DIAMOND HOME SERVICES INC, S-1/A, 1996-05-29

DIAMOND HOME SERVICES INC
S-1/A, 1996-05-29
GENERAL BLDG CONTRACTORS - RESIDENTIAL BLDGS

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1996

REGISTRATION NO. 333-3822

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DIAMOND HOME SERVICES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 1521 36-3886872
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>

222 CHURCH STREET
DIAMOND PLAZA
WOODSTOCK, ILLINOIS 60098
(815) 334-1414
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

ANN CROWLEY PATTERSON, ESQ.
VICE PRESIDENT-ADMINISTRATION,
GENERAL COUNSEL AND SECRETARY
DIAMOND HOME SERVICES, INC.
222 CHURCH STREET, DIAMOND PLAZA
WOODSTOCK, ILLINOIS 60098
(815) 334-1414
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------

COPIES TO:

<TABLE>
<S> <C>
Grant A. Bagan, P.C. Glenn W. Reed, Esq.
McDermott, Will & Emery Gardner, Carton & Douglas
227 West Monroe Street Quaker Tower
Chicago, Illinois 60606-5096 321 North Clark Street
Chicago, Illinois 60610
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / _______
------------------------

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission acting pursuant
to said Section 8(a), may determine.

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<PAGE>
DIAMOND HOME SERVICES, INC.
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K ITEM 501(B)

<TABLE>
<CAPTION>
FORM S-1 ITEM LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page; Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal and Selling Stockholders
8. Plan of Distribution................................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........... Prospectus Summary; Capitalization; Description of
Capital Stock
10. Interests of Named Experts and Counsel............... Legal Matters; Experts
11. Information with Respect to the Registrant........... Outside Front Cover Page; Prospectus Summary; Risk
Factors; Dividend Policy; Capitalization; Selected
Consolidated Financial and Operating Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Transactions; Principal and
Selling Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale; Consolidated
Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
</TABLE>

- ------------------------
*Inapplicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

SUBJECT TO COMPLETION, DATED MAY 29, 1996

PROSPECTUS
3,420,000 SHARES

[DIAMOND HOME SERVICES LOGO]

COMMON STOCK

Of the 3,420,000 shares of Common Stock offered hereby, 2,687,000 shares are
being sold by Diamond Home Services, Inc. (the "Company") and 733,000 shares are
being sold by Globe Building Materials, Inc. (the "Selling Stockholder"). See
"Principal and Selling Stockholders." The Company will not receive any proceeds
from the sale of shares by the Selling Stockholder.

After completion of the offering, the directors and executive officers of
the Company as a group will be deemed to beneficially own approximately 53.8% of
the Company's Common Stock, including 47.7% of the Company's Common Stock which
will continue to be owned by the Selling Stockholder (a corporation controlled
by the Company's Chairman of the Board, Chief Executive Officer and President).
See "Risk Factors -- Control by Principal Stockholder." A portion of the net
proceeds from this offering will be utilized by the Company to pay an $8.6
million special, one-time dividend to its existing stockholders prior to the
offering. See "Use of Proceeds."

Prior to the offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
will be between $11.00 and $13.00 per share. See "Underwriting" for information
relating to the determination of the initial public offering price. Application
has been made to approve the Common Stock for quotation on the Nasdaq National
Market under the symbol "DHMS."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDER
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total (3)............... $ $ $ $
</TABLE>

(1) The Company, the Selling Stockholder and, in the event the over-allotment
option is exercised, certain other stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $500,000.

(3) The Company, the Selling Stockholder and certain of the Company's other
stockholders have granted to the Underwriters a 30-day option to purchase up
to an aggregate of 513,000 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If all such shares are
purchased, the total Price to Public, Underwriting Discount, Proceeds to
Company and Proceeds to Selling Stockholder and certain other stockholders
will be $ , $ , $ and $ , respectively.

The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by them and subject to their right to
reject orders in whole or in part. It is expected that delivery of the
certificates for the Common Stock will be made on or about , 1996.

WILLIAM BLAIR & COMPANY

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>

GRAPHIC APPENDIX

The inside front cover page contains a multi-colored map of the United
States, indicating the cities in which the Company's headquarters, regional
offices and sales/production offices are located. Above the map, under the
heading "IMPROVING AMERICA'S HOMES," are pictures depicting: a garage door, an
independent contractor installing a garage door, an independent contractor
installing shingles on a roof, a completed roofing job, an independent
contractor installing a gutter, various fences offered by the Company and an
independent contractor installing an entry door.

Across the bottom of the inside front cover page are the following legends:

The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements certified by its
independent auditors and quarterly reports containing unaudited consolidated
financial information for the first three quarters of each fiscal year.

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

The inside back cover contains a series of multi-colored pictures, assembled
inside an outline resembling the shape of a house. The pictures depict: a garage
door, a Marquise Financial credit card and credit application, a security door,
a patio door, various entry doors and fences offered by the Company, independent
contractors installing a chain-link fence, an independent contractor installing
an entry door, an independent contractor installing a garage door, an
independent contractor installing insulation, an independent contractor
installing shingles on a roof, an independent contractor installing a gutter, a
completed roofing job, and independent contractors installing a light commercial
roofing job. Across the bottom of the page are the words "IMPROVING AMERICA'S
HOMES" and across the top of the page (in some instances partially blocked by
the "house" of pictures) are the words "RESIDENTIAL ROOFING. ENTRY DOORS.
SECURITY DOORS. GARAGE DOORS. PATIO DOORS. GUTTERS. FENCING. INSULATION. SOFFIT
FACIA. WINDOWS. FINANCING. LIGHT COMMERCIAL ROOFING. SIDING. GUTTERS." Inside
the "house" of pictures is the Diamond Home Services, Inc. logo.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD BE READ IN
CONJUNCTION WITH THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. EXCEPT AS OTHERWISE NOTED OR CONTAINED IN THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO INCLUDED HEREIN, ALL INFORMATION IN THIS PROSPECTUS
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND HAS BEEN
ADJUSTED TO GIVE EFFECT TO THE RECLASSIFICATION AND STOCK SPLIT OF EACH
OUTSTANDING SHARE OF THE COMPANY'S CLASS A VOTING COMMON STOCK AND CLASS B
NONVOTING COMMON STOCK INTO 50 SHARES OF COMMON STOCK, $.001 PAR VALUE (THE
"COMMON STOCK"), EFFECTED IMMEDIATELY PRIOR TO THE OFFERING. SEE
"CAPITALIZATION," "CERTAIN TRANSACTIONS" AND "DESCRIPTION OF CAPITAL STOCK."
UNLESS THE CONTEXT OTHERWISE INDICATES, AS USED HEREIN, THE DEFINED TERMS
"COMPANY" OR "DIAMOND" SHALL MEAN DIAMOND HOME SERVICES, INC. TOGETHER WITH ITS
WHOLLY-OWNED SUBSIDIARIES, DIAMOND EXTERIORS, INC., MARQUISE FINANCIAL SERVICES,
INC. AND SOLITAIRE HEATING AND COOLING, INC. UNLESS THE CONTEXT OTHERWISE
INDICATES, AS USED HEREIN, THE DEFINED TERM "GLOBE" SHALL MEAN GLOBE BUILDING
MATERIALS, INC. AND ITS WHOLLY-OWNED SUBSIDIARIES.

THE COMPANY

The Company is a leading national marketer and contractor of installed home
improvement products, including roofing, gutters, doors and fencing. The Company
markets its home improvement products and services directly to consumers
primarily under the "Sears" name pursuant to a three-year license agreement with
Sears, Roebuck and Co. ("Sears"), which expires December 31, 1998. Sears has
been in business for over 100 years and is a nationally recognized name in the
installed home improvement industry. The Company is one of the largest
third-party licensees of Sears home improvement products and services. The
Company currently markets its products directly to residential customers in 44
states through a combination of national and local advertising and its
approximately 700 sales managers and sales representatives (collectively
referred to herein as "Sales Associates"). The Company has 74 sales offices
located in major cities across the U.S., providing the Company with a presence
in markets covering approximately 77% of the owner-occupied households in the
U.S. The Company installs its products through a network of over 1,300 qualified
independent contractors and purchases its products through local and regional
independent distributors.

The Company was formed in May 1993 by a group consisting primarily of six
former Sears home improvement managers and Globe, a manufacturer of roofing
products, to participate in the consolidation of the installed home improvement
industry. The installed home improvement industry is large and fragmented.
According to the U.S. Department of Commerce, total expenditures for residential
improvements and repairs grew at an annual compounded rate of 5.7% from
approximately $97.5 billion in 1991 to approximately $115.0 billion in 1994. The
Company's competitors are typically small, family-owned independent contractors,
which are facing increasingly complex regulations, additional capital
requirements and the need for more sophisticated sales and marketing resources.

The Company believes that its ability to compete favorably in the installed
home improvement market has been enhanced by several factors, including its
ability to market and sell its premium products and services through targeted
advertising and formal in-home product presentations to prospective customers by
the Company's trained Sales Associates. Under its license to use the nationally
recognized "Sears" name, the Company provides consumers primarily "need-based"
products and services which are used to improve and repair portions of a home or
prevent potential problems, such as a damaged roof or a broken garage door. A
customer's decision to purchase "need-based" products and services tends to be
less discretionary than the decision to purchase other home improvement
products, since a decision to purchase a "need-based" product is typically in
response to a problem that needs to be promptly remedied. The Company provides
readily available financing to qualified customers through Sears and its
affiliates or through Marquise Financial Services, Inc. ("Marquise Financial"),
the Company's newly-formed consumer finance subsidiary. The Company is committed
to superior product offerings and customer service, as reflected in its
extensive labor and product warranty coverage. Additionally, the Company
believes its established relationships with independent contractors assure
reliable and superior product installation.

3
<PAGE>

The license agreement with Sears provides for immediate termination by Sears
for various reasons, including the Company's failure to comply with any material
provision of the license agreement or the receipt by Sears of an excessive
number of complaints regarding the Company. The license agreement is not
exclusive by its terms; however, historically, Sears has not licensed the same
home improvement products to multiple licensees within the same market.
Notwithstanding the foregoing, there can be no assurance that Sears will not
license the same home improvement products to other licensees within the
Company's markets. The Company is not owned or controlled by, or under common
control with, Sears.

Since commencement of the Company's operations in June 1993, the Company's
net sales have increased to $124.8 million for the year ended December 31, 1995.
The Company intends to continue its growth in net sales and profitability by
increasing penetration in existing markets through the addition of new Sales
Associates and sales offices and the generation of additional sales leads. The
Company also intends to add new installed product lines, including proprietary
products and other maintenance-related, "need-based" products and services, and
to increase its conversion rate of sales leads into sales. The Company believes
that the availability of an alternative source of financing for its customers
through Marquise Financial will lead to increased product sales and
profitability.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company........... 2,687,000 shares
Common Stock Offered by the Selling Stock-
holder....................................... 733,000 shares
Common Stock to be Outstanding After the
Offering..................................... 8,936,950 shares (1)
Use of Proceeds............................... To retire indebtedness, to pay an $8.6 million
special, one-time dividend to existing
stockholders, to fund the Company's consumer
finance subsidiary, for the development and
expansion of complementary product lines and
services and for working capital and other
general corporate purposes. See "Use of
Proceeds" and "Certain Transactions --
Transactions with Globe and Globe Affiliates."
Proposed Nasdaq National Market Symbol........ DHMS
</TABLE>

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(1) Excludes 670,000 shares of Common Stock reserved for issuance under the
Company's stock option plans, of which 275,000 shares are subject to options
to be granted upon consummation of the offering at an exercise price equal
to the initial public offering price. See "Management -- Stock Option
Plans."
------------------------

The Company was incorporated in Delaware on May 13, 1993 and commenced
operations on June 1, 1993. Diamond Exteriors, Inc. ("Exteriors"), a
wholly-owned subsidiary of the Company, was incorporated in Delaware on May 15,
1995. Marquise Financial and Solitaire Heating and Cooling, Inc. ("Solitaire")
were incorporated in Delaware, as wholly-owned subsidiaries of Exteriors, on
July 13, 1995 and November 27, 1995, respectively. The Company's principal
executive and administrative office is located at 222 Church Street, Diamond
Plaza, Woodstock, Illinois 60098, and its telephone number is (815) 334-1414.

Effective April 18, 1996, the Company transferred substantially all of its
assets and liabilities to Exteriors, its wholly-owned subsidiary. Simultaneous
with such transfer, Exteriors paid a dividend to the Company consisting of all
of the issued and outstanding capital stock of Marquise Financial and Solitaire.
Immediately prior to the consummation of the offering, the Company will
reclassify and split each outstanding share of its Class A Voting Common Stock
and Class B Nonvoting Common Stock into 50 shares of Common Stock.

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER THREE MONTHS ENDED
PERIOD FROM JUNE 1 31, MARCH 31,
TO ---------------------- --------------------
DECEMBER 31, 1993(1) 1994 1995 1995 1996
-------------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $ 20,548 $ 94,186 $ 124,848 $ 22,362 $ 27,093
Gross profit............................... 7,960 38,047 52,603 9,266 11,800
Operating profit (loss).................... (1,179) 2,951 6,795 256 714
Net income (loss).......................... (1,179) 1,995 3,735 (1) 349
Pro forma net income (2)................... 3,951 403
Pro forma net income per share (3)......... $ 0.53 $ 0.05
Pro forma weighted average common shares
outstanding (4)........................... 7,398 7,398
SELECTED OPERATING DATA:
Number of sales offices (5)................ 38 55 70 64 72
Number of Sales Associates (5)............. 260 496 631 557 674
Number of installed jobs................... 7,294 37,510 55,261 9,916 12,124
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
ACTUAL AS ADJUSTED (6)
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<S> <C> <C>
BALANCE SHEET DATA (5):
Working capital (deficit).......................................................... $ (5,293) $ 11,794
Total assets....................................................................... 35,508 44,000
Total debt......................................................................... 12,921 2,015
Common stockholders' equity........................................................ 5,182 26,069
</TABLE>

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(1) Period from inception of the Company's operations to December 31, 1993.

(2) Pro forma to give effect to the offering of Common Stock made hereby, as if
such offering were completed on the first day of the period presented,
assuming the proceeds of which were used solely to retire the Senior Manager
Performance Notes, of which approximately $4.0 million of principal (and no
interest) was outstanding at January 1, 1995, approximately $4.4 million of
principal and interest was outstanding at January 1, 1996 and approximately
$3.3 million of principal and interest remained outstanding at March 31,
1996. See "Use of Proceeds" and "Certain Transactions -- Transactions with
Senior Managers."

(3) Represents pro forma net income divided by pro forma weighted average common
shares outstanding.

(4) Pro forma weighted average common shares outstanding represents historical
weighted average common shares outstanding during the period presented plus
the number of shares, to be issued at an assumed initial public offering
price of $12.00 per share, sufficient to fund the repayment of the Senior
Manager Performance Notes, of which approximately $4.0 million of principal
(and no interest) was outstanding at January 1, 1995, approximately $4.4
million of principal and interest was outstanding at January 1, 1996 and
approximately $3.3 million of principal and interest remained outstanding at
March 31, 1996, and the payment of an $8.6 million special, one-time
dividend to the Company's existing stockholders (including management
stockholders and Globe). See "Certain Transactions -- Transactions with
Globe and Globe Affiliates".

(5) Calculated at the end of the period shown.

(6) As adjusted to reflect the sale by the Company of 2,687,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $12.00
per share and the application of the estimated net proceeds therefrom. See
"Use of Proceeds."

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING ANY SHARES OF COMMON STOCK OFFERED HEREBY.

LIMITED OPERATING HISTORY

The Company was formed in May 1993 by a group consisting primarily of six
former Sears home improvement managers and Globe, and commenced operations on
June 1, 1993 when it entered into a license agreement with Sears. Accordingly,
the Company's operating history is brief and may not serve as an accurate
indicator of the Company's future performance. Since its inception, the Company
has experienced substantial growth in revenue and profitability. There can be no
assurance that the Company's revenue growth and profitability will be sustained.
In January 1993, Sears decided to discontinue the direct selling, furnishing and
installing of product lines currently sold by the Company under the Sears
license agreement and elected instead to conduct such business through licensing
arrangements with third parties. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

DEPENDENCE ON SEARS LICENSE

Currently, substantially all of the Company's revenues are derived from
sales of products and services under a license agreement between Exteriors, a
wholly-owned subsidiary of the Company, and Sears. As used herein with respect
to the description of the Sears license agreement, the defined term "Company"
shall mean Diamond Home Services, Inc. together with Exteriors. The license
agreement authorizes the Company to sell, furnish and install roofing, gutters,
doors and fences under the "Sears" name as a Sears authorized contractor in 44
states. The Company entered into a new three-year license agreement with Sears
effective January 1, 1996. The license agreement expires December 31, 1998 and
after the first two years of its term, may be terminated prior to expiration by
either party without cause so long as such party has provided 12-months' written
notice prior to the termination date. The license agreement provides for
immediate termination by Sears for various reasons, including the Company's
failure to comply with any material provision of the license agreement or the
receipt by Sears of an excessive number of complaints regarding the Company. In
addition, Sears has the right upon 12-months' written notice to the Company, to
discontinue the Company's right to sell, furnish and install certain products in
certain markets under the "Sears" name if the sales volume or quality rating of
the Company with respect to such products or markets, as measured by Sears, fall
below the standards contained in the license agreement.

The license agreement is not exclusive by its terms; however, historically,
Sears has not licensed the same home improvement products to multiple licensees
within the same market. Notwithstanding the foregoing, there can be no assurance
that Sears will not license the same home improvement products to other
licensees within the Company's markets. Although in the past Sears has either
renewed or extended the license agreement with the Company, there can be no
assurance that the license agreement will be renewed or extended in the future.
The license agreement provides for the Company to pay Sears a license fee based
on the Company's gross sales for products licensed under the license agreement.
The license fee is fixed during the term of the license agreement at 11% of
gross sales for all products sold under the license agreement, other than doors,
which have a fixed license fee of 13% of gross sales. Termination of the license
agreement or certain rights thereunder, the failure of Sears to renew the
license agreement with the Company on its current terms, an increase in the
rates of the license fee paid by the Company to Sears, the addition of other
Sears licensees marketing the Company's products in the Company's markets, Sears
exercise of its right to discontinue the Company's license in any market or for
any product or a decline in Sears reputation could have a material adverse
effect on the net sales and profitability of the Company. In addition, in 1995,
approximately 44% of the Company's marketing expense was related to advertising
with Sears. In the event the license agreement is terminated or expires, the
Company would need to find alternative methods to market its products. There can
be no assurance that the alternative methods would be as cost-effective

6
<PAGE>
as advertising with Sears and, to the extent such methods are not as
cost-effective, the Company's net sales and profitability could be adversely
affected. The Company is not owned or controlled by, or under common control
with, Sears. Neither Sears nor any of its affiliates assumes any responsibility
with respect to this offering or the accuracy of any information set forth
herein. See "Business -- Sears License Agreement."

WARRANTY EXPOSURE

The Company provides each customer with a warranty on product and labor.
Depending on the type of product installed, the product and labor warranties
provided by the Company vary from one-year to up to 10 years. Additionally, the
manufacturer provides a warranty on the product and the independent contractor
provides a warranty on the labor. Generally, the product warranty provided by
manufacturers is commensurate as to scope and is typically longer as to duration
than the warranty that the Company provides to its customers. However, certain
manufacturer product warranties often provide a declining amount of coverage
over time, while the Company's warranty coverage does not decline during the
warranty period. The labor warranty that the Company receives from its
independent contractors (generally one to two years) is significantly shorter in
duration than that provided by the Company to its customers. In all cases, the
Company is primarily liable to the customer to fulfill all warranty obligations,
regardless of whether a manufacturer or independent contractor performs its
warranty obligations. The Company attempts to limit its potential warranty
exposure by pre-screening independent contractors, using quality products
produced by nationally known manufacturers and inspecting a portion of all
installations. The Company currently accrues a reserve for warranty claims which
has approximated 2% of net sales since the Company's inception.

Due to the Company's limited operating history and the length of the
warranties provided by the Company, there can be no assurance that the warranty
reserve is adequate. In addition, pursuant to the license agreement with Sears
(i) Sears has the right to settle, at the Company's expense and without the
Company's consent, any customer complaints, (ii) the Company has agreed to and
supports Sears policy of "Satisfaction Guaranteed or Your Money Back" as it
relates to customer complaints and adjustments and (iii) the Company's customers
are third party beneficiaries of the one-year product and labor warranty given
by the Company to Sears with respect to each installation. To the extent the
amount of money spent to reimburse Sears for customer complaint settlements or
to satisfy customers under the "Satisfaction Guaranteed or Your Money Back"
policy, together with any warranty claims settled by the Company materially
exceeds the warranty reserve or if certain manufacturers or a significant number
of independent contractors are unable to fulfill their warranty obligations, the
Company's results of operations could be materially adversely affected. See
"Business -- Warranty."

RELIANCE ON SALES ASSOCIATES

The Company's success depends upon its ability to identify, develop and
retain qualified employees, particularly Sales Associates. As of May 1, 1996,
the Company had 700 Sales Associates as compared to 557 as of March 31, 1995.
New Sales Associates may have limited prior experience in the home improvement
industry. As a result, the Company devotes substantial resources to the training
and development of its Sales Associates. There can be no assurance that the
Company will continue to be able to identify, develop and retain qualified Sales
Associates.

