trademark-. The Company has redesigned the layout of the     
PERSONAL TOUCH CATALOG-Registered Trademark- and has refined its product        
offerings to further appeal to its upper-middle income and primarily female     
customers. The Company has developed a plan to further build the circulation and
sales performance of the PERSONAL TOUCH CATALOG-Registered Trademark- by        
systematically accentuating the most successful products and eliminating those  
evidencing the poorest performance. Concurrently, management has determined to  
leverage its fixed expenses of this well-established franchise by offering to   
provide marketing and manufacturing fulfillment services to other catalog       
merchants--primarily in the nonprofit sector--where the economies of developing 
new catalog programs are somewhat more favorable than in the "for-profit"       
sector. For a further description of these efforts, see "Fulfillment            
Services--HSUS Catalog Program."                                                

While the check and label businesses employ more aggressive pricing to  
attract customers, the Catalog Item market relies more on the novelty, variety  
and quality of merchandise to secure orders. Sales tend to be more seasonal with
a large percentage of sales occurring during the October through December       
period. However, with the strategic development of the breadth of product in the
PERSONAL TOUCH CATALOG-Registered Trademark- described above, management expects
to mitigate the historically cyclical nature of this business.                  

FULFILLMENT SERVICES                                                            

    GENERAL.  The Company has a highly efficient, well-established marketing and
manufacturing infrastructure which it maintains to service its three core       
business lines. This infrastructure is flexible, scaleable and lends itself to  
providing additional capacity in a low-cost manner. The Company has contracted  
to produce for Harland stampers and miniprinters ("Stamps") sold through        
Harland's network of financial institutions (the "Harland Stamp Program") and   
has agreed in principle with the Humane Society of the United States ("HSUS") to
market, merchandise and fulfill orders for its new HSUS catalog program (the    
"HSUS Catalog Program").                                                        

 HARLAND STAMP PROGRAM.  In furtherance of the Company's relationship with
Harland as described under "Manufacturing--Checks," Harland has contracted to   
have the Company produce its requirements for "Slim Stamps" and for a high      
percentage of Harland's requirements for the production of other Stamp          

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products. Harland receives orders for Stamps from its customers, processes the  
orders and electronically transmits the personalized information directly to the
Company's manufacturing facility where the Stamps are produced and shipped,     
generally within a twenty-four hour period. Although the revenue derived from   
the Harland Stamp Program, which began in September of 1996, does not represent 
a significant portion of the Company's sales, management believes that, because 
of the success of the program, additional opportunities exist to produce more   
Stamps and other products for Harland and other third parties.                  

  HSUS CATALOG PROGRAM.  The Humane Society of the United States ("HSUS") is
an international, non-profit organization devoted to the promotion, protection  
and the humane treatment of animals. Artistic and the HSUS have agreed in       
principle to a five-year program in which Artistic will provide its catalog     
expertise to create, design, merchandise and fulfill orders in keeping with the 
mission related activity of the HSUS. The Company has agreed to be a "turnkey"  
provider of these services to the HSUS and is in discussion with other nonprofit
organizations to do the same. Although the revenue to be derived in 1997 from   
the HSUS Catalog Program is not expected to represent a significant portion of  
the Company's sales, management believes that the relationship offers a         
significant growth opportunity with the HSUS over the five-year term, as well as
with other nonprofit entities. The services to be provided to the HSUS have been
developed with limited additional cost as the Company is utilizing its existing 
capabilities for marketing, production and fulfillment of its PERSONAL TOUCH    
CATALOG-Registered Trademark-. Additionally, all customer names generated       
through the HSUS Catalog Program are expected to be maintained by the Company   
for further growth of its customer base and PI Program.                         

PI PROGRAMS                                                                     

The Company's PI Program is an important element in the continuing      
development of its ability to access, service and solicit orders from its       
established customer base of over 12 million buyers. The PERSONAL TOUCH         
CATALOG-Registered Trademark- and other Artistic advertising material is        
inserted in each package that is shipped to its customers and provides an       
inexpensive means of targeted solicitation to proven Artistic buyers that       
results in high average order sizes and favorable response rates. As the        
Company's customer base continues to grow through general sales activity, the PI
Program becomes a more powerful marketing asset of the Company. The Company also
derives revenue from the marketing of the space in its outgoing packages to     
other direct-mail participants for their advertising to "ridealong" with the    
Company's shipments.                                                            

LIST RENTALS                                                                    

   Artistic has 400,000 PERSONAL TOUCH CATALOG-Registered Trademark- customers
who have purchased Catalog Items from the Company in the past 12 months, four   
million direct-to consumer check customers, and three million customers of other
Personalized Products advertised in Mass Media (collectively, the "Artistic     
Names"). As of January 1, 1997, the Company has contracted with Brigar Computer 
Services, Inc. and Direct Tech, Inc. ("BDT") for the management and maintenance 
of the Artistic Names. Management expects that the Company will benefit from the
experience and direct-mail expertise offered by BDT. With support, training and 
advisement of the BDT consultants, Artistic should be able to more effectively  
utilize its catalog database management, statistical modeling and other file    
management techniques such as recency-frequency-monetary file segmentation. The 
Company expects that the information regarding Artistic's "best" customers will 
provide sales opportunities that have yet to be accessed. As a result of the    
proven success of sales through Artistic's in-house PI Program, management will 
continue to focus on building package insert opportunities or the "back end," to
leverage the Artistic Names as that list continues to grow. Additionally,       
management is focusing on cross-selling between the Artistic Names and the names
of the partners for whom it will conduct catalog fulfillment and other services.
The Company has also historically generated revenue from the rental and exchange
of the Artistic Names to and with other direct-mail companies. Management       
expects that with its renewed focus on the maintenance of the Artistic Names,   
the Company should derive additional revenue from such list rental activities as
it becomes easier                                                               

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to market the Artistic Names to other direct mailers who would benefit from the 
characteristics of the Artistic customers represented by the Artistic Names.    

MANAGEMENT INFORMATION SYSTEMS                                                  

In 1996 the Company began an extensive effort to overhaul its entire    
information systems infrastructure following a full-scale review of the         
Company's system capabilities. The study determined that the Company was        
enduring substantive capacity and reliability problems with its proprietary     
software and hardware. After the completion of the systems assessment in July of
1996, a strategic information systems plan was developed and a software package 
systems selection made. The following improvements have been accomplished or are
underway:                                                                       

-  Aging proprietary enterprise hardware has been replaced with an open 
  systems architecture relying on common BP 9000 hardware and the UNIX
      operating system, which has been networked with client/server enterprise
applications and PC based office automation tools.                

-  Proprietary financial and inventory systems have been replaced with  
     Lawson Insight, a client/ server based enterprise software package (the
"Enterprise Systems").                                            

  -  Existing PICK operating system-based order processing protocol is being
 converted to run under the UNIX operating system on the new HP 9000
hardware.                                                         

-  Use of stand-alone PC's has been consolidated to a modem PC network  
running standard Microsoft Office tools with e-mail and on-line   
calendaring and scheduling systems for office automation.         

 -  A cultural shift from hierarchical management to empowered work teams.

From this enterprise-wide effort, the Company expects enhanced access to        
financial and operational information for decision making and control in terms  
of both order content and timeliness of production and delivery, as well as a   
flexible information system architecture that can be easily scaled upward to    
support anticipated growth of the Company's business.                           

The Company has completed the installation of the hardware and network  
infrastructure for this system and the general ledger module became operational 
in January 1997. Purchasing, inventory management and accounts payable came on  
line in July 1997 and the order processing system was converted to the new      
platform in May 1997. This project will yield to Artistic an organizational and 
informational infrastructure that is a highly scaleable, competitive asset.     

MANUFACTURING                                                                   

CATALOG ITEMS AND PERSONALIZED PRODUCTS.  The Company personalizes      
approximately 90% of the products that it sells, while other-items are          
manufactured by outside vendors, "pick-packed" and shipped at Artistic Plaza or 
"drop-shipped" directly from the vendor. The Company has recently completed     
renovation of Artistic Plaza, a 142,000 square foot facility, which provides the
necessary space for all current manufacturing operations of the Company.        
Management believes that housing all manufacturing under one roof has decreased 
the cost of material movement and increased productivity through more efficient 
utilization of its personnel.                                                   

    Manufacturing operations utilize some of the newest technology available for
production of the Company's products. Activities are monitored to provide       
up-to-the-minute order tracking and training programs assure a qualified group  
of employees. Quality assurance is maintained to provide the Company's customers
with the highest degree of accuracy of product received.                        

  The Company maintains a wide variety of paper inventory to meet the demand
for its customers' orders. The Company has more recently been better able to    
plan its inventory replenishment cycle which                                    

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reduces the commitment of large amounts of working capital to inventory.        
Inventories have decreased 55% during 1996 as evidenced by an increase in       
inventory turns from 7.3x in 1995 to 10.0x in 1996, and the reduction of        
inventory from $5.8 million at year end 1995 to $2.6 million at year end 1996.  
These improvements have been accomplished through major programs such as        
supplier partnerships, replenishment, just-in time material management,         
consigned supply and inventory concepts, and strict quality management          
practices. The outsourcing of all check production to Harland as described below
in "--Checks" was also a major factor in the reduction of inventory. These      
approaches have resulted in reduced supply costs, freight costs and scrap, and  
more efficient reporting and tracking procedures and controls. The warehouse    
operations utilize efficient storage location and handling methods to ensure    
security of materials, reduced loss and damage, and ease of movement. These     
concepts add to a more efficient and low-cost operation. Management believes    
that the Company's inventory system accuracy level exceeds 99%.                 

CHECKS.  On August 29, 1996, the Company contracted with Harland for the
production of its requirements for checks for a period of seven years (the      
"Harland Contract"). All orders for check products are received by the Company, 
processed and electronically transferred to a Harland production facility in    
either the East or West geographical areas of the United States, depending on   
the customer's geographical location. Harland imprints the customers' checks and
ships the orders directly from its facilities for a fixed price per box and     
within tolerances including a two-day turnaround time and a 99.9% micro-line    
accuracy rate. The Harland Contract is a valuable asset to the Company as it    
provides for virtually unlimited check production capacity with no significant  
limitations or capital expenditure requirements which would otherwise be        
associated with the growth of the Check product line. As a part of the Harland  
Contract, the Company sold its check-production equipment to Harland at net book
value resulting in no gain or loss being recognized. Additionally, the Harland  
Contract has resulted in the elimination of business risk associated with       
quality, cost and labor-load leveling issues previously experienced by the      
Company. The Company has also directed its financial and human resources to new 
and more efficient uses within the Company. The Company believes that its       
relationship with Harland is positive.                                          

BACKLOG/POSTAGE.  The Company's backlog of orders is generally small in 
relation to total sales and is not material to an understanding of the Company's
business. Additionally, rapid order fulfillment is one means by which the       
Company can distinguish itself from its competition. Once a product is available
for shipment, the mode of transportation can be U.S. bulk mail, priority mail or
Federal Express. Because the Company is heavily involved in direct-mail         
solicitations and shipping of orders, increases in U.S. Postal Service ("USPS") 
rates affect its cost of doing business to a degree. Each time the USPS raises  
postage rates, the Company evaluates the classes of postage affected, the rates 
of increase and the potential impact on Company profits before it passes those  
increases on to its customers. The Company ships 2% of its products through     
private shipping providers such as Federal Express pursuant to contractual      
arrangements. The cost of such shipping is, generally, passed on to the customer
and the Company is therefore not detrimentally affected by changes in price     
structure under such contracts.                                                 

   DATA ENTRY/ORDER PROCESSING.  Over 7.6 million incoming orders were handled
in the Company's order processing department in 1996. Approximately 85% of the  
Company's orders are received through the mail, with the remainder being        
accepted via the telephones. The orders received through the mail are opened,   
processed and batched for data entry usually within four hours of receipt from  
the post office.                                                                

    Two data entry sites, one at Artistic Plaza and the other in Binghamton, New
York, key and verify each order. Networked computers utilizing post-relational  
database technology, along with fully integrated scanning devices, assist data  
entry clerks in the entry of personalized and other information related to each 
order. The speed and accuracy consistently exhibited by this department         
contributes to a high level of customer satisfaction, as well as the retention  
and growth of repeat customers.                                                 

  TELEMARKETING.  An increasing percentage of the Company's revenue is being
generated through its call center. In 1996, over 3.2 million telephone calls    
were answered as compared to 2 million calls in 1995.                           

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With a base of over 12 million customers, along with a direct link to the       
manufacturing floor, the customer service/telemarketing representatives are able
to recall detailed order history, facilitating customer inquiries, reorders or  
problem resolution. The use of cross-selling and "up-selling" techniques results
in the average order from the Company being 20-30% higher when placed over the  
telephone versus when it is received through the mail.                          

  RAW MATERIALS.  The raw materials necessary for the Company's business are
principally paper, paper products and printing supplies. While increases in the 
prices of these commodities affect the Company's cost of goods sold, such       
increases likewise affect the Company's competition; thus, it is not uniquely   
vulnerable to such changes. Management believes that the availability of paper  
products in 1996 expanded with a concomitant stabilization in prices, although  
there can be no assurance that such stabilization will continue. The Company    
historically has found the necessary materials readily available in sufficient  
quantities.                                                                     

EMPLOYEES.  As of February 28, 1997, the Company had approximately 656  
employees, including 578 hourly and 78 salaried workers. The Company maintains  
strong employee relations which has helped to build a cohesive, marketing-driven
organization that is focused, innovative and highly motivated. To enhance its   
workforce, Artistic has established ongoing programs for employee training,     
safety and communications. Employees are encouraged to join the Artistic's      
buyer's club which entitles them to discounts and enhances their loyalty to the 
Company. The Company believes its employee relations to be good. Artistic has   
never experienced a work stoppage and its employees are not represented by a    
labor union.                                                                    

CERTAIN INFORMATION CONCERNING MDC AND NEWCO

Newco is a newly incorporated Delaware corporation and an indirect      
wholly-owned subsidiary of MDC. To date, Newco has not conducted any business   
other than in connection with the Merger. Accordingly, no meaningful financial  
information with respect to Newco is available. The principal executive offices 
of Newco are located at 45 Hazelton Avenue, Toronto, Ontario, Canada M5R 2E3.   

MDC, an Ontario corporation, has its principal executive office at 45   
Hazelton Avenue, Toronto, Ontario, Canada M5R 2E3. MDC is principally engaged in
the business of manufacturing security products, including stamps, checks,      
tickets and plastic cards, operating a non-retail mail order catalog operation, 
and a retail and catalog packaged seed company. In addition, MDC provides       
advertising, marketing and design services and products.                        

    ADI is a New York corporation formed by Thomas C. Wyckoff for the purpose of
acquiring the P&C Businesses of the Company. To date, ADI has not conducted any 
business other than in connection with the Asset Sale. The principal executive  
offices of ADI are located at 111 Drive A, Strathmont Park, Elmira, New York    
14905.                                                                          

STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING 

 The 1998 Annual Meeting of Stockholders of the Company has been postponed
pending the results of the Special Meeting. In the event the Merger is not      
consummated and the 1998 Annual meeting is held, any stockholder proposal       
intended to be presented at the 1998 Annual Meeting must have been received by  
the Company prior to date of this proxy statement in order to be considered for 
inclusion in the proxy statement and form of proxy for such meeting.            

OTHER MATTERS 

    Management knows of no other matter which may properly be brought before the
Special Meeting. Under the Company's Bylaws, no business may be transacted at a 
special meeting of Stockholders unless it is included in the notice of the      
meeting. If any other matters properly come before the Special Meeting, it      

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is intended that the holders of the proxies hereby solicited will act in respect
to such matters in accordance with their best judgment.                         

AVAILABLE INFORMATION 

  The Company is subject to the informational requirements of the Commission
and in accordance therewith files reports, proxy statements, and other          
information in accordance with the Exchange Act. These materials can be         
inspected and copied at the public reference facilities maintained by the       
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at 
the Commission's regional offices at Seven World Trade Center, 13th Floor, New  
York, New York 10048 and Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material also can be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549 at       
prescribed rates. The Commission also maintains a web site that contains        
reports, proxy and information statements and other information regarding       
registrants that file electronically with the Commission at the address         
"http://www.sec.gov." In addition, the Company's Common Stock is listed on      
Nasdaq and material filed by the Company can be inspected at the offices of The 
Nasdaq Stock Market, Rep 1735 K Street N.W., Washington, D.C. 20006. After the  
Merger, it is expected that registration of the Common Shares under the Exchange
Act will be terminated.                                                         

  This Proxy Statement includes information required by the Commission to be
disclosed pursuant to Rule 13e-3 under the Exchange Act, which governs so-called
"going private" transactions by certain issuers of their affiliates. In         
accordance with the rule, the Company has filed with the Commission, under the  
Exchange Act, a Schedule 13E-3 relating to the Merger and the Asset Sale. This  
Proxy Statement does not contain all of the information set forth in the        
Schedule 13E-3, parts of which are omitted in accordance with the regulations of
the Commission. The Schedule 13E-3, and any amendments thereto, including       
exhibits filed as a part thereof, will be available for inspection and copying  
at the offices of the Commission as set forth above.                            

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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

    The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:                          

    1. The Annual Report of the Company on Form 10-K for its fiscal year
ended December 31, 1996;                                                

   2. The Quarterly Reports of the Company on Form 10-Q for its fiscal
period ended March 31, 1997, June 30, 1997 and September 30, 1997; and  

     3. All other reports filed by the Company since the end of the fiscal
    year covered by the Annual Report referred to above, including the Company's
Report on Form 8-K filed on December 30, 1997.                          

   All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and 
prior to the date of the Special Meeting shall be deemed to be incorporated     
herein by reference. Any statement contained herein or in a document all or a   
portion of which is incorporated or deemed to be incorporated by reference      
herein shall be deemed to be modified or superseded for purposes of this Proxy  
Statement to the extent that a statement contained herein or in any other       
subsequently filed document which also is or is deemed to be incorporated by    
reference herein. Any such statement so modified or superseded shall not be     
deemed, except as so modified or superseded, to constitute a part of this Proxy 
Statement.                                                                      

                                       By Order of the Board of Directors,

                     Thomas C. Wyckoff
                       ASSISTANT SECRETARY

[           ], 1998                                                             

PLEASE COMPETE AND RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE. NO 
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.                             

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                                                                         ANNEX I

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

MDC COMMUNICATIONS CORPORATION, 

AGI ACQUISITION CO. 

AND 

ARTISTIC GREETINGS INCORPORATED 

DATED AS OF DECEMBER 21, 1997 

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TABLE OF CONTENTS 

                                                        [Enlarge/Download Table]

                                             ARTICLE I                                        
                                            THE MERGER                                        
                                                                                       PAGE   
                                                                                       -----  

Section 1.01. The Merger..............................................................       2
                                                                                              
Section 1.02. Effective Time..........................................................       2
Section 1.03. Certificate of Incorporation and By-Laws of Surviving Corporation.......       2
Section 1.04. Directors and Officers of Surviving Corporation.........................       2
Section 1.05. Closing.................................................................       3
Section 1.06. Further Assurances......................................................       3
Section 1.07. Conversion of Shares....................................................       4
Section 1.08. Stock Options...........................................................       4
Section 1.09. Stockholders' Meeting; Proxy Statement..................................       5
Section 1.10. Dissenting Shares.......................................................       6
Section 1.11. Payment for Shares......................................................       6

                                            ARTICLE II                                        
                        REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO                    

Section 2.01. Organization............................................................       8
Section 2.02. Authority Relative to This Agreement....................................       9
Section 2.03. No Violations, Etc......................................................       9
Section 2.04. Proxy Statement.........................................................      10
Section 2.05. Financing...............................................................      10
Section 2.06. Brokers.................................................................      11

                                            ARTICLE III                                       
                           REPRESENTATIONS AND WARRANTIES OF THE COMPANY                      

Section 3.01. Organization and Qualification..........................................      11
Section 3.02. Authority Relative to This Agreement....................................      11
Section 3.03. No Violations, Etc......................................................      12
Section 3.04. Board Recommendation....................................................      13
Section 3.05. State Antitakeover Statutes.............................................      13
Section 3.06. Fairness Opinion........................................................      13
Section 3.07. Proxy Statement.........................................................      13
Section 3.08. Finders or Brokers......................................................      14
Section 3.09. SEC Filings.............................................................      14
Section 3.10. Financial Statements....................................................      15
Section 3.11. Absence of Undisclosed Liabilities......................................      15
Section 3.12. Absence of Changes or Events............................................      16
Section 3.13. Capitalization..........................................................      17
Section 3.14. Litigation..............................................................      18
Section 3.15. Insurance...............................................................      18
Section 3.16. Compliance with Law.....................................................      18
Section 3.17. Employee Benefits.......................................................      19
Section 3.18. Taxes...................................................................      20
Section 3.19. Contracts...............................................................      21
Section 3.20. Related Party Transactions..............................................      22
Section 3.21. Real Property...........................................................      22
Section 3.22. Environmental Matters...................................................      22
Section 3.23. Intellectual Property...................................................      23

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                                                        [Enlarge/Download Table]
                                                                                              
                                            ARTICLE IV                                        
                                             COVENANTS                                        


                                                                                       PAGE   
                                                                                       -----  
                                                                                              

Section 4.01. Conduct of Business of the Company......................................      25
Section 4.02. Other Potential Bidders.................................................      28
Section 4.03. Access to Information...................................................      29
Section 4.04. Commercially Reasonable Efforts; Other Actions..........................      30
Section 4.05. Public Announcements....................................................      31
Section 4.06. Notification of Certain Matters.........................................      31
Section 4.07. Indemnification.........................................................      31
Section 4.08. Expenses................................................................      32
Section 4.09. Resignation of Directors................................................      32
Section 4.10. Asset Purchase Agreement................................................      32

                                             ARTICLE V                                        
                             CONDITIONS TO THE OBLIGATIONS OF PARENT,                         
                                       NEWCO AND THE COMPANY                                  

Section 5.01. Conditions to Obligations of Parent, Newco and the Company..............      33
Section 5.02. Conditions to Obligations of Parent and Newco...........................      33
Section 5.03. Conditions to Obligations of Company....................................      34

                                            ARTICLE VI                                        
                                  TERMINATION; AMENDMENT, WAIVER                              

Section 6.01. Termination.............................................................      34
Section 6.02. Effect of Termination...................................................      36
Section 6.03. Certain Payments........................................................      37
Section 6.04. Amendment...............................................................      38
Section 6.05. Extension; Waiver.......................................................      38

                                            ARTICLE VII                                       
                                            DEFINITIONS                                       

Section 7.01. Terms Defined in This Agreement.........................................      39

                                           ARTICLE VIII                                       
                                           MISCELLANEOUS                                      

Section 8.01. Waiver of Compliance; Consents..........................................      40
Section 8.02. Survivability; Investigations...........................................      40
Section 8.03. Notices.................................................................      40
Section 8.04. Assignment; No Third Party Beneficiaries................................      41
Section 8.05. Governing Law...........................................................      42
Section 8.06. Counterparts............................................................      42
Section 8.07. Severability............................................................      42
Section 8.08. Interpretation..........................................................      42
Section 8.09. Entire Agreement........................................................      42

Signatures............................................................................     S-1

                                                                [Download Table]
                                                                       
Exhibits                                                               

    Exhibit 1................................  Asset Purchase Agreement
    Exhibit 2................................  Stockholders Agreement  

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of December 21, 1997 (the        
"Agreement"), by and among MDC Communications Corporation, an Ontario           
corporation ("Parent"), AGI Acquisition Co., a Delaware corporation ("Newco"),  
which is an indirect wholly owned Subsidiary of Parent, and Artistic Greetings  
Incorporated, a Delaware corporation (the "Company"). Newco and the Company are 
hereinafter sometimes collectively referred to as the "Constituent              
Corporations."                                                                  

RECITALS

  WHEREAS, the Board of Directors of the Company (the "Board") has, in light
of and subject to the terms and conditions set forth herein, (i) determined that
the Merger (as defined below) is fair to the stockholders of the Company and in 
the best interests of such stockholders and (ii) approved and adopted this      
Agreement and the transactions contemplated hereby (including the transactions  
contemplated by the Asset Purchase Agreement (as defined herein)) and resolved  
to recommend approval and adoption by the stockholders of the Company of this   
Agreement and the Asset Purchase Agreement;                                     

  WHEREAS, contemporaneously herewith, the Company is entering into an Asset
Purchase Agreement, dated as of even date herewith, with Artistic Direct        
Incorporated (together with any other asset purchase agreement substantially in 
the form of Exhibit 1 hereto and providing for the payment of cash consideration
of at least $9 million and the assumption of the Assumed Liabilities (as defined
therein), the "Asset Purchase Agreement"), pursuant to which the Company has    
agreed to sell (the "Asset Sale") certain assets relating to the personalized   
product and catalog businesses of the Company (the "P&C Business") for the      
consideration set forth therein and the assumption of certain liabilities       
relating to the P&C Business, on the terms and conditions more fully described  
therein; and                                                                    

    WHEREAS, the Board of Directors and the shareholders of Newco have, in light
of and subject to the terms and conditions set forth herein, approved and       
adopted this Agreement and the transactions contemplated hereby.                