The Company intends to increase the number of Sales Associates by
approximately 50 and to open 1 to 2 sales offices in new and existing markets
during the remainder of 1996. To the extent that the Company does not
successfully hire qualified Sales Associates or they are unable to achieve
anticipated performance levels, the Company's ability to penetrate existing and
new markets and, therefore, the Company's sales growth could be significantly
delayed or adversely affected. See "Business -- Sales."

HIGH TURNOVER OF SALES REPRESENTATIVES

The Company's sales representatives work on a commission-only basis. For
this reason, among others, the Company has experienced significant turnover of
its sales representatives. During the two-

7
<PAGE>

year period from January 1, 1994 through December 31, 1995, approximately 62% of
the Company's total sales representatives resigned or were terminated. During
the same period, the Company's 200 top-selling sales representatives
(representing approximately 15% of the sales representatives employed by the
Company during such period) generated approximately 61% of the Company's total
net sales. Among these top-selling sales representatives, approximately 30%
resigned or were terminated during the two-year period. The turnover of sales
representatives results in increased recruitment and training costs and a lower
than desired conversion rate of sales leads to sales. To the extent that the
turnover rate of sales representatives continues or increases, or the Company
loses a significant number of its most productive sales representatives, the net
sales and profitability of the Company could be adversely affected. See
"Business -- Sales."

DEPENDENCE ON AVAILABILITY OF QUALIFIED INDEPENDENT CONTRACTORS

The Company's success depends upon its ability to continue to hire
independent contractors possessing the technical skills, experience and
financial stability necessary to meet the Company's quality standards and to
satisfy the Company's insurance requirements. Because the Company provides up to
a 10-year warranty for labor on certain of its products, hiring qualified
independent contractors who will perform the work in accordance with the
Company's specifications and predetermined quality standards is extremely
important. The Company must continually identify and evaluate new independent
contractors and reevaluate the independent contractors it is currently
utilizing. Most of the Company's independent contractors also compete directly
with the Company and the Company, to a lesser extent, competes with other home
improvement companies for the services of independent contractors. The Company
only retains an independent contractor at the time an installation is sold. As a
result, no independent contractor is obligated to work for the Company until the
independent contractor accepts an assignment. In the past, the Company has
periodically had difficulty retaining a sufficient number of qualified
independent contractors, especially after periods of extreme weather in specific
geographic areas due to increased demand. There can be no assurance that
qualified independent contractors will continue to be available to, or choose to
work for, the Company in sufficient numbers to satisfy the Company's
installation requirements. The Company's policy requires that its independent
contractors satisfy the Company's workers' compensation and general liability
insurance requirements. In certain circumstances, independent contractors have
not carried or renewed their workers' compensation and general liability
insurance. To the extent that independent contractors do not carry the required
insurance, the Company could incur ultimate liability for any injury or damage
claims. The Company is in the process of taking actions aimed at better ensuring
that each independent contractor meets and continues to meet the Company's
workers' compensation and general liability insurance requirements. See
"Business -- Independent Contractors."

INTEREST RATE SENSITIVITY

The ability to affordably finance purchases, of which the interest rate
charged is a significant component, is an important part of a customer's
decision to purchase the Company's products. The average sales price charged by
the Company for its products and services typically ranges between $1,100 and
$5,000 and during fiscal 1995, approximately 89% of the Company's sales were
financed. As interest rates increase, customers often pay higher monthly
payments which may make the Company's products less affordable, and, as a
result, the Company's net sales and profitability may decrease.

DEPENDENCE ON AVAILABILITY OF SEARS CREDIT

Of the Company's sales which were financed during fiscal 1995, approximately
97% were financed through Sears and its affiliates. Historically, the Company
has been unable to provide financing to certain potential customers as a result
of the inability of these customers to satisfy the credit underwriting criteria
of Sears and its affiliates. Since the Company's inception, the credit approval
rate of Sears and its affiliates for the Company's customers has varied from
time to time based on a

8
<PAGE>
variety of factors. To the extent its customers are unable to obtain financing
through Sears and its affiliates, the Company's results of operations could be
adversely affected. See "Business -- Customer Financing."

NEW CONSUMER FINANCE SUBSIDIARY

In November 1995, Marquise Financial, the Company's consumer finance
subsidiary, commenced operations to provide an additional financing alternative
for purchasers of the Company's products. Many of the Company's customers who
finance their purchases through Marquise Financial may be higher credit risks
than the Company's other customers due to various factors, including, among
other things, their employment status and previous credit history, the absence
or limited extent of their prior credit history or their limited financial
resources. Consistent with the Company's strategy, many customers who finance
their purchases through Marquise Financial have not met and may not meet the
credit underwriting criteria of Sears and its affiliates. Consequently,
providing financing to these customers will likely involve a higher incidence of
default and increased delinquency rates and will involve greater servicing
costs. The Company currently bears the credit risk on the purchases financed
through Marquise Financial, unlike purchases financed through Sears and its
affiliates. Marquise Financial currently maintains a bad debt reserve for
expected losses. Due to Marquise Financial's limited operating history and the
Company's limited experience in consumer financing, there can be no assurance
that the bad debt reserve is adequate. To the extent that losses materially
exceed the bad debt reserve, the Company's results of operations could be
materially adversely affected. There can be no assurance that the credit
performance of its customers will be at the expected level, that Marquise
Financial's systems and controls will be adequate, that losses will be
consistent with the expected bad debt experience or that Marquise Financial will
be able to obtain financing sufficient to support its expanded operations. See
"Business -- Customer Financing."

DEPENDENCE ON KEY PERSONNEL

The Company is currently dependent upon the ability and experience of its
executive officers and other key employees, and there can be no assurance that
the Company will be able to retain all of such officers and employees. The loss
of key personnel could have a material adverse effect on the Company's
operations. Certain of the Company's key personnel also hold executive positions
and have responsibilities with Globe, certain of its affiliates and other
companies and expect to continue in these positions following the offering. The
Company does not maintain key-man life insurance on any of its officers or key
personnel. See "Management."

HIGHLY COMPETITIVE MARKET

The industry in which the Company competes is fragmented and competitive.
The Company competes for sales with numerous local home improvement installers
and independent contractors in each of its markets, some of which also serve as
independent contractors for the Company. The Company also competes against major
retailers which market and install products similar to the Company's, including
Home Depot, Inc. and Montgomery Ward & Co., Inc. In addition, AMRE, Inc., a
licensee of Century 21 Real Estate Corp. and a former Sears licensee for siding
and windows, is also a competitor. Certain of these competitors are
significantly larger and have greater financial resources than the Company. The
Company competes on the basis of price, Sears name recognition and reputation,
customer service reputation, workmanship and the ability of the Company and the
manufacturer to fulfill their warranty obligations. Because the Company's focus
is on providing additional value to its customers through warranty protection,
proprietary products and superior customer service, the Company typically
charges prices for its products and services which are higher than those of most
of its local competitors. The Company expects that the market for its products
and services will expand and therefore, competition will increase in the future.
There can be no assurance that the Company will remain competitive or that the
Company will be able to maintain its current profitability. See "Business --
Competition."

9
<PAGE>
SEASONALITY; QUARTERLY FLUCTUATIONS

The Company's results of operations may fluctuate from year to year or
quarter to quarter due to a variety of factors. The Company expects lower levels
of sales and profitability during the period from mid-November through
mid-March, impacting the first and fourth quarter of each fiscal year. The
Company believes that this seasonality is caused by winter weather in certain of
the Company's markets located in the northeastern and north central U.S. and
rainy weather, each of which limits the Company's ability to install exterior
home improvements. In addition, the demand for the Company's products and the
Company's results of operations may be affected by the severity of the weather.
For example, mild weather limits the number of roofs in need of repair but
allows the Company to continue to install its products. Conversely, severe
weather increases the number of roofs in need of repair but, due to increased
demand for independent contractors, limits the pool of qualified independent
contractors available to install the Company's products and can delay the time
it takes to complete an installation. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Seasonality" and "--
Quarterly Financial Information."

CONTROL BY PRINCIPAL STOCKHOLDER

Upon completion of the offering (assuming no exercise of the Underwriters'
over-allotment option), the Company's principal stockholder, Globe, will
beneficially own 47.7% of the Company's outstanding shares of Common Stock. As a
result, Globe will be able to exercise significant influence over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. C. Stephen Clegg, Chairman of the Board,
Chief Executive Officer and President of the Company, is also the Chairman of
the Board, Chief Executive Officer and controlling stockholder of Globe. Of the
five members of the Company's Board of Directors, three members are also
directors of Globe. Future sales by Globe of substantial amounts of Common
Stock, or the potential for such sales, could adversely affect prevailing market
prices. Upon completion of the offering (assuming no exercise of the
Underwriters' over-allotment option) the directors and executive officers of the
Company as a group will be deemed to beneficially own approximately 53.8% of the
Company's Common Stock, including 47.7% of the Common Stock which will continue
to be owned by Globe, and, therefore, the directors and executive officers as a
group will be able to exercise significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. See "Management," "Certain Transactions --
Legal Proceedings," "Principal and Selling Stockholders" and "Shares Eligible
for Future Sale."

CERTAIN TRANSACTIONS WITH AND PAYMENTS TO PRINCIPAL STOCKHOLDER

Immediately prior to the offering, Globe owns 80% of the issued and
outstanding Common Stock of the Company, with the remaining 20% being owned by
senior or former management. Globe manufactures home building products,
including roofing shingles and related roofing products. In 1995, the Company
purchased approximately $1.5 million of Globe roofing products through
independent distributors, representing approximately 16% in dollar volume of all
roofing products purchased by the Company. The Company will continue to purchase
Globe products through independent distributors following the completion of the
offering and the amount of such purchases may increase. The Company believes
that the prices charged by independent distributors for Globe products are
competitive with comparable products of other roofing products manufacturers.
The Company currently has a management agreement and tax sharing agreement with
Globe and its affiliates. In 1994 and 1995, the Company incurred management fees
to Globe in the aggregate amount of $464,000 and $558,000, respectively, and for
1996, through the date of the consummation of the offering, the Company will
have incurred to Globe a management fee of approximately $350,000. The
management agreement and tax sharing agreement will terminate upon the
consummation of the offering. The Company has a policy that all transactions
between the Company and any related party, including Globe and Catalog Holdings
Inc. and their affiliates, will be on terms no less favorable to the Company
than the Company believes would be available from unaffiliated third parties.
Globe licenses the name "Diamond Shield" to the Company pursuant to an
exclusive, royalty-free, perpetual license. Other than with respect to Globe's
status as a stockholder of the Company, the purchase of Globe products

10
<PAGE>

through independent distributors and the license agreement, the Company does not
anticipate any continuing relationship with Globe upon consummation of the
offering. See "Certain Transactions -- Transactions with Globe and Globe
Affiliates" and "-- Legal Proceedings."

Immediately prior to the offering, the Company expects to pay an $8.6
million special, one-time dividend to its existing stockholders. As an 80%
stockholder, Globe will receive approximately $6.9 million of this dividend. The
balance of the dividend will be paid to current and former management
stockholders. In April 1996, the Company redeemed all outstanding shares of
Series A Preferred Stock at an aggregate redemption price of $1.4 million. All
of these shares of Series A Preferred Stock were held by Globe. The price at
which the Series A Preferred Stock was redeemed was equal to the purchase price
paid by Globe for the Series A Preferred Stock in July 1993. No dividends or
interest were paid to Globe with respect to the Series A Preferred Stock.

The Company has engaged in negotiations regarding the purchase of
substantially all of the assets of The Handy Craftsmen, Inc. ("Handy Craftsmen")
from a majority-owned subsidiary of Catalog Holdings Inc. ("Catalog") for
approximately $2.0 million in cash. Mr. Clegg, Chairman of the Board, Chief
Executive Officer and President of the Company, is the Chairman of the Board and
Chief Executive Officer and controlling stockholder of Catalog. Handy Craftsmen
is engaged in the marketing and contracting of home repair services under the
Sears name pursuant to a license agreement with Sears. Catalog acquired a ninety
percent interest, on a fully diluted basis, in Handy Craftsmen in 1995 in return
for an advance of approximately $50,000. An agreement was also entered into
assuring employment for a five-year term to the individual who was previously
the sole owner and is currently the minority owner of Handy Craftsmen. Catalog
has loaned an additional amount of approximately $50,000 to Handy Craftsmen
since the acquisition. The Company believes that the acquisition of Handy
Craftsmen, if completed, will expand the range of "need based" services that the
Company offers under the Sears name, will allow the Company to further utilize
the Company's existing sales leads and will provide a good source of additional
leads for the Company's core business. The terms of purchase are being
negotiated on behalf of the Company by two senior officers (one of whom is a
director) of the Company. These individuals have no affiliation with Globe or
Catalog. The terms of purchase are being negotiated on behalf of Catalog by a
director of Catalog who has no affiliation with Diamond or Globe. The Company's
valuation of Handy Craftsmen is based on the value of the Sears license
agreement, the expected revenues and earnings of Handy Craftsmen and the
synergistic benefits that Handy Craftsmen brings to the Company. The Company
believes that the transaction, if completed, will be fair and beneficial to the
stockholders of the Company. There is no assurance that the transaction will be
consummated or, if consummated, that the final terms will not differ from those
currently contemplated. See "Management," and "Certain Transactions --
Transactions with Globe and Globe Affiliates."

HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW

Currently, all of the revenue of the Company's home improvement and finance
operations is generated by its wholly-owned subsidiaries. The primary asset of
the holding company is the capital stock in such subsidiaries. The holding
company generates minimum cash flow, other than from dividends and other cash
distributions from its subsidiaries. The right of the holding company to
participate in any distribution of earnings or assets of its subsidiaries is
subject to the prior claims, if any, of the creditors of such subsidiaries. In
addition, the Company's bank line of credit, which is secured through Exteriors,
its wholly-owned subsidiary, contains certain restrictive covenants, including
certain covenants that prohibit Exteriors from paying dividends to the Company
and restrict Exteriors' ability to make other distributions. See "Dividend
Policy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

COMPLIANCE WITH GOVERNMENT REGULATIONS

11
<PAGE>

OSHA standards, building and zoning regulations and environmental laws and
regulations relating to the disposal of demolition debris and other solid
wastes. In certain jurisdictions, the Company or one of its employees is
required to be licensed as a contractor. In addition, certain jurisdictions
require the Company or the independent contractor to obtain a building permit
for each installation. In addition, such laws and regulations, may, among other
things, regulate the Company's advertising, warranties and disclosures to
customers. Building codes, licensing requirements and safety laws vary from
state to state and, in certain circumstances, limit the availability and supply
of independent contractors and impose additional costs on the Company in
complying with such laws. Although the Company believes that it has been and is
currently in compliance in all material respects with such laws and regulations,
there can be no assurance that in the future the Company's results of operations
will not be materially adversely affected by existing or new laws or regulations
applicable to the Company's business.

The Company's consumer finance subsidiary, Marquise Financial, is subject to
numerous federal and state consumer protection laws and regulations which may
vary from jurisdiction to jurisdiction and which, among other things, require
the Company to: (i) obtain and maintain certain licenses and qualifications;
(ii) limit the interest rates, fees and other charges the Company is allowed to
charge; and (iii) limit or prescribe certain other terms of the Company's credit
applications and contracts. Although the Company believes that Marquise
Financial has been and is currently in compliance in all material respects with
such laws and regulations, there can be no assurance that in the future a change
in existing laws or regulations or the creation of new laws and regulations
applicable to Marquise Financial's business will not have an adverse effect on
the Company's ability to provide customer financing of its products or on the
profitability of such activities. See "Business -- Government Regulations."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Upon completion of this offering, the Company will have outstanding an
aggregate of 8,936,950 shares of Common Stock (9,074,900 shares if the
Underwriters' over-allotment option is exercised in full). All of the 3,420,000
shares (assuming the Underwriters' over-allotment is not exercised) sold in this
offering will be freely tradeable by persons other than affiliates of the
Company. The remaining 5,516,950 shares of Common Stock were issued by the
Company in private transactions not involving a public offering. Such shares may
be sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), depending upon the holding period of such securities and
subject to significant restrictions in the case of shares held by persons deemed
to be affiliates of the Company. In addition, any employee of the Company who
purchased his shares pursuant to certain plans or contracts may be entitled to
rely on the resale provisions of Rule 701 under the Securities Act. The Company
sold 268,750 shares of Common Stock to its employees pursuant to Rule 701. Sales
of substantial amounts of Common Stock by stockholders, or the perception that
such sales could occur, could adversely affect the market price in the public
market following this offering. The Company, the Selling Stockholder and all
other stockholders have executed "lock-up agreements" pursuant to which they
have, subject to certain exceptions in the case of the Company, agreed not to
sell, contract to sell or otherwise dispose of any shares of Common Stock, or
securities convertible into Common Stock (except Common Stock issued pursuant to
options to be granted and issued upon consummation of the offering), for a
period of 180 days after the date of this Prospectus, without the prior written
consent of William Blair & Company, L.L.C., except for the Common Stock offered
hereby.

Pursuant to an agreement between the Company and Globe, Globe is entitled to
certain registration rights with respect to the shares of Common Stock that it
owns. If Globe, by exercising such registration rights upon expiration of its
lock-up agreement described above, causes a large number of shares to be
registered and sold in the public market, such sales may have an adverse effect
on the market price of the Common Stock. In addition, the Company intends to
file a registration statement under the Securities Act to register an aggregate
of 670,000 shares of Common Stock reserved for issuance under the Company's
stock option plans. The Company will issue options to purchase 275,000 shares
upon consummation of the offering at an exercise price equal to the initial
public offering price. The issuance of such shares could result in the dilution
of the voting power of the shares

12
<PAGE>
of Common Stock purchased in this offering and could have a dilutive effect on
earnings per share. See "Management -- Stock Option Plans," "Description of
Capital Stock," "Shares Eligible for Future Sale" and "Underwriting."

NO PRIOR PUBLIC MARKET; VOLATILITY

Prior to the offering there has been no public market for the Company's
Common Stock. Although the Company has applied to have the Common Stock approved
for quotation on the Nasdaq National Market, there can be no assurance that an
active trading market will develop or be sustained following the offering. The
initial public offering price of the Common Stock offered hereby will be
determined in negotiations among the Company, the Selling Stockholder and
William Blair & Company, L.L.C., as representative of the several underwriters.
See "Underwriting." The trading price of the Company's Common Stock could be
subject to significant fluctuations in response to variations in quarterly
operating results and other factors. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Quarterly Financial
Information." In addition, in recent years the stock market in general, and the
market for shares of small capitalization stocks in particular, have experienced
extreme price fluctuations which have often been unrelated to the operating
performance of affected companies. General market price declines or market
volatility in the future could affect the market price of the Common Stock and
the negotiated initial public offering price may not be indicative of future
market prices.

ANTI-TAKEOVER PROVISIONS

The Company's Amended and Restated Certificate of Incorporation (the
"Amended Certificate") and Amended and Restated By-Laws (the "Amended By-Laws")
contain certain provisions that may have the effect of discouraging, delaying or
making more difficult a change in control of the Company even if some, or even
if a majority, of the Company's stockholders were to deem such an attempt to be
in the best interest of the Company. Among other things, the Amended Certificate
allows the Board of Directors to issue up to 4 million shares of Preferred Stock
and to fix the rights, privileges and preferences of those shares without any
further vote or action by the stockholders. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. While the
Company has no present intention to issue shares of Preferred Stock, any such
issuance could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. In addition,
the Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which could have the effect of delaying or
preventing a change of control of the Company. See "Description of Capital
Stock."

DILUTION

Purchasers of shares of the Common Stock offered hereby (at an assumed
initial public offering price of $12.00 per share) will experience immediate and
substantial dilution of the net tangible book value of the Common Stock of
$11.09 per share from the initial public offering price. See "Dilution."

13
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from this offering, after
deducting underwriting discounts and estimated offering expenses, are estimated
to be approximately $29.5 million, assuming an initial public offering price of
$12.00 per share. The Company will not receive any proceeds from the sale of the
shares by the Selling Stockholder.

The Company estimates that it will use approximately $15.0 million of the
net proceeds to the Company to repay all amounts expected to be outstanding
under its bank line of credit at the time of the offering, which amounts have
been primarily used to fund Marquise Financial. The Company's bank line of
credit which is secured through Exteriors, its wholly-owned subsidiary, is a
$15.0 million secured revolving facility which bears interest at a rate per
annum equal to, at Exteriors' option, the bank's prime rate (8.25% at May 1,
1996) or LIBOR plus 1.5%. A portion of the bank line of credit, $5.0 million,
matures in March 1997, with the remaining $10.0 million maturing in March 1998.
In addition, the Company estimates that it will use approximately $8.6 million
of the net proceeds to pay the special, one-time dividend to the Company's
existing stockholders (approximately $6.9 million of which will be paid to
Globe) and approximately $3.3 million to repay the principal amount of the
Company's Senior Manager Performance Notes (as defined herein) plus the accrued
interest thereon due to certain current and former management stockholders of
the Company. See "Certain Transactions -- Transactions with Senior Managers."
Stockholders who purchase shares in this offering will not participate in the
$8.6 million special, one-time dividend. The Company expects to use the
remaining approximately $2.6 million for working capital and other general
corporate purposes which may include the development or expansion of
complementary products or services, including the possible acquisition of
substantially all of the assets of Handy Craftsmen. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Certain Transactions -- Transactions with Globe and
Globe Affiliates."