NOW, THEREFORE, in consideration of the premises and the mutual         
representations, warranties, covenants, agreements and conditions contained     
herein, the parties hereto agree as follows:                                    

ARTICLE I 
THE MERGER

 Section 1.01.  THE MERGER.  (a) In accordance with the provisions of this
Agreement and the Delaware General Corporation Law (the "Delaware Act"), at the 
Effective Time (as hereinafter defined), Newco shall be merged (the "Merger")   
with and into the Company, and the Company shall be the surviving corporation   
(hereinafter sometimes called the "Surviving Corporation") and shall continue   
its corporate existence under the laws of the State of Delaware. The name of the
Surviving Corporation shall be "the Company". At the Effective Time the separate
existence of Newco shall cease.                                                 

(b) The Merger shall have the effects on Newco and the Company as       
constituent corporations of the Merger as provided under the Delaware Act.      

Section 1.02.  EFFECTIVE TIME.  The Merger shall become effective at the
time of filing of, or at such later time specified in, a certificate of merger, 
in the form required by and executed in accordance with the Delaware Act, with  
the Secretary of State of the State of Delaware in accordance with the          
provisions of the Delaware Act (the "Certificate of Merger"). The date and time 
when the Merger shall become effective is herein referred to as the "Effective  
Time."                                                                          

Section 1.03.  CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING    
CORPORATION.  The Certificate of Incorporation of the Company, as in effect     
immediately prior to the Effective Time, shall be amended as of the Effective   
Time so that Article Four of such Certificate is amended to read in its entirety
as follows: "The total number of shares of stock which the Corporation shall    
have authority to issue is 1,000 shares, all of one class of Common Stock having
a par value of $.01 per share, and each share of Common Stock shall be entitled 
to one vote on all matters as to which such stock is entitled to vote.". As so  
amended, the Certificate of Incorporation of the Company shall be the           
Certificate of Incorporation of the Surviving Corporation until thereafter      
amended as provided therein or by law. The By-Laws of Newco, as in effect       

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immediately prior to the Effective Time, shall be the By-Laws of the Surviving  
Corporation until thereafter amended as provided therein, by the Certificate of 
Incorporation or by law.                                                        

Section 1.04.  DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.  The    
directors of Newco immediately prior to the Effective Time will be the initial  
directors of the Surviving Corporation, and the officers of the Company         
immediately prior to the Effective Time will be the initial officers of the     
Surviving Corporation, in each case until their successors are elected and      
qualified.                                                                      

Section 1.05.  CLOSING.  (a) Unless this Agreement shall have been      
terminated and the transactions herein contemplated shall have been abandoned   
pursuant to the provisions of Section 6.01, and subject to satisfaction or      
waiver of the provisions of Article V hereof, the closing (the "Closing") of    
this Agreement shall take place at the offices of Simpson Thacher & Bartlett,   
425 Lexington Avenue, New York, New York, at 10:00 a.m. local time as soon as   
practicable but no later than the second business day after the satisfaction or 
waiver of the conditions set forth in Sections 5.01, 5.02 and 5.03 hereof, or at
such other place, time and date as the parties may mutually agree. The date and 
time of such Closing are herein referred to as the "Closing Date." For purposes 
of this Agreement "business day" shall mean any day except Saturday, Sunday and 
any day which shall be in New York City a legal holiday or a day on which       
banking institutions in New York or Toronto are authorized or required by law or
other government action to close.                                               

   (b) At the Closing, Parent, Newco and the Company shall cause a Certificate
of Merger to be executed and filed with the Secretary of State of the State of  
Delaware as provided in the Delaware Act, and shall take any and all other      
lawful actions and do any and all other lawful things to cause the Merger to    
become effective.                                                               

Section 1.06.  FURTHER ASSURANCES.  If, at any time after the Effective 
Time, the Surviving Corporation shall consider or be advised that any deeds,    
bills of sale, assignments, assurances or any other actions or things are       
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the   
rights, properties or assets of either of the Constituent Corporations acquired 
or to be acquired by the Surviving Corporation as a result of, or in connection 
with, the Merger or otherwise to carry out this Agreement, the officers and     
directors of the Surviving Corporation shall be authorized to execute and       
deliver, in the name and on behalf of each of the Constituent Corporations or   
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of the Constituent Corporations or    
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under 
such rights, properties or assets in the Surviving Corporation or otherwise to  
carry out this Agreement.                                                       

  Section 1.07.  CONVERSION OF SHARES.  (a) Each share (a "Share") of Common
Stock, par value $.10 per share (the "Common Stock"), of the Company issued and 
outstanding immediately prior to the Effective Time (other than (i) Shares held 
in the Company's treasury, (ii) Shares held by Parent, Newco or any other       
subsidiary of Parent and (iii) Dissenting Shares (as defined in Section 1.10    
hereof)) shall, at the Effective Time, by virtue of the Merger and without any  
action on the part of Newco, the Company or the holder thereof, be cancelled and
extinguished and be converted into the right to receive, pursuant to Section    
1.11, $5.70 per Share in cash (the "Merger Consideration"), payable to the      
holder thereof, without interest thereon, upon the surrender of the certificate 
formerly representing such Share, less any required withholding of taxes;       
PROVIDED that, in the event the aggregate cash consideration net of fees,       
expenses and other direct costs (including any break-up or termination fee and  
liquidated damages, if any) received by the Company pursuant to the Asset       
Purchase Agreement exceeds $9,000,000, the Merger Consideration with respect to 
each such Share shall be increased to include the pro rata portion of the amount
by which such consideration exceeds $9,000,000. At the Effective Time, each     
outstanding share of the common stock, par value $.01 per share, of Newco shall 
be converted into a share of common stock, par value $.01 per share, of the     
Surviving Corporation.                                                          

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 (b) Each Share held in the treasury of the Company and each Share held by
Parent, Newco or any subsidiary of Parent, or the Company immediately prior to  
the Effective Time shall, by virtue of the Merger and without any action on the 
part of Newco, the Company or the holder thereof, be cancelled, retired and     
cease to exist and no payment shall be made with respect thereto.               

   Section 1.08.  STOCK OPTIONS.  (a) Prior to the consummation of the Merger,
the Board shall use its best efforts to cause the terms of all outstanding stock
options heretofore granted under any stock option plan of the Company           
(collectively, the "Stock Plans") to be adjusted to provide that, at the        
Effective Time, each stock option outstanding immediately prior to the          
consummation of the Merger shall be cancelled and the holder thereof shall be   
entitled to receive as soon as practicable thereafter from the Company in       
consideration for such cancellation a cash payment of an amount equal to (i) the
excess, if any, of (A) the Merger Consideration over (B) the exercise price per 
share of Common Stock subject to such stock option, multiplied by (ii) the      
number of shares of Common Stock for which such stock option shall not          
theretofore have been exercised.                                                

   (b) All amounts payable pursuant to Section 1.08(a) shall be subject to any
required withholding of taxes and shall be paid without interest.               

   (c) Prior to the consummation of the Merger, the Board of Directors (or, if
appropriate, any committee administering the Stock Plans) shall adopt such      
resolutions or take such actions as are commercially reasonable, subject, if    
necessary, to obtaining consents of the holders thereof, to carry out the terms 
of this Section 1.08 and to provide that, on and after the Effective Time, no   
officer, director or employee of the Company shall have any right to acquire any
interest in, any equity security of the Company or any of its subsidiaries.     

Section 1.09.  STOCKHOLDERS' MEETING; PROXY STATEMENT.  (a) The Company,
acting through the Board, shall in accordance with applicable law and the       
Company's Certificate of Incorporation and By-Laws:                             

        (i) duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting") to be held as soon as practicable  
following the date of this Agreement for the purpose of considering and 
  taking action upon this Agreement and the Asset Purchase Agreement and the
transactions contemplated hereby and thereby;                           

     (ii) subject to its fiduciary duties as determined in good faith by a
 majority of the Board, based upon the written opinion of outside counsel,
include in the Proxy Statement (as amended or supplemented, the "Proxy  
Statement") required to be distributed to holders of Common Stock in    
connection with the Merger the recommendation of the Board that the     
 stockholders of the Company vote in favor of the approval and adoption of
this Agreement and the Asset Purchase Agreement and the transactions    
contemplated hereby and thereby and the written opinion of PaineWebber  
Incorporated (the "Financial Adviser") that the cash consideration to be
   received by the stockholders of the Company pursuant to the Merger is fair,
from a financial point of view, to such stockholders; and               

(b) The Company shall prepare and file with the Securities and Exchange 
Commission (the "SEC") the Proxy Statement and shall use all reasonable efforts 
to respond promptly to any comments made by the SEC with respect to the Proxy   
Statement and any preliminary version thereof, have the Proxy Statement cleared 
by the SEC and cause the Proxy Statement to be mailed to the Company's          
stockholders at the earliest practicable time. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement prior to its being    
filed with the SEC and shall consult with Parent and its counsel regarding      
comments made by the SEC.                                                       

At such meeting, Parent, Newco and their affiliates will vote all Shares
owned by them (or with respect to which such entities exercise voting control)  
in favor of approval and adoption of this Agreement and the transactions        
contemplated hereby.                                                            

Section 1.10.  DISSENTING SHARES.  Notwithstanding anything in this     
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented 
thereto in writing and who has demanded appraisal for such Shares in            

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accordance with Section 262 of the Delaware Act ("Dissenting Shares") shall not 
be converted into a right to receive the Merger Consideration, unless such      
holder fails to perfect or withdraws or loses his right to appraisal, in which  
case such Shares shall be treated as if they had been converted as of the       
Effective Time into a right to receive the Merger Consideration, without        
interest thereon. The Company shall give Parent and Newco prompt notice of any  
demands received by the Company for appraisal of Shares and, prior to the       
Effective Time, Parent and Newco shall have the right to direct all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, the  
Company shall not, except with the prior written consent of Parent or Newco,    
make any payment with respect to, or settle or offer to settle, any such        
demands.                                                                        

   Section 1.11.  PAYMENT FOR SHARES.  (a) Prior to the Effective Time, Parent
and Newco shall designate a bank or trust company reasonably acceptable to the  
Company to act as exchange agent in connection with the Merger (the "Exchange   
Agent"). At or prior to the Effective Time, Parent or Newco will provide the    
Exchange Agent with the funds necessary to make the payments contemplated by    
Section 1.07(a) hereof (the "Exchange Fund"). Such funds shall be invested by   
the Exchange Agent as directed by Newco or, after the Effective Time, the       
Surviving Corporation, PROVIDED that such investments shall be in obligations of
or guaranteed by the United States of America, in commercial paper obligations  
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &     
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding   
$500 million. Any net profit resulting from, or interest or income produced by, 
such investments will be payable to the Surviving Corporation or Parent, as     
Parent directs.                                                                 

    (b) Promptly after the Effective Time, the Exchange Agent shall mail to each
record holder, as of the Effective Time, of an outstanding certificate or       
certificates which immediately prior to the Effective Time represented Shares   
(the "Certificates") a form letter of transmittal (which shall specify that     
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and  
instructions for use in effecting the surrender of the Certificates for payment 
therefor. Upon surrender to the Exchange Agent of a Certificate, together with a
duly executed letter of transmittal and any other required documents, the holder
of such Certificate shall receive in exchange therefor (as promptly as          
practicable) the Merger Consideration, without any interest thereon, less any   
required withholding of taxes, and such Certificate shall forthwith be          
cancelled. If payment is to be made to a person other than the person in whose  
name a Certificate so surrendered is registered, it shall be a condition of     
payment that the Certificate so surrendered shall be properly endorsed or       
otherwise in proper form for transfer, that the signatures on the Certificate or
any related stock power shall be properly guaranteed and that the person        
requesting such payment shall either pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the       
Certificate so surrendered or establish to the satisfaction of the Surviving    
Corporation that such tax has been paid or is not applicable. Until surrendered 
in accordance with the provisions of this Section 1.11(b), each Certificate     
(other than Certificates representing Shares held in the Company's treasury or  
by Parent or Newco, or by any subsidiary of Parent or Newco, and other than     
Certificates representing Dissenting Shares) shall represent for all purposes   
only the right to receive for each Share represented thereby the Merger         
Consideration.                                                                  

(c) After the Effective Time, there shall be no transfers on the stock  
transfer books of the Surviving Corporation of the Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,          
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for the consideration provided for, and in accordance with the    
procedures set forth, in this Article I.                                        

(d) From and after the Effective Time, the holders of Certificates      
evidencing ownership of Shares outstanding immediately prior to the Effective   
Time shall cease to have any rights with respect to such Shares except as       
otherwise provided herein or by applicable law. Such holders shall have no      
rights, after the Effective Time, with respect to such Shares except to         
surrender such Certificates in exchange for cash                                

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pursuant to this Agreement or to perfect any rights of appraisal as a holder of 
Dissenting Shares that such holders may have pursuant to Section 262 of the     
Delaware Act.                                                                   

(e) Any portion of the Exchange Fund (including the proceeds of any     
investment thereof) that remains unclaimed by the stockholders of the Company   
for six months after the Effective Time shall be repaid to the Surviving        
Corporation. Any stockholders of the Company who have not theretofore complied  
with this Article I shall thereafter look only to the Surviving Corporation     
(subject to abandoned property, escheat or other similar laws) only as general  
creditors for payment of their claims for the Merger Consideration for each     
Share such stockholders hold, without any interest.                             

  (f) Notwithstanding anything to the contrary in this Section 1.11, none of
the Exchange Agent, Parent or the Surviving Corporation shall be liable to a    
holder of a Certificate formerly representing Shares for any amount properly    
delivered to a public official pursuant to any applicable abandoned property,   
escheat or similar law.                                                         

ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PARENT AND NEWCO 

 Each of Parent and Newco jointly and severally represents and warrants to
the Company as follows:                                                         

   Section 2.01. ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of Ontario. Newco is a corporation 
duly organized, validly existing and in good standing under the laws of the     
State of Delaware. Newco has not engaged in any business since it was           
incorporated other than in connection with the transactions contemplated by this
Agreement. Parent owns directly or indirectly all of the outstanding capital    
stock of Newco.                                                                 

    Section 2.02. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Newco
has full corporate power and authority to execute and deliver this Agreement and
to consummate the Merger and the other transactions contemplated hereby. The    
execution and delivery of this Agreement and the consummation of the Merger and 
the other transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of each of Parent and Newco and by Parent as the sole 
stockholder of Newco and no other corporate proceedings on the part of Parent or
Newco are necessary to authorize this Agreement or to consummate the Merger or  
the other transactions contemplated hereby. This Agreement has been duly and    
validly executed and delivered by each of Parent and Newco and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a valid
and binding agreement of each of Parent and Newco, enforceable against each of  
them in accordance with its terms, except to the extent that its enforceability 
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium 
or other laws affecting the enforcement of creditors' rights generally or by    
general equitable or fiduciary principles.                                      

 Section 2.03. NO VIOLATIONS, ETC. (a) Assuming that all filings, permits,
authorizations, consents and approvals have been duly made or obtained as       
contemplated by this Section 2.03, the execution and delivery of this Agreement 
and the consummation by Parent and Newco of the Merger and the other            
transactions contemplated hereby will not (i) violate any provision of the      
Certificate of Incorporation or By-Laws or similar organizational document of   
either Parent or Newco, (ii) assuming that all consents, approvals and          
authorizations contemplated by clause (b) below have been obtained and all      
filings described in such clause have been made, violate any statute, rule,     
regulation, order or decree of any public body or authority by which Parent,    
Newco or any of their properties is bound, or (iii) result in a violation or    
breach of, or constitute (with or without due notice or lapse of time or both) a
default under, any license, franchise, permit, indenture, agreement or other    
instrument to which Parent or Newco is a party, or by which Parent, Newco or any
of their properties is bound, excluding from the foregoing clauses (ii) and     
(iii) violations, breaches and defaults which, either individually or in the    
aggregate, would not materially impair the ability of Parent or Newco to        
consummate the Merger or the other transactions contemplated hereby or have a   
material adverse effect on the business, operations, assets or financial        
condition of Parent and its subsidiaries taken as a whole.                      

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 (b) No filing or registration with, or authorization, consent or approval
of, or notification to any governmental entity is required by Parent or Newco in
connection with the execution and delivery of this Agreement or the consummation
by Parent and Newco of the Merger and the other transactions contemplated       
hereby, except (i) in connection with the applicable requirements of the        
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR      
Act"), (ii) in connection, or in compliance, with the provisions of the         
Securities Act of 1933, as amended, and the rules and regulations promulgated   
thereunder (the "Securities Act") or the Exchange Act, (iii) the filing of      
appropriate merger documents as required by the Delaware Act, (iv) such         
consents, approvals, orders, authorizations, registrations, declarations and    
filings as may be required under the corporation, takeover or blue sky laws of  
various states and (v) such other consents, orders, authorizations,             
registrations, declarations and filings the failure of which to be obtained or  
made, either individually or in the aggregate, would not materially impair the  
ability of Parent or Newco to consummate the Merger and the other transactions  
contemplated hereby or have a material adverse effect on the business,          
operations, assets or financial condition of Parent and its subsidiaries taken  
as a whole.                                                                     

   Section 2.04.  PROXY STATEMENT.  None of the information supplied by Parent
or Newco in writing for inclusion in the Proxy Statement will, at the respective
times that the Proxy Statement or any amendments or supplements thereto are     
filed with the SEC and are first published or sent or given to holders of       
Shares, and, at the time that it or any amendment or supplement thereto is      
mailed to the Company's stockholders, at the time of the Stockholders' Meeting  
or at the Effective Time, contain any statement which, at the time and in the   
light of the circumstances under which it is made, is false or misleading with  
respect to any material fact, or which omits to state any material fact         
necessary in order to make the statements therein not false or misleading or    
necessary to correct any statement in any earlier Proxy Statement which has     
become false or misleading.                                                     

    Section 2.05.  FINANCING.  Parent or Newco, at the Effective Time, will have
sufficient funds available to consummate the Merger.                            

 Section 2.06. BROKERS. Except for Furman Selz (a true and correct copy of
whose engagement agreement has been provided to the Company), no broker, finder 
or investment banker is entitled to any brokerage, finder's or other fee or     
commission in connection with the transactions contemplated by this Agreement   
based upon arrangements made by and on behalf of Parent or Newco.               

ARTICLE III 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

The Company represents and warrants to Parent and Newco that, except as 
disclosed in the disclosure statement (the "Disclosure Statement"), dated the   
date hereof, from the Company to Parent:                                        

  Section 3.01. ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the     
jurisdiction of its incorporation and has all requisite corporate power and     
authority to own, lease and operate its properties and to carry on its business 
as now being conducted. The Company is duly qualified as a foreign corporation  
to do business, and is in good standing, in each jurisdiction where the         
character of its properties owned or leased or the nature of its activities     
makes such qualification necessary, except for failures to be so qualified or in
good standing which would not, individually or in the aggregate, have a Material
Adverse Effect or prevent or materially delay the consummation of the Merger.   
When used in connection with the Company, the term "Material Adverse Effect"    
means any change or effect that is or is reasonably likely to be materially     
adverse to the business, operations, assets, financial condition or results of  
operations of the Company. The Company is not in violation of any of the        
provisions of its Restated Certificate of Incorporation or By-laws. The Company 
has previously delivered to Parent accurate and complete copies of the Company's
Restated Certificate of Incorporation and By-laws, as currently in effect.      

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Section 3.02. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full
corporate power and authority to execute and deliver this Agreement and to      
consummate the Merger and the other transactions contemplated hereby. The       
execution and delivery of this Agreement and the consummation of the Merger and 
the other transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of the Company and no other corporate proceedings on  
the part of the Company are necessary to authorize this Agreement or to         
consummate the Merger and the other transactions contemplated hereby (other     
than, with respect to the Merger and the sale of assets contemplated by the     
Asset Purchase Agreement, the approval of a majority of the outstanding shares  
of Common Stock (the "Requisite Vote") at the Special Meeting or any adjournment
thereof). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by   
Parent and Newco, constitutes a legal, valid and binding agreement of the       
Company, enforceable against the Company in accordance with its terms, except to
the extent that its enforceability may be limited by applicable bankruptcy,     
insolvency, reorganization, moratorium or other laws affecting the enforcement  
of creditors' rights generally or by general equitable or fiduciary principles. 

   Section 3.03. NO VIOLATIONS, ETC. Except for the filings of the Certificate
of Merger, filings required under the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), filings required under and in     
compliance with the HSR Act and as set forth on Schedule 3.03 hereto, no filing 
with, notification to and no permit, authorization, consent or approval of, any 
public body is necessary for the consummation by the Company of the Merger or   
the other transactions contemplated hereby, excluding from the foregoing        
permits, authorizations, consents, approvals and notices which (i) if not       
obtained, made or given, either individually or in the aggregate, would not     
materially impair the ability of the Company to consummate the Merger or the    
other transactions contemplated hereby or have a Material Adverse Effect or (ii)
are required in connection with the transactions contemplated by the Asset      
Purchase Agreement. Neither the execution and delivery of this Agreement nor the
consummation of the Merger or the other transactions contemplated hereby nor    
compliance by the Company with any of the provisions hereof will (i) subject to 
obtaining the approval of a majority of the outstanding shares of Common Stock  
at the Special Meeting or any adjournment thereof if and to the extent required 
by the Delaware Act, conflict with or result in any breach of any provision of  
the Restated Certificate of Incorporation or By-Laws of the Company, (ii) other 
than as set forth on Schedule 3.03 hereto or as required in connection with the 
transactions contemplated by the Asset Purchase Agreement, result in a violation
or breach of, or constitute (with or without due notice or lapse of time or     
both) a default (or give rise to any right of termination, cancellation,        
acceleration, redemption or repurchase or result in the loss of a material      
benefit) under, any of the terms, conditions or provisions of any (x) note,     
bond, mortgage, indenture, or deed of trust or (y) license, lease, agreement or 
other instrument or obligation to which the Company is a party or by which any  
of them or any of their properties or assets may be bound or (iii) violate any  
order, writ, injunction, decree, statute, rule or regulation applicable to the  
Company or any of its properties or assets, excluding from the foregoing clauses
(ii) and (iii) violations, breaches or defaults which, either individually or in
the aggregate, would not materially impair the Company's ability to consummate  
the Merger or the other transactions contemplated hereby or have a Material     
Adverse Effect.                                                                 

   Section 3.04. BOARD RECOMMENDATION. The Board has approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby, determined
that the consideration to be received by the holders of shares of Common Stock  
pursuant to the Merger is fair to the holders of such Shares and recommended    
that the holders of such Shares approve and adopt this Agreement, the Merger and
the other transactions contemplated hereby.                                     

Section 3.05. STATE ANTITAKEOVER STATUTES. The Company or the Board, as 
applicable, has granted all approvals and taken all other steps necessary to    
exempt the Merger and the other transactions contemplated hereby from the       
requirements and provisions of Section 203 of the Delaware Act and any other    
state antitakeover statute or regulation such that none of the provisions of    
such Section 203 or any other "business combination," "moratorium," "control    
share," or other state antitakeover statute or regulation                       

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(x) prohibits or restricts the Company's ability to perform its obligations     
under this Agreement or its ability to consummate the Merger and the other      
transactions contemplated hereby, (y) would have the effect of invalidating or  
voiding this Agreement, or (z) would subject Parent or Newco to any material    
impediment or condition in connection with the exercise of any of their         
respective rights under this Agreement.                                         

   Section 3.06. FAIRNESS OPINION. The Company has received the opinion of the
Financial Adviser to the effect that as of the date hereof the cash             
consideration to be received by the stockholders of the Company pursuant to the 
Merger is fair, from a financial point of view, to such stockholders.           

    Section 3.07. PROXY STATEMENT. The Proxy Statement will comply as to form in
all material respects with applicable federal securities laws, except that no   
representation is made by the Company with respect to information supplied by   
Newco or Parent for inclusion in the Proxy Statement. The information supplied  
by the Company in writing for inclusion in the Proxy Statement will not, at the 
respective times that the Proxy Statement or any amendments or supplements      
thereto are filed with the SEC and are first published or sent or given to      
holders of Shares, contain any statement which, at the time and in the light of 
the circumstances under which it is made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in order 
to make the statements therein not false or misleading or necessary to correct  
any statement in any earlier Proxy Statement which has become false or          
misleading.                                                                     

Section 3.08. FINDERS OR BROKERS. Except for the Financial Adviser, the 
Company has not employed any investment banker, broker, finder or intermediary  
in connection with the transactions contemplated hereby who might be entitled to
a fee or any commission the receipt of which is conditioned upon consummation of
the Merger or the Asset Sale. The Company has heretofore furnished to Parent a  
complete and correct copy of all agreements between the Company and the         
Financial Adviser pursuant to which such firm would be entitled to any payment  
relating to the transactions contemplated hereby.                               

Section 3.09. SEC FILINGS. (a) The Company has filed with the SEC all   
required forms, reports and documents required to be filed by it with the SEC   
since December 31, 1995 (collectively, the "Company SEC Reports"), all of which 
complied as to form when filed in all material respects with the applicable     
provisions of the Securities Act and the Exchange Act, as the case may be. None 
of the Company SEC Reports (including all exhibits and schedules thereto and    
documents incorporated by reference therein) contained when filed or (except to 
the extent revised or superseded by a subsequent filing with the SEC) contains  
any untrue statement of a material fact or omitted or omits to state a material 
fact required to be stated therein or necessary to make the statements therein, 
in light of the circumstances under which they were made, not misleading.       

    (b) The Company will deliver to Parent as soon as they become available true
and complete copies of any report or statement mailed by it to its              
securityholders generally or filed by it with the SEC, in each case subsequent  
to the date hereof and prior to the Effective Time. As of their respective      
dates, such reports and statements (excluding any information therein provided  
by Parent or Newco, as to which the Company makes no representation) will not   
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in   
light of the circumstances under which they are made, not misleading and will   
comply in all material respects with all applicable requirements of law. The    
audited financial statements and unaudited interim financial statements of the  
Company to be included or incorporated by reference in such reports and         
statements will be prepared in accordance with United States generally accepted 
accounting principles applied on a consistent basis throughout the periods      
involved and will fairly present the financial position of the Company as of the
dates thereof and the results of operations and cash flow for the periods then  
ended (subject, in the case of any unaudited interim financial statements, to   
normal year-end adjustments and to the extent they may not include footnotes or 
may be condensed or summary statements).                                        

Section 3.10. FINANCIAL STATEMENTS. The audited financial statements and
unaudited interim financial statements of the Company included or incorporated  
by reference in the Company's forms, reports and documents filed with the SEC   
since December 31, 1995 have been prepared in accordance with United            

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States generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved, and fairly present the financial position of 
the Company as of the dates thereof and the results of operations and cash flows
for the periods then ended (subject, in the case of any unaudited interim       
financial statements, to normal year-end adjustments and to the extent they may 
not include footnotes or may be condensed or summary statements) and such       
audited financial statements have been certified as such (without exception) by 
the Company's independent auditors.                                             

Section 3.11. ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no    
liabilities or obligations of any nature, whether absolute, accrued, unmatured, 
contingent or otherwise, or any unsatisfied judgments or any leases of          
personalty or realty or unusual or extraordinary commitments, except the        
liabilities recorded on the balance sheet of the Company at December 31, 1996   
and the notes thereto included in the Company's Annual Report on Form 10-K for  
the year ended December 31, 1996, and except for liabilities or obligations     
incurred in the ordinary course of business and consistent with past practice   
since December 31, 1996 and those that would not individually or in the         
aggregate have a Material Adverse Effect.                                       

Section 3.12. ABSENCE OF CHANGES OR EVENTS. Since December 31, 1996:    

     (a) there has not been any direct or indirect redemption, purchase or
other acquisition of any shares of capital stock of the Company, or any 
   declaration, setting aside or payment of any dividend or other distribution
   by the Company in respect of its capital stock, other than the payment made
by the Company with respect to 500,000 shares of Common Stock put to the
Company by Valcheck Company on June 30, 1997;                           

      (b) except in the ordinary course of business and consistent with past
   practice, the Company has not incurred any indebtedness for borrowed money,
or assumed, guaranteed, endorsed or otherwise as an accommodation become
responsible for the obligations of any other individual, firm or        
corporation, made any loans or advances to any other individual, firm or
 corporation or entered into any commitment or transaction material to the
Company taken as a whole;                                               

     (c) there has not been any material change in the accounting methods,
principles or practices of the Company;                                 

      (d) there has not been any damage, destruction or loss, whether or not
  covered by insurance, except for such as would not, individually or in the
aggregate, have a Material Adverse Effect;                              

   (e) there has been no change in the business, operations, assets or
financial condition of the Company that has had or will have a Material 
Adverse Effect;                                                         

   (f) there has not been any revaluation by the Company of any of its
material assets, including but not limited to writing down the value of 
 inventory or writing off notes or accounts receivable, in any case, other
than in the ordinary course of business and in connection with the      
revaluation of certain fixed assets as set forth in the Disclosure      
Statement;                                                              

     (g) there has not been any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
 sharing, stock option (including without limitation the granting of stock
  options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or agreement or  
   arrangement, or any other increase in the compensation payable or to become
    payable to any present or former directors, officers or key employees of the
    Company, except for increases in base compensation in the ordinary course of
business consistent with past practice, or any employment, consulting or
severance agreement or arrangement entered into with any such present or
former directors, officers or key employees; or                         

        (h) there has not been any agreement by the Company to (i) do any of the
things described in the preceding clauses (a) through (g) other than as 
expressly contemplated or provided for in this Agreement or (ii) take,  
whether in writing or otherwise, any action which, if taken prior to the
 date of this Agreement, would have made any representation or warranty in
this Article III untrue or incorrect.                                   

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   Section 3.13.  CAPITALIZATION.  The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock. As of the date hereof, there are 
6,538,802 shares of Common Stock outstanding of which 695,396 shares of Common  
Stock held in the Company's treasury. As of the date hereof, no shares of Common
Stock were reserved for issuance upon the exercise of outstanding options and   
options which may be granted under the Stock Plans of the Company, all of which 
options and plans are listed and described in Schedule 3.13 hereto (the "Common 
Stock Equivalents"), and the number of shares issuable upon exercise of all such
options is as previously disclosed to Parent by the Company. Except as set forth
above and except for the Common Stock Equivalents there are not outstanding any 
shares of capital stock or other voting securities, any existing options,       
warrants, calls, subscriptions, or other rights or other agreements or          
commitments obligating the Company to issue, transfer or sell any shares of     
capital stock or voting securities of the Company or any other securities       
convertible into or exchangeable for or evidencing the right to subscribe for   
any such shares. There are no outstanding stock appreciation rights with respect
to the capital stock of the Company. All issued and outstanding shares of Common
Stock are duly authorized and validly issued, fully paid, nonassessable and free
of preemptive rights with respect thereto. The Company has no subsidiaries.     
There are no outstanding obligations of the Company to repurchase, redeem or    
otherwise acquire any shares of capital stock. The Company does not own,        
directly or indirectly, any capital stock or other ownership interest in any    
corporation, partnership, joint venture, limited liability company or other     
entity which is material to the business of the Company.                        

Section 3.14.  LITIGATION.  There is no (i) claim, action, suit,        
investigation or proceeding pending or, to the knowledge of the Company,        
threatened against or relating to the Company before any court or governmental  
or regulatory authority or body or arbitration tribunal, or (ii) outstanding    
judgment, order, writ, injunction or decree, or application, request or motion  
therefor, of any court, governmental agency or arbitration tribunal in a        
proceeding to which the Company or any of its assets was or is a party except,  
in the case of clauses (i) and (ii) above, such as would not, individually or in
the aggregate, either prevent or materially delay the Company's ability to      
consummate the Merger or the other transactions contemplated hereby or have a   
Material Adverse Effect.                                                        

    Section 3.15.  INSURANCE.  Schedule 3.15 hereto lists all material insurance
policies in force on the date hereof covering the businesses, properties and    
assets of the Company and all claims against such policies. All such policies   
are currently in effect and true and complete copies of all such policies have  
been delivered to Parent. The Company has not received notice of the            
cancellation of any of such insurance in effect on the date of this Agreement.  
As of the date hereof, there are no material claims by the Company under any    
such policy or instrument as to which any insurance company is denying liability
or defending under a reservation of rights clause. To the Company's best        
knowledge, all necessary notifications of claims have been made to insurance    
carriers other than those which would not have a Material Adverse Effect.       

   Section 3.16.  COMPLIANCE WITH LAW.  The Company has not violated or failed
to comply with any statute, law, ordinance, regulation, rule or order of any    
foreign, federal, state or local government or any other governmental department
or agency, or any judgment, decree or order of any court, applicable to its     
business or operations except where any such violation or failure to comply     
would not, individually or in the aggregate, have a Material Adverse Effect. The
Company has all permits, licenses and franchises from governmental agencies     
required to conduct its businesses as now being conducted, except for such      
permits, licenses and franchises the absence of which would not, individually or
in the aggregate, have a Material Adverse Effect or prevent or materially delay 
the consummation of the Merger.                                                 

Section 3.17.  EMPLOYEE BENEFITS.  (a) Schedule 3.17 contains a true and
complete list of each "employee benefit plan" (within the meaning of section    
3(3) of the Employee Retirement Income Security Act of 1974, as amended         
("ERISA"), including, without limitation, multiemployer plans within the meaning
of ERISA section 3(37)), stock purchase, stock option, severance, employment,   
change-in-control, fringe benefit, collective bargaining, bonus, incentive,     
deferred compensation and all other employee benefit plans, agreements,         
programs, policies or other arrangements, whether or not subject to ERISA, under
which any employee or former employee of the Company has any present or future  
right to benefits or under which the Company has any present or future material 
liability, other than any such plan                                             

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or plans that, individually or in the aggregate, do not provide for any payment 
or payments or unrecorded liabilities in excess of $50,000.                     

(b) With respect to each Company Plan, the Company has delivered or made
available to Parent a current, accurate and complete copy (or, to the extent no 
such copy exists, an accurate description) thereof and, to the extent           
applicable: (i) any related trust agreement or other funding instrument; (ii)   
the most recent determination letter, if applicable; (iii) any summary plan     
description for a Company Plan; and (iv) for the most recent year (A) the Form  
5500 and attached schedules, (B) audited financial statements and (C) actuarial 
valuation reports;                                                              

   (c) Except to the extent not reasonably expected to have a Material Adverse
Effect: (i) each Company Plan has been established and administered in          
accordance with its terms, and in compliance with the applicable provisions of  
ERISA, the Code and other applicable laws, rules and regulations; (ii) each     
Company Plan which is intended to be qualified within the meaning of Code       
section 401(a) has received a favorable determination letter as to its          
qualification, and nothing has occurred, whether by action or failure to act,   
that could reasonably be expected to cause the loss of such qualification; (iii)
no event has occurred and no condition exists that would subject the Company to 
any material tax, fine, lien, penalty or other liability imposed by ERISA, the  
Code or other applicable laws, rules and regulations; (iv) for each Company Plan
with respect to which a Form 5500 has been filed, no material change has        
occurred with respect to the matters covered by the most recent Form since the  
date thereof; and (v) no "reportable event" (as such term is defined in ERISA   
section 4043), "prohibited transaction" (as such term is defined in ERISA       
section 406 and Code section 4975) or "accumulated funding deficiency" (as such 
term is defined in ERISA section 302 and Code section 412 (whether or not       
waived)) has occurred with respect to any Company Plan within the last five     
years for which has resulted or is reasonably likely to result in any material  
liability that remains unsatisfied;                                             

    (d) Except as set forth in the Disclosure Statement, with respect to each of
the Company Plans that is not a multiemployer plan within the meaning of section
4001(a)(3) of ERISA but is subject to Title IV of ERISA, as of the Closing Date,
the assets of each such Company Plan are at least equal in value to the present 
value of the accrued benefits (vested and unvested) of the participants in such 
Company Plan on a termination and projected benefit obligation basis, based on  
the actuarial methods and assumptions indicated in the most recent actuarial    
valuation reports;                                                              

   (e) Except to the extent not reasonably expected to have a Material Adverse
Effect: with respect to any Company Plan, (i) no actions, suits or claims (other
than routine claims for benefits in the ordinary course) are pending or         
threatened, (ii) no facts or circumstances exist that could give rise to any    
such actions, suits or claims, and (iii) no written or oral communication has   
been received from the PBGC in respect of any Company Plan subject to Title IV  
of ERISA concerning the funded status of any such plan or any transfer of assets
and liabilities from any such plan in connection with the transactions          
contemplated herein; and                                                        

   (f) Except as set forth in the Disclosure Statement, no Company Plan exists
that could result in the payment to any present or former employee of the       
Company of any money or other property or accelerate or provide any other rights
or benefits to any present or former employee of the Company as a result of the 
transaction contemplated by this Agreement, whether or not such payment would   
constitute a parachute payment within the meaning of Code section 280G and      
whether or not some other future event is required to trigger payment or        
otherwise result in liability to the Company.                                   

   Section 3.18.  TAXES.  Except as set forth in the Disclosure Statement, the
Company and any consolidated, combined, unitary or aggregate group for tax      
purposes of which the Company or any former subsidiary is or was a member has   
(x) timely filed (or there have been filed on its behalf) with the appropriate  
governmental authorities all Tax Returns (as hereinafter defined) required to be
filed by it on or prior to the date hereof, and (y) duly paid in full or made   
provision in accordance with United States GAAP (or there has been paid or      
provision has been made on its behalf) for the payment of all Taxes (as         

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hereinafter defined) for all periods ending through the date hereof, except for 
any such filings or payments which would not, individually or in the aggregate  
have a Material Adverse Effect.                                                 

"Taxes" shall mean any and all taxes, charges, fees, levies or other    
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, occupation, use,     
service, service use, license, net worth, payroll, franchise, transfer and      
recording taxes, fee and charges, imposed by the Service or any taxing authority
(whether domestic or foreign including, without limitation, any state, county,  
local or foreign government or any subdivision or taxing agency thereof         
(including a United States possession)), whether computed on a separate,        
consolidated, unitary, combined or any other basis; and such term shall include 
any interest whether paid or received, fines, penalties or additional amounts   
attributable to, or imposed upon, or with respect to, any such taxes, charges,  
fees, levies or other assessments. "Tax Return" shall mean any report, return,  
document, declaration or other information or filing required to be supplied to 
any taxing authority or Jurisdiction (foreign or domestic) with respect to      
Taxes, including, without limitation, information returns, any documents with   
respect to or accompanying payments of estimated Taxes, or with respect to or   
accompanying requests for the extension of time in which to file any such       
report, return, document declaration or other information.                      

Section 3.19.  CONTRACTS.  Each note, bond, mortgage, indenture, lease, 
license, contract, agreement or other instrument or obligation to which the     
Company is a party or by which any of it or any of its properties or assets may 
be bound (collectively, the "Contracts") is legally valid and binding against   
the Company and, to the Company's best knowledge, each other party thereto and  
in full force and effect, except where failure to be legally valid and binding  
and in full force and effect would not, individually or in the aggregate, have a
Material Adverse Effect, and there are not defaults thereunder by the Company   
and, to the Company's best knowledge, any other party thereto, except those     
defaults that would not have a Material Adverse Effect on the Company. The      
Company has previously made available for inspection by Newco or its            
representatives all material Contracts listed on Schedule 3.19.                 

Section 3.20.  RELATED PARTY TRANSACTIONS.  Except as set forth in the  
Disclosure Statement or in the Company SEC Documents, no director, officer,     
partner, employee, "affiliate" or "associate" (as such terms are defined in Rule
12b-2 under the Exchange Act) of the Company has borrowed money from or has     
outstanding any indebtedness or other similar obligations to the Company.       

Section 3.21.  REAL PROPERTY.  The Company has sufficient title or      
leaseholds to real property to conduct its business as currently conducted with 
only such exceptions as individually or in the aggregate would not have a       
Material Adverse Effect.                                                        

Section 3.22.  ENVIRONMENTAL MATTERS.  Except as would not result in a  
Material Adverse Effect, and except as disclosed in the Disclosure Statement:   

       (i) The Company holds all Environmental Permits (as defined below), and
the Company is in compliance with all Environmental Laws;               

 (ii) As of the date hereof, there are no Environmental Claims (as
defined below) pending or, to the knowledge of the Company, threatened  
against the Company;                                                    

(iii) The Company is not a party to any consent decree, order or  
    agreement which requires performance of any response or corrective action to
address any Hazardous Material or any violation of Environmental Law;   

  (iv) To the knowledge of the Company, there are no (A) underground
storage tanks, (b) polychlorinated biphenyls, (C) friable asbestos or   
asbestos-containing materials, (D) sumps, (E) surface impoundments, (F) 
    landfills, or (G) sewers or septic systems present at any facility currently
    owned or leased by the Company that is expected to give rise to liability of
the Company under any Environmental Laws;                               

       (v) To the knowledge of the Company, there are no events or conditions,
including without limitation the release, threatened release, emission, 
discharge, generation, treatment, storage or                            

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    disposal of Hazardous Materials (as defined below), that would reasonably be
 expected to give rise to liability of the Company under any Environmental
Laws;                                                                   

(vi) The Company has not assumed by contract any liabilities or 
obligations under any Environmental Laws; and                           

      (vii) For purposes of this Agreement, the following terms shall have the
following meanings:                                                     

          "ENVIRONMENTAL CLAIM" means any written notice, claim, demand, suit,
 complaint, proceeding or other communication by any person alleging
      liability or potential liability (including without limitation liability
or potential liability for investigatory costs, cleanup costs,    
     governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) under any Environmental Laws,
     including without limitation any liability resulting from the presence,
 discharge, emission, release or threatened release of any Hazardous
    Materials at any location, whether or not owned, leased or operated by
the Company.                                                      

           "ENVIRONMENTAL LAWS" means all applicable foreign, federal, state and
    local statutes, rules, regulations, ordinances, common law, orders and
decrees relating in any manner to pollution or protection of the  
       environment, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Solid Waste 
Disposal Act, the Clean Air Act, the Clean Water Act, the Toxic   
Substances Control Act, the Emergency Planning and                
     Community-Right-to-Know Act, the Occupational Safety and Health Act and
the Safe Drinking Water Act, all as amended.                      

        "ENVIRONMENTAL PERMITS" means all permits, licenses, registrations
     and other governmental authorizations required under Environmental Laws
for the Company to conduct its operations and businesses.         

    "HAZARDOUS MATERIALS" means all hazardous or toxic substances,
   wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and            
   asbestos-containing materials, pollutants, contaminants and all other
materials and substances regulated by any Environmental Law.      

 Section 3.23.  INTELLECTUAL PROPERTY.  Schedule 3.23 sets forth a list of
all material registered and material unregistered Intellectual Property (as     
defined below) owned by the Company and used in the conduct of its business and 
all agreements granting any right to use or practice any right relating to the  
Intellectual Property currently used in the conduct of the Company's business   
(the "Licenses") as of the date hereof. Except as set forth in the Disclosure   
Statement (i) the Company is the sole owner of all of its rights under the      
Licenses free and clear of any liens, claims, encumbrances or interests; (ii)   
the Company is the sole owner of, or has a valid right to use pursuant to a     
License, all patents and patent applications, registered and unregistered       
trademarks, service marks, trade names, trade dress, logos, company names and   
other source or business identifiers, including all goodwill associated         
therewith, the names, likenesses and other attributes of individuals, registered
and unregistered copyrights, computer programs and databases, trade secrets,    
proprietary technology, know-how, industrial designs and other confidential     
information and any pending applications for any of the foregoing (collectively,
the "Intellectual Property") currently used in the conduct of the Company's     
business, free and clear of any liens, claims, encumbrances or interests; (iii) 
to the Company's best knowledge, the present operations of the Company do not,  
and its past operations did not, infringe upon, violate, interfere or conflict  
with the rights of others with respect to any Intellectual Property, and no     
claim is pending or, to the Company's best knowledge, threatened, to this       
effect; (iv) to the Company's best knowledge, none of the Intellectual Property 
is invalid or unenforceable, or has not been used or enforced or has failed to  
be used or enforced in a manner that would result in the abandonment,           
cancellation or unenforceability of any of the Intellectual Property and no     
claim is pending or, to the Company's best knowledge, threatened, to this       
effect; (v) no License provision or any other contract, agreement or            
understanding to which the Company is a party would prevent the continued use by
the Company (as currently used by the Company) of any Intellectual Property     

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following the consummation of the transactions contemplated hereby; (vi) to the 
Company's best knowledge, no person is infringing upon or otherwise violating   
any Intellectual Property or License; and (vii) there are no claims pending or, 
to the Company's best knowledge, threatened in connection with any License, in  
all cases in clauses (i) through (vii) of this Section 3.23 with only such      
exceptions as would not, individually or in the aggregate, have a Material      
Adverse Effect.                                                                 

ARTICLE IV
COVENANTS 

  Section 4.01.  CONDUCT OF BUSINESS OF THE COMPANY.  Except as set forth in
the Disclosure Statement and as expressly agreed to in writing by Parent, during
the period from the date of this Agreement to the Effective Time, the Company   
will conduct its operations according to its ordinary and usual course of       
business consistent with past practice, and will use all commercially reasonable
efforts to preserve intact its business organization, to keep available the     
services of its officers and employees and to maintain satisfactory             
relationships with suppliers, distributors, customers and others having business
relationships with it and will take no action which would adversely affect its  
ability to consummate the Merger or the other transactions contemplated hereby. 
Without limiting the generality of the foregoing, and except as otherwise       
expressly provided in this Agreement or the Asset Purchase Agreement, prior to  
the Effective Time, the Company will not, without the prior written consent of  
Parent and except as disclosed in the Disclosure Statement:                     

        (a) amend its Restated Certificate of Incorporation (or other applicable
charter document) or By-Laws;                                           

        (b) authorize for issuance, issue, sell, deliver, grant any options for,
or otherwise agree or commit to issue, sell or deliver any shares of any
   class of capital stock of the Company or any securities convertible into or
   exchangeable or exercisable for shares of any class of capital stock or any
   other ownership interest (including, but not limited to, stock appreciation
rights or phantom stock) of the Company, other than pursuant to and in  
    accordance with the terms of the Common Stock Equivalents outstanding on the
date hereof and listed on Schedule 3.13;                                

 (c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its   
    capital stock or purchase, redeem or otherwise acquire any shares of its own
capital stock;                                                          

        (d) (i) create, incur, assume, maintain or permit to exist any long-term
debt or any short-term debt for borrowed money other than under existing
lines of credit and except for short-term debt incurred in the ordinary 
course of business and consistent with past practice; (ii) assume,      
guarantee, endorse or otherwise become liable or responsible (whether   
directly, contingently or otherwise) for the obligations of any other   
 person; or (iii) make any loans, advances or capital contributions to, or
investments in, any other person in excess of $50,000 in the aggregate  
    (other than investments in marketable securities made in the ordinary course
of business of the Company and consistent with past practice);          

   (e) except as may be required by law, enter into, adopt or amend or
  terminate any bonus, profit sharing, compensation, severance, termination,
   stock option, stock appreciation right, restricted stock, performance unit,
 stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
 current or former director, officer or employee in any manner, or (except
    for normal increases in salary or wages of employees who are not officers of
    the Company in the ordinary course of business consistent with past practice
   that, in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company, and as required under existing     
 agreements) increase in any manner the compensation or fringe benefits of
  any current or former director, officer or employee or grant any severance
  or termination pay or pay any benefit not required by any plan, agreement,
trust, fund, policy and arrangement as in effect as of the date hereof; 

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     (f)  except for sales of inventory in the ordinary course of business
and consistent with past practice, sell, transfer, lease or otherwise   
dispose of, or encumber, or agree to sell, transfer, lease, or otherwise
   dispose of or encumber, any assets, properties, real, personal or mixed not
in excess of $50,000 individually;                                      

(g)  enter into any agreements, commitments or contracts, except
 agreements, commitments or contracts either (i) for the purchase, sale or
    lease of goods or services in the ordinary course of business and consistent
   with past practice or (ii) which do not, individually, relate to the making
of payments or the provision of services for consideration in excess of 
$50,000 over the term of any such agreement, commitment or contract;    

(h)  authorize, recommend, propose or announce an intention to  
    authorize, recommend or propose, or enter into any agreement in principle or
 an agreement with respect to, any plan of liquidation or dissolution, any
    acquisition (by merger, consolidation or acquisition of assets or securities
or any disposition of any assets or securities) of any corporation,     
    partnership or other business organization or division thereof or any change
in its capitalization, or any entry into a material contract or any     
amendment or modification of any material contract or any release or    
    relinquishment of any material contract rights not in the ordinary course of
   business and consistent with past practice or modify or amend the contracts
 between the parties referred to in paragraph 15 of the Disclosure Letter;