At May 1, 1996, approximately $10.2 million was outstanding under the
Company's bank line of credit, substantially all of which indebtedness was
incurred in connection with the funding of Marquise Financial. The balance of
the amount expected to be outstanding under the bank line of credit at the time
of the offering is expected to be incurred in connection with the additional
funding of Marquise Financial.

Pending such uses, the Company intends to invest the net proceeds of the
offering in short-term, investment-grade, interest-bearing instruments. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

DIVIDEND POLICY

Other than the $8.6 million special, one-time dividend described above, the
Company has not declared or paid any cash dividends on its Common Stock since
its formation. The Company's bank line of credit which is secured through
Exteriors, its wholly-owned subsidiary, prohibits Exteriors from paying
dividends to the Company. The Company has obtained a waiver from the bank with
respect to the $8.6 million special, one-time dividend. The ability of the
Company to pay dividends in the future will depend primarily on the receipt of
cash dividends and other cash payments from its subsidiaries. The Company
currently intends to retain any future earnings to finance the growth and
development of its businesses and therefore, does not anticipate paying any cash
dividends in the foreseeable future. Payment of any future dividends will depend
upon the future earnings and capital requirements of the Company and other
factors which the Board of Directors considers appropriate.

14
<PAGE>
CAPITALIZATION

The following table sets forth the short-term debt and total capitalization
of the Company (i) at March 31, 1996, (ii) pro forma to reflect the payment by
the Company of the $8.6 million special, one-time dividend to existing
stockholders (including management stockholders and Globe) and the redemption of
all of the outstanding shares of the Company's Series A Preferred Stock for $1.4
million from Globe, and (iii) pro forma as adjusted to reflect the sale by the
Company of 2,687,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $12.00 per share and the application of the estimated
net proceeds therefrom. See "Use of Proceeds," and "Certain Transactions --
Transactions with Globe and Globe Affiliates."

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Due to stockholders, including interest................................ $ 1,444 $ 11,444 $ 554
Line of credit......................................................... 7,706 7,706 --
--------- -------------- -----------
Total short-term debt................................................ $ 9,150 $ 19,150 $ 554
--------- -------------- -----------
--------- -------------- -----------

Long-term debt due to stockholders....................................... $ 3,861 $ 3,861 $ 1,461

Preferred Stock, at redemption price..................................... 1,400 -- --

Common stockholders' equity:
Common Stock, $.001 par value; 25,000,000 shares authorized; 6,249,950
shares issued and outstanding, actual and pro forma; 8,936,950 shares
issued and outstanding, pro forma as adjusted (1)..................... 6 6 9
Additional paid-in capital............................................. 983 983 30,467
Officer notes receivable............................................... (707) (707) (707)
Retained earnings (deficit)............................................ 4,900 (3,700) (3,700)
--------- -------------- -----------
Total common stockholders' equity (deficit).......................... 5,182 (3,418) 26,069
--------- -------------- -----------
Total capitalization............................................... $ 10,443 $ 443 $ 27,530
--------- -------------- -----------
--------- -------------- -----------
</TABLE>

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

(1) Excludes 670,000 shares of Common Stock reserved for issuance under the
Company's stock option plans, of which 275,000 shares are subject to
options, to be granted upon consummation of the offering at an exercise
price equal to the initial public offering price. See "Management -- Stock
Option Plans."

15
<PAGE>
DILUTION

The net tangible book value (deficit) applicable to Common Stock of the
Company as of March 31, 1996, was $(12.8 million) or $(2.05) per share of Common
Stock. The deficit in net tangible book value per share represents the total
assets (excluding intangibles) less total liabilities including the outstanding
Series A Preferred Stock, which was redeemed for $1.4 million from Globe,
divided by the number of shares of Common Stock outstanding. After giving effect
to (i) the receipt of $29.5 million of estimated net proceeds from the sale by
the Company of 2,687,000 shares of Common Stock in the offering at an assumed
initial public offering price of $12.00 per share and (ii) the use of net
proceeds as described under "Use of Proceeds," including the payment of an $8.6
million special, one-time dividend to its existing stockholders (including
management stockholders and Globe), the pro forma net tangible book value of the
Company as of March 31, 1996 would have been $8.1 million or $0.91 per share.
This represents an immediate increase in net tangible book value of $2.96 per
share to existing stockholders and an immediate dilution of $11.09 per share to
new stockholders purchasing shares of Common Stock in the offering. The
following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 12.00
Net tangible book value per share before the offering..... (2.05)
Increase per share attributable to new stockholders....... 2.96
---------
Net tangible book value per share after the offering........ 0.91
---------
Dilution per share to new stockholders...................... $ 11.09
---------
---------
</TABLE>

The following table summarizes, as of March 31, 1996, the differences
between the number of shares purchased from the Company, the total consideration
paid to the Company and the average price per share paid by existing
stockholders and new stockholders:

<TABLE>
<CAPTION>
SHARES PURCHASED (1) TOTAL CONSIDERATION AVERAGE
------------------------ --------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................. 6,249,950 69.9% $ 989,000 3.0% $ 0.16
New stockholders.................................. 2,687,000 30.1 32,244,000 97.0 12.00
----------- ----- -------------- -----
Total........................................... 8,936,950 100.0% $ 33,233,000 100.0%
----------- ----- -------------- -----
----------- ----- -------------- -----
</TABLE>

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

(1) Excludes 670,000 shares of Common Stock reserved for issuance under the
Company's stock option plans, of which 275,000 shares are subject to options
to be granted upon consummation of the offering at an exercise price equal
to the initial public offering price. See "Management -- Stock Option
Plans."

16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following selected consolidated financial and operating data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the consolidated financial statements and
notes thereto and other financial information included elsewhere in this
Prospectus. The statement of operations data for the period from June 1, 1993
(inception of operations) to December 31, 1993 and the years ended December 31,
1994 and 1995, and the balance sheet data as of December 31, 1994 and 1995, are
derived from the consolidated financial statements of the Company included
elsewhere herein, which consolidated financial statements have been audited by
Ernst & Young LLP, independent auditors. The selected consolidated financial
information at December 31, 1993 has been derived from the Company's audited
consolidated financial statements not included herein. The statements of
operations and balance sheet data as set forth below for, and as of the end of,
each of the three-month periods ended March 31, 1995 and 1996 have been derived
from the Company's unaudited financial statements, which have been prepared on
the same basis as the audited financial statements and, in the opinion of
management, include all adjustments which are necessary for a fair statement of
the results of the interim period, and all such adjustments are of a normal
recurring nature. The selected financial and operating data for the three months
ended March 31, 1996 are not necessarily indicative of the results to be
expected for the fiscal year ending December 31, 1996.

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
PERIOD FROM JUNE 1 DECEMBER 31, MARCH 31,
TO ---------------------- --------------------
DECEMBER 31, 1993(1) 1994 1995 1995 1996
-------------------- --------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $ 20,548 $ 94,186 $ 124,848 $ 22,362 $ 27,093
Cost of sales...................................... 12,588 56,139 72,245 13,096 15,293
-------- --------- ----------- --------- ---------
Gross profit....................................... 7,960 38,047 52,603 9,266 11,800
Selling, general and administrative expenses....... 9,113 34,821 45,305 8,884 10,954
Amortization of intangibles........................ 26 275 503 126 132
-------- --------- ----------- --------- ---------
Operating profit (loss)............................ (1,179) 2,951 6,795 256 714
Interest expense, net.............................. -- 39 410 186 66
-------- --------- ----------- --------- ---------
Income (loss) before income taxes.................. (1,179) 2,912 6,385 70 648
Income tax provision............................... -- 917 2,650 71 299
-------- --------- ----------- --------- ---------
Net income (loss).................................. $ (1,179) $ 1,995 $ 3,735 $ (1) $ 349
-------- --------- ----------- --------- ---------
-------- --------- ----------- --------- ---------
Pro forma net income (2)........................... $ 3,951 $ 403
Pro forma net income per share (3)................. $ 0.53 $ 0.05
Pro forma weighted average common shares
outstanding (4)................................... 7,398 7,398
SELECTED OPERATING DATA:
Number of sales offices (5)........................ 38 55 70 64 72
Number of Sales Associates (5)..................... 260 496 631 557 674
Number of installed jobs........................... 7,294 37,510 55,261 9,916 12,124
BALANCE SHEET DATA (5):
Working capital (deficit).......................... $ 42 $ (8,324) $ (4,814) $ (8,786) $ (5,293)
Total assets....................................... 4,837 29,275 30,143 24,756 35,508
Total debt......................................... 1,187 15,553 6,216 10,286 12,921
Common stockholders' equity (deficit).............. (979) 936 4,833 2,336 5,182
</TABLE>

- ------------------------
(1) Period from inception of the Company's operations to December 31, 1993.

17
<PAGE>

(3) Represents pro forma net income divided by pro forma weighted average common
shares outstanding.

(5) Calculated at the end of the period shown.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

In June 1993, the Company commenced its operations with a corporate office,
4 regional offices and 5 sales offices. At the commencement of its operations,
the Company received its initial license from Sears to sell roofing and entry
doors on a national basis, and garage doors and gutters in the eastern U.S.,
under the "Sears" name. By December 1993, the Company was operating 38 sales
offices with 260 Sales Associates. The Company has since expanded its product
offerings and markets under the Sears license agreement to include the sale of
fencing, garage doors and gutters in 44 states. In connection with the expanded
product offerings and markets, the Company opened new sales offices and
increased the number of its Sales Associates and the number of independent
contractors with whom it has relationships. At December 31, 1995, the Company
operated 70 sales offices and employed 631 Sales Associates. At May 1, 1996, the
Company had 74 sales offices serving 77% of the owner-occupied households in the
U.S. and employed 700 Sales Associates. Since inception, the Company has
installed over 100,000 jobs. The rapid growth in the Company's net sales and net
income is reflective of the number of sales offices opened, sales leads
generated, and the increased number of Sales Associates employed and independent
contractors contracted with, as well as the nationally recognized "Sears" name
in the home improvement industry. The Company intends to increase the number of
Sales Associates by approximately 50 and to open 1 to 2 sales offices in new and
existing markets during the remainder of 1996.

The Company recognizes revenue upon completion of each installation and
receipt from the customer of a signed certificate of satisfaction. During fiscal
1995, approximately 89% of the Company's sales were financed, and of such
financed sales, approximately 97% were financed through Sears and its
affiliates. The Company receives payment from Sears on sales financed by Sears
and its affiliates approximately seven days after completion of the
installation. Sears and its affiliates have no recourse against the Company for
bad debts relating to such sales. In 1996, the Company began receiving
participation fees from Sears and its affiliates for credit placement equal to
approximately 1.6% of sales financed through Sears and its affiliates. The
participation fees are payable by Sears and its affiliates over a ten-year
period, with 71% of the total participation fee to be paid in the first three
years following each installation financed through Sears and its affiliates. The
Company's right to receive the participation fee is subject to termination under
certain circumstances.

The Company's cost of sales includes the Sears license fee, installation and
material costs and a warranty reserve of 2% of net sales. The Company and Sears
entered into a new three-year license agreement effective January 1, 1996.
Throughout the term of the license agreement, the license fee is fixed at 11% of
gross sales for all products sold under the license agreement, other than doors,
which have a fixed license fee of 13% of gross sales. Prior to the renewal of
the license agreement with Sears, the license fee increased from 5-10%
(depending upon the type of product) during 1993 to 8-12% during the second half
of 1994 and to 11-13% in 1995. The license fees were initially established at
rates favorable to the Company to assist the Company during the start-up phase
of its operations.

The Company retains independent contractors to perform all of its
installations. Payments for installation services are typically made promptly
upon the receipt of a certificate of satisfaction from the customer. Materials
for the installations are purchased locally from independent distributors and,
therefore, the Company does not need to carry inventories of products and
materials. Payment terms with distributors range from 10 to 70 days, with the
majority being 30 days or longer. As a result of the use by most of the
Company's customers of third party credit sources, the Company generally
receives payment for a completed installation before it pays the distributors
for the related materials.

Selling, general and administrative expenses include advertising and
marketing expense, selling commissions and related payroll costs, field
operating expense and general administrative expenses. During fiscal 1995,
approximately 44% of the Company's marketing expense was related to purchasing
space in Sears-produced advertising. Prior to the beginning of each year, the
Company is required

19
<PAGE>
to commit to the amount of advertising space that it intends to purchase from
Sears for the upcoming year. The Company has committed to the placement of 25
direct advertising newspaper inserts with Sears for 1996, compared to 16 and 25
advertising placements in 1994 and 1995, respectively. In 1994 and 1995, the
Company incurred expenses payable to Sears of $1.7 million and $2.8 million,
respectively, for advertising.

In 1994 and 1995, the Company incurred senior management bonuses in the
aggregate amount of $1.3 million and $2.0 million, respectively, pursuant to the
incentive compensation arrangements implemented when the Company was formed. The
Company expects that the bonus amounts paid to management will decrease as a
percentage of operating income in 1996 as a result of the Company's newly
adopted management incentive compensation plan which is in effect for fiscal
1996. The newly adopted management incentive compensation plan more heavily
rewards year to year incremental increases in the Company's profitability and
net sales than the Company's previous management incentive compensation plan.

In 1994, the Company entered into a management agreement with Globe, the
Company's principal stockholder, pursuant to which Globe provides certain
management, treasury, legal, purchasing and other administrative services to the
Company. The Company pays Globe a management fee based upon gross sales.
Management fees were $464,000 and $558,000 for 1994 and 1995, respectively. The
management fee will continue to be paid in 1996 through consummation of the
offering and is expected to be approximately $350,000. The management agreement
will be terminated upon consummation of the offering. See "Certain Transactions
- -- Transactions with Globe and Globe Affiliates." The Company expects that the
elimination of the management fee will be partially offset by increased costs
incurred by the Company to directly procure the services previously provided by
Globe under the management agreement.

Effective September 23, 1994, the Company was included in the consolidated
federal income tax return of Globe. A tax-sharing agreement between the Company
and Globe specifies the allocation and payment of liabilities and benefits
arising from the filing of a consolidated tax return. The agreement requires the
Company to pay its share of the consolidated federal tax liability as if it has
taxable income, and to be compensated if losses or credits generate benefits
that are utilized to reduce the consolidated tax liability. The Company will
continue to be included in the consolidated group with Globe through
consummation of the offering. The tax sharing agreement will be terminated upon
consummation of the offering. See "Certain Transactions -- Transactions with
Globe and Globe Affiliates."

20
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage of
net sales and period to period percentage increases of certain line items
reflected in the Company's consolidated statements of operations.

<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF NET SALES INCREASE
--------------------------------------------------------------------- (DECREASE)
FROM JUNE 1 YEARS ENDED THREE MONTHS ENDED MARCH -------------
TO DECEMBER 31, 31,
DECEMBER 31, ------------------------ ------------------------
1993 (1) 1994 1995 1995 1996 1994 TO 1995
----------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales......................... 100.0% 100.0% 100.0% 100.0% 100.0% 32.6%
Cost of sales.................... 61.3 59.6 57.9 58.6 56.4 28.7
----- ----- ----- ----- -----
Gross profit..................... 38.7 40.4 42.1 41.4 43.6 38.3
Selling, general and
administrative expenses......... 44.3 37.0 36.3 39.7 40.5 30.1
Amortization of intangibles...... 0.1 0.3 0.4 0.6 0.5 82.9
----- ----- ----- ----- -----
Operating profit (loss).......... (5.7) 3.1 5.4 1.1 2.6 130.3
Interest expense, net............ -- -- 0.3 0.8 0.2 951.3
----- ----- ----- ----- -----
Income (loss) before income
taxes........................... (5.7) 3.1 5.1 0.3 2.4 119.3
Income tax provision............. -- 1.0 2.1 0.3 1.1 189.0
----- ----- ----- ----- -----
Net income (loss)................ (5.7)% 2.1% 3.0% 0.0% 1.3% 87.2
----- ----- ----- ----- -----
----- ----- ----- ----- -----

<CAPTION>
FIRST QUARTER
1995 TO FIRST
QUARTER 1996
-------------
<S> <C>
Net sales......................... 21.2%
Cost of sales.................... 16.8
Gross profit..................... 27.3
Selling, general and
administrative expenses......... 23.3
Amortization of intangibles...... 4.8
Operating profit (loss).......... 178.9
Interest expense, net............ (64.5)
Income (loss) before income
taxes........................... *
Income tax provision............. *
Net income (loss)................ *
</TABLE>

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

* Not meaningful.

(1) Period from inception of the Company's operations to December 31, 1993.

FIRST QUARTER FISCAL 1996 COMPARED TO FIRST QUARTER FISCAL 1995

NET SALES

Net sales increased $4.7 million, or 21.2%, from $22.4 million for the first
quarter 1995 to $27.1 million for the first quarter 1996. Approximately 65.9% of
the increase in net sales was attributable to roofing and gutter products and
services, net sales of which increased $3.1 million to $18.8 million for the
first quarter 1996. Approximately 26.2% of the increase in net sales was
attributable to fencing products and services, net sales of which increased $1.2
million to $3.6 million for the first quarter 1996. Net sales of garage door and
entry door products and services remained constant at $4.2 million. The balance
of the increase in net sales was due to credit participation fee income from
Sears and its affiliates, which was payable beginning January 1, 1996, on
installed sales financed by Sears and its affiliates during the quarter, and
interest income, which was not material, on receivables financed by the
Company's newly-formed consumer finance subsidiary, Marquise Financial. These
increases in net sales were due primarily to an increase in the number of
installations as the Company increased the number of its Sales Associates from
557 to 674 and increased selling prices.

GROSS PROFIT

Gross profit increased $2.5 million, or 27.3%, from $9.3 million, or 41.4%
of net sales, for the first quarter 1995 to $11.8 million, or 43.6% of net
sales, for the first quarter 1996. The increase in gross profit resulted from an
increased number of installations, increased selling prices, the credit
participation fee from Sears and its affiliates and interest income from
Marquise Financial, partially offset by the increase in the Sears license fee.
The license fee incurred to Sears increased $639,000, or 29.7%, from $2.2
million, or 9.6% of net sales, for the first quarter 1995 to $2.8 million, or
10.3% of net sales, for the first quarter 1996. The increase in the license fee
incurred to Sears for the first quarter 1996 was due to the increase in sales
volume and an increase in the license fee rates. Sears and the Company entered
into a new three-year license agreement effective January 1, 1996. Among other

21
<PAGE>

things, the license agreement provides for a fixed license fee, at the March
1995 license fee rate, to be charged during the term of the license agreement.
Gross profit before the Sears license fee, credit participation fee and interest
income increased $2.8 million, or 24.1%, from $11.4 million, or 51.1% of net
sales, for the first quarter 1995 to $14.2 million, or 53.1% of net sales, for
the first quarter 1996. The unit costs of materials, installation labor and
warranty expense remained relatively constant during the period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased $2.1 million, or
23.3%, from $8.9 million in the first quarter 1995 to $11.0 million in the first
quarter 1996 and as a percentage of net sales increased from 39.7% to 40.5%. The
increase in selling, general and administrative expenses resulted primarily from
the expenses associated with increased sales volume, the increased number of
Sales Associates and expenses related to the hiring of personnel to support the
expansion of the infrastructure of the Company and the start-up of Marquise
Financial. Direct advertising expense increased $65,000, or 4.5%, from $1.4
million for the first quarter 1995 to $1.5 million for the first quarter 1996;
as a percentage of net sales, however, direct advertising expense decreased from
6.4% for the first quarter 1995 to 5.5% for the first quarter 1996, reflecting
improved utilization of sales leads primarily due to the increase in Sales
Associates. Selling commission expense increased $265,000, or 13.1%, from $2.0
million in the first quarter 1995 to $2.3 million in the first quarter 1996; as
a percentage of net sales, however, selling commission expense decreased from
9.1% in the first quarter 1995 to 8.6% in the first quarter 1996. Sales
representatives are compensated on a variable commission basis depending upon
the type of product sold. Performance-based compensation paid to officers and
regional, sales and production managers increased $126,000, or 55.5%, from
$227,000 in the first quarter 1995 to $353,000 in the first quarter 1996,
primarily due to an increase in operating income. See "Certain Transactions --
Transactions with Senior Managers" and "-- Transactions with Other Managers."
Management fees incurred to Globe increased, commensurate with the gross sales
increase, from $110,000 in the first quarter 1995 to $131,000 in the first
quarter 1996. The management agreement between Globe and the Company will be
terminated upon consummation of the offering. The balance of selling, general
and administrative expenses, primarily sales lead-generation activities,
administrative, field operation and Marquise Financial payrolls and related
costs and general expenses, increased $1.5 million, or 28.8%, from $5.2 million,
or 23.2% of net sales, in the first quarter 1995 to $6.7 million, or 24.7% of
net sales, in the first quarter 1996. The increase was primarily due to
increased expenses relating to support personnel and services required to manage
the Company's expanding infrastructure and for start-up expenses related to
Marquise Financial.

AMORTIZATION OF INTANGIBLES

Amortization of intangibles increased from $126,000 in the first quarter
1995 to $132,000 in the first quarter 1996. The amortization expense relates
primarily to goodwill incurred in connection with the September 1994 stock
repurchase from management. See "Certain Transactions -- Transactions with
Senior Managers."

NET INTEREST EXPENSE

Net interest expense decreased $120,000, from $186,000 in the first quarter
1995 to $66,000 in the first quarter 1996, as interest income from invested
excess operating cash partially offset the interest expense related to the notes
payable to certain of the Company's senior managers in connection with the
September 1994 stock repurchase from management. See "Certain Transactions --
Transactions with Senior Managers."

INCOME TAX PROVISION

The Company's income tax provision increased from $71,000, or an effective
rate of 101%, for the first quarter 1995, to $299,000, or an effective rate of
46.1%, for the first quarter 1996. The difference in the effective income tax
rate and the federal statutory rate (34%) is due primarily to amortization of
intangibles which are not deductible for income tax purposes and the effect of
state income taxes.

22
<PAGE>

NET INCOME

The Company's net income increased $350,000, from essentially break-even in
the first quarter 1995 to $349,000 in the first quarter 1996.

FISCAL 1995 COMPARED TO FISCAL 1994

NET SALES

Net sales increased $30.6 million, or 32.6%, from $94.2 million in 1994 to
$124.8 million in 1995. Approximately 42.5% of the increase in net sales was
attributable to roofing and gutter products and services, net sales of which
increased $13.0 million to $87.1 million in 1995. The remaining increase in net
sales was due to garage door and entry door products and services, net sales of
which increased $7.1 million to $19.3 million in 1995 as well as fencing and
other products and services, net sales of which increased $10.5 million to $18.4
million in 1995. These increases in net sales were due primarily to an increase
in the number of installations which resulted from the first full-year impact of
the Company's 55 sales offices and the opening of 15 new sales offices, an
increase in Sales Associates from 496 to 631 and the addition of fencing in
certain markets. Net sales also increased due to increased selling prices.

GROSS PROFIT

Gross profit increased $14.6 million, or 38.3%, from $38.0 million or 40.4%
of net sales, in 1994 to $52.6 million, or 42.1% of net sales, in 1995. The
increase in gross profit resulted from an increased number of installations and
increased selling prices, partially offset by the increase in the Sears license
fee. The license fee incurred to Sears increased $5.6 million, or 75.7%, from
$7.4 million, or 7.9% of net sales, in 1994 to $13.0 million, or 10.4% of net
sales in 1995. The increase in the license fee incurred to Sears in 1995 was due
to the increase in sales volume and an increase in the license fee rates. Sears
and the Company entered into a new three-year license agreement effective
January 1, 1996; among other things, the license agreement provides for a fixed
license fee, at the March 1995 license fee rate, to be charged during the term
of the license agreement. Gross profit before the Sears license fee increased
$20.2 million, or 44.4%, from $45.4 million, or 48.3% of net sales, in 1994 to
$65.6 million, or 52.5% of net sales, in 1995. The unit costs of materials,
installation labor and warranty expense remained relatively constant during the
period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased $10.5 million, or
30.1%, from $34.8 million in 1994 to $45.3 million in 1995 and as a percentage
of net sales remained relatively constant at 37.0% in 1994 as compared to 36.3%
in 1995. The increase in selling, general and administrative expenses resulted
primarily from expenses associated with increased sales volume and the increased
number of Sales Associates and, to a lesser extent, expenses related to the
hiring of personnel to support the expansion of the infrastructure of the
Company. Direct advertising expense increased from $6.1 million in 1994 to $6.3
million in 1995; as a percentage of net sales, however, direct advertising
expense decreased from 6.5% in 1994 to 5.0% in 1995. Selling commission expense
increased $2.5 million, or 30%, from $8.5 million in 1994 to $11.0 million in
1995; as a percentage of net sales however, selling commission expense decreased
from 9.0% in 1994 to 8.8% in 1995. Sales representatives are compensated on a
variable commission basis depending upon the type of product sold.
Performance-based compensation paid to officers and regional, sales and
production managers increased from $3.0 million in 1994 to $3.9 million in 1995
primarily due to the increase in operating income. See "Certain Transactions --
Transactions with Senior Managers" and "-- Transactions with Other Managers" for
information regarding future payments to management. Management fees incurred to
Globe increased, commensurate with the gross sales increase, from $464,000 in
1994 to $558,000 in 1995. The management agreement between the Company and Globe
will be terminated upon consummation of the offering. The balance of selling,
general and administrative expenses, primarily sales lead-generation activities,
administrative and field operation payrolls and related costs and general
expenses, increased $6.8 million, or 40.7%, from $16.7 million, or 17.8% of net
sales, in

23
<PAGE>
1994 to $23.5 million, or 18.9% of net sales, in 1995. This increase was
primarily due to the additional number of sales offices and expenses relating to
support personnel and services required to manage the Company's expanding
infrastructure.

AMORTIZATION OF INTANGIBLES

Amortization of intangibles increased $228,000 from $275,000 in 1994 to
$503,000 in 1995, reflecting the full-year impact of goodwill amortization
related to the September 1994 stock repurchase from management. See "Certain
Transactions -- Transactions with Senior Managers."

NET INTEREST EXPENSE

Net interest expense increased $371,000, from $39,000 in 1994 to $410,000 in
1995, primarily as a result of increased borrowings under the Company's bank
line of credit required to fund the September 1994 stock repurchase and interest
payments on the notes issued to certain of the Company's senior managers in
connection therewith. See "Certain Transactions -- Transactions with Senior
Managers."

INCOME TAX PROVISION

The Company's income tax provision increased from $917,000, or an effective
rate of 31.5%, in 1994, to $2.7 million, or an effective tax rate of 41.5%, in
1995. The increase in the effective income tax rate was primarily due to the
utilization in 1994 of the 1993 net operating loss carryforward.

NET INCOME

The Company's net income increased $1.7 million, from $2.0 million in 1994
to $3.7 million in 1995.

FISCAL 1994 COMPARED TO THE SEVEN MONTHS ENDED DECEMBER 31, 1993

NET SALES

Net sales increased $73.7 million, from $20.5 million for the seven months
ended December 31, 1993 to $94.2 million in 1994. The increase in net sales of
75.3% was attributable to roofing and gutter products and services, net sales of
which increased $55.5 million to $74.0 million in 1994. The remaining increase
in net sales was due to garage door and entry door products and services, net
sales of which increased $10.4 million to $12.1 million in 1994 as well as
fencing and other products and services, net sales of which increased $7.8
million to $8.1 million in 1994. These increases were due primarily to an
increase in the number of installations which resulted from the first full-year
impact of the Company's 38 sales offices, the opening of 17 new sales offices,
an increase in Sales Associates from 260 to 496, and the addition of fencing and
garage doors in certain markets, as well as increased selling prices.

GROSS PROFIT

Gross profit increased $30.1 million, from $8.0 million, or 38.7% of net
sales, for the seven months ended December 31, 1993 to $38.1 million, or 40.4%
of net sales, in 1994. The increased gross profit resulted from an increased
number of installations and increased selling prices, partially offset by the
increase in the Sears license fee. The license fee incurred to Sears increased
$6.2 million, from $1.2 million, or 5.8% of net sales, in the seven months ended
December 31, 1993 to $7.4 million, or 7.9% of net sales, in 1994. The increase
in the license fee incurred in 1994 was due to the increase in sales volume and
an increase in the license fee rates. Gross profit before the Sears license fee
increased $36.2 million, from $9.2 million, or 44.6% of net sales, in the seven
months ended December 31, 1993 to $45.4 million, or 48.3% of net sales, in 1994.
The unit costs of materials, installation labor and warranty expense remained
relatively constant during the period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased $25.7 million, from
$9.1 million for the seven months ended December 31, 1993, to $34.8 million in
1994 and as a percentage of net sales, decreased from 44.3% for the seven months
ended December 31, 1993, to 37.0% in 1994. The increase in selling, general and
administrative expenses resulted primarily from expenses associated with

24
<PAGE>
increased sales volume and a full year of operations. The decrease as a
percentage of net sales was due primarily to the charges in 1993 related to the
start-up of the Company. Direct advertising expense increased $4.4 million from
$1.7 million in the seven months ended December 31, 1993 to $6.1 million in
1994; as a percentage of net sales, however, advertising expense decreased from
8.2% for the seven months ended December 31, 1993 to 6.5% in 1994. Selling
commission expense increased $6.8 million, from $1.7 million, or 8.4% of net
sales, in the seven months ended December 31, 1993 to $8.5 million, or 9.0% of
net sales, in 1994. Performance-based compensation paid to officers and
regional, sales and production managers was $3.0 million in 1994, including a
one-time bonus in the aggregate amount of $1.1 million; no such compensation
expense was incurred in the seven months ended December 31, 1993, as the Company
recorded net losses in such period. Management fees incurred to Globe were
$464,000 in 1994; no such fees were incurred for the seven months ended December
31, 1993. The balance of selling, general and administrative expenses, primarily
sales lead-generation activities, administrative and field operation payrolls
and related costs and general expenses, increased $11.0 million, from $5.7
million, or 27.7% of net sales, in the seven months ended December 31, 1993 to
$16.7 million, or 17.8% of net sales, in 1994. This increase was primarily due
to the additional number of sales offices and expenses relating to support
personnel and services required to manage the Company's expanding
infrastructure.

AMORTIZATION OF INTANGIBLES

Amortization of intangibles was $275,000 in 1994 reflecting the impact of
goodwill amortization related to the September 1994 stock repurchase from
management. See "Certain Transactions -- Transactions with Senior Managers."

NET INTEREST EXPENSE

Net interest expense increased by $39,000 as a result of borrowings required
to fund the September 1994 stock repurchase from management.

INCOME TAX PROVISION

The income tax provision was $917,000 in 1994; there was no income tax
provision in the seven months ended December 31, 1993. The effective income tax
rate in 1994 was 31.5%. The increase in income tax provision in 1994 was
primarily due to the income in 1994, offset by the utilization of the net
operating loss carryforward generated in 1993.

NET INCOME

The Company's net income increased $3.2 million from a net loss of $1.2
million for the seven months ended December 31, 1993 to net income of $2.0
million in 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary capital needs have been to fund the growth of the
Company and to fund the September 1994 stock repurchase from management and the
related payment of notes to management in September 1995. See "Certain
Transactions." The Company's primary sources of liquidity have been cash flow
from operations and borrowings under its bank credit facility. The Company's
operations through December 31, 1995 have not been capital intensive. The
Company's capital expenditures for 1993, 1994, 1995 and the first quarter 1996
were approximately $244,000, $573,000, $888,000 and $120,000, respectively.
Capital expenditures for fiscal 1996 are expected to be approximately $1.5
million, primarily related to the ongoing upgrading of computer hardware and
software. Future requirements for capital expenditures are expected to be funded
by cash flow from operations and bank lines of credit. The Company believes that
it has sufficient operating cash flow, working capital and bank financing,
together with the net proceeds from the offering and the financing arrangements
currently being pursued by the Company with respect to Marquise Financial, to
meet all of its obligations for the foreseeable future, including funding for
Marquise Financial and for the development and expansion of complementary
product lines and services.

In November 1995, the Company commenced the operations of Marquise
Financial, its consumer finance subsidiary. Marquise Financial has been
capitalized and funded with the Company's excess

25
<PAGE>

operating cash flow and borrowings under the Company's bank line of credit which
is secured through Exteriors, and the Company is actively pursuing additional
funding of up to $35.0 million for Marquise Financial for 1996. At May 1, 1996,
Marquise Financial had consumer finance receivables of approximately $11.9
million. The Company anticipates that the net proceeds from the offering, the
bank line of credit, the possible sale of consumer finance receivables of
Marquise Financial and cash flow from operations will be sufficient to satisfy
the Company's financing cash requirements in the foreseeable future. In the
event the Company is unable to obtain all requisite financing for its consumer
financing activities, the Company will reduce its consumer financing activities
until it can arrange for other financing alternatives. See "Risk Factors -- New
Consumer Finance Subsidiary" and Notes to Unaudited Condensed Consolidated
Financial Statements.

At March 31, 1996, the Company had approximately $46,000 in cash and cash
equivalents and a net working capital deficit of approximately $5.3 million. The
working capital deficit at March 31, 1996 represents an increase in the working
capital deficit of $479,000 from December 31, 1995, due to repayment of
stockholder notes from management partially offset by earnings in the first
quarter 1996. Borrowings under the bank line of credit increased from zero at
December 31, 1995 to $7.7 million at March 31, 1996. The utilization of excess
cash and the increase in borrowings under the bank line of credit is primarily
attributable to financing the increase in consumer finance receivables by
Marquise Financial.

In September 1994, the Company repurchased 40.2% of its outstanding Common
Stock from the Company's senior management for an aggregate of $17.7 million in
cash, notes and other obligations. The repurchase of the Common Stock was
accounted for under the purchase method of accounting. Since net assets were
already stated at approximate fair market value, the purchase cost of the shares
in excess of their par value and other direct costs incurred by the Company were
recorded as goodwill. Goodwill is being amortized over 40 years. Amortization
expense includes goodwill amortization and amortization of organizational
expenses. See "Certain Transactions -- Transactions with Senior Managers."

From its inception in June 1993 through March 31, 1996, the Company has
generated cash flow from operations of approximately $13.0 million. The Company
used $12.5 million of cash in connection with the repurchase of 40.2% of its
Common Stock from management stockholders and $1.8 million of the cash for
capital expenditures. See "Certain Transactions -- Transactions with Senior
Managers."

The Company's bank line of credit which is secured through Exteriors,
consists of a collateralized line of credit of $15.0 million. As of March 31,
1996, Exteriors had $7.7 million outstanding on its line of credit and
anticipates that approximately $15.0 million will be outstanding upon the
closing of the offering, a substantial portion of which will be used to fund
Marquise Financial. The Company intends to pay amounts outstanding under the
bank line of credit with a portion of the net proceeds of the offering. See "Use
of Proceeds." The bank line of credit bears interest at a rate per annum equal
to, at Exteriors' option, the bank's prime rate or LIBOR plus 1.5%. A portion of
the credit facility, $5.0 million, matures in March 1997, with the remaining
$10.0 million maturing in March 1998. Since inception, the Company has
periodically renewed its bank line of credit, increasing its line of credit from
$2.5 million to $15.0 million and lowering the interest rate charged.

At March 31, 1996, the Company had notes outstanding, plus accrued interest
thereon, and other obligations totaling $5.3 million payable to certain current
and former management stockholders. The Company expects to repay the $3.3
million of principal outstanding and accrued interest under the notes with a
portion of the net proceeds of the offering. See "Use of Proceeds" and "Certain
Transactions -- Transactions with Senior Managers."

26
<PAGE>
QUARTERLY FINANCIAL INFORMATION

The following table sets forth certain unaudited financial information for
each quarter during fiscal 1994 and 1995 and the first quarter of fiscal 1996.
The amounts shown are not necessarily comparable or indicative of actual trends,
since these amounts also reflect the addition of new products and additional
locations during these periods.

<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1994 1994 1994 1994 1995 1995 1995 1995
--------- -------- ------------- ------------ --------- -------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $12,915 $23,576 $28,200 $29,495 $22,362 $31,134 $36,459 $34,893
Gross profit............ 5,273 9,687 11,534 11,553 9,266 13,152 15,412 14,773
Operating profit
(loss)................. (126) 1,323 75(a) 1,679 256 1,680 2,667 2,192
Net income (loss)....... (122) 1,185(b) 87(b) 845 (1) 894 1,532 1,310

MARCH 31,
1996
---------

<S> <C>
Net sales............... $27,093
Gross profit............ 11,800
Operating profit
(loss)................. 714
Net income (loss)....... 349
</TABLE>

- ------------------------------
(a) Includes a bonus in the aggregate amount of $1.1 million paid to management
and $320,000 of management fees paid to Globe for the nine months ended
September 30, 1994.

(b) Includes tax benefits from the utilization of the Company's 1993 net
operating loss carryforward.

SEASONALITY

INFLATION

Inflation has not had a material impact upon operating results and the
Company does not expect it to have such an impact in the future. To date, in
those instances where the Company has experienced cost increases, it has been
able to increase selling prices to offset such increases in cost. There can be
no assurance, however, that the Company's business will not be affected by
inflation or that it can continue to increase its selling prices to offset
increased costs and remain competitive.

27
<PAGE>
BUSINESS

GENERAL

The Company is a leading national marketer and contractor of installed home
improvement products, including roofing, gutters, doors and fencing. The Company
markets its home improvement products and services directly to consumers
primarily under the "Sears" name pursuant to a three-year license agreement with
Sears which expires December 31, 1998. Sears has been in business for over 100
years and is a nationally recognized name in the installed home improvement
industry. The Company is one of the largest third-party licensees of Sears home
improvement products and services. The Company currently markets its products
directly to residential customers in 44 states through a combination of national
and local advertising and its approximately 700 Sales Associates. The Company
has 74 sales offices located in major cities across the U.S., providing the
Company with a presence in markets covering approximately 77% of the
owner-occupied households in the U.S. The Company installs its products through
a network of over 1,300 qualified independent contractors and purchases its
products through local and regional independent distributors.

The Company was formed in May 1993 to participate in the consolidation of
the installed home improvement industry. Since commencement of the Company's
operations in June 1993, the Company's net sales have increased to $124.8
million for the year ended December 31, 1995. The Company intends to continue
its growth in net sales and profitability by increasing penetration in existing
markets through the addition of new Sales Associates and sales offices and the
generation of additional sales leads. In addition, the Company intends to add
new installed product lines, including proprietary products and other
maintenance-related, "need-based" products and services, and to increase its
conversion rate of sales leads into sales. The Company also believes that the
availability of an alternative source of credit financing for its customers
through Marquise Financial will lead to increased product sales and
profitability.

INDUSTRY OVERVIEW

According to the U.S. Department of Commerce, total expenditures for
residential improvements and repairs grew at an annual compounded rate of 5.7%
from approximately $97.5 billion in 1991 to approximately $115.0 billion in
1994. The Company believes there are several trends accounting for the growth in
the home improvement market over the past several years. As the inventory of
homes in the U.S. grows each year, the size of the home improvement market grows
in turn. For example, the average age at which most homes in the U.S. are
re-roofed is approximately 17.5 years; as a result, as the number of existing
homes grows each year, the number of homes which need to be re-roofed grows as
well. In addition, the size of the average roof in the U.S. has increased
slightly over the past years, leading to larger projects. Furthermore, the
Company believes that as the value of the average home in the U.S. has
increased, homeowners are more willing to use higher quality or premium products
on their roofs and other parts of their homes to protect or enhance the value of
their homes.

The installed home improvement industry is large and fragmented. Providers
tend to be small, family-owned independent contractors, serving a localized
customer base and often are undercapitalized. Increasingly, providers of home
improvement services are facing a growing array of complex regulation. For
example, most independent contractors are now required to have a valid license
and insurance, including worker's compensation insurance, in order to operate.
As a result of this increased regulatory complexity, the industry is
increasingly characterized by a high rate of local contractors entering and
exiting the home improvement business.

28
<PAGE>
OPERATING STRATEGY

The Company seeks to significantly increase its market share in the
installed home improvement market by providing premium home improvement products
in a cost-effective manner. Key elements of the Company's operating strategy
include:

- EFFICIENT MARKETING, SALES LEAD GENERATION AND SALES. The Company
currently has 74 sales offices with approximately 700 Sales Associates in 44
states covering approximately 77% of the owner-occupied households in the U.S.
The Company has been able to cost-effectively generate sales leads through its
targeted advertising approach. The Company advertises nationally through
Sears-produced advertising and locally through the yellow pages and local
newspapers. In addition, the Company has developed an efficient program for
fielding telephone calls, qualifying potential customers and promptly
dispatching Sales Associates.

- LICENSEE OF NATIONALLY RECOGNIZED SEARS NAME. The Company is licensed to
sell, furnish and install, under the "Sears" name, certain products and services
approved by Sears in 44 states. The Company believes that it realizes
significant benefits from selling and marketing its products under the "Sears"
name. Prior to January 1993, Sears sold, furnished and installed the exterior
home improvement product lines currently sold by the Company and had been
selling, furnishing and installing certain of the Company's product lines for
over 40 years. Sears enjoys a national reputation for its quality products and
commitment to customer satisfaction, which the Company believes provides the
Company with a significant competitive advantage in its markets.

- FOCUS ON "NEED-BASED" PRODUCTS AND OWNER-OCCUPIED HOUSEHOLDS. The
Company markets, sells and installs primarily "need-based" products and services
which are used to improve and repair portions of a home or prevent potential
problems, such as a damaged roof or a broken garage door. A customer's decision
to purchase "need-based" products and services tends to be less discretionary
than the decision to purchase other home improvement products, since a decision
to purchase a "need-based" product is typically in response to a problem that
needs to be promptly remedied. The Company focuses its marketing efforts on
owner-occupied homes. Because most people's largest investment is their home,
the Company believes home-owners are more willing to protect or enhance the
value of their investment by installing "need-based" products.

- VARIABLE COST OPERATIONS. The Company's operating costs are
substantially variable due to its method of purchasing products and retaining
independent contractors and its utilization of incentive-based compensation
programs for its Sales Associates and, to a lesser extent, its administrative
and operating management. The Company does not maintain any inventories of
products but instead purchases products from its independent distributors when a
sale is made to a customer. Likewise, the Company does not retain an independent
contractor to install a job until a sale has been made. Substantially all of the
compensation paid to a sales representative is based on sales generated by the
sales representative. In addition, as a result of the Company's automated
information systems, the Company's administrative and field support operations
are cost-efficient.