   (i)  except as previously approved by the Board of Directors of the
 Company prior to the date hereof and as identified to Parent prior to the
date hereof, authorize or commit to make capital expenditures in any    
 calendar month in excess of $100,000; PROVIDED, HOWEVER, that amounts not
authorized or committed in any calendar month may be carried forward to 
future calendar months;                                                 

 (j)  permit any material insurance policy naming the Company as a
beneficiary or a loss payee to be cancelled, terminated or materially   
altered;                                                                

   (k)  maintain its books and records in a manner not in the ordinary
course of business and consistent with past practice;                   

(l)  enter into any hedging, option, derivative or other similar
transaction;                                                            

        (m)  change any assumption underlying, or method of calculating, any bad
debt, contingency, provision or other reserve;                          

     (n)  pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than the payment,   
   discharge or satisfaction of liabilities in the ordinary course of business
and consistent with past practice;                                      

   (o)  except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting  
practices or principles used by it;                                     

        (p)  make any material tax election or settle or compromise any material
federal, state, local or foreign tax liability;                         

   (q)  settle or compromise any pending or threatened suit, action or
claim which is material;                                                

      (r)  collect receivables or pay payables or purchase inventory or make
shipments to customers, other than in the ordinary course of business   
consistent with past practice;                                          

      (s)  modify the amount spent on advertising for the Company as a whole
  and the allocation between each of the check business and the P&C Business
from the schedule related thereto previously delivered by the Company to
Parent; or                                                              

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        (t)  agree to do any of the foregoing or any action which would make any
of the representations or warranties of the Company contained in this   
  Agreement untrue and incorrect as of the date when made if such action had
then been taken.                                                        

    Section 4.02.  OTHER POTENTIAL BIDDERS.  (a) The Company, its affiliates and
their respective officers, directors, employees, representatives and agents     
shall immediately cease any existing discussions or negotiations, if any, with  
any parties conducted heretofore with respect to any acquisition or exchange of 
all or any material portion of the assets of, or any equity interest in, the    
Company or any business combination with the Company other than a sale of assets
and assumption of liabilities pursuant to the Asset Purchase Agreement. The     
Company may, directly or indirectly, furnish information and access, in each    
case only in response to unsolicited requests therefor made after the date      
hereof, to any corporation, partnership, person or other entity or group        
pursuant to confidentiality agreements, and may participate in discussions and  
negotiate with such entity or group concerning any merger, sale of assets, sale 
of shares of capital stock or similar transaction involving the Company or any  
division of the Company, if such entity or group has submitted a bona fide      
written proposal to the Board relating to any such transaction and the Board by 
a majority vote determines in its good faith judgment, based upon the written   
advice of outside counsel, that failing to take such action would constitute a  
breach of the Board's fiduciary duty under applicable law; PROVIDED, HOWEVER,   
that the Company may furnish information and access, and participate in         
discussing and negotiate, with respect to a sale of assets and assumption of    
liabilities pursuant to the Asset Purchase Agreement. The Board shall notify    
Parent immediately if any such proposal is made and shall in such notice        
indicate in reasonable detail the identity of the offeror and the terms and     
conditions of any proposal and shall keep Parent promptly advised of all        
material developments in connection therewith. Except as set forth above,       
neither the Company or any of its affiliates, nor any of its or their respective
officers, directors, employees, representatives or agents shall, directly or    
indirectly, encourage, solicit, participate in or initiate discussions or       
negotiations with, or provide any information to, any corporation, partnership, 
person or other entity or group (other than Parent and Newco, any affiliate or  
associate of Parent and Newco or any designee of Parent and Newco) concerning   
any merger, sale of assets, sale of shares of capital stock or similar          
transactions involving the Company or any division of the Company (other than   
with respect to the assets and liabilities to be transferred pursuant to the    
Asset Purchase Agreement), PROVIDED, HOWEVER, that nothing herein shall prevent 
the Board from taking, and disclosing to the Company's stockholders, a position 
contemplated by Rules 14D-9 and 14e-2 promulgated under the Exchange Act with   
regard to any tender offer, PROVIDED, FURTHER, that the Board shall not         
recommend that the stockholders of the Company tender their Shares in connection
with any such tender offer unless the Board by a majority vote determines in its
good faith judgment that, based upon the written advice of outside counsel,     
failing to take such action would constitute a breach of the Board's fiduciary  
duty under applicable law.                                                      

  (b)  Notwithstanding anything in this Agreement to the contrary, no action
taken by the Board, based upon the written advice of outside counsel, in the    
exercise of its fiduciary duties, shall constitute a breach of any provision of 
this Agreement.                                                                 

  Section 4.03.  ACCESS TO INFORMATION.  (a) From the date of this Agreement
until the Effective Time, the Company will give Parent and Newco and their      
authorized representatives (including counsel, environmental and other          
consultants, accountants, auditors, and intellectual property counsel and       
agents) full access during normal business hours to all facilities, personnel   
and operations and to all books and records of the Company, will permit Parent  
and Newco to make such inspections as they may reasonably require and will cause
its officers to furnish Parent with such financial and operating data and other 
information with respect to the businesses and properties of the Company as     
Parent may from time to time reasonably request.                                

 (b)  Parent will permit the Company and its agents, including its counsel
and auditors, to have access to Parent's books and records and personnel for the
purpose of conducting customary due diligence regarding the accuracy of the     
Parent SEC Documents.                                                           

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(c)  Each of Parent and Newco will hold and will cause their respective 
authorized representatives, including consultants and advisors, to hold in      
strict confidence pursuant to the Confidentiality Agreement dated October 21,   
1996 between Parent and the Company (the "Confidentiality Agreement") all       
documents and information concerning the Company furnished to Parent or Newco in
connection with the transactions contemplated by this Agreement. The Company    
will hold and will cause its respective authorized representatives, including   
consultants and advisers, to hold in strict confidence pursuant to the          
Confidentiality Agreement all documents and information concerning the Parent   
and Newco furnished to the Company in connection with the transactions          
contemplated by this Agreement.                                                 

  Section 4.04.  COMMERCIALLY REASONABLE EFFORTS; OTHER ACTIONS.  Subject to
the terms and conditions herein provided, Parent, Newco and the Company shall   
use all commercially reasonable efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or      
appropriate under applicable laws and regulations to consummate and make        
effective as soon as practicable the transactions contemplated by this          
Agreement, including, without limitation, (i) the filing of Notification and    
Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust Division")  
and using all commercially reasonable efforts to respond as promptly as         
practicable to all inquiries received from the FTC or the Antitrust Division for
additional information or documentation, (ii) the obtaining of all necessary    
consents, approvals or waivers, and (iii) the lifting of any legal bar to the   
Merger. Parent shall cause Newco to perform all of its obligations under this   
Agreement and shall not take any action which would cause the Company to fail to
perform its obligations hereunder. The Company shall not take any action which  
would cause Parent or Newco to fail to perform its obligations hereunder.       

 Section 4.05.  PUBLIC ANNOUNCEMENTS.  Before issuing any press release or
otherwise making any public statement with respect to the Merger or any of the  
other transactions contemplated hereby, Parent, Newco and the Company will      
consult with, and obtain the consent of, which consent shall not be unreasonably
withheld, each other as to its form and substance and shall not issue any such  
press release or make any such public statement prior to obtaining such consent,
except as may be required by law or any listing agreement with its securities   
exchange.                                                                       

Section 4.06.  NOTIFICATION OF CERTAIN MATTERS.  The Company shall give 
prompt notice to Parent of any notice of, or other communication relating to, a 
default or event which, with notice or lapse of time or both, would become a    
default, received by the Company subsequent to the date of this Agreement and   
prior to the Effective Time, under any contract material to the business,       
operations, assets or financial condition of the Company to which the Company is
a party or is subject. Each of the Company and Parent shall give prompt notice  
to the other party of (a) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in          
connection with the Merger or other transactions contemplated hereby, (b) the   
occurrence or existence of any event which would, or could with the passage of  
time or otherwise, make any representation or warranty made by such party       
contained herein untrue or (c) any failure of such party to comply with or      
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to    
this Section 4.06 shall not limit or otherwise affect the remedies available    
hereunder to the party receiving such notice.                                   

    Section 4.07.  INDEMNIFICATION.  (a) For six years after the Effective Time,
Parent shall cause the Surviving Corporation to indemnify, defend and hold      
harmless the present and former directors and officers of the Company,          
determined as of the Effective Time, against all losses, claims, damages,       
expenses or liabilities (collectively, "Costs") (but only to the extent such    
costs are not otherwise covered by insurance or are not promptly paid by        
insurance) arising out of actions or omissions or alleged actions or omissions  
occurring at or prior to the Effective Time to the extent permitted or required 
under applicable law and the Company's Restated Certificate of Incorporation and
By-Laws in effect at the date hereof (to the extent consistent with applicable  
law).                                                                           

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(b)  For a period of three years after the Effective Time, the Surviving
Corporation shall use its best efforts to cause to be maintained in effect the  
current policies of directors' and officers' liability insurance maintained by  
the Company (provided that the Surviving Corporation may substitute therefor    
policies of at least the same coverage and amounts containing terms and         
conditions which are no less advantageous) with respect to claims arising from  
facts or events which occurred before the Effective Time to the extent          
available; PROVIDED, HOWEVER, that the Surviving Corporation shall not be       
obligated to make annual premium payments for such insurance to the extent such 
premiums exceed 150% of the annual premiums paid as of the date hereof by the   
Company for such insurance (which the Company represents and warrants to be not 
more than $60,000).                                                             

    (c)  Parent hereby agrees to guarantee each and every one of the obligations
of the Surviving Corporation set forth in Sections 4.07(a) and 4.07(b).         

 Section 4.08.  EXPENSES.  Except as set forth in Section 6.03, Parent and
Newco, on the one hand, and the Company, on the other hand, shall bear their    
respective expenses incurred in connection with the Merger, including, without  
limitation, the preparation, execution and performance of this Agreement and the
transactions contemplated hereby and all fees and expenses of investment        
bankers, finders, brokers, agents, representatives, counsel and accountants.    

  Section 4.09.  RESIGNATION OF DIRECTORS.  Prior to the Effective Time, the
Company shall take all commercially reasonable efforts to deliver to Parent the 
resignation of such directors of the Company as Parent shall specify, effective 
at the Effective Time.                                                          

 Section 4.10.  ASSET PURCHASE AGREEMENT.  (a) The Company shall not amend
the Asset Purchase Agreement or waive any of its rights thereunder without the  
prior written consent of Parent.                                                

   (b)  The Company shall keep Parent reasonably informed of the status of the
financing related to the Asset Purchase Agreement.                              

ARTICLE V 
CONDITIONS TO THE OBLIGATIONS OF
PARENT, NEWCO AND THE COMPANY 

Section 5.01.  CONDITIONS TO OBLIGATIONS OF PARENT, NEWCO AND THE       
COMPANY.  The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of each of the     
following conditions:                                                           

    (a) this Agreement, the Asset Purchase Agreement, the Merger and the
 transactions contemplated by the Asset Purchase Agreement shall have been
 adopted by the affirmative vote of the stockholders of the Company by the
Requisite Vote;                                                         

       (b) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired; and                                         

     (c) there shall not have been any action taken, or any statute, rule,
regulation, judgment, decree, order or injunction proposed, sought,     
   promulgated, enacted, entered, enforced or deemed applicable to the Merger,
 or any other action shall have been taken, proposed or threatened, by any
state or federal government or governmental authority or by any U.S. or 
Canadian court, that presents substantial likelihood of prohibiting or  
restricting consummation of the Merger.                                 

Section 5.02.  CONDITIONS TO OBLIGATIONS OF PARENT AND NEWCO.  The      
obligations of Parent and Newco to effect the Merger shall be subject to the    
fulfillment at or prior to the Effective Time of each of the following          
conditions:                                                                     

     (a) there shall not have occurred any event or circumstances that has
had or is reasonably likely to have a Material Adverse Effect on the    
Company;                                                                

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(b) all representations and warranties of the Company under this
    Agreement which are qualified as to materiality shall be true and correct in
all respects and all representations and warranties of the Company under
 this Agreement that are not qualified as to materiality shall be true and
correct in all material respects on and as of the Effective Time;       

 (c) the Company shall have performed in all material respects all
covenants and agreements required to be performed by it prior to the    
Effective Time;                                                         

    (d) Parent shall have received a certificate signed on behalf of the
 Company by its chief executive officer to the effect set forth in clauses
(b) and (c) above; and                                                  

     (e) all conditions under the Asset Purchase Agreement shall have been
satisfied or waived and the transactions contemplated thereby shall have
been consummated.                                                       

    Section 5.03.  CONDITIONS TO OBLIGATIONS OF COMPANY.  The obligations of the
Company to effect the Merger shall be subject to the fulfillment at or prior to 
the Effective Time of each of the following conditions:                         

     (a) all representations and warranties of Parent and Newco under this
    Agreement which are qualified as to materiality shall be true and correct in
all respects and all representations and warranties of Parent and Newco 
   under this Agreement that are not qualified as to materiality shall be true
and correct in all material respects on and as of the Effective Time.   

      (b) Parent and Newco shall have performed in all material respects all
  covenants and agreements required to be performed by each of them prior to
the Effective Time.                                                     

ARTICLE VI

TERMINATION; AMENDMENT, WAIVER

    Section 6.01.  TERMINATION.  This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or     
after stockholder approval thereof:                                             

(a) by mutual written consent of Parent, Newco and the Company; 

(b) by Parent and Newco or the Company if any court of competent
jurisdiction in the United States or Canada or other United States or   
Canadian governmental body shall have issued a final order, injunction, 
  decree or ruling or taken any other final action restraining, enjoining or
   otherwise prohibiting the Merger and such order, injunction, decree, ruling
or other action is or shall have become nonappealable; PROVIDED that the
    right to terminate this Agreement pursuant to this Section 6.01(b) shall not
   be available to any party which has not used its reasonable best efforts to
cause any such order, injunction, decree, ruling or other action to be  
lifted;                                                                 

        (c) by either the Parent and Newco or the Company if the stockholders of
the Company fail to adopt and approve this Agreement, the Asset Purchase
 Agreement, the Merger and the transactions contemplated by this Agreement
   and the Asset Purchase Agreement at the Special Meeting and any adjournment
thereof, by the Requisite Vote;                                         

        (d) by the Company if a corporation, partnership, person or other entity
or group shall have made a bona fide offer not solicited in violation of
   Section 4.02 that the Board by a majority vote determines in its good faith
judgment and in the exercise of its fiduciary duties (i), based upon the
advice of the Financial Advisor, is more favorable to the Company's     
stockholders than the Merger and (ii), based upon the written advice of 
    outside counsel, must not make or must withdraw or modify its recommendation
of the Merger in order to avoid breaching its fiduciary duties under    
  applicable law; PROVIDED, HOWEVER, that such termination under this clause
shall not be effective (i) unless Parent or Newco does not, within 5    
  business days of receipt of the Company's notification of its intention to

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   enter into a definitive agreement with respect to a superior proposal, make
an offer that the Board by a majority vote determines in its good faith 
   judgment and in the exercise of its fiduciary duties, based upon the advice
of the Financial Advisor, is at least as favorable to the Company's     
 stockholders as the superior proposal and (ii) until the Company has made
   payment of the full fee and expense reimbursement required by Section 6.03;

     (e) by Parent and Newco, if (i) there shall have been a breach of any
    representation or warranty on the part of the Company that is or will have a
    Material Adverse Effect on the Company or which materially adversely affects
  the ability of the Company to consummate the Merger, (ii) there shall have
   been a breach of any covenant or agreement on the part of the Company which
   is or will result in a Material Adverse Effect on the Company or materially
    adversely affects the ability of the Company to consummate the Merger, which
shall not have been cured prior to the earlier of (A) 10 days following 
  notice of such breach and (B) two business days prior to the Closing Date,
(iii) the Company shall engage in negotiations with any entity or group 
    (other than Parent or Newco) that has proposed a Third Party Acquisition (as
defined below), (iv) the Board (A) shall have withdrawn or modified in a
   manner adverse to Newco its approval or recommendation of this Agreement or
  the Merger or shall have recommended another offer or transaction or shall
have adopted any resolution to effect any of the foregoing or (B), in   
response to any tender or exchange offer for more than 20% of the       
outstanding Common Stock, shall not have recommended rejection of such  
tender offer or exchange offer within the time periods specified by     
 applicable law, or shall have adopted any resolution to effect any of the
foregoing; (v) the existing Asset Purchase Agreement shall have become  
terminable by the Company and the Company shall not have entered into a 
substitute Asset Purchase Agreement with another party within 2 Business
  Days; or (vi) the Company shall have failed to mail the Proxy Statement as
promptly as practicable after the clearance thereof by the SEC or the   
Company has failed to include in the Proxy Statement the Board's        
recommendation of the Merger;                                           

(f) by the Company if (i) there shall have been a breach of any 
  representation or warranty on the part of Parent or Newco which materially
  adversely affects (or materially delays) the consummation of the Merger or
    (ii) there shall have been a material breach of any covenant or agreement on
the part of Parent or Newco and which materially adversely affects (or  
   materially delays) the consummation of the Merger which shall not have been
  cured prior to the earliest of (A) 10 days following notice of such breach
and (B) two business days prior to the Closing Date; or                 

        (g) by Parent and Newco or the Company if the Merger shall not have been
consummated on or before the date that is 5 months from the date of this
  Agreement; provided that the right to terminate this Agreement pursuant to
   this Section 6.01(g) shall not be available to any party which has not used
its reasonable best efforts to cause the Merger to be consummated.      

  Section 6.02.  EFFECT OF TERMINATION.  In the event of the termination and
abandonment of this Agreement pursuant to Section 6.01, this Agreement shall    
forthwith become void and have no effect, without any liability on the part of  
any party hereto or its affiliates, directors, officers or stockholders, other  
than the provision of this Section 6.02 and Section 6.03 hereof. Nothing        
contained in this Section 6.02 shall relieve any party from liability for any   
breach of this Agreement.                                                       

Section 6.03.  CERTAIN PAYMENTS.  (a) In the event Parent and Newco     
terminate this Agreement pursuant to Section 6.01(e)(i), (ii) or (v) hereof,    
Parent and Newco would suffer direct and substantial damages, which damages     
cannot be determined with reasonable certainty. To compensate Parent and Newco  
for such damages, the Company shall pay to Parent, as liquidated damages        
immediately upon such a termination, an amount equal to the reasonable,         
documented out-of-pocket third party expenses of Parent and Newco incurred in   
connection with the transactions contemplated hereby, not to exceed             

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$600,000 in the aggregate. It is specifically agreed that the amount to be paid 
pursuant to this Section 6.03(a) represents liquidated damages and not a        
penalty.                                                                        

(b) If                                                                  

 (i) Parent and Newco terminate this Agreement pursuant to Section
   6.01(e)(vi) hereof and, within 18 months thereafter the Company enters into
an agreement with respect to a Third Party Acquisition, or a Third Party
   Acquisition occurs, involving any party (or any affiliate thereof) (x) with
whom the Company (or its agents) had negotiations with a view to a Third
Party Acquisition, (y) to whom the Company (or its agents) furnished    
information with a view to a Third Party Acquisition or (z) who had     
   submitted a proposal or expressed an interest in a Third Party Acquisition,
 in the case of each of clauses (x), (y) and (z) after the date hereof and
prior to such termination; or                                           

  (ii) Parent and Newco terminate this Agreement pursuant to Section
6.01(e)(iii) or (vi), and within 18 months thereafter a Third Party     
   Acquisition shall occur involving a consideration for Shares (including the
value of any stub equity) in excess of the Merger Consideration; or     

 (iii) (A) the Company terminates this Agreement pursuant to 6.01(d)
hereof or (B) Parent and Newco or the Company terminate this Agreement  
 pursuant to Section 6.01(c) hereof or (C) Parent and Newco terminate this
Agreement pursuant to Section 6.01(e)(iv),                              

the Company shall pay to Parent and Newco either prior to termination in the    
case of the event described in Section 6.03(iii)(A) or within one business day  
following the execution and delivery of such agreement or such occurrence or    
termination, as the case may be, in the case of the event described in Section  
6.03(i), (ii), (iii)(B) or (iii)(C), a fee, in cash, of $1,300,000, plus        
reasonable, documented out-of-pocket third party expenses of Parent and Newco   
incurred in connection with the transactions contemplated hereby, PROVIDED,     
HOWEVER, that the Company in no event shall be obligated to pay more than one   
such $1,300,000 fee with respect to all such agreements and occurrences and such
termination.                                                                    

"Third Party Acquisition" means the occurrence of any of the following  
events (i) the acquisition of the Company by merger or otherwise by any person  
(which includes a "person" as such term is defined in Section 13(d)(3) of the   
Exchange Act) or entity other than Parent, Newco or any affiliate thereof (a    
"Third Party"); (ii) the acquisition by a Third Party of more than 30% of the   
total assets of the Company (other than pursuant to the Asset Purchase          
Agreement); (iii) the acquisition by a Third Party of 30% of more of the        
outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or
the declaration or payment of an extraordinary dividend; or (v) the repurchase  
by the Company or any of its subsidiaries of more than 20% of the outstanding   
Shares, other than a repurchase which was not approved by the Company or        
publicly announced prior to the termination of this Agreement and which is not  
part of a series of transactions resulting in a change of control.              

   Section 6.04.  AMENDMENT.  This Agreement may be amended by action taken by
the Company, Parent and Newco at any time before or after approval of the Merger
by the stockholders of the Company (if required by applicable law) but, after   
any such approval, no amendment shall be made which requires the approval of    
such stockholders under applicable law without such approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of the       
parties hereto.                                                                 

   Section 6.05.  EXTENSION; WAIVER.  At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the     
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any    
document, certificate or writing delivered pursuant hereto or (iii) waive       
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of either party hereto to any such extension  
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its   
rights hereunder shall not constitute a waiver of such rights.                  

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ARTICLE VII 

DEFINITIONS 

  Section 7.01.  TERMS DEFINED IN THIS AGREEMENT.  The following capitalized
terms used herein shall have the meanings ascribed in the indicated sections.   

                                                                [Download Table]
                                                                                
Agreement........................................................... First      
                                                                     Paragraph  
Antitrust Division.................................................. 4.04       
Asset Purchase Agreement............................................ 1.07       
Board............................................................... Recitals   
Certificates........................................................ 1.11       
Certificate of Merger............................................... 1.12       
Closing............................................................. 1.05       
Closing Date........................................................ 1.05       
Common Stock........................................................ Recitals   
Company............................................................. First      
                                                                     Paragraph  
Common Stock Equivalents............................................ 3.13       
Company SEC Reports................................................. 3.04       
Contracts........................................................... 3.19       
Confidentiality Agreement........................................... 4.02       
Delaware Act........................................................ 1.01       
Disclosure Statement................................................ Article III
Dissenting Shares................................................... 1.10       
Effective Time...................................................... 1.02       
ERISA............................................................... 3.17       
Exchange Act........................................................ 3.03       
Exchange Agent...................................................... 1.11       
Exchange Fund....................................................... 1.11       
Financial Advisor................................................... 1.09       
FTC................................................................. 4.04       
HSR Act............................................................. 2.03       
Intellectual Property............................................... 3.23       
Licenses............................................................ 3.23       
Material Adverse Effect............................................. 3.01       
Merger.............................................................. 1.01       
Merger Consideration................................................ 2.07       
Newco............................................................... First      
                                                                     Paragraph  
Parent.............................................................. First      
                                                                     Paragraph  
Proxy Statement..................................................... 1.09       
SEC................................................................. 1.04       
Securities Act...................................................... 2.03       
Special Meeting..................................................... 1.09       
Stock Plans......................................................... 1.08       
Surviving Corporation............................................... 1.01       
Tax Return.......................................................... 3.18       
Taxes............................................................... 3.18       
Third Party......................................................... 6.03       
Third Party Acquisition............................................. 6.03       

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ARTICLE VIII

MISCELLANEOUS 

Section 8.01.  WAIVER OF COMPLIANCE; CONSENTS.  Any failure of Parent or
Newco, on the one hand, or the Company, on the other hand, to comply with any   
obligation, covenant, agreement or condition herein may be waived by the Company
or Parent or Newco, respectively, only by a written instrument signed by the    
party granting such waiver, but such waiver or failure to insist upon strict    
compliance with such obligation, covenant, agreement or condition shall not     
operate as a waiver of, or estoppel with respect to, any subsequent or other    
failure. Whenever this Agreement requires or permits consent by or on behalf of 
any party hereto, such consent shall be given in writing in a manner consistent 
with the requirements for a waiver of compliance as set forth in this Section   
8.01.                                                                           

Section 8.02.  SURVIVABILITY; INVESTIGATIONS.  The respective           
representations and warranties of Parent, Newco and the Company contained herein
or in any certificates or other documents delivered prior to or at the Closing  
shall not be deemed waived or otherwise affected by any investigation made by   
any party hereto and shall not survive the Closing.                             