- COMMITMENT TO SUPERIOR CUSTOMER SERVICE. The Company promotes
exceptional value to its customers by presenting, delivering and installing a
quality product in a timely manner. The Company trains its Sales Associates to
fully inform customers as to what to expect from the Company's products and
services and to be knowledgeable about the Company's products. The Company
retains independent contractors who are monitored by the Company's quality
control coordinators to ensure conformance to the Company's quality standards.
Unlike many of its competitors, the Company requests no payments from customers
with approved credit until the job is complete and the customer has signed a
written certificate of satisfaction. The Company backs each installation with
labor and product warranties of up to 10 years. In addition, the manufacturers'
product warranties, which are issued directly to the customer, may provide
product warranty coverage for as long as 40 years. Furthermore, the Company,
pursuant to the license agreement has adopted the Sears policy of "Satisfaction
Guaranteed or Your Money Back" with respect to each installation.

29
<PAGE>
- ESTABLISHED RELATIONSHIPS WITH INDEPENDENT CONTRACTORS. Currently, the
Company has established relationships (i.e., independent contractors who have
performed two or more installations for the Company) with approximately 1,300
independent contractors. Prior to retention, the Company generally pre-screens
independent contractors for quality of installations and insurance coverage.
After retaining an independent contractor, the Company's goal is to monitor the
independent contractor's performance to ensure the independent contractor
satisfies the Company's quality and customer satisfaction standards. The Company
believes it is able to attract qualified independent contractors by providing
the independent contractors with prompt payment and predictable workflow and by
relieving the independent contractor of marketing, sales and collection duties.

- CONSUMER FINANCING. The Company is able to offer its customers the
option of financing their purchases through Sears and its affiliates or through
Marquise Financial, the Company's newly-formed consumer finance subsidiary which
began operations in November 1995. The Company believes that its ability to
offer these financing alternatives to qualified customers has a positive effect
on its Sales Associates' ability to close sales.

- AUTOMATED INFORMATION SYSTEMS. The Company operates a sales lead
management, job cost, billing, accounting and management information system at
its headquarters. The Company believes that its procedures permit material
delivery, product installation and job inspection in a cost-effective and timely
manner leading to prompt installation of its products. In addition, sales of
products financed by Sears and its affiliates and the license fee paid by the
Company to Sears are settled electronically between the Company and Sears. The
systems employed by the Company are being further upgraded to more efficiently
link incoming phone calls with a timely in-home sales presentation.

GROWTH STRATEGY

The Company's strategy is to continue its growth by focusing on the
following areas:

- INCREASING PENETRATION OF CURRENT PRODUCT LINES. The Company believes it
has less than 1% of the market for its current product lines. The industry in
which the Company competes is fragmented and characterized by inconsistent
quality and a high turnover of competitors. The Company believes that it can
increase its share of the market and its profitability by effectively promoting
its quality products to generate additional sales leads, increasing the size of
its sales force and increasing its close ratio (i.e., the percentage of sales
leads resulting in sales).

- INCREASING SIZE AND PRODUCTIVITY OF SALES FORCE. The Company has been
rapidly increasing the size of its sales force from 557 Sales Associates at
March 31, 1995, to 700 Sales Associates at May 1, 1996. Additional Sales
Associates will permit the Company to improve its response time to sales leads,
which, based on the Company's experience, improves the percentage of sales leads
resulting in sales. The Company intends to increase the number of Sales
Associates by approximately 50 and to open 1 to 2 sales offices in new and
existing markets during the remainder of 1996. The Company is also in the
process of implementing a professional training program for all Sales Associates
which, based on performance to date, is expected to increase the effectiveness
and productivity of its Sales Associates.

- EXPANDING PRODUCT OFFERINGS AND PROPRIETARY PRODUCTS. The Company plans
to focus on expanding its markets and product lines by adding more "need-based"
products and services. In 1995 and early 1996, the Company began test marketing
the installation, under the "Diamond Exteriors" name, of light commercial
roofing and the provision of heating and air conditioning services, repair and
installation under the "Solitaire" name. Additionally, in conjunction with
certain manufacturers, the Company has developed and is in the process of
further developing certain proprietary products under the "Diamond Shield" name
which the Company licenses from Globe. Currently, the Company sells proprietary
roofing, garage door and fencing products. These proprietary products permit the
Company to offer its customers unique, high quality products with an extended
labor and materials warranty that is not subject to direct price comparisons
with the Company's competitors.

30
<PAGE>
- INCREASED UTILIZATION OF SEARS RELATED SALES LEADS. The Company believes
that, by adding complementary product lines and services to its Sears license
arrangements, it can increase its utilization of its sales leads and therefore
increase profitability. The Company receives sales leads requesting products and
services which the Company currently does not provide. The Company expects to
further utilize sales leads it has already generated at no additional
incremental cost by expanding into complementary Sears product lines. Any such
expansion of the license arrangements will require Sears prior approval.

- ADDITIONAL CREDIT AVAILABILITY. During fiscal 1995, approximately 89% of
the Company's sales were financed, and of such financed sales, approximately 97%
were financed through Sears and its affiliates. Historically, the Company has
been unable to provide financing to certain potential customers as a result of
the inability of these customers to satisfy the credit underwriting criteria of
Sears and its affiliates. Since the Company's inception, Sears credit approval
rate for the Company's customers has varied from time to time based on a variety
of factors. As a result, in November 1995, the Company established a consumer
finance subsidiary, Marquise Financial, to provide potential customers with an
alternate source of financing their purchases, thereby creating opportunities
for increased net sales and profitability.

PRODUCTS

The following table sets forth the net sales and percentage of total net
sales for each of the Company's major product lines.

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
PERIOD FROM JUNE 1 TO ---------------------------------------------------- -------------------------
DECEMBER 31, 1993 1994 1995 1995
------------------------- ------------------------- ------------------------- -------------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
NET SALES TOTAL NET SALES TOTAL NET SALES TOTAL NET SALES TOTAL
----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roofing and Gutters..... $ 18,532 90.2% $ 74,015 78.6% $ 87,060 69.7% $ 15,687 70.2%
Garage Doors............ 713 3.5 5,538 5.9 10,606 8.5 2,195 9.8
Entry and Security
Doors.................. 1,029 5.0 6,600 7.0 8,682 7.0 2,039 9.1
Fencing................. 188 0.9 7,358 7.8 17,933 14.3 2,381 10.6
Other................... 86 0.4 675 0.7 567 0.5 60 0.3
----------- ------------ ----------- ----- ----------- ----- ----------- -----
Total............... $ 20,548 100.0% $ 94,186 100.0% $ 124,848 100.0% $ 22,362 100.0%
----------- ------------ ----------- ----- ----------- ----- ----------- -----
----------- ------------ ----------- ----- ----------- ----- ----------- -----

1996
-------------------------
PERCENT OF
NET SALES TOTAL
----------- ------------

<S> <C> <C>
Roofing and Gutters..... $ 18,804 69.4%
Garage Doors............ 2,414 8.9
Entry and Security
Doors.................. 1,738 6.4
Fencing................. 3,621 13.4
Other................... 516 1.9
----------- -----
Total............... $ 27,093 100.0%
----------- -----
----------- -----
</TABLE>

The Company purchases all of its products directly from independent
distributors and/or manufacturers. All products sold by the Company under the
license agreement must be pre-approved by Sears. To date, the Company has not
experienced any difficulties obtaining the approval of Sears for any of its
products; however, there can be no assurance that Sears will continue to approve
the Company's new products.

Set forth below is brief description of the products offered by the Company:

ROOFING AND GUTTERS. The Company sells and installs most types of roofing
products, including asphalt, fiberglass, laminate, 3-tab and wood shingles, clay
and concrete tile and metal. The Company also sells and installs a proprietary,
premium shingle under the "Diamond Shield" name, which is manufactured by Globe.
The Diamond Shield shingle has a 30-year warranty and is rapidly becoming the
Company's most popular shingle. Globe licenses the name "Diamond Shield" to the
Company pursuant to an exclusive, royalty-free, perpetual license. See "Certain
Transactions -- Transactions with Globe and Globe Affiliates." The Company does
not sell, install or tear-off asbestos roofing. The Company installs all types
of residential roofs from flat roofs to roofs with multiple peaks. The average
price for a roof installed by the Company is $5,000. The Company also sells and
installs aluminum and steel gutters. The average price of installed gutters is
$1,200. The Company repairs roofs in certain limited markets as a Sears
authorized contractor and provides warranty service on Sears behalf for exterior
home products sold, furnished and installed by Sears prior to Sears exit from
the selling,

31
<PAGE>
furnishing and installing of roofing products. Pursuant to the Sears license
agreement, the Company also sells and installs soffit/facia, siding for dormers
and gable ends, chimney repair and tear-off roofing in connection with its
roofing installations.

The Company, on a limited test basis, also sells and installs, under the
"Diamond Exteriors" name, most types of light commercial roofing products, which
are similar to residential roofing products, including a wide variety of
shingles and various types of modified asphalt and rubber-based roll roofing
products. The average price for a light commercial roof installation is $15,000.
Typically, a light commercial roofing installation involves roofs of less than
13,000 square feet, such as fast food restaurants, convenience stores and small,
single-unit buildings. The light commercial roofing products and services are
not marketed or sold pursuant to a Sears license agreement.

GARAGE DOORS. The Company sells and installs a complete line of wood, steel
and fiberglass garage doors. The average price of an installed garage door,
including custom-made garage doors, is $1,250. In connection with the sales of
garage doors, the Company also sells and installs Sears brand garage door
openers. The Company sells a proprietary, high quality insulated steel garage
door under the "Diamond Shield" name. The Company repairs garage doors as a
Sears authorized contractor.

ENTRY AND SECURITY DOORS. The Company sells and installs exterior entry
doors and security storm doors. The Company offers a variety of pre-finished
energy-efficient steel, wood and fiberglass entry doors in a wide assortment of
colors and styles. The average price of an installed entry door is $1,700. The
Company also offers steel-frame security storm doors which provide energy
efficiency and security. The average price for a fully installed security storm
door is $1,100. In addition, the Company sells patio doors and patio storm
doors.

FENCING. The Company sells and installs a variety of fencing products
including galvanized, steel and aluminized chain link fences, vinyl coated steel
fabric fences with matching color frameworks, wood fences in a variety of styles
and plastic fences. The Company also sells a proprietary chain link fence under
the "Diamond Shield" name which features an extra-strong ribbed design and rust
protection. The average price of an installed fence is $2,000.

OTHER. The Company sells and installs skylights, insulation and a complete
line of exterior home improvement products for mobile homes such as siding,
windows, doors and roofing. The Company is currently testing operations which
will provide, through Solitaire, cleaning, repair and replacement products and
services to the heating and air conditioning market, which services are not
marketed or sold pursuant to a Sears license agreement. This category also
includes financing income from Marquise Financial and credit participation fees
from Sears and its affiliates.

NATIONAL MARKETING AND SALES LEAD GENERATION

The Company's principal marketing activities are conducted by participation
in Sears national advertising campaigns. In 1995, approximately 44% of the
Company's marketing expense was related to Sears produced advertising. Prior to
the beginning of each year, the Company is required to commit to the amount of
advertising that it intends to purchase from Sears for the upcoming year. In
1994 and 1995, the Company incurred expenses to Sears of $1.7 million and $2.8
million, respectively, for advertising. The Company believes that Sears national
advertising campaigns enable the Company to cost-effectively market its
products. In addition, the Company advertises in the yellow pages, local
newspapers, and, to a lesser extent, on radio and television. To improve the
efficiency of its promotional activities, the Company monitors responses with
internally developed computer software to determine which groups of homeowners
produce the highest percentages of scheduled appointments and sales and to
compile information such as the average sale price per sales lead for each type
of advertising media. The Company's analysis of this information provides the
basis for the ongoing refinement of its advertising program.

The Company's advertisements with Sears display a toll free number for a
potential customer to call. Currently, all calls from potential customers
responding to Sears advertisements, representing approximately 50% of the total
calls received by the Company, go through a call center operated by

32
<PAGE>

Sears which is operated 24 hours a day. A call-prompt system allows the caller
to select the desired product in response to automated questions outlining the
various products and services. Calls relating to the Company's products are then
automatically transferred to the appropriate Company call center based on the
area code of the caller. The Company call center which receives the telephone
call verifies the products the customer is interested in, schedules an
appointment and transmits the sales lead via facsimile or computer to the
appropriate sales office. The East, Southeast and West regions of the Company
each operate their own call center. These Company call centers are usually
staffed from 8:00 a.m. to 8:00 p.m., Monday through Friday and, depending on the
time of year, on Saturday and Sunday in certain regions. The Central region's
call center is operated by HI, Inc., a call center staffed 24 hours a day and an
affiliate of Globe. See "Certain Transactions -- Transactions with Globe and
Globe Affiliates." The sales calls generated by non-Sears advertising are
received either directly at the appropriate Company call center or through HI,
Inc.

SALES

Potential customers who contact the Company are scheduled for an in-home
presentation from a sales representative, generally within two to five days of
the initial contact. Appointment schedules are transmitted by facsimile or
computer from the call centers to the various sales offices two to three times
per day. Sales managers attempt to schedule two to three appointments per sales
representative each day, Monday through Saturday, and each sales representative
is required to report the results of each appointment on a daily basis. Such
data provide the basis for the computer-generated management information upon
which the Company evaluates each sales representative's performance in such
areas as sales as a percentage of appointments, cancellation rate, average
dollar amount of sales, job profitability and amount of commissions earned.

Upon being assigned a qualified sales lead, one of the Company's sales
representatives will make an in-home presentation explaining the Company's
products to the potential customer with the assistance of brochures and videos.
During the in-home presentation, the sales representative will also determine
the specifications of the home improvement project and provide a price estimate
for the work to be performed. The Company follows a policy of requiring no money
down from customers with approved credit, with payment to be made only upon
completion of the job and the receipt of a written statement from the customer
confirming satisfaction.

The Company employs an incentive-based compensation program coupled with
employee benefit programs, including health insurance coverage, for its Sales
Associates. Sales representatives receive a percentage of the revenue generated
by a sale, with the percentage varying, depending upon the type of product sold.
In addition, in the event of improper estimating or other errors which lead to a
reduced profit on an installation, the sales representative's commission is
reduced by a portion of the reduced profit. Sales managers are paid a minimum
base salary, with incentives based on both monthly sales and the quarterly
profits for their sales offices.

The Company places great importance on recruiting skilled, professional and
motivated sales representatives. The attraction and retention of qualified sales
representatives is critical to the Company's goal of continued sales growth. The
Company attracts sales representatives by general advertising and referrals. The
Company has experienced significant turnover in the past, because, among other
reasons, the Company's sales representatives work on a commission-only basis.
During the two-year period from January 1, 1994 through December 31, 1995,
approximately 62% of the Company's total sales representatives resigned or were
terminated. During the same period, the Company's 200 top-selling sales
representatives (representing approximately 15% of the sales representatives
employed by the Company during such period) generated approximately 61% of the
Company's total net sales. Among these top-selling sales representatives,
approximately 30% resigned or were terminated during the two-year period. The
turnover of sales representatives results in increased recruitment and training
costs and a lower than desired conversion rate of sales leads to sales. To the
extent that the turnover rate of sales representatives continues or increases,
or the Company loses a significant number of its most productive sales
representatives, the net sales and profitability

33
<PAGE>
of the Company could be adversely affected. The Company is attempting to reduce
turnover rates through more selective recruiting and better training. See "Risk
Factors -- Reliance on Sales Associates" and "-- High Turnover of Sales
Representatives."

The Company has found that improved training of its Sales Associates
increases the level of service that can be provided to the customer and improves
the percentage of sales leads which ultimately result in sales. The Company
employs, and is in the process of implementing nationwide a one to two week
training program for all Sales Associates. The training program involves
instruction as to the high standards of integrity and customer service required
by the Company, technical information about the various products offered by the
Company and "on the job" training with an experienced Sales Associate. The
Company has developed a series of videos and training materials to assist in the
training process. The Company's product suppliers also provide representatives
to assist in the training programs at the supplier's expense.

The Company's sales and installation activities are organized into four
geographic regions (the East, Southeast, Central and West), each of which is
managed by a regional president. Each region typically has a Vice President of
Sales, to whom the sales managers report, and a Vice President of Operations, to
whom installation managers and quality control coordinators report. The East
Region has two District Managers, reporting to a Vice President of Sales and a
Regional Manager of Operations. Each sales office is electronically connected to
its particular regional office. Currently, each region has a call center (except
the Central region which uses HI, Inc., an affiliate of Globe, as its call
center) through which sales leads are assigned to the various sales offices. See
"Certain Transactions -- Transactions With Globe and Globe Affiliates." The
Company currently has 74 sales offices which are typically staffed with a sales
manager, an installation manager and a quality control coordinator. The sales
manager is responsible for assigning sales leads to the sales representatives,
monitoring their performance and recruiting sales representatives. The
installation manager is responsible for scheduling and retaining independent
contractors for particular jobs and recruiting independent contractors. The
quality control coordinator inspects a portion of the installations while they
are in progress or upon completion and qualifies new independent contractors.

INDEPENDENT CONTRACTORS

The Company retains independent contractors to perform all of its
installations. Prior to retention, the Company generally pre-screens each
contractor's background and work to ensure that it meets the Company's quality
standards. Each of the Company's sales offices enters into arrangements with
multiple independent contractors setting forth the compensation structure for
the independent contractor for a specified type and scope of installation.
Independent contractors engaged by the Company employ their own workers and are
required to maintain their own vehicles, equipment, insurance and licenses. The
Company's policy requires that its independent contractors satisfy the Company's
workers' compensation and general liability insurance requirements. In certain
circumstances, independent contractors have not carried or renewed their
workers' compensation and general liability insurance. To the extent that
independent contractors do not carry the required insurance, the Company could
incur ultimate liability for any injury or damage claims. The Company is in the
process of taking actions aimed at better ensuring that each independent
contractor meets and continues to meet the Company's workers' compensation and
general liability insurance requirements. See "Risk Factors -- Dependence on
Availability of Qualified Independent Contractors." The Company has established
relationships (i.e., independent contractors who have performed two or more
installations for the Company) with over 1,300 independent contractors. Each
independent contractor provides the Company with a one to two year warranty for
its work which is significantly shorter in duration than the labor warranty
provided by the Company to its customers. See "-- Warranty."

From time to time, the Company has experienced difficulty retaining a
sufficient number of qualified independent contractors, especially after periods
of extreme weather in specific geographic areas due to increased demand.
However, the Company is in the process of developing and testing

34
<PAGE>
several programs to increase its ability to attract and retain quality
independent contractors. These programs include a more rapid payment mechanism
and a certification program based on work quality whereby independent
contractors are paid increased rates for their services based on their
certification level. Although these programs will marginally increase the
Company's costs, the Company believes that they will help ensure an adequate
supply of qualified independent contractors and reduce future incidences of
warranty claims. See "Risk Factors -- Dependence on Availability of Qualified
Independent Contractors."

CUSTOMER FINANCING

The average sales price charged by the Company for its products and services
ranges between $1,100 and $5,000. During fiscal 1995, approximately 89% of the
Company's sales were financed, and, of the sales which were financed,
approximately 97% were financed through Sears and its affiliates. A sales
representative is generally able to determine credit availability for a customer
by calling the Sears consumer credit department or Marquise Financial during the
in-home presentation. In the Company's credit arrangements with Sears and its
affiliates, Sears and its affiliates assume all credit risk and the Company
receives from Sears and its affiliates, upon completion of the installation, the
full contract price. Because the Company's target market is a homeowner living
in a single family home, its potential customers generally have a good credit
rating. However, in the past Sears and its affiliates credit approval rate for
the Company's customers has varied from time to time based on a variety of
factors. The continued availability of affordable financing for potential
customers is necessary for the Company to continue to sell its products. See
"Risk Factors -- Interest Rate Sensitivity" and "-- Dependence on Availability
of Sears Credit."

In November 1995, Marquise Financial, the Company's consumer finance
subsidiary, commenced operations to provide an additional financing alternative
for purchasers of the Company's products. If the customer does not want to
finance the purchase through Sears and its affiliates or, in some cases, if
Sears and its affiliates declines the customer's credit application, the
customer may finance the purchase through Marquise Financial, so long as the
customer satisfies Marquise Financial's credit criteria. The sales
representative makes a phone call during the in-home presentation and is
generally able to determine credit availability for a customer with Marquise
Financial within 5 to 10 minutes. Unlike financing through Sears and its
affiliates, the Company bears the credit risk on all financing provided by
Marquise Financial. Customers financing purchases with Marquise Financial can
pay a smaller portion of the principal balance on a monthly basis than is
currently required by Sears and its affiliates. Although this lengthens the term
of the loan, the Company believes that lower monthly payments make its products
more affordable at the time of purchase. The Sears license agreement requires
that Sears and its affiliates be given a right of first refusal with respect to
75% of the total dollar volume of applications for credit received by the
Company in connection with sales made under the Sears license agreement. As of
May 1, 1996, Marquise Financial had $11.9 million in consumer finance
receivables outstanding. The Company is actively pursuing additional funding of
up to $35.0 million for Marquise Financial for 1996. See "Risk Factors -- New
Consumer Finance Subsidiary" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

WARRANTY

35
<PAGE>
warranty obligations, regardless of whether a manufacturer or independent
contractor performs its warranty obligations. In addition, pursuant to the
license agreement with Sears (i) Sears has the right to settle, at the Company's
expense and without the Company's consent, any customer complaints, (ii) the
Company has agreed to and supports Sears policy of "Satisfaction Guaranteed or
Your Money Back" as it relates to customer complaints and adjustments and (iii)
the Company's customers are third-party beneficiaries of the one-year product
and labor warranty given by the Company to Sears with respect to each
installation. The Company attempts to limit its potential warranty exposure by
pre-screening independent contractors, using quality products produced by
nationally known manufacturers and inspecting a portion of all installations. In
addition to the product warranty it provides, the Company generally transfers to
its customers, to the extent transferable, the manufacturers' product warranties
which may provide product warranty coverage for as long as 40 years.