Section 8.03.  NOTICES.  All notices and other communications hereunder 
shall be in writing and shall be delivered personally, by next-day courier or   
mailed by registered or certified mail (return receipt requested), first class  
postage prepaid, or telecopied with written confirmation of receipt, to the     
parties at the addresses specified below (or at such other address for a party  
as shall be specified by like notice; provided, that notices of a change of     
address shall be effective only upon receipt thereof). Any such notice shall be 
effective upon receipt, if personally delivered or telecopied, one day after    
delivery to a courier for next-day delivery, or three days after mailing, if    
deposited in the U.S. mail, first class postage prepaid.                        

(a) if to the Company, to                                               
One Kromer Center                                                   
P.O. Box 1999                                                       
Elmira, NY 14902-1999                                               
Telephone: (607) 735-4500                                           
Facsimile: (607) 733-5699                                           
Attention: Stuart Komer                                             
with a copy to                                                      
Cahill Gordon & Reindel                                             
80 Pine Street                                                      
New York, NY 10005                                                  
Telephone: (212) 701-3000                                           
Facsimile: (212) 269-5420                                           
Attention: William B. Gannett, Esq.                                 

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(b) if to Parent, or Newco, to                                          
45 Hazelton Avenue                                                              
Toronto, Ontario                                                    
Canada M5R 2E3                                                      
Telephone: (416) 960-9000                                           
Attention: Miles S. Nadal                                           
with a copy to                                                      
Marni J. Lerner, Esq.                                               
Edward J. Chung, Esq.                                               
Simpson Thacher & Bartlett                                          
425 Lexington Avenue                                                
New York, NY 10017                                                  
Telephone: (212) 455-2000                                           
Facsimile: (212) 455-2502                                           

    Section 8.04.  ASSIGNMENT; NO THIRD PARTY BENEFICIARIES.  This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of  
the parties hereto and their respective successors and permitted assigns, but   
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties, except that Parent and Newco may assign all or any of     
their respective rights and obligations hereunder to any direct or indirect     
wholly owned subsidiary or subsidiaries of Parent, PROVIDED that no such        
assignment shall relieve the assigning party of its obligations hereunder if    
such assignee does not perform such obligations. This Agreement is not intended 
to confer any rights or remedies hereunder upon any other person except the     
parties hereto and, with respect to Section 4.07, the officers and directors of 
the Company.                                                                    

  Section 8.05.  GOVERNING LAW.  Except as the laws of the State of Delaware
are by their terms applicable, this Agreement shall be governed by the laws of  
the State of New York (regardless of the laws that might otherwise govern under 
applicable New York principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and   
remedies.                                                                       

   Section 8.06.  COUNTERPARTS.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which       
together shall constitute one and the same instrument.                          

Section 8.07.  SEVERABILITY.  In case any one or more of the provisions 
contained in this Agreement should be invalid, illegal or unenforceable in any  
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or       
impaired thereby so long as the economic or legal substance of the transactions 
contemplated hereby is not affected in any manner materially adverse to any     
party and such invalidity, illegality or unenforceability shall only apply as to
such party in the specific jurisdiction where such judgment shall be made.      

  Section 8.08.  INTERPRETATION.  The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the  
agreement of the parties and shall not in any way affect the meaning or         
interpretation of this Agreement. As used in this Agreement, the term "person"  
shall mean and include an individual, a partnership, a joint venture, a         
corporation, a trust, an unincorporated organization and a government or any    
department or agency thereof.                                                   

Section 8.09.  ENTIRE AGREEMENT.  This Agreement, including the exhibits
hereto and the documents and instruments referred to herein (including the      
Confidentiality Agreement and Disclosure Statement), embodies the entire        
agreement and understanding of the parties hereto in respect of the subject     
matter contained herein and supersedes all prior agreements and the             
understandings between the parties with respect to such subject matter. There   
are no representations, promises, warranties, covenants, or undertakings, other 
than those expressly set forth or referred to herein and therein.               

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  ASSET PURCHASE AGREEMENT (this "Agreement") dated as of December 21, 1997,
between ARTISTIC GREETINGS INCORPORATED, a Delaware corporation ("Artistic"),   
and ARTISTIC DIRECT INCORPORATED, a privately-held New York corporation ("ADI").

Thomas C. Wyckoff has formed ADI (an S election corporation) in order to
acquire certain assets and to assume certain liabilities described in Annex 1.  

Concurrently herewith, Artistic and MDC Communications Corporation, an  
Ontario corporation ("MDC"), have entered into an Agreement and Plan of Merger  
(the "Merger Agreement"), dated as of even date herewith, (the "Merger") of AGI 
Acquisition Co., a Delaware corporation and a wholly owned subsidiary of MDC,   
with and into Artistic.                                                         

  It is a condition to the Merger that the Asset Purchase (as defined below)
shall have been consummated.                                                    

   Prior to consummation of the Merger, subject to the terms and conditions of
this Agreement, Artistic shall sell to ADI certain assets, and assign to ADI    
certain liabilities, of Artistic relating to its Personalized Product and       
Catalog businesses (the "P&C Businesses"), including, without limitation, all   
related intangible assets, going-concern value and goodwill, as well as the real
property (the "Real Property") and leased property (the "Leased Property") of   
Artistic (collectively, the "Assets") (such transactions being referred to      
herein as the "Asset Purchase").                                                

 ADI, on the one hand, and Artistic, on the other, desires to make certain
representations, warranties and agreements in connection with the Asset Purchase
and to prescribe various conditions to the Asset Purchase.                      

Accordingly, in consideration of the premises and the representations,  
warranties and agreements herein contained, the parties hereto agree as follows:

ARTICLE I 
THE ASSET PURCHASE

Section 1.1  THE ASSET PURCHASE.  Upon the terms and subject to the     
conditions of this Agreement, at the Closing (as defined in Section 1.4), ADI   
shall purchase and acquire from Artistic, and Artistic shall convey, assign,    
transfer and sell to ADI, all of Artistic's right, title and interest in and to 
the Assets described in Annex 1, including the assets listed on the balance     
sheet of Artistic as set forth on Schedule 1.1 (the "Assumed Balance Sheet      
Assets"), and including the assets relating to both the P&C Businesses and the  
businesses of Artistic other than the P&C Businesses as set forth on Schedule   
1.1A (the "Joint Assets") to the extent the Joint Assets relate to the P&C      
Businesses, with such additions, deletions and replacements as may have occurred
between the date hereof and the Closing Date (as defined in Section 1.4) in the 
ordinary course of business consistent with Section 4.1 or as the parties may   
otherwise agree is necessary to make any corrections thereto (it being          
understood that the Assets shall not include any assets, properties and other   
rights relating to the check business of Artistic and those assets, properties  
and other rights set forth in Schedule 1.1B (the "Excluded Assets")). At the    
Closing, Artistic shall deliver to ADI such specific assignments, bills of sale,
endorsements, deeds and other good and sufficient instruments of conveyance and 
transfer, in form and substance reasonably satisfactory to ADI and Artistic and 
their respective counsel, as shall be reasonably requested by ADI to effectively
vest in ADI title to all the Assets. Simultaneously with the delivery of such   
instruments, Artistic shall transfer to ADI originals of all contracts,         
agreements, commitments, books, records, files, certificates, licenses, permits,
plans and specifications and other data relating to and reasonably necessary for
the continued operation of the P&C Businesses.                                  

    Section 1.2  PURCHASE PRICE.  In consideration of the transfer to ADI of the
Assets, ADI shall on the Closing Date (a) deliver to Artistic $9,000,000 (the   
"Purchase Price") by wire transfer of immediately                               

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available funds, into an account of Artistic designated to ADI at least two     
Business Days prior to the Closing Date (provided that at the election of the   
ADI, up to $250,000 of the Purchase Price may be satisfied by delivery to       
Artistic of a Promissory Note substantially in the form of Exhibit H) and (b)   
assume the Assumed Liabilities (as defined in Section 1.3). The Purchase Price  
shall be subject to adjustment pursuant to Section 1.8 and Section 5.5(e).      
"Business Day" shall mean any day other than a Saturday, Sunday or other day on 
which banks are authorized to be closed in New York City or Toronto.            

Section 1.3  ASSUMPTION OF LIABILITIES.                                 

    (a)  ASSUMED LIABILITIES.  In addition to payment of the Purchase Price, ADI
shall assume at the Closing, and subsequently in due course pay, honor and      
discharge, (i) all the obligations, debts and liabilities of Artistic arising   
out of or relating to the P&C Businesses or the Assets, (ii) the employment     
related liabilities of Business Employees as set forth in Section 5.12, (iii)   
all environmental liabilities of Artistic, (iv) the obligations, debts and      
liabilities set forth on Annex 1, (v) contingent and unknown liabilities arising
out of or relating primarily to the P&C Businesses, the Real Property or the    
Leased Property, accruing before, on or after the Closing Date (as defined in   
Section 1.4), (vi) the liabilities listed on the balance sheet of Artistic to   
the extent set forth on Annex 1(the "Assumed Balance Sheet Liabilities"), (vii) 
liabilities which relate to both the P&C Businesses and the businesses of       
Artistic other than the P&C Businesses (the "Joint Liabilities") to the extent  
provided in Section 1.9 and as shall be set forth on Schedule 1.3A and (viii)   
the allocable share of Joint Employee Liabilities set forth in Schedule 1.3B,   
determined on the basis of FTE (full time employee) equivalents (collectively,  
the "Assumed Liabilities"). Artistic shall retain and ADI shall not assume any  
of Artistic's obligations, debts and liabilities set forth on Schedule 1.3 and  
any other obligations, debts and liabilities other than the Assumed Liabilities 
(the "Excluded Liabilities").                                                   

(b)  THIRD-PARTY CONSENTS.  Any leases, rental agreements, insurance    
policies, sales orders, insurance contracts, trust agreements, licenses,        
agreements, permits, purchase orders, registered user agreements, commitments   
and any and all other contracts or binding arrangements, whether written or     
oral, express or implied, which are related to the P&C Businesses and the       
Assets, including any entered into between the date hereof and the Closing in   
the ordinary course of business, all of which shall be identified on Annex 2    
except for contracts entered into between the date hereof and the Closing       
(collectively, the "Assumed Contracts"), shall be assumed by ADI at the Closing 
Date. To the extent that any Assumed Contract is not assignable without the     
consent of another party, this Agreement shall not constitute an assignment or  
an attempted assignment thereof if such assignment or attempted assignment would
constitute a breach thereof or of any other Assumed Contract. Artistic agrees to
use its reasonable efforts on or prior to the Closing Date to obtain the consent
of such other party to the assignment to ADI of any such Assumed Contract in all
cases in which such consent is required for such assignment. If such consent    
cannot be so obtained on or prior to the Closing Date, Artistic agrees to       
cooperate with ADI in any reasonable arrangement designed to provide for ADI the
benefits intended to be assigned to ADI under the relevant Assumed Contract,    
including enforcement at the cost and for the account of ADI of any and all     
rights of Artistic against the other party thereto arising out of the breach or 
cancellation thereof by such other party or otherwise (such Assumed Contracts   
being the "Deferred Contracts"); provided that all losses, taxes or other items 
generated by the relevant Deferred Contracts shall be for ADI's account;        
provided further, that, except as otherwise provided in this Agreement or the   
Schedules, Exhibits and Annexes hereto, Artistic shall not have any liability to
ADI arising out of such Deferred Contracts and ADI shall reimburse Artistic and 
indemnify and hold Artistic harmless from all liabilities incurred or asserted  
as a result of Artistic's post-Closing direct or indirect ownership of the      
Deferred Contracts.                                                             

    (c)  ASSUMPTION AGREEMENT.  On the Closing Date (as defined in Section 1.4),
ADI shall execute and deliver to Artistic the Assumption Agreement,             
substantially in the form of Exhibit A.                                         

Section 1.4  CLOSING.  The closing of the Asset Purchase (the "Closing")
shall take place in the offices of Simpson Thacher & Bartlett, 425 Lexington    
Avenue, New York, New York, at 10:00 a.m., local                                

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time, on the second Business Day following the date on which all the conditions 
to the consummation of the transactions contemplated herein set forth in Article
VI have been satisfied or waived, or such other time, date and place as ADI and 
Artistic shall agree (such date being the "Closing Date").                      

   Section 1.5  FURTHER ASSURANCES.  From and after the Closing Date, upon the
reasonable request of ADI, Artistic shall do, execute, acknowledge and deliver  
all such further acts, assurances, deeds, assignments, transfers, conveyances   
and other instruments and papers as may be reasonably required to sell, assign, 
transfer, convey and deliver to and vest in ADI, and protect its right, title   
and interest in and employment of, all the Assets intended to be sold, assigned,
transferred, conveyed and delivered to ADI pursuant to this Agreement           
(including, with respect to any Assets that are licensed or leased to Artistic, 
to cause, upon the request of ADI, the assignment of any such licenses or leases
(and any other maintenance, servicing or other agreement specifically relating  
to any Asset) to ADI, the expenses of any such action to be borne equally by    
Artistic and ADI, it being understood that until such assignment, ADI will      
reimburse Artistic for charges and lease payments it makes after the Closing    
Date (for periods after the Closing Date) in respect of such Assets under any   
such licenses or leases), and as otherwise may be appropriate to carry out the  
transactions contemplated by this Agreement.                                    

  Section 1.6  FMV SCHEDULE.  Within 45 days after the Closing Date, ADI and
Artistic will determine the fair market value of the various classes of the     
Assets, the Assumed Liabilities and the other rights and benefits conferred     
hereunder and will set forth such fair market value upon an agreed schedule (the
"FMV Schedule"). The parties agree that the Purchase Price shall be allocated   
for tax purposes among the Assets in a manner consistent with the FMV Schedule  
and the provisions of Section 1060 of the Internal Revenue Code of 1986, as     
amended (the "Code") and the Treasury regulations promulgated thereunder. The   
allocation set forth on the FMV Schedule shall be made in good faith and arrived
at by arm's length negotiation, and each of the parties agrees that it will not 
take, without the prior written consent of the other, any position on any       
federal or state income or transfer tax return (including Form 8954, Asset      
Acquisition Statement under Section 1060 of the Code) or before any governmental
agency, any position or make any allocation inconsistent with that set forth in 
the FMV Schedule.                                                               

  Section 1.7  INTELLECTUAL PROPERTY LLC.  Immediately following the Closing
but prior to the Effective Time of the Merger (as defined in the Merger         
Agreement), ADI and Artistic will enter into a Limited Liability Company        
Agreement (the "Limited Liability Agreement") substantially in the form of      
Exhibit G whereby ADI and Artistic shall contribute to a limited liability      
company formed by the parties prior to the Closing Date, certain intellectual   
property and other interests referred to on the schedules to the Limited        
Liability Agreement, and also shall consummate the other transactions           
contemplated by the Limited Liability Agreement (including the schedules        
thereto).                                                                       

Section 1.8  PURCHASE PRICE ADJUSTMENTS.  (a) Following the Closing, the
parties will in good faith determine the amount, if any, by which Artistic has  
made capital expenditures on property, plant and equipment (other than routine  
maintenance and servicing) in excess of $100,000 per calendar month during the  
period from the date hereof through the Closing Date (provided that to the      
extent that in any calendar month less than $100,000 is so expended, such       
difference may be carried forward to future calendar months), the Purchase Price
will be increased by the amount of such excess expenditure (the "Excess"). Upon 
final agreement of the parties as to the amount of the Excess, ADI shall deliver
a promissory note to Artistic in substantially the form of the Promissory Note  
attached as Exhibit G with an issue price equal to the Excess.                  

 (b) At Closing, Artistic shall deliver to ADI the sum of (i) the positive
difference between (A) the Komer Severance Payment (as defined in Section 5.12  
(j)) that would have been due Komer if the transactions contemplated by the     
Merger Agreement had occurred prior to December 31, 1997, and (B) the Komer     
Severance Payment payable at the time of the Merger and (ii) $333,333. Such     
payments shall be made by wire transfer of immediately available funds, at      
Closing, to an account designated by ADI                                        

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to Artistic at least two days prior to the Closing, and shall be considered an  
adjustment to the Purchase Price.                                               

Section 1.9  ALLOCATION OF CERTAIN JOINT LIABILITIES.  During the period
from the date hereof through the Closing Date, ADI and Artistic shall endeavor  
in good faith to allocate between Assumed Liabilities and Excluded Liabilities  
the Joint Liabilities which otherwise have not been so allocated. If any Joint  
Liability can not be so allocated by the parties, Artistic will be responsible  
for 100% of such Joint Liability and ADI will pay to Artistic amounts necessary 
to satisfy 55% of such Joint Liability (within five days of Artistic's          
satisfaction of such liabilities).                                              

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ADI 

ADI represents and warrants to Artistic as follows:                     

   Section 2.1  ORGANIZATION AND QUALIFICATION.  ADI (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of 
New York and has all requisite corporate power and authority to carry on its    
business as now being conducted and to own and operate the properties and assets
it now owns, and (ii) is in good standing in each jurisdiction where the        
character of its business owned or held under lease or the nature of its        
activities makes such qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse  
Effect on ADI or prevent or materially delay the consummation of the            
transactions contemplated hereby. "Material Adverse Change" or "Material Adverse
Effect" means, when used with respect to ADI, Artistic or the P&C Businesses,   
any change or effect that is or, is reasonably likely to be materially adverse  
to the business, operations, assets, financial condition or results of          
operations of ADI, Artistic or the P&C Businesses, as the case may be.          

Section 2.2  AUTHORITY.  ADI has all requisite power and authority to   
execute and deliver this Agreement, the Bill of Sale and Assignment, the        
Assumption Agreement and any other agreement contemplated hereby to which it is 
a party, to perform its obligations hereunder and thereunder, and to consummate 
the Asset Purchase and the other transactions contemplated hereby. The execution
and delivery by ADI of this Agreement and the consummation by ADI of the Asset  
Purchase and the other transactions contemplated hereby have each been duly and 
validly authorized by the Board of Directors of ADI and no other corporate      
proceedings on the part of ADI are necessary to authorize this Agreement or to  
consummate the Purchase and the other transactions contemplated hereby. This    
Agreement has been duly and validly executed and delivered by ADI and, assuming 
the valid authorization, execution and delivery of this Agreement by Artistic,  
constitutes a legal, valid and binding agreement of ADI, enforceable against ADI
in accordance with its terms, except to the extent such enforceability may be   
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent       
transfer or other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and by the effect of general principles of 
equity (regardless of whether enforceability is considered in a proceeding in   
equity or at law).                                                              

Section 2.3  NO VIOLATIONS, ETC.  The execution and delivery of this    
Agreement do not or will not, as the case may be, and the consummation of the   
transactions contemplated hereby and compliance with the provisions hereof do   
not or will not, conflict with, or result in any violation of, or default (with 
or without notice or lapse of time, or both) under, or give rise to a right of  
termination, cancelation or acceleration of any obligation or to the loss of a  
material benefit under, or result in the creation of any lien, security         
interest, charge or encumbrance upon any of the properties or assets of ADI     
under, any provision of (i) the Certificate of Incorporation or Bylaws of ADI,  
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or    
other agreement, instrument, permit, concession, franchise or license applicable
to ADI, or (iii) any judgment, order, decree, statute, law, ordinance, rule or  
regulation applicable to ADI or any of its properties or assets, other than, in 
the case of clauses (ii) or (iii), any such conflicts, violations, defaults,    
losses, liens, security interests, charges or encumbrances that, individually or
in the aggregate,                                                               

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would not have a Material Adverse Effect on ADI, materially impair the ability  
of ADI to perform its obligations hereunder or prevent the consummation of any  
of the transactions contemplated hereby. No filing or registration with, or     
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,       
authority or tribunal (a "Governmental Agency") is required by or with respect  
to ADI in connection with the execution and delivery of this Agreement by ADI or
is necessary for the consummation by ADI of the Asset Purchase, except for such 
consents, orders, authorizations, registrations, declarations and filings, the  
failure of which to be obtained or made would not, individually or in the       
aggregate, have a Material Adverse Effect on ADI, materially impair the ability 
of ADI to perform its obligations hereunder or prevent the consummation of the  
transaction contemplated hereby.                                                

Section 2.4  BROKERS.  No broker, investment banker or other person is  
entitled to any broker's, finder's or similar fee or commission in connection   
with the transactions contemplated by this Agreement based upon arrangements    
made by or on behalf of ADI.                                                    

 Section 2.5.  FINANCING.  ADI has in hand binding proposal, commitment or
similar letters, which are currently in effect and true and correct copies of   
which are attached hereto as Schedule 2.5, with a reputable financial           
institution or institutions or Governmental Agencies to obtain, together with   
commitments of equity and/or subordinated indebtedness (of no less than $1.25   
million in the aggregate, excluding the $250,000 Promissory Note referred to in 
Section 1.2 (the "Proposal Letters"), all funds necessary to enable ADI to      
finance the Purchase Price and consummate this Agreement (the "Financing").     

Section 2.6.  NO OTHER REPRESENTATIONS OR WARRANTIES.  Except for the   
representations and warranties contained in this Article II, neither ADI nor any
other person makes any other express or implied representation or warranty on   
behalf of ADI.                                                                  

ARTICLE III 
REPRESENTATIONS AND WARRANTIES OF ARTISTIC

Artistic represents and warrants to ADI as follows:                     

   Section 3.1  ORGANIZATION AND QUALIFICATION.  Artistic (i) is a corporation
duly organized, validly existing and in good standing under the laws of the     
State of Delaware and has all requisite corporate power and authority to carry  
on its business as now being conducted and to own and operate the properties and
assets it now owns, and (ii) is duly qualified as a foreign corporation to do   
business, and is in good standing, in each jurisdiction where the character of  
its business owned or leased or the nature of its activities makes such         
qualification necessary, except where the failure to be so qualified or in good 
standing would not, individually or in the aggregate, have a Material Adverse   
Effect on the P&C Businesses, or prevent or materially delay the consummation of
the transactions contemplated hereby.                                           

  Section 3.2  AUTHORITY.  Artistic has all requisite power and authority to
execute and deliver this Agreement, the Bill of Sale and Assignment, the        
Assumption Agreement and any other agreement contemplated hereby to which it is 
a party, to perform its obligations hereunder and thereunder, and to consummate 
the Asset Purchase and the other transactions contemplated hereby. The execution
and delivery by Artistic of this Agreement and the consummation by Artistic of  
the Asset Purchase and the other transactions contemplated hereby have each been
duly and validly authorized by the Board of Directors of Artistic (the "Board") 
and no other corporate proceedings on the part of Artistic are necessary to     
authorize this Agreement or to consummate the Asset Purchase and the other      
transactions contemplated hereby (other than, with respect to the Merger and the
Asset Purchase, the receipt of the "Requisite Vote" (as defined in the Merger   
Agreement)). This Agreement has been duly and validly executed and delivered by 
Artistic and, assuming the valid authorization, execution and delivery of this  
Agreement by ADI, constitutes a legal, valid and binding agreement of Artistic, 
enforceable against Artistic in accordance with its terms, except to the extent 
such enforceability may be limited by bankruptcy, insolvency, reorganization,   
moratorium, fraudulent transfer or other similar laws of general applicability  
relating to or affecting the enforcement of creditors' rights and by the effect 
of general principles of equity (regardless of whether enforceability is        
considered in a proceeding in equity or at law).                                

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   Section 3.3  NO VIOLATIONS, ETC.  Subject to receipt of the Requisite Vote,
the execution and delivery of this Agreement do not or will not, as the case may
be, and the consummation of the transactions contemplated hereby and compliance 
with the provisions hereof do not or will not, conflict with, or result in any  
violation of, or default (with or without notice of lapse of time, or both)     
under, or give rise to a right of termination, cancelation or acceleration of   
any obligation or to the loss of a material benefit under, or result in the     
creation of any lien, security interest, charge or encumbrance upon any of the  
properties or assets of Artistic under, any provision of (i) the Certificate of 
Incorporation or Bylaws of Artistic, (ii) any loan or credit agreement, note,   
bond, mortgage, indenture, lease or other agreement, instrument, permit,        
concession, franchise or license applicable to Artistic, or (iii) any judgment, 
order, decree, statute, law, ordinance, rule or regulation applicable to        
Artistic or any of its respective properties or assets, other than, in the case 
of clauses (ii) or (iii), any such conflicts, violations, defaults, losses,     
liens, security interests, charges or encumbrances that, individually or in the 
aggregate, would not have a Material Adverse Effect, materially impair the      
ability of Artistic to perform its obligations hereunder or prevent the         
consummation of any of the transactions contemplated hereby. Except for the     
filings referred to in Section 3.03 and Schedule 3.03 to the Merger Agreement,  
which are incorporated by reference herein, no filing or registration with, or  
authorization, consent or approval of, any Governmental Agency is required by or
with respect to Artistic in connection with the execution and delivery of this  
Agreement or the Merger Agreement by Artistic or is necessary for the           
consummation by Artistic of the Merger, the Asset Purchase and the other        
transactions contemplated hereby and thereby, except for such consents, orders, 
authorizations, registrations, declarations and filings, the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on Artistic, materially impair the ability of Artistic to perform
its obligations hereunder or thereunder or prevent the consummation of the      
transactions contemplated hereby or thereby.                                    

   Section 3.4  BOARD RECOMMENDATION.  The Board has approved and adopted this
Agreement, the Asset Purchase, the Merger and the other transactions            
contemplated by this Agreement and the Merger Agreement, determined that the    
consideration to be received by the holders of shares of common stock of        
Artistic pursuant to the Merger is fair to the holders of such shares and       
recommended that the holders of such shares approve and adopt the Merger        
Agreement, the Merger, the Asset Purchase and the other transactions            
contemplated by this Agreement and the Merger Agreement.                        

Section 3.5  BROKERS.  No broker, investment banker or other person is  
entitled to any broker's, finder's or other similar fee or commission in        
connection with the transactions contemplated by this Agreement based upon      
arrangements made by or on behalf of Artistic.                                  

Section 3.6  NO OTHER REPRESENTATIONS OR WARRANTIES.  Except for the    
representations and warranties contained in this Article III, neither Artistic  
nor any other person makes any other express or implied representation or       
warranty on behalf of Artistic.                                                 

ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS 

    Section 4.1  CONDUCT OF BUSINESS.  Prior to the Closing Date, Artistic shall
operate its business (including the P&C Businesses) in the ordinary course of   
business and in all respects in accordance with Section 4.01 of the Merger      
Agreement.                                                                      

 Section 4.2  OTHER POTENTIAL BIDDERS.  Artistic, its affiliates and their
respective officers, directors, employees, representatives and agents shall     
immediately cease any existing discussions or negotiations, if any, with any    
parties conducted heretofore with respect to a transaction or series of         
transactions involving the Assets and the Assumed Liabilities to be transferred 
or assumed hereunder. Artistic, its affiliates and their respective officers,   
directors, employees, representatives and agents, may, directly or indirectly,  
furnish information and access, in each case only in response to unsolicited    
requests therefor made after the date hereof, to any corporation, partnership,  
person or other entity or group pursuant to confidentiality                     

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agreements, and may participate in discussions and negotiate with such entity or
group concerning any transaction involving the Assets and the Assumed           
Liabilities, if such entity or group has submitted a bona fide written proposal 
to the Board relating to any such transaction and the Board by a majority vote  
determines that such transaction would be on substantially the same basis as    
this Agreement and would result in increased aggregate cash consideration being 
available to the stockholders of Artistic. The Board shall notify ADI           
immediately if any such proposal is made and shall in such notice indicate in   
reasonable detail the identity of the offeror and the terms and conditions of   
any proposal and shall keep ADI promptly advised of all material developments in
connection therewith. Except as set forth above, neither Artistic or any of its 
affiliates, nor any of its or their respective officers, directors, employees,  
representatives or agents shall, directly or indirectly, encourage, solicit,    
participate in or initiate discussions or negotiations with, or provide any     
information to, any corporation, partnership, person or other entity or group   
(other than ADI, any affiliate or associate of ADI or any designee of ADI)      
concerning any transaction involving the Assets or the Assumed Liabilities.     
Nothing in this Section 4.2 shall prohibit Artistic from complying with its     
obligations under the Merger Agreement.                                         

 Section 4.3  NO SOLICITATION.  Artistic agrees that it will not, from and
after the Closing through and including the fifth anniversary of the Closing    
Date, without the prior written consent of ADI, directly or indirectly, solicit 
the employment of any person who is at that time an employee, representative or 
officer of the P&C Businesses and who was prior to the Closing an employee of   
Artistic in connection with any of the P&C Businesses and whose compensation and
benefits were in excess of $50,000 per year; provided that in no event will this
provision limit Artistic in its normal advertising, posting or other general    
employment opportunity communication activities.                                

ARTICLE V 
ADDITIONAL AGREEMENTS 

Section 5.1  FEES AND EXPENSES.  Whether or not the Closing occurs, all 
costs and expenses (other than fees and expenses of financing sources) incurred 
by Artistic in connection with this Agreement and the transactions contemplated 
herein, shall be paid by Artistic, and all such costs and expenses (other than  
fees and expenses of financing sources) of ADI shall be paid by Artistic at or  
prior to Closing. Prior to the Closing or upon termination of this Agreement,   
Artistic shall recharacterize the promissory notes, dated October 15, 1997 and  
November 7, 1997, of ADI as an expense of Artistic.                             

Section 5.2  REASONABLE BEST EFFORTS.  Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties shall use all       
reasonable best efforts to take, or cause to be taken, all actions, and to do,  
or cause to be done, and to assist and cooperate with the other party in doing, 
all things necessary, proper or advisable to consummate and make effective, in  
the most expeditious manner practicable, the Asset Purchase and the other       
transactions contemplated by this Agreement and the prompt satisfaction of the  
conditions hereto, including, without limitation, all required consents,        
authorizations, orders, exemptions and approvals of any third parties,          
including, without limitation, Governmental Agencies.                           

Section 5.3  INTENTIONALLY OMITTED.                                     

   Section 5.4  FINANCING.  (a) ADI shall deliver to Artistic on or before the
date (which shall be no later than five Business Days after it has been cleared 
by the Securities and Exchange Commission (it being understood that Artistic    
will notify ADI of such clearance promptly)) (the "Mailing Date") on which the  
Proxy Statement (as defined in the Merger Agreement) is scheduled to be mailed  
to the stockholders of Artistic true and correct copies of each Proposal Letter 
which shall be in full force and effect at such time.                           

 (b) In the event that all or any portion of the Financing provided for in
the Proposal Letters has become unavailable at or prior to the Mailing Date,    
regardless of fault, ADI shall deliver to Artistic within                       

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10 Business Days of the Mailing Date, proposal, commitment or similar letters   
from others providing for the financing necessary for the consummation of the   
transactions contemplated hereby, on and subject to terms and conditions no less
favorable to ADI in the aggregate than provided for in the Proposal Letters.    

    (c) During the period from the Mailing Date through the Closing Date, in the
event that all or any portion of the Financing provided for in the Proposal     
Letters becomes unavailable, regardless of fault, ADI shall deliver to Artistic 
within 30 days of the date that such financing became unavailable, proposal,    
commitment or similar letters from others providing for the financing necessary 
for the consummation of the transactions contemplated hereby, on and subject to 
terms and conditions no less favorable to ADI in the aggregate than provided for
in the Proposal Letters. ADI shall keep Artistic promptly informed of all       
material developments with respect to the Financing.                            

  (d) ADI intends that the terms and conditions of the Financing shall be no
less favorable taken as a whole than those previously set forth in the Proposal 
Letters or any replacement letters. ADI shall use its best efforts to satisfy at
or before the Closing all conditions to the transactions constituting the       
Financing and to its drawing down the cash proceeds thereunder.                 

Section 5.5  INDEMNIFICATION.                                           

(a)  ARTISTIC INDEMNITY.  On and after the Closing Date, Artistic shall 
indemnify and hold ADI and its affiliates harmless against and in respect of all
actions, claims, suits, demands, judgments, costs and expenses (including       
reasonable attorneys' fees of ADI) (collectively, "Damages") relating to (i) the
Excluded Liabilities, (ii) the ownership or operation of the Excluded Assets by 
Artistic or any other person following the Closing Date, (iii) the Merger       
(whether arising from a claim made by a stockholder of Artistic or otherwise)   
(iv) the representation by Artistic regarding broker fees set forth in Section  
3.5 or (v) the obligations of Artistic regarding AGI employees, including,      
without limitation, employee benefit plans and employment liabilities, as set   
forth in Section 5.12. The indemnification provided for in this Section 5.5(a)  
shall terminate and be of no further force and effect two years from the Closing
Date. Artistic shall not be liable pursuant to this Section 5.5(a) for any      
amounts which in the aggregate exceed $9,000,000.                               

   (b)  ADI INDEMNITY.  On and after the Closing Date, ADI shall indemnify and
hold Artistic and its affiliates harmless against and in respect of all Damages 
relating to (i) the Assumed Liabilities, (ii) the ownership or operation of the 
P&C Businesses or the Assets by ADI or any other person following the Closing   
Date, (iii) the representation by ADI regarding broker's fees set forth in      
Section 2.4, (iv) the Deferred Contracts to the extent provided in Section 1.3, 
or (v) the obligations of ADI regarding AGI employees, including, without       
limitation, employee benefit plans and employment liabilities, as set forth in  
Section 5.12. ADI shall not be liable pursuant to this Section 5.5(b) for any   
amounts, which in the aggregate exceed $9,000,000.                              

 (c)  INDEMNIFICATION PROCEDURES.  With respect to third-party claims, all
claims for indemnification by each of ADI or Artistic or their affiliates, as   
the case may be (an "Indemnified Party") hereunder shall be asserted and        
resolved as set forth in this Section 5.5. In the event that any written claim  
or demand for which ADI or Artistic, as the case may be (an "Indemnifying       
Party"), would be liable to any Indemnified Party hereunder is asserted against 
or sought to be collected from any Indemnified Party by a third party (a "Third 
Party Claim"), such Indemnified Party shall promptly notify the Indemnifying    
Party of such claim or demand and the amount or the estimated amount thereof to 
the extent then feasible (which estimate shall not be conclusive of the final   
amount of such claim or demand) (the "Claim Notice"); provided that failure of  
such Indemnified Party to give prompt notice as provided herein shall not       
relieve the Indemnifying Party of any of its obligations hereunder, except to   
the extent that the Indemnifying Party is materially prejudiced by such failure.
The Indemnifying Party shall have 20 days from the personal delivery or mailing 
of the Claim Notice (the "Notice Period") to notify the Indemnified Party (a)   
whether or not the Indemnifying Party disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such claim or demand   
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such claim or demand. All reasonable costs and expenses incurred by the         
Indemnified Party in defending such claim or demand shall be a liability of, and
shall be paid by, the Indemnifying Party. Except as hereinafter provided, in the
event that the Indemnifying Party notifies the Indemnified Party within the     
Notice Period that it desires to defend the Indemnified Party against such claim
or demand, the Indemnifying Party shall have the right to defend the Indemnified
Party by appropriate proceedings, through counsel of its own choosing, subject  
to the reasonable approval of such Indemnified Party, and shall have the sole   
power to direct and control such defense. If the Indemnifying Party shall assume
the defense of a claim or demand, it shall not settle or compromise such claim  
without the prior written consent of the Indemnified Party, unless such         
settlement or compromise includes as an unconditional term thereof the giving by
the claimant of a release of the Indemnified Party from all liability with      
respect to such claim or demand. If the Indemnifying Party shall assume the     
defense of a claim or demand, the fees of any separate counsel retained by the  
Indemnified Party shall be borne by such Indemnified Party unless there exists a
conflict between them as to their respective legal defenses (other than one that
is of a monetary nature), in which case the Indemnified Party shall be entitled 
to retain separate counsel, the reasonable fees and expenses of which shall be  
reimbursed by the Indemnifying Party. If the Indemnifying Party does not notify 
the Indemnified Party within 20 days after the receipt of the Claim Notice that 
it elects to undertake the defense thereof and acknowledges its obligation to   
indemnify the Indemnified Party hereunder, the Indemnified Party shall have the 
right to contest, settle or compromise the claim but shall not thereby waive any
right to indemnity therefor pursuant to this Agreement.                         

   (d)  NET AMOUNTS.  The amount of any indemnification payments made pursuant
to this Section 5.5 shall be computed net of any insurance proceeds received by 
the Indemnified Party in connection with such payments. If the amount with      
respect to which any claim is made under this Section 5.5 (an "Indemnity Claim")
gives rise to a currently realizable Tax Benefit (as defined below) to the party
making the claim, the indemnity payment shall be reduced by the amount of the   
Tax Benefit available to the party making the claim. To the extent such         
Indemnity Claim does not give rise to a currently realizable Tax Benefit, if the
amount with respect to which any Indemnity Claim is made gives rise to a        
subsequently realized Tax Benefit to the party that made the claim, such party  
shall refund to the Indemnifying Party the amount of such Tax Benefit when, as  
and if realized. For the purposes of this Agreement, any subsequently realized  
Tax Benefit shall be treated as though it were a reduction in the amount of the 
initial Indemnity Claim, and the liabilities of the parties shall be            
redetermined as though both occurred at or prior to the time of the indemnity   
payment. For purposes of this Section 5.5(d), a "Tax Benefit" means an amount by
which the tax liability of the party (or group of corporations including the    
party) is reduced (including, without limitation, by deduction, reduction of    
income by virtue of increased tax basis or otherwise, entitlement to refund,    
credit or otherwise) plus any related interest received from the relevant taxing
authority. Where a party has other losses, deductions, credits or items         
available to it, the Tax Benefit from any losses, deductions, credits or items  
relating to the Indemnity Claim shall be deemed to be realized proportionately  
with any other losses, deductions, credits or items. For the purposes of this   
Section 5.5(d), a Tax Benefit is "currently realizable" to the extent it can be 
reasonably anticipated that such Tax Benefit will be realized in the current    
taxable period or year or in any tax return with respect thereto (including     
through a carryback to a prior taxable period) or in any taxable period or year 
prior to the date of the Indemnity Claim. In the event that there should be a   
determination disallowing the Tax Benefit, the Indemnifying Party shall be      
liable to refund to the Indemnified Party the amount of any related reduction   
previously allowed or payments previously made to the Indemnifying Party        
pursuant to this Section 5.5(d). The amount of the refunded reduction or payment
shall be deemed a payment under this Section 5.5 and thus shall be paid subject 
to any applicable reductions under this Section 5.5(d).                         

(e)  ADJUSTMENT TO PURCHASE PRICE.  The parties agree that any          
indemnification payments made pursuant to this Agreement shall be treated for   
tax purposes as an adjustment to the Purchase Price, unless otherwise required  
by applicable law.                                                              

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 (f)  MITIGATION.  Each Indemnified Party shall be obligated in connection
with any claim for indemnification under this Section 5.5 to use all            
commercially reasonable efforts to mitigate damages upon and after becoming     
aware of any event which could reasonably be expected to give rise to such      
damages.                                                                        

(g)  NOTICE.  Whenever any claim for indemnification shall arise under  
Section 5.5 other than a Third Party Claim (a "Claim"), the party seeking       
indemnification (the "Indemnitee") shall notify in writing the party from which 
indemnification is sought (the "Indemnitor") of the Claim within 60 days after  
the Indemnitee becomes aware of the Claim's existence, with such notice to      
contain the factual basis for the Claim and the amount or an estimate (if known 
or reasonably determinable) of the liability that may arise therefrom, provided 
that the failure to provide such notice shall not affect the Indemnitor's right 
to indemnification hereunder except to the extent that the Indemnitor is        
materially prejudiced by such failure.                                          

(h)  LIMITATION OF DAMAGES.  Neither party hereto nor any affiliate of  
either of them shall be liable for any consequential, punitive or special       
damages pursuant to this Agreement or any of the agreements contemplated hereby.

  (i)  SURVIVAL.  The indemnities provided in this Section 5.5 shall survive
the Closing.                                                                    

Section 5.6  PUBLIC ANNOUNCEMENTS.  Before issuing any press release or 
otherwise making any public statement with respect to the Asset Purchase or any 
of the other transactions contemplated hereby, ADI and Artistic will consult    
with, and obtain the consent of, each other (which consent shall not be         
unreasonably withheld) as to the form and substance of such release or statement
and shall not issue any such release or make any such statement prior to        
obtaining such consent, except as may be required by law or the rules and       
regulations of the Securities and Exchange Commission or any securities exchange
or national quotation system.                                                   

  Section 5.7  SALES AND TRANSFER TAXES.  Each of ADI and Artistic shall pay
one-half of any and all domestic and foreign sales, use, excise, documentary,   
stamp duties, motor vehicle registration, value added and/or transfer or similar
taxes and filing or recording expenses or fees due with respect to the Asset    
Purchase or otherwise required to be paid in connection with the transfer of the
Assets; provided that each party shall be responsible for any interest charge,  
penalty or addition to tax applicable to it under applicable law with respect   
thereto.                                                                        

  Section 5.8  ACCESS TO INFORMATION.  (a) Artistic shall afford to ADI, and
to ADI's accountants, counsel, financial advisers and other representatives,    
reasonable access during normal business hours and permit them to make such     
inspections during normal business hours as they may reasonably require during  
the period from the date of this Agreement through the Closing Date to all      
books, contracts, commitments and records relating to the P&C Businesses and the
Real Property and, during such period, Artistic shall furnish to ADI (i) access 
to each report, schedule, registration statement and other document filed by    
Artistic during such period pursuant to the requirements of federal or state    
laws relating to the P&C Businesses and the Real Property and (ii) all other    
information concerning the P&C Businesses and the Real Property as ADI may      
reasonably request. Except as required by law, ADI will hold, and will cause its
affiliates, associates and representatives to hold, any non-public information  
in confidence until such time as such information otherwise becomes publicly    
available and shall use its reasonable best efforts to ensure that such         
affiliates, associates and representatives do not disclose such information to  
others without the prior written consent of Artistic. In the event of           
termination of this Agreement for any reason, ADI shall promptly return or      
destroy all non-public documents so obtained from Artistic and any copies made  
of such documents for ADI. ADI shall not, and shall cause its affiliates,       
associates and representatives not to, use any non-public information regarding 
Artistic in any way detrimental to Artistic.                                    

(b) No investigation pursuant to this Section 5.8 shall affect any      
representation or warranty in this Agreement of any party hereto or any         
condition to the obligations of the parties hereto.                             

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Section 5.9  RISK OF LOSS.  All risk of loss to the Assets, including,  
without limitation, the Real Property and Leased Assets, shall remain in        
Artistic until the transfer of the Assets on the Closing Date. In the event of  
any casualty or loss to the Assets prior to the Closing and ADI elects to       
consummate this transaction, ADI may, at ADI's option, require Artistic at      
Closing to assign by specific assignment to ADI all of its claims under and the 
proceeds of any and all insurance policies (including proceeds received by      
Artistic prior to Closing) as well as claims against any third parties relating 
to such casualty or loss on the property subject thereto.                       

    Section 5.10  BULK TRANSFER LAWS.  Artistic shall comply with the provisions
of any so-called "bulk transfer" or similar laws of any applicable jurisdiction 
concerning the Asset Purchase, and ADI shall reasonably cooperate with Artistic 
in connection therewith.                                                        

Section 5.11  TRANSITION SERVICES AGREEMENT, ETC.  On the date hereof,  
Artistic and ADI shall enter into each of a Transition Services Agreement (the  
"Transition Services Agreement") and Advertising and Fulfillment Agreement (the 
"Advertising and Fulfillment Agreement"), substantially in the form of Exhibit B
and C, respectively.                                                            

Section 5.12  EMPLOYEE RELATIONS AND BENEFITS.                          

(a)  BUSINESS EMPLOYEES.  For purposes of this Agreement, "Business     
Employees" shall mean all employees of Artistic (other than Komer and Joseph    
Calabro) as of the Closing Date.                                                

  (b)  CONTINUITY OF EMPLOYMENT.  The parties hereto intend that there shall
be continuity of employment with respect to the Business Employees. ADI shall   
offer employment, commencing on the Closing Date, to each Business Employee     
(including those on vacation, layoff, leave, short-term or long-term disability 
or other permitted absence of employment) with comparable compensation          
(including salary, fringe benefits, job responsibility and location) as that    
provided to such employees by Artistic prior to Closing. Nothing in this        
Agreement, including this Section 5.12 (b) confers upon any person any right to 
continued employment by Artistic or ADI as of and after the Closing Date.       

 (c)  EMPLOYMENT LIABILITIES.  On and after the Closing Date, ADI shall be
responsible and liable for all liabilities and obligations (including under any 
benefit plans) in connection with the employment before, on or after Closing (or
termination of employment) of the Business Employees hired by ADI including the 
assumption of any employment agreements with respect to such Business Employees.

  (d)  SERVICE CREDIT.  With respect to the Business Employees hired by ADI,
ADI shall give credit for all service with Artistic for all purposes under the  
401(k) plans assumed by ADI, but only to the same extent credit had been given  
under the 401(k) plans assumed by ADI prior to the Closing Date.                

    (e)  WELFARE PLANS.  With respect to any ADI plan that is a "welfare benefit
plan" (as defined in Section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), or would be a "welfare benefit plan", if such   
plan were subject to ERISA, for the benefit of Business Employees on and after  
the Closing Date, ADI shall (i) not exclude any Business Employee previously    
covered by a similar welfare benefit plan maintained by Artistic from inclusion 
in any such plan on the basis of any pre-existing condition limitations and (ii)
give effect, in determining any deductible and maximum out-of-pocket            
limitations, to claims incurred and amounts paid by, and amounts reimbursed to, 
its employees with respect to the welfare benefit plans as maintained by        
Artistic immediately prior to Closing.                                          

 (f)  401(K) PLANS.  With respect to any 401(k) benefit plan maintained by
Artistic for the benefit of the Business Employees or of former employees of    
Artistic (collectively, the "401(k) Plans"), ADI shall assume all the rights,   
obligations, duties and sponsorship of Artistic under the 401(k) Plans. Artistic
and ADI shall cooperate to amend all agreements and documents necessary to      
permit ADI to assume all such rights, obligations, duties and sponsorship.      

    (g)  ACCRUED VACATION.  With respect to any accrued but unused vacation time
to which any Business Employees hired by ADI are entitled, Artistic shall remain
responsible for payments to such Business                                       

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Employees relating to such accrued vacation time up through Closing, and ADI    
shall assume responsibility for payments for any such accrued vacation time of  
such Business Employees thereafter.                                             

(h)  BONUSES.  With respect to any compensation bonuses to which any    
Business Employees hired by ADI are entitled, Artistic shall remain responsible 
for such bonuses arising out of employment up through January 1, 1998, and ADI  
shall assume responsibility for bonus payments arising out of employment of such
Business Employees thereafter.                                                  

   (i)  POST-RETIREMENT BENEFITS.  To the extent that Business Employees hired
by ADI receive (or are eligible to receive) any Post-Retirement Benefits from   
Artistic immediately prior to the Closing Date, such employees shall receive (or
be eligible to receive) the same Post-Retirement Benefits from ADI following    
Closing to the same extent that Artistic would have been obligated therefor, and
on and after the Closing Date, no such Business Employee shall be eligible to   
receive "Post-Retirement Benefits" from Artistic (including, but not limited to,
retiree medical benefits).                                                      

(j)  SEVERANCE OF KOMER AND LIFE INSURANCE POLICY.  ADI shall assume the
obligation to pay the severance and other payments and reimbursement obligations
to which Komer is entitled under the Executive Employment Agreement between     
Artistic and Komer dated August 3, 1993, (the "Komer Severance Payment"). With  
respect to the life insurance policies referred to on Annex 2-G insuring        
Artistic in the event of the death of Komer (the "Komer Policies"), ADI shall   
acquire the right to receive payment under the Komer Policies in the amount of  
their aggregate cash surrender value thereof (the "Artistic Cash Surrender Value
Payment"). In addition, Artistic shall make the payments to ADI at Closing as   
set forth in Section 1.8(b).                                                    

(k)  WARN ACT.  To the extent applicable to such party, each party shall
provide any required notice under the Worker Adjustment and Retraining          
Notification Act ("WARN") and any other similar applicable law and to otherwise 
comply with any such statute with respect to any "plant closing" or "mass       
layoff" (as defined in WARN) or similar event affecting their respective        
employees and occurring on or after Closing or arising as a result of the       
transactions contemplated hereby.                                               

ARTICLE VI
CONDITIONS PRECEDENT TO THE ASSET PURCHASE

Section 6.1  CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE ASSET  
PURCHASE.  The respective obligations of each party to effect the Asset Purchase
are subject to the fulfillment or written waiver at or prior to the Closing Date
of the condition that no Governmental Entity or court of competent jurisdiction 
shall have enacted, issued, promulgated, enforced or entered any law, rule,     
regulation, executive order, decree, injunction or other order (whether         
temporary, preliminary or permanent) which is then in effect and has the effect 
of prohibiting the Asset Purchase or any of the other transactions contemplated 
hereby; provided that, in the case of any such decree, injunction or other      
order, each of the parties shall have used reasonable best efforts to prevent   
the entry of any such injunction or other order and to appeal as promptly as    
practicable any decree, injunction or other order that may be entered.          