To secure the performance of the independent contractors under their
warranties, the Company requires most independent contractors to deposit with
the Company between 1% and 2% of the payment such independent contractors
receive for each completed installation, up to an aggregate maximum agreed-upon
amount, which amount is held in reserve by the Company. These retentions are
used to secure performance by an independent contractor of any labor warranty
claims. Although the amounts retained may not be sufficient to cover all labor
warranty costs, the Company believes that such retentions provide sufficient
incentive to the independent contractor to perform the installation or needed
repair in accordance with the Company's high quality standards. The Company
currently accrues a reserve for warranty claims, which has approximated 2% of
net sales since the Company's inception. See "Risk Factors -- Warranty
Exposure."

PURCHASING

The Company purchases roofing materials, gutters, doors, fencing and related
products primarily from a variety of local and regional independent distributors
and/or manufacturers. Each independent distributor provides a variety of
services to the Company, including the maintenance of adequate inventories to
support the Company's prompt need for materials, the delivery of requisite
materials to each job site and the provision of extended payment terms for the
products purchased. Through the use of independent distributors, the Company
avoids the costs associated with maintaining an inventory and operating
distribution centers. In many cases, the payment terms extended by the Company's
suppliers permit the Company to collect payment for an installation prior to
payment by the Company of the associated product costs. The independent
distributors benefit from their relationships with the Company due to the
consistent volume of purchases by the Company and the resultant increased
inventory turnover and the limited credit risk posed by the Company. The Company
believes it has good relationships with its independent distributors.

In 1995, approximately 20% of the Company's material purchases were supplied
by ABC Supply Co., inc., an independent distributor having facilities in
multiple locations. The Company believes that other distribution companies would
be able to offer comparable services and pricing to the Company. Approximately
16% in dollar volume of all roofing products purchased by the Company during
1995 were manufactured by Globe, the Company's principal stockholder. See
"Certain Transactions -- Transactions with Globe and Globe Affiliates."

SEARS LICENSE AGREEMENT

Currently, the Company conducts primarily all of its direct marketing and
installation activities under a license agreement between Exteriors and Sears.
As used herein with respect to the description of the Sears license agreement,
the defined term "Company" shall mean Diamond Home Services, Inc. together with
Exteriors. The Company entered into a new three-year license agreement with
Sears effective January 1, 1996. The license agreement authorizes the Company to
sell, furnish and install roofing, gutters, doors and fences under the "Sears"
name as a Sears authorized contractor to residential customers in 44 states.
During the term of the license agreement, the Company may not sell, furnish or
install similar products under either its own or any other retailer's name
without Sears consent. The license agreement expires December 31, 1998 but,
under certain circumstances, may be

36
<PAGE>

extended for a wind down period of up to six months. After the first two years
of its term, the license agreement may be terminated prior to expiration by
either party without cause so long as such party has provided 12-months' written
notice prior to the termination date. The license agreement also provides for
immediate termination by Sears for various reasons, including failure to comply
with any material provision of the license agreement; allegations that the
approved products infringe a third party's patent, trademark or copyright or
that they are being sold in violation of law; the Company's failure to have
merchantable, conforming products ready for delivery and installation at the
time specified; or receipt by Sears, in its opinion, of an excessive number of
complaints regarding the Company and the Company's failure to timely provide
Sears with adequate assurances, as determined by Sears, that issues involving
such complaints have been resolved to Sears satisfaction. In addition, Sears has
the right, at any time, upon 12 months' notice to the Company to discontinue the
Company's right to sell, furnish and install certain products in certain markets
under the "Sears" name if the sales volume or relative "Quality Every Day!"
standards or "Service Quality Index" scores, as defined in the license
agreement, for such products or services fall below the standards contained in
the license agreement.

Measuring and evaluating sales levels and customer satisfaction is important
to both the Company and Sears. Annually, the Company and Sears review the
Company's following year's sale forecast and operating plan. Quarterly, the
Company and Sears review the "Service Quality Index" ("SQI Index") scores for
the Company with respect to each region and product. The SQI Index is a Sears
measure of the Company's performance against "Quality Every Day!" ("QED")
standards with respect to the Company's delivery of products and services. The
Company's scores are compared against the average scores for Sears licensees as
a group. During the past year, the Company's average SQI Index scores have been
within five percentage points of the average for all Sears licensees. Both the
Company and Sears agree that the Company should improve its customer
satisfaction scores. The Company believes that its rapid growth has resulted in
scores at a level below that which the Company would have received had its
growth been slower. However, the Company believes that it can improve its
quality and service and has taken and is in the process of taking a number of
initiatives involving its systems, reporting, employees, independent
contractors, suppliers and distributors directed at improving its quality and
service.

The license agreement is not exclusive by its terms; however, historically,
Sears has not licensed the same home improvement products to multiple licensees
within the same market. The Company believes Sears does not grant licenses to
more than one licensee in a market to avoid confusion among the customers with
respect to pricing and other factors; provided, however, there can be no
assurance that Sears will continue to limit its licenses. The license agreement
may not be assigned by the Company to a third party other than an affiliate
without Sears consent.

The license agreement provides for the Company to pay Sears a license fee
based on the Company's gross sales for products licensed under the license
agreement. The license fee is a fixed percentage of such sales for certain
products. See "Risk Factors -- Dependence on Sears License" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
license agreement provides for an additional fee of 1% of gross sales for each
sale made pursuant to a customer referral from a Sears retail store associate.

The license agreement imposes quality standards which must be maintained by
the Company, as to both the products and the services it offers. Prior to any
new product introduction, each product sold under the license agreement with
Sears must be approved by Sears. In addition, all marketing materials employing
the "Sears" name are subject to the prior approval of Sears. The license
agreement grants Sears title to all customer information generated by the
Company during the term of the license agreement, as well as to all telephone
numbers used by the Company in connection with its operations under the license
agreement and provides that the Company has no right or interest in such
customer information or goodwill. The Company cannot use such information other
than in connection with the license agreement. The license agreement also
provides Sears the right to settle,

37
<PAGE>
at the Company's expense and without the Company's consent, any customer
complaints. The Company is not aware of any material claims made against Sears
by customers of the Company which the Company has not directly resolved with the
customer, but no assurances can be given that Sears will not do so in the future
with respect to the Company's customers. The Company has agreed to and supports
Sears policy of "Satisfaction Guaranteed or Your Money Back." The license
agreement also provides that the customers are third-party beneficiaries of the
one-year product and labor warranty from the Company to Sears with respect to
each installation.

The license agreement requires that Sears be given a right of first refusal
with respect to a minimum of 75% of the total dollar volume of applications for
credit received by the Company in connection with sales made pursuant to the
license agreement. If Sears declines any credit application, such application is
referred to the Company and the Company, at its discretion, can provide credit
to the applicant or seek a third party to provide credit. Beginning in 1996, the
Company receives from Sears and its affiliates a participation fee equal to
approximately 1.6% of sales financed through Sears and its affiliates. The
participation fees are payable by Sears and its affiliates over a ten-year
period, with 71% of the total participation fee to be paid in the first three
years following each installation financed through Sears and its affiliates. The
Company's right to receive the participation fee is subject to termination under
certain circumstances.

The Company believes that it has a good relationship with Sears and that it
is one of Sears largest third-party home improvement product licensees measured
by number of installations, gross sales, license fees paid to Sears and the
number of sales offices and markets served. In 1993, 1994 and 1995, the Company
incurred license fees to Sears in the aggregate amount of $1.2 million, $7.4
million and $13.0 million, respectively, and for the three months ended March
31, 1995 and 1996, $2.2 million and $2.8 million, respectively. In the event
that Sears were to terminate or fail to renew the license agreement, the Company
believes that, through its established sales and installation system, its
products and services could be marketed, installed and financed by the Company
independently or under the name of an alternative retail licensor. However,
termination of the license agreement or certain rights thereunder, the failure
of Sears to renew the license agreement with the Company on its current terms,
an increase in the rates of the license fee paid by the Company to Sears, the
addition of other Sears licensees marketing the Company's products in the
Company's markets, Sears exercise of its right to discontinue the Company's
license in any market or for any product or a decline in Sears reputation could
have a material adverse effect on net sales and profitability of the Company.

COMPETITION

The industry in which the Company competes is fragmented and competitive.
The Company believes that it is one of the largest companies in the U.S. engaged
in the sale and installation of exterior home improvement products. The Company
competes for sales with numerous local home improvement installers and
independent contractors in each of its markets, some of which also serve as
independent contractors for the Company. The Company also competes against major
retailers which market and install products similar to the Company's, including
Home Depot, Inc. and Montgomery Ward & Co., Inc. In addition, AMRE, Inc., a
licensee of Century 21 Real Estate Corp. and a former Sears licensee for siding
and windows, is also a competitor. To date, none of the retailer-sponsored
programs has provided significant competition to the Company. However, there is
no assurance that this absence of competition will continue. Certain of these
competitors are significantly larger and have greater financial resources than
the Company. In addition, Home Depot, Inc. and Montgomery Ward & Co., Inc. each
has a nationwide chain of retail stores, which provides them the opportunity to
offer products and services similar to the Company's directly to their
customers. The Company competes on the basis of price, Sears name recognition
and reputation, customer service reputation, workmanship and the ability of the
Company and the manufacturer to fulfill their warranty obligations. Because the
Company's focus is on providing additional value to its customers through
warranty protection, proprietary products and superior customer service, the
Company typically charges prices for its products and services which are higher
than those of most of its local competitors. The Company's ability to operate
under its license agreement to use the "Sears" name is

38
<PAGE>

of great importance to the Company's ability to compete and has significantly
contributed to the Company's rapid growth. The Company expects that the market
for its products and services will expand and therefore, competition will
increase in the future. There can be no assurance that the Company will remain
competitive or that the Company will be able to maintain its current
profitability. See "Risk Factors -- Highly Competitive Market."

GOVERNMENT REGULATIONS

The Company's business and the activities of its independent contractors are
subject to various federal, state and local laws, regulations and ordinances
relating to, among other things, in-home sales, consumer financing, advertising,
the licensing of home improvement independent contractors, OSHA standards,
building and zoning regulations and environmental laws and regulations relating
to the disposal of demolition debris and other solid wastes. In certain
jurisdictions, the Company or one of its employees is required to be licensed as
a contractor. In addition, certain jurisdictions require the Company or the
independent contractor to obtain a building permit for each installation. The
Company is also subject to certain federal, state and local laws and
regulations, which, among other things, regulate the Company's advertising,
warranties and disclosures to customers. Although the Company believes that it
has been and is currently in compliance in all material respects with such laws
and regulations there can be no assurance that in the future the Company's
results of operations will not be materially adversely affected by existing or
new laws or regulations applicable to the Company's business.

Marquise Financial's operations are subject to supervision by state
authorities (typically state banking, consumer credit or insurance authorities)
that generally require that the Company be licensed to conduct its business. In
many states, issuance of licenses is dependent upon a finding of public
convenience, and of financial responsibility, character and fitness of the
applicant. The Company is generally subject to state regulations, examinations
and reporting requirements, and licenses are revocable for cause. Currently,
Marquise Financial is licensed and qualified to provide financing in 42 states.

The Federal Consumer Credit Protection Act ("FCCPA") is comprised of various
federal statutes governing the consumer finance industry. Included within the
FCCPA are, among other federal statutes, the Truth in Lending Act, the Fair
Credit Reporting Act, the Equal Credit Opportunity Act and the Fair Debt
Collection Practices Act. The Truth in Lending Act requires a written statement
showing the annual percentage rate of finance charges and requires that other
information be presented to debtors when consumer credit contracts are executed.
The Fair Credit Reporting Act requires certain disclosures to applicants for
credit concerning information that is used as a basis for denial of credit. The
Equal Credit Opportunity Act prohibits discrimination against applicants with
respect to any aspect of a credit transaction on the basis of sex, marital
status, race, color, religion, national origin, age, derivation of income from a
public assistance program, or the good faith exercise of a right under the
FCCPA. In addition, the Fair Debt Collections Practices Act proscribes various
debt collection practices which it deems unfair, harassing or deceptive.

Marquise Financial is subject to state usury laws. In certain states and
under certain circumstances, state law has been preempted by federal law,
although for a period of time individual states were permitted to enact
legislation superseding federal law. To be eligible for the federal preemption,
the credit application must comply with certain consumer protection provisions.
A few states have elected to override federal law, but have established maximum
rates that either fluctuate with changes in prevailing rates or are high enough
so that, to date, no state's maximum interest rate has precluded Marquise
Financial from continuing to offer financing in that state. Although the Company
believes that Marquise Financial has been and is currently in compliance in all
material respects with such laws and regulations, there can be no assurance that
in the future a change in existing laws or regulations or the creation of new
laws and regulations applicable to Marquise Financial's business

39
<PAGE>

will not have an adverse effect on the Company's ability to provide customer
financing of its products or on the profitability of such activities. See "Risk
Factors -- Compliance with Government Regulations."

EMPLOYEES AND INDEPENDENT CONTRACTORS

At May 1, 1996, the Company employed 1,250 persons, including 700 Sales
Associates and 306 part-time employees. In addition, the Company has
relationships (i.e., independent contractors who have performed two or more
installations for the Company) with approximately 1,300 independent contractors
which perform installation services. The Company considers its relations with
its employees and independent contractors to be good.

PROPERTIES

The Company's principal executive and administrative office is currently
located in approximately 23,000 square feet of office and warehouse space in
Woodstock, Illinois pursuant to a lease agreement which expires December 31,
2001. The Company leases four regional offices in Dallas, the Los Angeles area,
the Orlando area and Pittsburgh. The regional offices range in size from 3,400
square feet to 5,900 square feet and have lease terms of between 2 and 4 years.
As of May 1, 1996, the Company leased 70 sales/installation offices. These
offices occupy between 800 and 2,000 square feet and typically have lease terms
of up to three years.

LEGAL PROCEEDINGS

See "Certain Transactions -- Legal Proceedings" for information regarding
certain pending legal proceedings involving the Company, the Chairman of the
Board, Chief Executive Officer and President and one of the Company's other
directors.

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<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and key employees of the Company are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ---------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
C. Stephen Clegg (1) 45 Chairman of the Board, Chief Executive
Officer and President
James M. Gillespie (1) 57 Vice President -- Southeastern Region and a
Director
Frank Cianciosi 53 Vice President -- Eastern Region and National
Sales Manager
Richard G. Reece 48 Chief Financial Officer and Treasurer
Ann Crowley Patterson 37 Vice President -- Administration, General
Counsel and Secretary
James F. Bere Jr. (2)(3) 45 Director
Jacob Pollock 71 Director
George A. Stinson (1)(2)(3) 81 Director

OTHER REGIONAL VICE PRESIDENTS:
Jerome E. Cooper 56 Vice President -- Central Region
Ronald D. Schurter 56 Vice President -- Western Region

KEY EMPLOYEES:
S. Austin Sawyer 63 President of Marquise Financial Services,
Inc.
Rodger Ibach 60 Vice President
Marvin Lerman 54 Vice President -- Purchasing
Denis M. Haggerty 55 Vice President -- Sales and Marketing
Alan G. Miller 30 Controller
</TABLE>

- ------------------------
(1) Member of Executive Committee.

(2) Member of Compensation Committee.

(3) Member of Audit Committee.

MR. C. STEPHEN CLEGG has been a director of the Company since September 1993
and has served as the Company's Chairman of the Board and Chief Executive
Officer since February 1996 and President since April 1996. Mr. Clegg also
serves as the Chairman of the Board and the Chief Executive Officer of
Exteriors, the Chief Executive Officer of Marquise and the Chief Executive
Officer, President and sole director of Solitaire. From April 1989 to the
present, Mr. Clegg has served as Chairman of the Board, Chief Executive Officer
and controlling stockholder of Globe, a manufacturer of home building products,
including roofing shingles and related roofing products. Globe is the Company's
principal stockholder. Mr. Clegg has served as the Chairman of the Board and
Chief Executive Officer of Mid-West Spring Manufacturing Company, a
publicly-traded company which manufactures specialty springs, wire forms and
metal stamping products ("Mid-West Spring"), since April 1993 and has served as
a director since 1991. Since April 1994, Mr. Clegg has also served as the
Chairman of the

41
<PAGE>

Board, Chief Executive Officer and controlling stockholder of Catalog. Catalog
is the parent company of HI, Inc., which receives fees from the Company for
providing call center services and for generating sales leads. See "Certain
Transactions -- Transactions with Globe and Globe Affiliates" and "-- Legal
Proceedings." Mr. Clegg is president of Clegg Industries, Inc., a private
investment firm which he founded in September 1988. Prior to founding Clegg
Industries, Inc., he was a managing director of AEA Investors, Inc. Mr. Clegg is
currently a director of two other public companies, Birmingham Steel
Corporation, a steel production company and Ravens Metal Products, Inc., a
manufacturer of aluminum products. Mr. Clegg intends to continue in his current
capacity with each of the above-referenced companies. Mr. Clegg currently
devotes and intends to devote a majority of his time to the management of the
Company.

MR. JAMES M. (MILT) GILLESPIE has been a director of the Company since May
1995 and Vice President -- Southeastern Region of the Company since April 1996.
He was President -- Southeastern Region of the Company from May 1995 to April
1996, had been Southeastern Region Manager from February 1994 to May 1995 and
was a director of the Company from September 1993 to September 1994. Mr.
Gillespie is also the President -- Southeastern Region of Exteriors. Prior to
joining the Company, Mr. Gillespie held various retail management positions with
Sears from 1962 to 1989 and was a regional business manager of installed home
improvements at Sears from 1989 to May 1993.

MR. FRANK CIANCIOSI has been Vice President -- Eastern Region and the
National Sales Manager of the Company since April 1996 and had earlier served as
a director of the Company from September 1993 to September 1994. He was
President -- Eastern Region of the Company from May 1995 to April 1996 and had
been Eastern Region Manager from February 1994 to May 1995. Mr. Cianciosi is
also the President -- Eastern Region of Exteriors. Prior to joining the Company,
Mr. Cianciosi held various retail management positions with Sears from 1962 to
1989 and was a regional business manager of installed home improvements at Sears
from 1989 to April 1993.

MR. RICHARD G. REECE has served as Chief Financial Officer and Treasurer of
the Company since April 1996. He was assistant treasurer of the Company from
August 1994 to April 1996 and a director from May 1995 to April 1996. Mr. Reece
is also the assistant treasurer of Exteriors, the Chief Financial Officer, Vice
President and Treasurer of Marquise and the Chief Financial Officer of
Solitaire. Mr. Reece is also Vice President and Chief Financial Officer of
Globe. From November 1990 to the present, Mr. Reece has been the sole officer,
director and stockholder of Paradigm 2000 Inc., a consulting firm which he
founded. Mr. Reece will resign his positions at Globe prior to consummation of
the offering and will devote substantially all of his time to the Company. From
June 1986 to December 1990, Mr. Reece was Executive Vice President and Chief
Operating Officer of American Health Companies, Inc. which is the parent
corporation of Diet Center, Inc. Prior to joining American Health Companies,
Inc., Mr. Reece was a partner with Ernst & Young LLP, an international public
accounting firm.

MS. ANN CROWLEY PATTERSON has served as Vice President -- Administration,
General Counsel and Secretary of the Company since April 1996. Ms. Patterson is
also the sole director, Vice President, General Counsel and Secretary of
Marquise Financial and the Vice President, General Counsel and Secretary of
Solitaire. Ms. Patterson also serves as the Vice President, General Counsel and
Secretary of Globe and serves in a similar capacity at Mid-West Spring. Ms.
Patterson also serves as the Vice President and Secretary of Catalog Holdings
Inc. Ms. Patterson intends to continue in these current positions. Ms. Patterson
currently devotes and intends to devote a majority of her time to the Company.
Ms. Patterson was associated with Jones, Day, Reavis & Pogue in New York, New
York and Chicago, Illinois from February 1989 to November 1993 and was
associated with Skadden, Arps, Slate, Meagher & Flom in New York, New York from
September 1984 to February 1989.

MR. JAMES F. BERE, JR. has served as a director of the Company since April
1996. From January 1995 to the present, Mr. Bere has been the Chairman of the
Board of Directors and Chief Executive Officer of Ameritel L.L.C., an
outsourcing solutions company which he founded in 1982 and for which he

42
<PAGE>
served as President and Chief Executive Officer from 1982 through 1990. From
January 1993 to May 1994, Mr. Bere was a Vice President of PIA Merchandising
Company and from September 1990 to December 1992 he was a Senior Vice President
of Marketing and Business Development for Matrix Marketing, Inc., a division of
Cincinnati Bell.

MR. JACOB POLLOCK has served as a director of the Company since September
1993. He also serves as a director of Globe and Mid-West Spring. From May 1991
to the present, Mr. Pollock has been Chairman of the Board, Chief Executive
Officer and Treasurer of Ravens Metal Products Inc. From April 1989 to the
present, Mr. Pollock has been the Chief Executive Officer and the Chief
Operating Officer of J. Pollock & Co., a company which is principally engaged in
the sale of aluminum, private investing and consulting. From 1949 to 1989, Mr.
Pollock served as Chief Executive Officer of Barmet Aluminum Corporation. Mr.
Pollock also serves as a director of several non-public companies, including
Techno Cast, Inc. and Aluminum Warehouse, Inc. See "Certain Transactions --
Legal Proceedings."