Section 6.2  CONDITIONS TO OBLIGATION OF ARTISTIC TO EFFECT THE ASSET   
PURCHASE.  The obligation of Artistic to effect the Asset Purchase is subject to
the fulfillment at or prior to the Closing of the following additional          
conditions; provided that Artistic may waive in writing any of such conditions  
in its sole discretion:                                                         

     (a)  PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES.  ADI
shall have performed in all material respects each of its agreements    
contained in this Agreement required to be performed on or prior to the 
   Closing, and each of the representations and warranties of ADI contained in
    this Agreement shall be true and correct on and as of the Closing Date as if
made on and as of such date.                                            

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   (b)  OFFICERS' CERTIFICATE.  ADI shall have furnished to Artistic a
  certificate, dated the Closing, signed by the appropriate officers of ADI,
 certifying to the effect that to their best knowledge, the conditions set
forth in Section 6.2 (a) have been satisfied.                           

     (c)  DELIVERY OF PURCHASE PRICE.  ADI shall have made delivery of the
Purchase Price as provided in Section 1.2 of this Agreement.            

     (d)  ASSUMPTION AGREEMENT.  ADI shall have executed and delivered the
Assumption Agreement, in the form attached as Exhibit A, covering the   
Assumed Liabilities.                                                    

       (e)  MERGER AGREEMENT.  All conditions precedent to the consummation of
   the Merger (or any merger pursuant to any successor merger agreement) shall
    have been satisfied or waived and the parties thereto are ready, willing and
 able to consummate such transaction immediately after the consummation of
the transactions contemplated hereby.                                   

Section 6.3  CONDITIONS TO OBLIGATIONS OF ADI TO EFFECT THE ASSET       
PURCHASE.  The obligation of ADI to effect the Asset Purchase is subject to the 
fulfillment at or prior to the Closing of the following additional conditions,  
provided that ADI may waive in writing any such conditions in its sole          
discretion:                                                                     

(a)  PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND            
   WARRANTIES.  Artistic shall have performed in all material respects each of
 its agreements contained in this Agreement required to be performed on or
prior to the Closing and each of the representations and warranties of  
   Artistic contained in this Agreement shall be true and correct on and as of
the Closing as if made on and as of such date.                          

   (b)  OFFICERS' CERTIFICATE.  Artistic shall have furnished to ADI a
certificate, dated the Closing, signed by the appropriate officers of   
Artistic, certifying to the best of their knowledge, the conditions set 
forth in Section 6.3 (a) have been satisfied.                           

    (c)  ABSENCE OF CHANGES.  There shall not have occurred any Material
 Adverse Change with respect to the P&C Businesses between the date hereof
and the Closing Date.                                                   

   (d)  BILL OF SALE AND ASSIGNMENT.  Artistic shall have executed and
 delivered the Bill of Sale and Assignment, in the form attached hereto as
Exhibit D, covering the Assets set forth on Annex 1 and the Assumed     
Contracts and Leased Property Lease Agreements set forth on Annex 2.    

   (e)  WARRANTY DEED.  Artistic shall have executed and delivered the
Warranty Deed covering the Real Property in the form attached hereto as 
 Exhibit E (or such other form as may be required in the State of New York
for a general warranty deed) relating to the Real Property.             

       (f)  LIMITED LIABILITY COMPANY AGREEMENT.  Artistic shall have executed
   and delivered the Limited Liability Company Agreement, in the form attached
as Exhibit G, conveying the trademarks and other intellectual property  
rights to be conveyed as described in the schedules thereto.            

    (g)  TITLE INSURANCE.  ADI shall have obtained title commitments for
title insurance on the Real Property.                                   

  (h)  TITLES.  Artistic shall have endorsed and delivered the title
certificates to the Assets described in Annex 1.                        

      (i)  TRADEMARK ASSIGNMENT AGREEMENT.  Artistic shall have executed and
delivered the Trademark Assignment Agreement, in the form attached as   
   Exhibit F, conveying the trademarks to be conveyed as described on Annex 1.

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ARTICLE VII 
TERMINATION, AMENDMENT AND WAIVER 

Section 7.1  TERMINATION.  This Agreement may be terminated at any time 
prior to the Closing Date as follows:                                           

(a) by the mutual written consent of Artistic and ADI;          

    (b) by Artistic or ADI if any court of competent jurisdiction in the
  United States or other United States governmental body shall have issued a
 final order, injunction, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the transactions        
contemplated hereby, and such order, injunction, decree, ruling or other
action is or shall have become nonappealable; provided that the right to
terminate this Agreement pursuant to this Section 7.1(b) shall not be   
available to any party which has not used its reasonable best efforts to
cause any such order, injunction, decree, ruling or other action to be  
lifted;                                                                 

     (c) by either Artistic or ADI if the stockholders of Artistic fail to
adopt and approve this Agreement and the Merger Agreement and the       
   transactions contemplated by this Agreement and the Merger Agreement at the
   special meeting contemplated by the Merger Agreement by the Requisite Vote;

        (d) by Artistic if a corporation, partnership, person or other entity or
group shall have made a bona fide offer not solicited in violation of   
  Section 4.2 that the Board by a majority vote determines in its good faith
 judgment and in the exercise of its fiduciary duties is more favorable to
    Artistic's stockholders than the transactions contemplated hereby; provided,
however, that such termination under this clause shall not be effective 
until Artistic has made payment to ADI of the full fee and expense      
reimbursement required by Section 7.3;                                  

       (e) by ADI, if (i) there shall have been a breach of any representation
   or warranty on the part of Artistic that is or will have a Material Adverse
Effect on the P&C Businesses or which materially adversely affects the  
 ability of Artistic to consummate the transactions contemplated hereby or
    (ii) there shall have been a breach of any covenant or agreement on the part
    of Artistic which is or will result in a Material Adverse Effect on Artistic
or the P&C Businesses or materially adversely affects the ability of    
    Artistic to consummate the transactions contemplated hereby, which shall not
    have been cured prior to the earlier of (A) 10 days following notice of such
breach and (B) two Business Days prior to the Closing Date or (iii) the 
Board shall have withdrawn or modified in a manner adverse to ADI its   
approval or recommendation of this Agreement, or shall have adopted any 
resolution to effect the foregoing;                                     

(f) by Artistic if (i) there shall have been a breach of any    
representation or warranty on the part of ADI which materially adversely
affects (or materially delays) the consummation of the transaction      
  contemplated hereby or (ii) there shall have been a material breach of any
covenant or agreement on the part of ADI and which materially adversely 
affects (or materially delays) the consummation of the transaction      
    contemplated hereby which shall not have been cured prior to the earliest of
   (A) 10 days following notice of such breach and (B) two Business Days prior
to the Closing Date; or                                                 

(g) by Artistic or ADI if the Merger Agreement shall have been  
   terminated unless Artistic shall have entered into another merger agreement
   substantially in the form of the Merger Agreement and approved by the Board
of Directors of Artistic.                                               

Section 7.2  EFFECT OF TERMINATION.  In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall     
forthwith become null and void and have no further force and effect, without any
liability on the part of any party hereto or its affiliates, directors, officers
or stockholders, other than the provisions of Sections 5.1, 7.2, 7.3 and 9.10,  
and the third sentence                                                          

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of Section 5.8 (a), all of which shall survive such termination. Nothing        
contained in this Section 7.2 shall relieve any party from liability for any    
material and willful breach of this Agreement.                                  

Section 7.3  CERTAIN PAYMENTS.  If:                                     

        (i) ADI terminates this Agreement pursuant to Section 7.1(e)(iii) hereof
and, within 12 months thereafter Artistic enters into an agreement with 
  respect to a Third Party Acquisition, or a Third Party Acquisition occurs,
 involving any party (or any affiliate thereof) (x) with whom Artistic (or
  its agents) had negotiations with a view to a Third Party Acquisition, (y)
to whom Artistic (or its agents) furnished information with a view to a 
   Third Party Acquisition or (z) who had submitted a proposal or expressed an
  interest in a Third Party Acquisition, in the case of each of clauses (x),
(y) and (z) after the date hereof and prior to such termination; or     

       (ii) ADI terminates this Agreement pursuant to Section 7.1(e)(iii), and
   within 18 months thereafter a Third Party Acquisition shall occur involving
a consideration in excess of the Purchase Price; or                     

   (iii) Artistic terminates this Agreement pursuant to 7.1(d) hereof,

Artistic shall pay to ADI either prior to termination in the case of the event  
described in clause (iii) above or within one Business Day following the        
execution and delivery of such agreement or such occurrence or termination, as  
the case may be, in the case of an event described in Section 7.3(i) or (ii),   
$360,000 plus the unreimbursed, reasonable documented out-of-pocket third party 
expenses of ADI incurred in connection with the transactions contemplated by    
this Agreement as liquidated damages immediately upon such termination (the     
"Termination Fee"), in cash; provided, however, that Artistic in no event shall 
be obligated to pay more than one such Termination Fee with respect to all such 
agreements and occurrences.                                                     

"Third Party Acquisition" means the acquisition by any person (which    
includes a "person" as such term is defined in Section 13(d)(3) of the          
Securities Exchange Act of 1934) or entity other than ADI of all or a material  
portion of the Assets or the P&C Businesses.                                    

    Section 7.4  WAIVER.  At any time prior the Closing Date, the parties hereto
may (i) extend the time for the performance of any of the obligations or other  
acts of the other parties hereto; (ii) waive any inaccuracies in the            
representations and warranties contained herein or in any document delivered    
pursuant hereto; and (iii) waive compliance with any of the agreements or       
conditions contained herein which may legally be waived. Any agreement on the   
part of a party hereto to any such extension or waiver shall be valid only if   
set forth in an instrument in writing signed on behalf of such party. The       
failure of either party hereto to assert any of its rights hereunder shall not  
constitute a waiver of such rights.                                             

ARTICLE VIII
POST CLOSING COVENANTS

Section 8.1 ACCESS TO INFORMATION.                                      

(a) Artistic agrees that it will (i) maintain the pre-closing financial 
records of the P&C Businesses in the offices of Artistic in Baltimore, Maryland 
following the Closing Date and (ii) permit ADI and its respective financial and 
tax advisors access to such records during normal business hours on two-days'   
prior written notice to Artistic, as set forth in Section 9.1 hereof.           

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    (b) If at any time it is necessary that a party be furnished with additional
information, documents or records relating to the Assets or the P&C Businesses  
in order properly to prepare or support its tax returns or other documents or   
reports required to be filed with governmental authorities or any securities    
exchanges or otherwise for any purpose in connection with the performance or    
discharge by the parties of their obligations hereunder, and such information,  
documents or records are in the possession or control of another party, such    
other party agrees to use all reasonable efforts to furnish or make available   
such information, documents or records (or copies thereof).                     

   (c) Each party to this Agreement hereby agrees that it shall cooperate with
the other by executing and/or filing or causing to be executed and/or filed any 
required documents (including any real property transfer tax returns required to
be filed with respect to the transactions contemplated by this Agreement and any
forms or reports required to be filed pursuant to Section 1060 of the Code, the 
Treasury Regulations promulgated thereunder or any provisions of state or local 
law) and by making available to the other, without limitation, all work papers, 
records and notes of any kind, at all reasonable times, for the purpose of      
allowing the appropriate party to complete tax returns, forms and reports,      
respond to audits, obtain refunds, make any determination required under this   
Agreement, verify issues and negotiate settlements with tax authorities or      
defend or prosecute tax claims. In the case of income taxes relating to the P&C 
Businesses, Artistic shall be exclusively responsible for handling the          
compliance and audits for income taxes for periods prior to and including the   
Closing Date and ADI shall be exclusively responsible for handling the          
compliance and audits for income taxes for periods after the Closing Date.      

ARTICLE IX
GENERAL PROVISIONS

   Section 9.1  NOTICES.  All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, sent by        
overnight courier or telecopied (with a confirmatory copy sent by overnight     
courier) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):                                  

(a) If to ADI, to:                                                      

Artistic Direct Incorporated                                    
One Komer Center                                                    
PO Box 1999                                                         
Elmira, NY 14902                                                    
Attention: Thomas C. Wyckoff                                        
Title: Chief Executive Officer and President                        
Facsimile: (607) 733-5782                                           
Telephone: (607) 735-4555                                           

with copies to:                                                 

Roberts, Sheridan & Kotel                                       
Tower 49                                                            
12 East 49th Street                                                 
New York, NY 10017                                                  
Attention: Rory M. Deutsch, Esq., and                               
Ira L. Kotel, Esq.                                                  
Facsimile (212) 299-8686                                            
Telephone: (212) 299-8600                                           

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(b) If to Artistic:                                                     

Artistic Greetings Incorporated                                 
One Komer Center                                                    
P.O. Box 1999                                                       
Elmira, NY 14902                                                    
Attention: Joseph A. Calabro                                        
Title: President                                                    
Facsimile: (607) 733-5699                                           
Telephone: (607) 735-4508                                           

with copies to:                                                 

Cahill Gordon & Reindel                                         
80 Pine Street                                                      
New York, NY 10005-1702                                             
Attention: William B. Gannett, Esq.                                 
Facsimile: (212) 269-5420                                           
Telephone: (212) 701-3000                                           

and                                                             

Simpson Thacher & Bartlett                                      
425 Lexington Avenue                                                
New York, NY 10017                                                  
Attention: Marni I. Lerner, Esq., and Edward J. Chung, Esq.         
Facsimile: (212) 455-2502                                           
Telephone: (212) 455-2000.                                          

   Section 9.2  INTERPRETATION.  When a reference is made in this Agreement of
a Section, such reference shall be to a Section of this Agreement unless        
otherwise indicated, and the words "hereof," "herein" and "hereunder" and       
similar terms refer to this Agreement as a whole and not to any particular      
provision of this Agreement, unless the context otherwise requires. The table of
contents and headings contained in this Agreement are for reference purposes    
only and shall not affect in any way the meaning or interpretation of this      
Agreement. Whenever the words "include," "includes" or "including" are used in  
this Agreement, they shall be deemed to be followed by the words "without       
limitation."                                                                    

   Section 9.3  COUNTERPARTS.  This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become    
effective when one or more counterparts have been signed by each of the parties 
and delivered to the other parties.                                             

Section 9.4  ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.  This      
Agreement, and the Transition Services Agreement, the Joint Marketing Services  
Agreement, the Escrow Agreement, the Trademark Assignment Agreement and the     
other agreements, documents and instruments referred to herein, (i) constitute  
the entire agreement between the parties hereto and supersedes all prior        
agreements and understandings, both written and oral, among the parties with    
respect to the subject matter hereof and (ii) are not intended to confer upon   
any person (including, without limitation, any employees of Artistic) other than
the parties any rights or remedies hereunder; provided, however, that legal     
counsel for the parties hereto may rely upon the representations and warranties 
contained herein and in the certificates delivered pursuant to Sections 6.2 (b) 
and 6.3 (b).                                                                    

Section 9.5  GOVERNING LAW.  This Agreement shall be governed by, and   
construed in accordance with, the laws of the State of New York, regardless of  
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.                                                                   

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Section 9.6  ASSIGNMENT.  Neither this Agreement nor any of the rights, 
interests or obligations hereunder shall be assigned by operation of law or     
otherwise by any of the parties without the prior written consent of the other  
party in its sole and absolute discretion, and any such purported assignment    
without the express prior written consent of the other party shall be void ab   
initio. Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.                                                         

    Section 9.7  SEVERABILITY.  If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of   
the transactions contemplated hereby are not affected in any manner materially  
adverse to any party. Upon such determination that any term or other provision  
is invalid, illegal or incapable of being enforced, the parties shall negotiate 
in good faith to modify this Agreement so as to effect he original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions be consummated as originally contemplated to the fullest extent    
possible.                                                                       

   Section 9.8  ENFORCEMENT.  The parties agree that if all the conditions set
forth in Article VI are satisfied on or prior to the Closing Date, and this     
Agreement shall not have otherwise been terminated, and Artistic shall breach   
its obligation to consummate the transactions contemplated hereby, including,   
without limitation, the provisions of Article I, that irreparable damages would 
occur to ADI, that money damages would not be an adequate remedy at law, and,   
accordingly, that ADI shall be entitled to specifically enforce the terms and   
provisions of this Agreement in any court of competent jurisdiction in the      
United States or any state thereof or any place that the Assets are located, in 
addition to any other right or remedy to which it is entitled at law or in      
equity. Artistic shall not assert, and hereby knowingly waives any defense in   
any such action that money damages would be an adequate remedy at law.          

Section 9.9  DEFINED TERMS.  For purposes of this Agreement, the term:  

       (a) "affiliate" of a person means a person that directly or indirectly,
   through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person; and                    

        (b) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act).                                  

Section 9.10  CONSENT TO JURISDICTION.  In the event that any legal     
proceedings are commenced in any court with respect to any matter arising under 
this Agreement, the parties hereto specifically consent and agree that the      
courts of the State of New York and/or the Federal Courts located in the State  
of New York shall have jurisdiction over each of the parties hereto and over the
subject matter of any such proceedings, and the venue of any such action shall  
be in New York County, New York and/or the U.S. District Court for the Southern 
District of New York.                                                           

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   IN WITNESS WHEREOF, ADI and Artistic have executed this Agreement as of the
date first written above.                                                       

                                ARTISTIC DIRECT INCORPORATED

                             By: /s/ THOMAS C. WYCKOFF

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

                                 Name: Thomas C. Wyckoff

                                             Title:  CHIEF EXECUTIVE OFFICER AND
             PRESIDENT

                                   ARTISTIC GREETINGS INCORPORATED

                             By: /s/ JOSEPH A. CALABRO

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

                                 Name: Joseph A. Calabro

                           Title:  PRESIDENT

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                                                                       ANNEX III

STOCKHOLDERS AGREEMENT dated as of December 21, 1997 among MDC          
COMMUNICATIONS CORPORATION, an Ontario corporation ("PARENT"), and the          
undersigned holders (each a "STOCKHOLDER" and, collectively, the "STOCKHOLDERS")
of shares of common stock, par value $.10 per share (the "COMMON STOCK"), of    
ARTISTIC GREETINGS INCORPORATED, a Delaware corporation (the "COMPANY").        

 WHEREAS, Parent, AGI Acquisition Co., a Delaware corporation and a wholly
owned subsidiary of Parent ("SUB"), and the Company, propose to enter into an   
Agreement and Plan of Merger dated as of the date hereof (as the same may be    
amended or supplemented, the "MERGER AGREEMENT"; capitalized terms used but not 
defined herein shall have the meanings set forth in the Merger Agreement)       
providing for the merger of Sub with and into the Company (the "MERGER"), upon  
the terms and subject to the conditions set forth in the Merger Agreement;      

WHEREAS, concurrently with the execution of the Merger Agreement, the   
Company and Artistic Direct Incorporated, a New York corporation ("ADI"),       
propose to enter into an Asset Purchase Agreement dated as of the date hereof   
(as the same may be amended or supplemented and together with any other asset   
purchase agreement substantially in the form thereof and providing for the      
payment of cash consideration of at least $9 million, the "ASSET PURCHASE       
AGREEMENT") providing for ADI to purchase certain of the assets, and assume     
certain of the liabilities, of the Company (the "ASSET PURCHASE");              

WHEREAS, each Stockholder owns the number of shares of Common Stock set 
forth opposite its or his name on the signature page of this Agreement (such    
shares of Common Stock, the "EXISTING SHARES" and, together with any other      
shares of capital stock of the Company acquired by such Stockholder after the   
date hereof and during the term of this Agreement, and other than 40,000 shares 
of Common Stock which Mr. Komer has transferred, or may transfer, to one or more
charitable entities, being collectively referred to herein as the "SUBJECT      
SHARES"); and                                                                   

WHEREAS, as a condition to its willingness to enter into the Merger     
Agreement, Parent has requested that each Stockholder enter into this Agreement;

   NOW, THEREFORE, to induce Parent to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the premises and   
the representations, warranties and agreements contained herein, the parties    
agree as follows:                                                               

1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. Each Stockholder  
hereby, severally and not jointly, represents and warrants to Parent as of the  
date hereof in respect of himself or itself as follows:                         

      (a) AUTHORITY. The Stockholder has all requisite legal capacity, power
and authority to enter into this Agreement and to consummate the        
  transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Stockholder and constitutes a valid and   
binding obligation of the Stockholder enforceable in accordance with its
terms. The execution and delivery of this Agreement do not, and the     
    consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, conflict with, or result in any violation of, or 
default (with or without notice or lapse of time or both) under any     
provision of, any trust agreement, organizational documents, standstill 
   agreement, loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise, license, 
    judgment, order, notice, decree, statute, law, ordinance, rule or regulation
    applicable to the Stockholder or to the Stockholder's property or assets. If
  the Stockholder is married and the Stockholder's Subject Shares constitute
   community property or otherwise need spousal or other approval to be legal,
valid and binding, this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, the     
    Stockholder's spouse, enforceable against such spouse in accordance with its
   terms. No trust of which such Stockholder is a trustee requires the consent
    of any beneficiary to the execution and delivery of this Agreement or to the
consummation of the transactions contemplated hereby.                   

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(b) THE SUBJECT SHARES. Such Stockholder is the record holder or
beneficial owner of the number of the Existing Shares as is set forth   
  opposite such Stockholder's name on the signature page hereto. On the date
 hereof, the Existing Shares set forth opposite such Stockholder's name on
    the signature page hereto constitute all of the outstanding shares of Common
   Stock owned of record or beneficially by such Stockholder. Such Stockholder
  does not have record or beneficial ownership of any shares of Common Stock
  not set forth on signature page hereto. Such Stockholder has sole power of
 disposition with respect to all of the Existing Shares set forth opposite
  such Stockholder's name on the signature page hereto and sole voting power
   with respect to the matters set forth in Section 6 hereof and sole power to
   demand dissenter's or appraisal rights, in each case with respect to all of
the Existing Shares set forth opposite such Stockholder's name on the   
signature page hereto, with no restrictions on such rights, subject to  
applicable federal securities laws and the terms of this Agreement. Such
Stockholder will have sole power of disposition with respect to Subject 
  Shares other than Existing Shares, if any, which become beneficially owned
by such Stockholder and will have sole voting power with respect to the 
  matters set forth in Section 3 hereof and sole power to demand dissenter's
  or appraisal rights, in each case with respect to all Subject Shares other
than Existing Shares, if any, which become beneficially owned by such   
Stockholder with no restrictions on such rights, subject to applicable  
federal securities laws and the terms of this Agreement.                

       (c) Such Stockholder's Subject Shares and the certificates representing
   such Subject Shares are now and at all times during the term hereof will be
 held by such Stockholder, or by a nominee or custodian for the benefit of
  such Stockholder, free and clear of all liens, claims, security interests,
   proxies, voting trusts or agreements, understandings or arrangements or any
  other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.                                                      

      (d) No broker, investment banker, financial adviser or other person is
    entitled to any broker's, finder's, financial adviser's or other similar fee
   or commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of such Stockholder in his or her
capacity as such.                                                       

     (e) Such Stockholder understands and acknowledges that Parent and Sub
  are entering into the Merger Agreement in reliance upon such Stockholder's
execution and delivery of this Agreement with Parent.                   