MR. GEORGE A. STINSON has served as a director of the Company since
September 1993. Mr. Stinson also presently serves on the Board of Directors of
Globe and Mid-West Spring. Mr. Stinson is currently retired from active
corporate management and the practice of law. From 1961 until 1982 he served as
Chief Executive Officer of National Steel Corporation and from 1965 to 1981 he
was also its Chairman of the Board. From 1981 to 1985 he was of counsel to the
law firm of Thorp, Reed & Armstrong in Washington, D.C. Mr. Stinson also
presently serves on the Board of Directors of Birmingham Steel Corporation.

MR. JEROME COOPER has been Vice President -- Central Region of the Company
since April 1996. He was President -- Central Region of the Company from May
1995 to April 1996 and had been Central Region Manager from February 1994 to May
1995. Mr. Cooper is also the President -- Central Region of Exteriors. Prior to
joining the Company, Mr. Cooper held various retail management positions with
Sears from 1963 to 1991 and was regional business manager of installed home
improvements at Sears from 1991 to May 1993.

MR. RONALD SCHURTER has been Vice President -- Western Region of the Company
since April 1996. He was President -- Western Region of the Company from May
1995 to April 1996 and had been Western Region Manager from February 1994 to May
1995. Mr. Schurter is also the President -- Western Region of Exteriors. Prior
to joining the Company, Mr. Schurter held various retail management positions
with Sears from 1958 to 1992 and was a regional business manager of installed
home improvements at Sears from 1992 to May 1993.

MR. S. AUSTIN SAWYER has been President of Marquise Financial since March
1996. He has been the President of Cornerstone Financial Corporation, a
commercial lending corporation, since May 1995. Mr. Sawyer intends to continue
in his current capacity with Cornerstone Financial Corporation. Mr. Sawyer was a
Senior Vice President of Bank of Northern Illinois from February 1993 to
February 1995, and was Vice President of the Lending Services Division of Sears
Consumer Financial Corporation from 1990 to January 1993. From 1980 through
1989, Mr. Sawyer was the President and a director of C&S Family Credit Inc., a
division of Citizens & Southern Corporation in Atlanta, Georgia.

MR. RODGER IBACH has been a Vice President of the Company since April 1996.
He was President and Secretary of the Company from its formation in May 1993 to
April 1996 and was a director of the Company from May 1993 to September 1994 and
again from May 1995 to April 1996. Mr. Ibach is also the President of Exteriors.
Prior to joining the Company, Mr. Ibach held various retail management positions
with Sears from 1960 to 1985 and was a manager of contractor relations for
installed home improvements at Sears from 1985 to June 1993.

MR. MARVIN LERMAN has been Vice President -- Purchasing of the Company since
its formation in May 1993 and has served in the same capacity at Exteriors since
April 1996. Prior to joining the Company, Mr. Lerman held various management
positions at Sears from 1963 to May 1993.

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MR. DENIS HAGGERTY has been Vice President -- Sales and Marketing of the
Company since its formation in May 1993 and has served in the same capacity at
Exteriors since April 1996. Prior to joining the Company, Mr. Haggerty held
various management positions at Sears from 1962 to May 1993.

MR. ALAN MILLER has been Controller of the Company since April 1996. He was
Chief Financial Officer and Treasurer of the Company from September 1993 to
April 1996. Mr. Miller is also the Chief Financial Officer of Exteriors. From
November 1989 to December 1993, Mr. Miller was Assistant Controller of Globe.
From June 1987 to November 1989 he was an auditor with Ernst & Young LLP.

TERM OF OFFICE AND ELECTION OF ADDITIONAL DIRECTOR

Each member of the Board of Directors of the Company is elected annually.
All officers serve at the pleasure of the Board of Directors. There are no
family relationships among any of the directors or officers of the Company.
However, three of the officers (Messrs. Clegg and Reece and Ms. Patterson) and
three of the directors (Messrs. Clegg, Pollock and Stinson) of the Company have
positions with other companies controlled by Mr. Clegg. The Company currently
has one director who is not employed by, or otherwise affiliated with, Globe,
the Company or any other companies controlled by Mr. Clegg. The Company intends
to use its best efforts to select an additional director during 1996 who is not
employed by, or otherwise affiliated with, Globe, the Company or any other
companies controlled by Mr. Clegg.

BOARD COMMITTEES

The Board of Directors has established three standing committees: the Audit
Committee, the Compensation Committee and the Executive Committee. The Audit
Committee recommends the appointment of auditors and oversees the accounting and
audit functions of the Company. The Compensation Committee determines executive
officers' and key employees' salaries and bonuses and administers the Stock
Option Plan. The Executive Committee has the authority to take all actions which
the Board of Directors as a whole would be able to take, except as limited by
applicable law. Since April 1996, Messrs. Clegg, Gillespie and Stinson have
served on the Company's Executive Committee and Messrs. Bere and Stinson have
served on the Company's Compensation Committee and Audit Committee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In 1995, the Company had no Compensation Committee but the Board of
Directors performed equivalent functions. Of the members of the Board of
Directors in 1995, Mr. Griffin served as the Company's Chief Executive Officer,
Mr. Gillespie served as the Company's President -- Southeastern Region, Mr.
Ibach served as the Company's President and Mr. Reece served as the Company's
assistant treasurer. See "Certain Transactions."

Mr. Clegg is currently a member of the Compensation Committee of the Board
of Directors of Ravens Metal Products, Inc., a company for which Mr. Pollock, a
director of the Company, is the Chairman of the Board, Chief Executive Officer
and Treasurer.

DIRECTOR COMPENSATION

Directors who are not employees or officers of the Company receive $1,000
for each Board and committee meeting attended. In addition, all directors may be
reimbursed for certain expenses in connection with attendance at Board and
committee meetings. Other than with respect to reimbursement of expenses,
directors who are employees or officers of the Company will not receive
additional compensation for service as a director. Nonemployee directors will
also receive options to purchase shares of the Company's Common Stock pursuant
to the Company's Nonemployee Director Stock Option Plan. See "-- Stock Option
Plans."

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EXECUTIVE COMPENSATION

The following table sets forth information with respect to all compensation
paid or earned for services rendered to the Company in 1995 by the Company's
chief executive officer, the Company's four other highest compensated executive
officers and the former chief executive officer of the Company who terminated
service with the Company effective February 12, 1996 (together, the "Named
Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS (1) COMPENSATION COMPENSATION
- ---------------------------------------------------------------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
C. Stephen Clegg (2)............................................ -- -- -- --
Chairman of the Board, Chief Executive Officer and President
James M. Gillespie.............................................. $ 126,800 $ 247,236 $ 3,080(3) --
Vice President -- Southeastern Region and a Director
Frank Cianciosi................................................. 126,650 410,407 2,997(3) --
Vice President -- Eastern Region and National Sales Manager
Jerome Cooper................................................... 126,800 244,441 282(3) --
Vice President -- Central Region
Rodger Ibach (5)................................................ 116,800 273,292 3,688(3) $ 20,000(4)
Vice President
Donald Griffin (6).............................................. 125,000 408,655 3,488(3) 20,000(4)
</TABLE>

- ------------------------
(1) Reflects bonuses earned under the Company's 1995 Executive Bonus Plan and
monthly payments of $5,000 per month with respect to each of Messrs.
Cianciosi, Cooper and Ibach; $5,416.67 per month with respect to Mr.
Gillespie; and $15,751.67 per month with respect to Mr. Griffin, pursuant to
security agreements between such individuals and the Company. See "--
Agreements with Managers" and "Certain Transactions -- Transactions With
Senior Managers."

(2) Mr. Clegg received no compensation from the Company in 1995. For a
discussion of the management fees paid by the Company in 1995 to Globe, for
which Mr. Clegg is the Chairman of the Board, Chief Executive Officer and
controlling stockholder, pursuant to a management agreement between the
Company and Globe, see "Certain Transactions -- Transactions with Globe and
Globe Affiliates." On February 12, 1996, Mr. Clegg became the Chairman of
the Board and Chief Executive Officer of the Company and in April 1996 he
became the Company's President. As a result, Mr. Clegg will receive
compensation from the Company in 1996.

(3) Reflects amounts paid to the individuals during the fiscal year for the
payment of certain taxes.

(4) Reflects insurance premiums paid by the Company on behalf of the individuals
listed.

(5) Mr. Ibach was President of the Company at December 31, 1995. Since April
1996, Mr. Ibach has been a Vice President of the Company and the President
of Exteriors.

(6) Mr. Griffin resigned as the Chief Executive Officer, Chairman of the Board
and a director of the Company effective February 12, 1996.

STOCK OPTION PLANS

Under the Company's 1996 Incentive Stock Option Plan (the "Stock Option
Plan"), key employees may be granted non-qualified stock options, incentive
stock options, stock appreciation rights and

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<PAGE>
stock awards. "Key employees" are those employees who, in the opinion of the
Compensation Committee of the Board of Directors (the "Committee") have
demonstrated a capacity for contributing in a substantial measure to the success
of the Company. The Company has reserved 620,000 shares of Common Stock for
future issuance under the Stock Option Plan, subject to anti-dilution
adjustments.

The Committee is authorized to determine, among other things, the key
employees to whom, and the times at which, options and other benefits are to be
granted, the number of shares subject to each option or benefit, the applicable
vesting schedule and the exercise price (provided that the exercise price may
not be less than 85% of fair market value of the Common Stock at the date of
grant). The maximum term of a stock option under the Stock Option Plan is ten
years. The Committee also determines the treatment to be afforded a participant
in the event of termination of employment for any reason, including death,
disability or retirement.

The exercise price of incentive stock options granted under the Stock Option
Plan must be at least equal to 100% of the fair market value of the stock
subject to the option on the date of grant. The exercise price of incentive
stock options granted to an optionee who owns stock possessing more than 10% of
the voting power of the Company's outstanding capital stock must equal at least
110% of the fair market value of the stock subject to the option on the date of
grant.

The Board of Directors has the power to amend the Stock Option Plan from
time to time, without stockholder approval, except that stockholder approval is
required for any amendment which would (i) result in any member of the Committee
losing his or her status as a "disinterested person" under applicable securities
laws, or (ii) result in the Stock Option Plan losing its status as a protected
plan under applicable securities laws.

Stock options with respect to 275,000 shares of Common Stock will be granted
to certain employees pursuant to the Stock Option Plan effective on the date the
offering is consummated. The exercise price for such options will be equal to
the initial public offering price of the Common Stock offered hereby.

The Company has also adopted the 1996 Nonemployee Director Stock Option Plan
(the "Director Stock Plan"). The purpose of the Director Stock Plan is to enable
the Company to attract and retain outstanding individuals to serve as members of
the Board of Directors by providing such persons opportunities to acquire Common
Stock of the Company. The Director Stock Plan contains a formula which provides
for automatic annual grants beginning one year after a director's election to
each non-employee director of non-qualified stock options to purchase 1,000
shares of Common Stock. The purchase price per share for such options will be
equal to the fair market value of a share of Common Stock on the date of grant.
Any such option will not be exercisable until one year after the date of grant
and will terminate ten years after the date of grant. The Company has reserved
50,000 shares of Common Stock for issuance under the Director Stock Plan,
subject to anti-dilution adjustments.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Amended Certificate contains provisions eliminating the
personal liability of its directors for monetary damages resulting from breaches
of their fiduciary duty to the extent permitted by the General Corporation Law
of Delaware. These provisions in the Amended Certificate do not eliminate the
duty of care and, in appropriate circumstances, equitable remedies such as an
injunction or other forms of non-monetary relief would remain available under
Delaware law. Each director will continue to be subject to liability for breach
of a director's duty of loyalty to the Company or its stockholders, for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for any transaction from which the director derived an
improper personal benefit and for improper distributions to stockholders. These
provisions also do not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.

The Company's Amended By-Laws provide that the Company will indemnify its
directors and officers to the fullest extent permitted by law. The Company's
Amended By-Laws also permit it to

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<PAGE>
secure insurance on behalf of any person it is required or permitted to
indemnify for any liability arising out of his or her actions in such capacity,
regardless of whether the Amended By-Laws would permit indemnification. The
Company maintains liability insurance for its directors and officers.

The Company has entered into agreements to indemnify its directors and
certain of its officers, in addition to the indemnification provided for in the
Company's Amended By-Laws. These agreements, among other things, will indemnify
the Company's directors and such officers for all direct and indirect expenses
and costs (including, without limitation, all reasonable attorneys' fees and
related disbursements, other out of pocket costs and reasonable compensation for
time spent by such persons for which they are not otherwise compensated by the
Company or any third person) and liabilities of any type whatsoever (including,
but not limited to, judgments, fines and settlement fees) actually and
reasonably incurred by such person in connection with either the investigation,
defense, settlement or appeal of any threatened, pending or completed action,
suit or other proceeding, including any action by or in the right of the
corporation, arising out of such person's services as a director or officer of
the Company or as a director, officer, employee or other agent of any subsidiary
of the Company or any other company or enterprise to which the person provides
services at the request of the Company if such director or officer acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the Company and, with respect to any criminal action or
proceeding, if he or she had no reasonable cause to believe his or her conduct
was unlawful. The Company believes that these provisions and agreements are
necessary to attract and retain talented and experienced directors and officers.

At present, except as described under "Certain Transactions -- Legal
Proceedings," there is no pending litigation or proceeding involving any
director or officer of the Company where indemnification will be required or
permitted. The Company is not aware of any threatened litigation or proceeding
that might result in a claim for such indemnification.

AGREEMENTS WITH MANAGERS

The Company has security agreements with sixteen of its managers, including
the Senior Managers (as hereinafter defined), which provide for monthly payments
by the Company, beginning January 1, 1995 and ending December 1, 1999. Pursuant
to these security agreements, each manager has agreed not to compete with the
Company for 18 months following the termination of his employment with the
Company or an affiliate of the Company and to maintain the confidentiality of
the Company's proprietary information. See "Certain Transactions."

401(K) PLAN

The Company sponsors a voluntary contribution plan qualified under Section
401(k) of the Internal Revenue Code of 1986, as amended (the "401(k) Plan"). All
full-time employees of the Company who have worked for the Company for at least
12 continuous months and have attained the age of 21 are eligible to participate
in the 401(k) Plan. Under the 401(k) Plan, each employee may elect to contribute
to the 401(k) Plan, through payroll deductions, a specified percentage of his or
her compensation up to the statutory limitation. Each employee is fully vested
at all times with respect to his or her contributions. The Company pays only the
administrative expenses of the 401(k) Plan and currently makes no contributions
to the 401(k) Plan.

CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

In connection with its formation in May 1993, the Company issued 100% of its
initially issued shares of Common Stock to certain of its managers (the "Senior
Managers") in exchange for $100,000. The Senior Managers consisted of the
following seven individuals, all of whom are also stockholders: Messrs.
Cianciosi, Cooper, Gillespie, Griffin, Ibach, Lerman, and Schurter. In July
1993, the Company issued to Globe shares of Common Stock representing a 50%
equity interest in the Company and 1,400 shares of Series A Preferred Stock in
exchange for $100,000 and $1.4 million, respectively. Following these issuances,
the Senior Managers as a group and Globe each owned 50% of the Common Stock and

47
<PAGE>

Globe owned all of the Series A Preferred Stock. Globe, by virtue of an
agreement among the stockholders affording Globe the right to elect a majority
of the Board of Directors of the Company, has had and continues to exercise
control over the Company. This agreement will terminate upon consummation of the
offering. See "Principal and Selling Stockholders."

TRANSACTIONS WITH SENIOR MANAGERS

In September 1994, the Company repurchased (the "Senior Manager Repurchase")
40.2% of the Common Stock then outstanding from the Senior Managers. In exchange
for the stock, the Company paid to the Senior Managers an aggregate of (i) $9.4
million in cash; (ii) $1.5 million in subordinated notes (the "Senior Manager
Notes") and (iii) $4.0 million in subordinated performance notes (the "Senior
Manager Performance Notes"). In addition, at the time of the Senior Manager
Repurchase, the Company and each of the Senior Managers amended each Senior
Manager's employment agreement with the Company, so that, among other things,
the Company agreed to pay to the Senior Managers an aggregate amount of
approximately $2.8 million in 60 monthly security payments beginning January 1,
1995 and ending December 1, 1999. In 1995, the Company made security payments of
an aggregate of $60,000 to each of Messrs. Cianciosi, Cooper, Ibach, Lerman and
Schurter; $65,000 to Mr. Gillespie; and $189,020 to Mr. Griffin. As discussed
further below, upon Mr. Griffin's resignation from the Company, in February
1996, he and the Company executed a Settlement Agreement which modifies and
supercedes the terms of all previous payment arrangements between Mr. Griffin
and the Company. In April 1996, each of the employment agreements with the
remaining Senior Managers was superceded by security agreements providing for
certain monthly payments to be made by the Company to each of the Senior
Managers in exchange for non-competition and non-disclosure covenants from each
Senior Manager. The security agreements do not contain any specified term of
employment. See "Management -- Agreements with Managers." At April 1, 1996, an
aggregate of approximately $1.4 million of such security payments remained to be
paid with an aggregate of $225,000 to be paid to each of Messrs. Cianciosi,
Cooper, Ibach, Lerman and Schurter and an aggregate of $243,750 to be paid to
Mr. Gillespie. These security payments are not contingent on future employment.

In September 1995, the Company paid to the Senior Managers an aggregate of
approximately $1.6 million representing the principal and accrued interest due
on all of the Senior Manager Notes (Messrs. Cianciosi, Cooper, Gillespie, Ibach,
Lerman and Schurter each received $218,000 and Mr. Griffin received $327,000).
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

Interest on the Senior Manager Performance Notes accrues at an annual rate
of 9% and is payable annually each year ending December 31, 1995 through
December 31, 1999, only if certain earnings targets are met for such year.
Likewise, principal payments on the Senior Manager Performance Notes are to be
paid each year only if either (i) that year's earnings target is met or (ii) a
cumulative earnings target equal to the sum of all previous years' earnings
targets is satisfied. Any principal amount of the Senior Manager Performance
Notes which has not been paid by December 31, 2000 is to be paid 90 days after
the end of the fiscal year in which the Company's cumulative earnings before
interest and taxes for the years ended December 31, 1995 through such year are
at least $56.0 million. No payments are to be due or paid with respect to the
Senior Manager Performance Notes if the earnings targets have not been achieved
by December 31, 2009 and no interest payments are to be made after December 31,
1999. The Company met the 1995 annual earnings target and accordingly paid the
Senior Managers, including Mr. Griffin, an aggregate of $800,000 of the
principal amount of the Senior Manager Performance Notes (Mr. Griffin received
$200,000 and each of Messrs. Cianciosi, Cooper, Gillespie, Ibach, Lerman and
Schurter received $100,000) plus accrued interest in March 1996 with respect to
1995 performance. Following such payment, there remained $800,000 principal
amount outstanding on the Senior Manager Performance Note payable to Mr. Griffin
and $400,000 principal amount outstanding on the Senior Manager Performance
Notes payable to each of Messrs. Cianciosi, Cooper, Gillespie, Ibach, Lerman and
Schurter. Notwithstanding the payment provisions described above, in the event
of a public offering of stock by the Company (or a company

48
<PAGE>
which controls the Company), the Company has agreed to use its best efforts to
use the proceeds from such an offering to pay all of the outstanding principal
and interest under the Senior Manager Performance Notes. The Company intends to
utilize a portion of the net proceeds of this offering to fund such repayment.
See "Use of Proceeds."

Mr. Griffin ("Griffin") resigned from the Company on February 12, 1996. In
connection with his resignation, Griffin and the Company entered into a
settlement and non-competition agreement (the "Settlement Agreement"). Under the
Settlement Agreement, Griffin has released the Company from any and all actions
which he may have against the Company and is to receive, as full satisfaction
and settlement of any and all claims that he may have against the Company: (i)
$30,751.66 per month from February 1996 through February 1997; (ii) $20,751.66
per month from March 1997 through February 1999; (iii) $15,751.66 per month from
March 1999 through December 1999; and (iv) payment, pursuant to its terms, of
the Senior Manager Performance Note which was issued by the Company to Griffin,
and which, at March 15, 1996 had an aggregate principal amount outstanding of
$800,000. In addition, the Company has agreed to pay all amounts due and payable
to a health insurance carrier for the cost of providing health insurance
coverage to Griffin until the earlier to occur of (x) January 1, 1997 and (y)
the date on which Griffin becomes employed.

Under the terms of the Settlement Agreement and pursuant to a waiver to the
Stockholders Agreement among the Company and each of its stockholders, Griffin
retained ownership of 138,700 shares of the Company's Common Stock; the
remaining 92,500 shares of Common Stock which Griffin owned prior to his
resignation were repurchased by the Senior Managers and the Managers (as defined
below) in accordance with the Stockholders Agreement. The Stockholders Agreement
will terminate upon consummation of the offering.