 2. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby represents and
warrants to each Stockholder that Parent has all requisite corporate power and  
authority to enter into this Agreement and to consummate the transactions       
contemplated hereby. The execution and delivery of this Agreement by Parent, and
the consummation of the transactions contemplated hereby, have been duly        
authorized by all necessary corporate action on the part of Parent. This        
Agreement has been duly executed and delivered by Parent and constitutes a valid
and binding obligation of Parent enforceable in accordance with its terms. The  
execution and delivery of this Agreement do not, and the consummation of the    
transactions contemplated hereby and compliance with the terms hereof will not, 
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under any provision of, the certificate of            
incorporation or by-laws of Parent, any trust agreement, loan or credit         
agreement, note, bond, mortgage, indenture, lease or other agreement,           
instrument, permit, concession, franchise, license, judgment, order, notice,    
decree, statute, law, ordinance, rule or regulation applicable to Parent or to  
Parent's property or assets.                                                    

  3. COVENANTS OF EACH STOCKHOLDER. From and after the date hereof and until
the termination of this Agreement in accordance with Section 8, each            
Stockholder, severally and not jointly, agrees as follows:                      

     (a) At any meeting of stockholders of the Company called to vote upon
  the Merger, the Merger Agreement, the Asset Purchase or the Asset Purchase
  Agreement or at any adjournment thereof or in any other circumstances upon
which a vote, consent or other approval with respect to the Merger, the 
Merger Agreement, the Asset Purchase or the Asset Purchase Agreement is 
sought, such Stockholder                                                

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   shall vote (or cause to be voted) the Subject Shares in favor of the Merger
   and the Asset Purchase, the adoption by the Company of the Merger Agreement
  and the Asset Purchase Agreement and the approval of the terms thereof and
   each of the other transactions contemplated by the Merger Agreement and the
Asset Purchase Agreement.                                               

       (b) At any meeting of stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which the Stockholder's vote,
    consent or other approval is sought, the Stockholder shall vote (or cause to
be voted) the Subject Shares against (i) any merger agreement or merger 
(other than the Merger Agreement and the Merger), consolidation,        
combination, sale of a material amount of assets (other than the Asset  
Purchase Agreement and the Asset Purchase), reorganization,             
recapitalization, dissolution, liquidation or winding-up of or by the   
   Company or any other takeover proposal (collectively, "TAKEOVER PROPOSAL"),
   (ii) any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the  
Company under the Merger Agreement, the Asset Purchase Agreement or this
  Agreement or (iii) (x) any material amendment of the Company's certificate
    of incorporation or by-laws, (y) any change in a majority of the persons who
  constitute the Board of Directors of the Company or (z) any other proposal
   or transaction involving the Company, which is intended or could reasonably
   be expected to impede, frustrate, prevent, delay or nullify (A) the ability
   of the Company to consummate the Merger or the Asset Purchase or (B) any of
the transactions contemplated by this Agreement, the Asset Purchase     
Agreement or the Merger Agreement. The Stockholder further agrees not to
commit or agree to take any action inconsistent with the foregoing.     

        (c) Each Stockholder, severally and not jointly, agrees not to (i) offer
 to sell, sell, transfer, encumber, pledge, assign or otherwise dispose of
   (including by gift) (collectively, "TRANSFER"), or enter into any contract,
  option or other arrangement with respect to or consent to the Transfer of,
    the Subject Shares or any interest therein to any person other than pursuant
 to the terms of the Merger, (ii) except as contemplated hereby, grant any
 proxies or powers of attorney with respect to the Subject Shares, deposit
   any Subject Shares into a voting trust or enter into any voting arrangement
    with respect to the Subject Shares, or any interest in the foregoing, except
    with Parent or Sub, (iii) take any action that would make any representation
    or warranty of such Stockholder contained herein untrue or incorrect or have
  the effect of preventing or disabling the Stockholder from performing such
 Stockholder's obligations under this Agreement or (iv) commit or agree to
take any of the foregoing actions.                                      

      (d) Each Stockholder hereby irrevocably waives any rights of appraisal
or rights to dissent from the Merger that the Stockholder may have.     

   (e) Each Stockholder agrees with, and covenants to, Parent that the
Stockholder shall not request that the Company register the transfer    
(book-entry or otherwise) of any certificate or uncertificated interest 
representing any of the Subject Shares, unless such transfer is made in 
compliance with this Agreement. In the event of a stock dividend or     
distribution, or any change in the Common Stock by reason of any stock  
    dividend or distribution, or any change in the Common Stock by reason of any
   stock dividend, split-up, recapitalization, combination, exchange of shares
or the like, the term "Subject Shares" shall be deemed to refer to and  
include the Subject Shares as well as all such stock dividends and      
distributions and any shares into which or for which any or all of the  
Subject Shares may be changed or exchanged and the Purchase Price (as   
defined herein) shall be accordingly adjusted. Each Stockholder shall be
    entitled to receive any cash dividend paid by the Company during the term of
this Agreement until the Subject Shares are cancelled in the Merger or  
purchased hereunder.                                                    

        (f) Each Stockholder, severally and not jointly, shall not, nor shall it
 authorize or permit any partner, officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, such 
  Stockholder to, directly or indirectly, (i) solicit, initiate or encourage
the                                                                     

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   submission of any Takeover Proposal or (ii) participate in any discussions,
    conversations, negotiations or other communications regarding, or furnish to
 any person any information with respect to, or otherwise cooperate in any
    way, assist or participate in, facilitate or encourage any effort or attempt
 by any other person or entity, to seek to do any of the foregoing or take
  any other action to facilitate any inquiries or the making of any proposal
   that constitutes, or is likely to lead to, any Takeover Proposal; provided,
  however, that the foregoing shall not restrict a Stockholder who is also a
  director of the Company from taking actions in such Stockholder's capacity
 as a director to the extent and in the circumstances permitted by Section
4.02 of the Merger Agreement. Each Stockholder, in its capacity as such,
  will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with  
respect to any of the foregoing.                                        

       (g) THE STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS SUB AND ANY DESIGNEE
OF SUB, EACH OF THEM INDIVIDUALLY, STOCKHOLDER'S IRREVOCABLE (UNTIL THE 
    TERMINATION OF THIS AGREEMENT) PROXY AND ATTORNEY-IN-FACT WITH FULL POWER OF
SUBSTITUTION) TO VOTE THE SUBJECT SHARES OF STOCKHOLDER AS INDICATED IN 
SECTION 3(A) AND 3(B) ABOVE. THE STOCKHOLDER INTENDS THIS PROXY TO BE   
 IRREVOCABLE (UNTIL THE TERMINATION OF THIS AGREEMENT) AND COUPLED WITH AN
INTEREST AND WILL TAKE SUCH FURTHER ACTION AND HEREBY REVOKES ANY PROXY 
    PREVIOUSLY GRANTED BY STOCKHOLDER WITH RESPECT TO SUCH STOCKHOLDER'S SUBJECT
SHARES.                                                                 

4. FURTHER AGREEMENTS OF STOCKHOLDERS. If, after termination of this    
Agreement pursuant to Section 7 hereof, Stockholder receives any cash or        
non-cash consideration in respect of the Subject Shares in connection with a    
Third Party Business Combination (as defined below) during the period commencing
on the date of such termination and ending on the first anniversary thereof (the
"SALE PERIOD"), Stockholder shall promptly pay over to Parent one half of the   
excess, if any, of such consideration over the product of the Merger            
Consideration and the number of Subject Shares with respect to which such       
consideration is received by such Stockholder in connection with such Third     
Party Business Combination (the "EXCESS CONSIDERATION"); PROVIDED that, (i) if  
the consideration received by such Stockholder shall be securities listed on a  
national securities exchange or traded on the NASDAQ National Market ("NASDAQ"),
the per share value of such consideration shall be equal to the closing price   
per share listed on such national securities exchange or NASDAQ on the date such
transaction is consummated and (ii) if the consideration received by such       
Stockholder shall be in a form other than securities, the per share value shall 
be determined in good faith as of the date such transaction is consummated by   
Parent and the Stockholders, or, if Parent and the Stockholders cannot reach    
agreement, by a nationally recognized investment banking firm reasonably        
acceptable to the parties. The term "THIRD PARTY BUSINESS COMBINATION" of the   
Company means the occurrence of any of the following events: (A) the Company is 
acquired by merger or otherwise by any person or group, including Parent or any 
affiliate thereof (a "THIRD PARTY"); (B) the Company enters into an agreement   
with a Third Party which contemplates the acquisition of 20% or more of the     
total assets of the Company; (C) the Company or Parent enters into a merger or  
other agreement with a Third Party which contemplates the acquisition of more   
than 20% of the outstanding shares of the Company's capital stock; or (D) a     
Third Party acquires more than 20% of the total assets of the Company. If during
the Sale Period, any Stockholder Transfers his or its Subject Shares to any     
other person (other than in connection with a Third Party Business Combination  
described above) and such other person receives any consideration for any       
Subject Shares in connection with a Third Party Business Combination within the 
Sale Period, such Stockholder shall continue to be bound by the provisions of   
this Section 4 with respect to the payment to Parent of the Excess Consideration
as if such Stockholder received such consideration for the Subject Shares in    
such Third Party Business Combination.                                          

   5. FURTHER ASSURANCES. The Stockholder will, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further      
consents, documents and other instruments as Parent                             

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may reasonably request for the purpose of effectively carrying out the          
transactions contemplated by this Agreement.                                    

 6. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior 
written consent of the other parties, except that Parent may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
direct or indirect wholly owned subsidiary of Parent. Subject to the preceding  
sentence, this Agreement will be binding upon, inure to the benefit of and be   
enforceable by the parties and their respective successors and assigns.         

   7. TERMINATION. Except for Stockholder's obligations pursuant to Section 4,
this Agreement shall terminate, and no party shall have any rights or           
obligations hereunder and this Agreement shall become null and void and have no 
further effect upon the earliest of (a) the Effective Time, and (b) the date on 
which the Merger Agreement is terminated pursuant to Section 6.01 thereof.      
Nothing in this Section 7 shall relieve any party of liability for breach of    
this Agreement.                                                                 

 8. COSTS AND EXPENSES. All costs and expenses incurred in connection with
this Agreement and the consummation of the transactions contemplated hereby     
shall be paid by the party incurring such expenses.                             

9. GENERAL PROVISIONS.                                                  

(a) AMENDMENTS. This Agreement may not be amended except by an  
instrument in writing signed by each of the parties hereto.             

      (b) NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or sent by    
    overnight courier (providing proof of delivery) to Parent in accordance with
  Section 9.03 of the Merger Agreement and to each Stockholder at its or his
   set forth on the signature page of this Agreement (or at such other address
for a party as shall be specified by like notice).                      

 (c) INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless 
otherwise indicated. The headings contained in this Agreement are for   
reference purposes only and shall not affect in any way the meaning or  
  interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be   
followed by the words "without limitation".                             

     (d) SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or  
  public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or 
  legal substance of the transactions contemplated hereby is not affected in
    any manner materially adverse to any party. Upon such determination that any
   term or other provision is invalid, illegal or incapable of being enforced,
    the parties hereto shall negotiate in good faith to modify this Agreement so
   as to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated  
  hereby may be consummated as originally contemplated to the fullest extent
possible.                                                               

(e) COUNTERPARTS. This Agreement may be executed in one or more 
  counterparts, all of which shall be considered one and the same agreement,
 and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.          

  (f) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
    (including the documents and instruments referred to herein) (i) constitutes
    the entire agreement and supersedes all prior agreements and understandings,
   both written and oral, among the parties with respect to the subject matter
hereof and (ii) is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.                        

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        (g) GOVERNING LAW. This Agreement shall be governed by, and construed in
 accordance with, the laws of the State of Delaware regardless of the laws
   that might otherwise govern under applicable principles of conflicts of law
thereof.                                                                

10. STOCKHOLDER CAPACITY. No person executing this Agreement who is or  
becomes during the term hereof a director or officer of the Company makes any   
agreement or understanding herein in his capacity as such director or officer.  
The Stockholder signs solely in his capacity as the record holder or beneficial 
owner of, or the trustee of a trust whose beneficiaries are the beneficial      
owners of, such Stockholder's Subject Shares and nothing herein shall limit or  
affect any actions taken by a Stockholder in his capacity as an officer or      
director of the Company to the extent specifically permitted by the Merger      
Agreement.                                                                      

 11. ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in    
accordance with their specific terms or were otherwise breached. It is          
accordingly agreed that the parties shall be entitled to an injunction or       
injunctions to prevent breaches of this Agreement and to enforce specifically   
the terms and provisions of this Agreement in any court of the United States    
located in the State of Delaware or in a Delaware state court, this being in    
addition to any other remedy to which they are entitled at law or in equity. In 
addition, each of the parties hereto (i) consents to submit such party to the   
personal jurisdiction of any Federal court located in the State of Delaware or  
any Delaware state court in the event any dispute arises out of this Agreement  
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other     
request for leave from any such court; (iii) agrees that such party will not    
bring any action relating to this Agreement or the transactions contemplated    
hereby in any court other than a Federal court sitting in the state of Delaware 
or a Delaware state court and (iv) waives any right to trial by jury with       
respect to any claim or proceeding related to or arising out of this Agreement  
or any of the transactions contemplated hereby. All rights, powers and remedies 
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any      
thereof by any party shall not preclude the simultaneous or later exercise of   
any other such right, power or remedy by such party.                            

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IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by its
officer thereunto duly authorized and each Stockholder has signed this          
Agreement, all as of the date first written above.                              

                                                                [Download Table]
                                                                              
                           MDC COMMUNICATIONS CORPORATION                     

                           By:        /s/ PETER LEWIS                         
                                      ----------------------------------------
                                      Name:      Peter M. Lewis               
                                      Title:     EXECUTIVE VICE PRESIDENT,    
                                                 CORPORATE DEVELOPMENT        

Number of Subject Shares:  STOCKHOLDER:                                       

2,250,000                  AMERICAN GREETINGS CORPORATION                     

                           By:        /s/ MORRY WEISS                         
                                      ----------------------------------------
                                      Name:      Morry Weiss                  
                                      Title:     CHAIRMAN AND CHIEF EXECUTIVE 
                                                 OFFICER                      
                                      Address:   One American Road            
                                                 Cleveland, Ohio 44144        

Number of Subject Shares:  STOCKHOLDER:                                       

411,786                                                                       
                                      /s/ STUART KOMER                        
                                      ----------------------------------------
                                      Name:      Stuart Komer                 
                                      Address:   850 Euclid Avenue            
                                                 Elmira, New York 14901       

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                                                                        ANNEX IV

January 27, 1997                                                                

CONFIDENTIAL                                                                    

The Special Committee of the Board of Directors                                 
Artistic Greetings Incorporated                                                 
One Komer Center                                                                
Elmira, NY 14902                                                                

Ladies and Gentlemen:                                                           

Artistic Greetings Incorporated (the "Company") has entered into an     
Agreement and Plan of Merger (the "Agreement") with AGI Acquisition Co.         
("Newco") and MDC Communications Corp. ("Parent") dated December 21, 1997,      
pursuant to which Newco shall be merged with and into the Company (the          
"Merger"). At the Effective Time (as defined in the Agreement) of the Merger,   
each outstanding share of common stock, par value $0.10 per share of the Company
(the "Company Common Stock"), other than shares held in the Company's treasury, 
will be converted into the right to receive $5.70 in cash (the "Merger          
Consideration").                                                                

You have asked us whether or not, in our opinion, the proposed Merger   
Consideration to be received by the shareholders of the Company, other than     
American Greetings Corporation ("American Greetings"), is fair to the           
shareholders of the Company, other than American Greetings, from a financial    
point of view.                                                                  

In arriving at the opinion set forth below, we have, among other things:

   (1) Reviewed the Company's Annual Reports, Forms 10-K and related financial
 information for the three fiscal years ended December 31, 1996, the
      Company's Forms 10-Q and the related unaudited financial information for
the nine months ended September 30, 1996 and 1997;                

    (2) Reviewed certain information, including financial forecasts, relating to
    the business, earnings, cash flow, assets and prospects of the Company
which were furnished to us by the Company;                        

  (3) Conducted discussions with members of senior management of the Company
concerning its businesses and prospects;                          

(4) Reviewed the historical market prices and trading activity for the  
Company Common Stock and compared them with that of certain other 
publicly traded companies which we deemed to be relevant;         

  (5) Compared the results of operations of the Company with that of certain
other companies which we deemed to be relevant;                   

(6) Reviewed the Merger Consideration premium to the historical market  
prices of the Company Common Stock and compared them to historical
     transaction stock premiums paid by acquirors in transactions of similar
value;                                                            

(7) Reviewed the Agreement; and                                         

 (8) Reviewed such other financial studies and analyses and performed such
 other investigations and took into account such other matters as we
    deemed necessary, including our assessment of general economic, market
and monetary conditions.                                          

    In preparing our opinion, we have relied on the accuracy and completeness of
all information that was publicly available, supplied or otherwise communicated 
to us by or on behalf of the Company, and we have not assumed any responsibility
to independently verify such information. With respect to the financial         
forecasts (the "Projections") examined by us, we have assumed, with your        
consent, that they were                                                         

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reasonably prepared on bases reflecting the best available estimates and good   
faith judgments of the Company's management as to the future performance of the 
Company at the time of such preparation. PaineWebber Incorporated noted that the
Projections provided by the Company's management (i) for the Fiscal Year Ended  
December 31, 1997 were significantly higher than the actual results for the     
twelve month period ended September 30, 1997; (ii) had been prepared            
approximately eight months prior to delivery of the Opinion; and (iii) had not  
been updated since that time. We have not undertaken, and have not been provided
with, an independent evaluation or appraisal of the assets or liabilities       
(contingent or otherwise) of the Company and have assumed that (i) the purchase 
method of accounting will be used, and (ii) all material assets and liabilities 
(contingent or otherwise, known or unknown) of the Company are as set forth in  
the consolidated financial statements.                                          

  Our Opinion is directed to the Special Committee of the Board of Directors
of the Company and does not constitute a recommendation to any shareholder of   
the Company as to how any such shareholder should vote on the Merger. This      
opinion does not address the relative merits of the Merger and any other        
transactions or business strategies that may have been discussed by the Special 
Committee of the Board of Directors of the Company as alternatives to the Merger
or the decision of the Special Committee of the Board of Directors of the       
Company to proceed with the Merger. In addition, we were not requested to, and  
have not, expressed any opinion as to the fairness, from a financial point of   
view, of that sale of certain assets and liabilities of the non-check businesses
of the Company. Our opinion is based on economic, monetary and market conditions
on the date hereof.                                                             

 In rendering this opinion, we have not been engaged to act as an agent or
fiduciary of, and the Special Committee of the Board of Directors of the Company
has expressly waived any duties or liabilities we may otherwise deemed to have  
had to, the Company's equity holders or any other third party.                  

 In the ordinary course of its business, PainWebber Incorporated may trade
the securities of the Company and Parent for its own account and for the        
accounts of customers and, accordingly, may at any time hold long or short      
positions in such securities.                                                   

PaineWebber Incorporated is currently acting as financial advisor to the
Special Committee of the Board of Directors of the Company in connection with   
the Merger and will receive a fee in connection with rendering of this opinion  
and upon the consummation of the Merger.                                        

  On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the proposed Merger Consideration to be received by the  
shareholders of the Company, other than American Greetings, pursuant to the     
Merger is fair to the shareholders of the Company, other than American          
Greetings, from a financial point of view.                                      

   This opinion has been prepared at the request of and for the information of
the Special Committee of the Board of Directors of the Company in connection    
with the Merger and shall not be reproduced, summarized, described or referred  
to, provided to any person or otherwise made public or used for any other       
purpose without the prior written consent of PaineWebber Incorporated; provided,
however, that this letter may be reproduced in full in the Proxy Statement      
relating to the Merger.                                                         

                     Very truly yours,
                            PAINEWEBBER INCORPORATED

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                                                                         ANNEX V

TEXT OF SECTION 262 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

SECTION 262, APPRAISAL RIGHTS.                                                  

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

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

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

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

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

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

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

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

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

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

(d) Appraisal rights shall be perfected as follows:                     

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

        (2)  If the merger or consolidation was approved pursuant to Section 228
 or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days    
    thereafter, shall notify each of the holders of any class or series of stock
   of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are   
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the  
surviving or resulting corporation to all such holders of any class or  
   series of stock of a constituent corporation that are entitled to appraisal
    rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the    
  effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such  
 notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it 
 reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such    
    holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent   
corporation shall send a second notice before the effective date of the 
    merger or consolidation notifying each of the holders of any class or series
of stock of such constituent corporation that are entitled to appraisal 
rights of the effective date of the merger or consolidation or (ii) the 
 surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided,  
   however, that if such second notice is sent more than 20 days following the
 sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded    
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or                                           

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assistant secretary or of the transfer agent of the corporation that is 
    required to give either notice that such notice has been given shall, in the
  absence of fraud, be prima facie evidence of the facts stated therein. For
   purposes of determining the stockholders entitled to receive either notice,
  each constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given, provided
   that if the notice is given on or after the effective date of the merger or
 consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the  
    record date shall be the close of business on the day next preceding the day
on which the notice is given.                                           

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

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

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

  (h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or        
consolidation, together with a fair rate of interest, if any, to be paid upon   
the amount determined to be the fair value. In determining such fair value, the 
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of 
interest which the surviving or resulting corporation would have had to pay to  
borrow money during the pendency of the proceeding. Upon application by the     
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion,                  

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permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an    
appraisal. Any stockholder whose name appears on the list filed by the surviving
or resulting corporation pursuant to subsection (f) of this section and who has 
submitted his certificates of stock to the Register in Chancery, if such is     
required, may participate fully in all proceedings until it is finally          
determined that he is not entitled to appraisal rights under this section.      

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

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

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

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

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ARTISTIC GREETINGS INCORPORATED 
ONE KOMER CENTER
ELMIRA, NEW YORK 14902
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS 
[          ], 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS 

The undersigned hereby appoints Joseph A. Calabro and William Ingram,   
jointly and severally, proxies for the undersigned with full power of           
substitution, and hereby authorizes them to represent and to vote, in accordance
with the instructions on the reverse side of this card, all shares of the common
stock, par value $.10 per share (the "Shares"), of Artistic Greetings           
Incorporated. The undersigned is entitled to vote at the Special Meeting of     
Stockholders to be held on [           ], 1998 at [    ], New York, New York,   
commencing at 10 a.m., Eastern Daylight Time, or at any postponement or         
adjournment thereof. The proxies may vote in their discretion upon such other   
business as may properly be brought before the meeting or any postponement or   
adjournment thereof.                                                            

 COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON REVERSE SIDE

                                  CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE

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The shares represented by this Proxy will be voted as directed by the   
stockholder. Where no voting instructions are given, the shares represented by  
this Proxy will be voted FOR Items 1 and 2.                                     

Please Mark your votes as this                                                  

Item 1 -- Approve the Merger Agreement and Merger as described in the   
Company's Proxy Statement. The Board of Directors recommends a vote FOR approval
of the Merger Agreement and the Merger.                                         

                                                                [Download Table]
                                                               
FOR                        AGAINST                      ABSTAIN
/ /                          / /                          / /  

  Item 2 -- Approve the Asset Purchase Agreement and Asset Sale as described
in the Company's Proxy Statement. The Board of Directors recommends a vote FOR  
approval of the Asset Purchase Agreement and the Asset Sale.                    

                                                                [Download Table]
                                                               
FOR                        AGAINST                      ABSTAIN
/ /                          / /                          / /  

Item 3 -- In the discretion of the Board of Directors, upon such other  
business as may be properly brought before the Special Meeting or any           
postponement or adjournment thereof.                                            

                                                                [Download Table]
                                                               
FOR                        AGAINST                      ABSTAIN
/ /                          / /                          / /  

If you plan to attend the Special Meeting, please check this box / /    

COMMENTS/ADDRESS CHANGE Please mark this box if you have written        
comments/address change on the reverse side. / /                                

 Receipt is hereby acknowledged of the Notice of Special Meeting and Proxy
Statement of Artistic Greetings Incorporated                                    

                                                                [Download Table]
                                               
-----------------------------------------------
Signature(s)                                   

Date                                           
-----------------------------------------------
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS
OPPOSITE AND RETURN IT IN THE ENCLOSED         
ENVELOPE. IF ACTING AS EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, ETC. YOU SHOULD SO INDICATE 
WHEN SIGNING. IF THE SIGNER IS A CORPORATION,  
PLEASE SIGN FULL CORPORATE NAME.               

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PREM14A’ Filing		Date		First		Last			Other Filings
		12/31/00		34
Filed on:		1/26/98		16		17			SC 13E3
		1/23/98		35
		1/21/98		33
		1/1/98		96
		12/31/97		17		112			10-K405,  10-K405/A,  NT 10-K,  SC 13D
		12/30/97		57					8-K
		12/21/97		2		111			8-K
		12/19/97		15		35
		12/17/97		17
		12/15/97		18
		12/1/97		18
		11/7/97		15		91
		11/1/97		47
		10/15/97		15		91
		9/30/97		14		112			10-Q
		9/25/97		14
		9/10/97		14
		8/8/97		14
		8/7/97		14
		8/6/97		14
		7/18/97		47
		6/30/97		57		69			10-Q
		5/1/97		13
		4/30/97		13
		3/31/97		57					10-Q
		2/28/97		55
		2/27/97		13
		1/27/97		111
		1/1/97		52
		12/31/96		17		111			10-K
		10/24/96		13
		10/21/96		13		77
		10/4/96		19
		9/30/96		17		111			10-Q
		8/29/96		54					8-K,  8-K/A
		4/30/96		34
		12/31/95		68					10-K
		1/1/95		18
		8/3/93		96
		6/16/92		34
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