TRANSACTIONS WITH OTHER MANAGERS

In January 1995, the Company issued shares representing an aggregate of
approximately 4% of its outstanding Common Stock to certain other members of the
Company's management (the "Managers") in exchange for (i) cash for the par value
of the securities purchased and (ii) secured promissory notes from such Managers
payable in an aggregate amount of $869,295 (the "Manager Purchase Notes"). The
Manager Purchase Notes accrue interest at a rate of 7% per annum and interest is
payable annually beginning December 31, 1995, with the principal and a final
interest payment to be paid December 31, 1999. The amounts due under the Manager
Purchase Notes may be prepaid at any time without penalty. The Manager Purchase
Notes are secured by a pledge of the individual Managers' shares of Common
Stock. Since the Company exceeded its 1995 performance goal, in December 1995
the Company paid a special bonus to each Manager equal to (i) all interest
accrued on the Manager Purchase Note through December 31, 1995 and (ii) 20% of
the outstanding principal amount of the Manager Purchase Note.

In November 1994, the Company and the Managers also entered into security
agreements. The security agreements provide, among other things, for the payment
to the Managers of an aggregate amount of $4.2 million, payable in 60 monthly
installments beginning January 1, 1995 and ending December 1, 1999. At March 1,
1996, approximately $3.0 million of such payments remained to be paid. The
payments under these security agreements are contingent upon the Manager's
continued employment with the Company. See "Management -- Agreements with
Managers."

TRANSACTIONS WITH GLOBE AND GLOBE AFFILIATES

As described above, in July 1993, the Company issued to Globe shares of
Common Stock representing a 50% equity interest in the Company and 1,400 shares
of Series A Preferred Stock in exchange for $100,000 and $1.4 million,
respectively. Globe, by virtue of an agreement among the stockholders affording
Globe the right to elect a majority of the Board of Directors of the Company,
has had and continues to exercise control over the Company. This agreement will
terminate upon consummation of the offering. The Series A Preferred Stock was
redeemed for $1.4 million in April 1996. Mr. Clegg, Chairman of the Board, Chief
Executive Officer and President of the Company, is also the Chairman of the
Board, Chief Executive Officer and controlling stockholder of Globe.

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<PAGE>
In 1994, the Company and Globe entered into a management agreement, pursuant
to which Globe provides certain management, treasury, legal, purchasing and
other administrative services to the Company. The amount of the management fee
paid by the Company to Globe for services rendered under the management
agreement is based on a percentage of the Company's gross sales; provided,
however, that after December 31, 1997, such management fee cannot exceed
$750,000 plus expenses for any given year. The Company incurred management fees
to Globe of $464,000 and $558,000 for services in 1994 and 1995, respectively,
and through the date of the consummation of the offering will have incurred
management fees to Globe of approximately $350,000 for services in 1996. The
management agreement will be terminated upon consummation of the offering.

As a result of the July 1993 issuances and the Senior Manager Repurchase, in
September 1994, the Company and Globe became a consolidated group for federal
tax purposes. As a result, Globe and the Company entered into a tax-sharing
agreement which specifies the allocation and payment of liabilities and benefits
arising from the filing of a consolidated tax return. The tax sharing agreement
requires the Company to pay its share of the consolidated federal tax liability,
as if it has taxable income, and to be compensated if losses or credits generate
benefits that are utilized to reduce the consolidated tax liability. The Company
will continue to be included in the consolidated group with Globe through the
consummation of the offering. The tax sharing agreement will be terminated upon
consummation of the offering.

The Company purchases, through independent distributors, shingles and other
roofing products manufactured by Globe. The Company does not purchase any
products directly from Globe. In 1995, the Company purchased approximately $1.5
million of Globe roofing products through independent distributors, representing
approximately 16% in dollar volume of all roofing products purchased by the
Company. The Company believes that the prices charged by independent
distributors for Globe products are competitive with comparable products of
other roofing product manufacturers. The Company will continue to purchase Globe
products through independent distributors following the completion of the
offering and the amount of such purchase may increase.

In February 1996, the Company loaned Globe $1.5 million, at an interest rate
of approximately 8.25% per annum. The entire amount of such principal plus
interest was repaid in April 1996. In June 1995, the Company loaned Globe $1.0
million at an interest rate of approximately 9.65% per annum. The entire amount
of such principal plus interest was repaid in November 1995. During 1994, the
Company loaned Globe $1.5 million at an interest rate of approximately 7.5% per
annum. The entire amount of such principal plus interest was repaid by Globe in
September 1994. The Company does not intend to loan money to Globe in the
future. In addition, in the past the Company has guaranteed a certain portion of
Globe's indebtedness. The amount the Company guaranteed was limited by the
available borrowing under the Company's bank line of credit; provided, however,
that the amount guaranteed by the Company could not exceed $3.0 million. Until
July 1995, the Company guaranteed $3.0 million of Globe's indebtedness. Since
July 1995, the Company has not guaranteed any of Globe's indebtedness and does
not intend to guarantee any of Globe's indebtedness in the future.

During 1994, the Company paid $150,000 to Catalog, of which Mr. Clegg
(Chairman of the Board, Chief Executive Officer and President of the Company) is
the Chairman of the Board, Chief Executive Officer and controlling stockholder,
for (i) warrants (the "Catalog Warrants") to purchase 3,275 shares of Class A
Common Stock, par value $.01 per share, of Catalog (the "Catalog Common"), (ii)
the prepayment for 3,000 to 4,000 sales leads expected to be generated by the
home improvement catalog produced by Catalog's wholly-owned subsidiary, HI, Inc.
and (iii) the prepayment for certain call center services provided by HI, Inc.
to the Company. HI, Inc. provided the Company with all of the sales leads and
call center services set forth above in 1994 and 1995. The Catalog Warrants are
exercisable at a price of $100 per share of Catalog Common (subject to
adjustment) at any time before August 1, 1997, at which time the Catalog
Warrants expire. No value was ascribed to the Catalog Warrants because the fair
market value of the shares of Catalog Common into which they are exercisable was
determined to be below the exercise price. Transfer of the Catalog Warrants is
restricted to certain individuals or entities.

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HI, Inc. provides call center services for certain of the Company's regions
for which HI, Inc. is paid a predetermined amount for each sales lead that it
handles. The $150,000 payment described above covered the costs of all sales
leads and call center services purchased by the Company from HI, Inc. through
December 31, 1995. The Company believes that the prices charged by HI, Inc. are
competitive with the prices charged by comparable call center providers. The
Company will continue to purchase call center services from HI, Inc. following
completion of the offering.

The Company has engaged in negotiations regarding the purchase of
substantially all of the assets, including customer lists and the right to use
the "Handy Craftsmen" name, from Handy Craftsmen, a majority-owned subsidiary of
Catalog, for approximately $2.0 million in cash. Handy Craftsmen is engaged in
the marketing and contracting of home repair services under the Sears name
pursuant to a license agreement with Sears. Catalog acquired a ninety percent
interest, on a fully diluted basis, in Handy Craftsmen in 1995 in return for an
advance of approximately $50,000. An agreement was also entered into assuring
employment for a five-year term to the individual who was previously the sole
owner and is currently the minority owner of Handy Craftsmen. Catalog has loaned
an additional amount of approximately $50,000 to Handy Craftsmen since the
acquisition. The Company believes that the acquisition of Handy Craftsmen, if
completed, will expand the range of "need based" services that the Company
offers under the Sears name, will allow the Company to further utilize the
Company's existing sales leads and will provide a good source of additional
leads for the Company's core business. The terms of purchase are being
negotiated on behalf of the Company by two senior officers (one of whom is a
director) of the Company. These individuals have no affiliation with Globe or
Catalog. The terms of purchase are being negotiated on behalf of Catalog by a
director of Catalog who has no affiliation with Diamond or Globe. The Company's
valuation of Handy Craftsmen is based on the value of the Sears license
agreement, the expected revenues and earnings of Handy Craftsmen and the
synergistic benefits that Handy Craftsmen brings to the Company. The Company
believes that the transaction, if completed, will be fair and beneficial to the
stockholders of the Company. There is no assurance that the transaction will be
consummated or, if consummated, that the final terms will not differ from those
currently contemplated. See "Risk Factors -- Certain Transactions with and
Payments to Principal Stockholder." "Use of Proceeds."

The Company anticipates that it will continue to purchase Globe products and
HI, Inc. call center services. The Company has adopted a policy that all
transactions between the Company and any affiliate, including Globe and Catalog
and their affiliates, will be on terms no less favorable to the Company than
terms the Company believes would be available from unaffiliated third parties.
Globe licenses the name "Diamond Shield" to the Company pursuant to an
exclusive, royalty-free, perpetual license. Other than with respect to its
status as a stockholder, the purchase of Globe products through independent
distributors and the license agreement, the Company does not anticipate any
continuing relationship with Globe upon consummation of the offering.

Prior to the offering, the Company intends to pay a special, one-time
dividend of $8.6 million to its existing stockholders, which include management
and Globe and has redeemed all of its outstanding Series A Preferred Stock for
$1.4 million from Globe. As an 80% stockholder, Globe will receive approximately
$6.9 million of the dividend. The price at which the Series A Preferred Stock
was redeemed was equal to the purchase price paid by Globe for the Series A
Preferred Stock in July 1993. No dividends or interest were paid to Globe with
respect to the Series A Preferred Stock. See "Use of Proceeds."

LEGAL PROCEEDINGS

International Equity Capital Growth Fund, L.P. ("IECGF") owns approximately
24% of the common stock (on a fully diluted basis) of Globe. In October 1994,
IECGF indicated to Mr. Clegg that it desired liquidity and wanted to sell its
interest in Globe. Discussions took place among various Globe representatives
and representatives of IECGF regarding such a transaction, but IECGF has
demanded a price which Globe has been unwilling and unable to meet. Globe is
aware of negotiations which IECGF has had with parties unrelated to Globe in
attempts to sell its position, however, no

51
<PAGE>

transaction has occurred. In light of this, representatives of IECGF have taken
a variety of actions which, in the opinion of certain members of Globe
management, have been detrimental to Globe and are intended to strengthen the
negotiating position of IECGF. In a meeting in April 1996, counsel for IECGF, in
the course of negotiations regarding the possible purchase of IECGF's interest,
threatened to file litigation if Globe did not arrange to purchase the IECGF
position. This threat of litigation did not include any indication of the nature
of the claims that would be asserted by IECGF.

On May 14, 1996, IECGF filed a purported derivative action on behalf of
Globe and the Company against Mr. Clegg and Jacob Pollock, a director of both
Globe and the Company, in the Court of Chancery of the State of Delaware. The
complaint alleges, among other things, that Mr. Clegg breached his fiduciary
duty to the Company by causing Catalog (in lieu of the Company) to acquire Handy
Craftsmen and by virtue of the $2,000,000 purchase price the Company is
contemplating paying to Catalog for the assets of Handy Craftsmen. IECGF claims
such price is in excess of the true value of those assets by an unspecified
amount. The complaint also challenges as excessive the $150,000 payment to
Catalog described above which was paid for the purchase of warrants, sales leads
and call center services. No other specific transactions are challenged in the
complaint relating to the Company's affairs. The complaint also makes
allegations against Mr. Clegg and Mr. Pollock which include breach of fiduciary
duty as a result of alleged conflicts of interest related to certain
transactions which have been consummated at Globe.

The Company believes that the allegations of the complaint are wholly
without merit. Mr. Clegg and Mr. Pollock strongly deny the breaches alleged by
the complaint. Globe believes that the conduct of IECGF in bringing such action
is an attempt at forcing Globe to purchase IECGF's interest on terms that Globe
believes are not in Globe's best interest. Mr. Clegg and Mr. Pollock have
indicated that they intend to vigorously defend the action.

52
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information as of May 1, 1996
regarding the beneficial ownership of the Company's Common Stock by (i) the
Selling Stockholder, (ii) each stockholder known by the Company to be the
beneficial owner of more than five percent of the outstanding shares of the
Company's Common Stock, (iii) each director of the Company, (iv) each Named
Executive Officer and (v) all directors and executive officers of the Company as
a group. Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below, based on information provided by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Except as set forth below,
the address of each of the stockholders named below is the Company's principal
executive and administrative office.

<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY OWNED SHARES BEING SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING OFFERED AFTER OFFERING (1)
-------------------------- ------------ --------------------------
NAME NUMBER PERCENT (2) NUMBER NUMBER PERCENT (2)
- ----------------------------------------------- ----------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Globe Building Materials, Inc. (3)............. 5,000,000 80.0% 733,000 4,267,000 47.7%
C. Stephen Clegg (4)........................... 5,000,000 80.0 733,000 4,267,000 47.7
James M. Gillespie............................. 136,350 2.2 -- 136,350 1.5
Frank Cianciosi................................ 136,350 2.2 -- 136,350 1.5
James F. Bere, Jr.............................. -- -- -- -- --
Jacob Pollock (3)(5)........................... 5,000,000 80.0 733,000 4,267,000 47.7
George A. Stinson (3)(5)....................... 5,000,000 80.0 733,000 4,267,000 47.7
Jerome Cooper.................................. 136,350 2.2 -- 136,350 1.5
Rodger Ibach (1)............................... 136,350 2.2 -- 136,350 1.5
Donald Griffin (1)(6).......................... 138,700 2.2 -- 138,700 1.6
All directors and executive officers as a group
(10 persons) (4).............................. 5,545,400 88.7 733,000 4,812,400 53.8
</TABLE>

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

(1) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to 100,000 shares from Globe, 137,950 shares from the Company and an
aggregate of 275,050 shares from Messrs. Ibach and Griffin. See
"Underwriting."

(2) Percentage of beneficial ownership is based on 6,249,950 shares of Common
Stock outstanding as of May 1, 1996, and 8,936,950 shares of Common Stock
outstanding after completion of the offering.

(3) The address of Globe Building Materials, Inc. is 2230 Indianapolis Blvd.,
Whiting, Indiana 46394. Mr. Clegg controls approximately 59.0% of the common
stock of Globe through direct ownership and through ownership by entities
Mr. Clegg controls. In addition, Mr. Clegg controls approximately 11.0% of
the common stock of Globe through voting agreements with other Globe
stockholders. Messrs. Pollock and Stinson own approximately 1.7% and 1.4% of
the common stock of Globe, respectively.

(4) Includes all shares owned by Globe. Mr. Clegg may be deemed to be the
beneficial owner of such shares by virtue of his positions as Chairman of
the Board, Chief Executive Officer and controlling stockholder of Globe.

(5) Includes all shares owned by Globe. Messrs. Pollock and Stinson may be
deemed beneficial owners of the shares owned by Globe by virtue of their
positions as directors of Globe. Messrs. Pollock and Stinson disclaim
beneficial ownership of such shares.

(6) The address of Mr. Griffin is 3637 Woodlake Dr., Bonita Springs, Florida
33923. Mr. Griffin resigned as Chief Executive Officer, Chairman of the
Board and a director of the Company effective February 12, 1996.

Certain of the shares as to which the Underwriters hold an over-allotment
option will be sold to the Underwriters, if such option is exercised, by Messrs.
Ibach and Griffin. The defined term "Selling Stockholders" means Globe and
Messrs. Ibach and Griffin, collectively.

53
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 29,000,000 shares,
of which 25,000,000 shares are Common Stock, par value $.001 per share, and
4,000,000 shares are Preferred Stock, par value $.001 per share. At December 31,
1995, after giving effect to (i) the reclassification and stock split of each
outstanding share of the Company's Class A Voting Common Stock and Class B
Nonvoting Common Stock into 50 shares of Common Stock and (ii) the redemption of
all of the Company's outstanding Series A Preferred Stock, there were 6,249,950
shares of Common Stock outstanding and held of record by 18 stockholders and no
shares of Preferred Stock outstanding. After completion of the offering,
8,936,950 shares of Common Stock will be issued and outstanding, assuming no
exercise of the Underwriters' over-allotment option.

The following description of the capital stock of the Company and certain
provisions of the Company's Amended Certificate and Amended By-Laws is a summary
and is qualified in its entirety by the provisions of the Amended Certificate
and Amended By-Laws, which have been filed as exhibits to the Company's
Registration Statement, of which this Prospectus is a part.

COMMON STOCK

The issued and outstanding shares of Common Stock are, and the shares being
offered hereby will, upon payment therefor, be validly issued, fully paid and
nonassessable. Subject to the right of holders of Preferred Stock, the holders
of outstanding shares of Common Stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the Board
of Directors may from time to time determine. See "Dividend Policy." The shares
of Common Stock are neither redeemable nor convertible, and the holders thereof
have no preemptive or subscription rights to purchase any securities of the
Company. Upon liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to receive, pro rata, the assets of the Company
which are legally available for distribution, after payment of all debts and
other liabilities and subject to the prior rights of any holders of Preferred
Stock then outstanding. Each outstanding share of Common Stock is entitled to
one vote on all matters submitted to a vote of stockholders. There is no
cumulative voting in the election of directors.

PREFERRED STOCK

The Company's Amended Certificate authorizes the Board of Directors to issue
the Preferred Stock in classes or series and to establish the designations,
preferences, qualifications, limitations or restrictions of any class or series
with respect to the rate and nature of dividends, the price and terms and
conditions on which shares may be redeemed, the terms and conditions for
conversion or exchange into any other class or series of the stock, voting
rights and other terms. The Company may issue, without approval of the holders
of Common Stock, Preferred Stock which has voting, dividend or liquidation
rights superior to the Common Stock and which may adversely affect the rights of
holders of Common Stock. The issuance of Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of the
holders of Common Stock and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock.

CERTAIN STATUTORY PROVISIONS

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"). Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the time of the transaction in which the person
became an interested stockholder, unless (i) prior to such time of the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, the transaction is approved by the board of directors of
the corporation, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock, or (iii) at or subsequent to such
time, the business combination is approved by the board of directors and by the
affirmative vote

54
<PAGE>
of at least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder. For purposes of Section 203, a "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation's voting stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank, Chicago, Illinois.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have outstanding 8,936,950
shares of Common Stock (9,074,900 shares if the Underwriters' over-allotment
option is exercised in full). All of the 3,420,000 shares (assuming the
Underwriters' over-allotment option is not exercised) sold in this offering will
be freely tradeable by persons other than affiliates of the Company. The
remaining 5,516,950 shares of Common Stock were issued by the Company in private
transactions not involving a public offering, are treated as "restricted
securities" for purposes of Rule 144, and may not be resold unless they are
registered under the Securities Act or are resold pursuant to an exemption from
registration, including the exemption provided under Rule 144 of the Securities
Act.

RULE 144

In general, Rule 144, as currently in effect, provides that a person who is
an affiliate of the Company or who beneficially owns shares which are issued and
sold in reliance upon exemptions from registration under the Securities Act
("Restricted Shares") must own such Restricted Shares for at least two years
before they may be sold. Further, Rule 144 limits the amount of Restricted
Shares which can be sold, so that the number of shares sold by a person (or
persons whose sales are aggregated), within any three-month period does not
exceed the greater of 1% of the then outstanding shares of Common Stock
(beginning on the 91st day immediately after the offering) or the average weekly
trading volume in the Common Stock during the four calendar weeks preceding the
filing of a notice of intent to sell. Sales under Rule 144 are also subject to
certain manner-of-sale provisions, notice requirements and the availability of
current public information about the Company. However, a person who is not
deemed to have been an "affiliate" of the Company at any time during the three
months preceding a sale, and who has beneficially owned Restricted Shares for at
least three years, would be entitled to sell such shares under Rule 144 without
regard to volume limitations, manner-of-sale provisions, notice requirements or
the availability of current public information about the Company.

In addition, any employee of the Company who purchased his shares pursuant
to certain plans or contracts may be entitled to rely on the resale provisions
of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144.
Rule 701 further provides that non-affiliates may sell such shares in reliance
on Rule 144 without having to comply with the public information, volume
limitation or notice provisions of Rule 144. In both cases, a holder of Rule 701
shares is required to wait until the 91st day immediately after the offering
before selling such shares. The Company sold 268,750 shares of Common Stock to
its employees pursuant to Rule 701.

The Company, the Selling Stockholder and the other stockholders, holding in
the aggregate 5,516,950 shares of Common Stock, or 61.7% of the shares of Common
Stock outstanding after the offering, have, subject to certain exceptions in the
case of the Company, agreed that they will not sell, contract to sell or
otherwise dispose of any shares of Common Stock or securities convertible into
Common Stock (except Common Stock issued pursuant to options to be granted and
issued upon consummation of the offering) for a period of 180 days after the
date of this Prospectus, without the

55
<PAGE>

prior written consent of William Blair & Company, L.L.C., except for the Common
Stock offered hereby. See "Underwriting." After the expiration of the lock-up
period, up to 5,516,950 shares may be freely tradeable, subject to compliance
with the terms and conditions of Rule 144.

Prior to the offering, there has been no established trading market for the
Common Stock, and no predictions can be made as to the effect that sales of
Common Stock under Rule 144, pursuant to a registration statement or otherwise,
or the availability of shares of Common Stock for sale, will have on the market
price prevailing from time to time. Sales of substantial amounts of Common Stock
in the public market, or the perception that such sales could occur, could
depress the prevailing market price. Such sales may also make it more difficult
for the Company to sell equity securities or equity-related securities in the
future at a time and price that it deems appropriate. See "Risk Factors --
Shares Eligible for Future Sale; Registration Rights."

The Company intends to file a registration statement under the Securities
Act to register an aggregate of 670,000 shares reserved for issuance under the
Stock Option Plan and the Director Stock Plan, thus permitting the resale of
such shares by non-affiliates in the public market without restriction under the
Securities Act, subject, however, to vesting requirements with the Company and
the lock-up agreements described above.

REGISTRATION RIGHTS

Pursuant to an agreement between Globe and the Company, Globe is entitled to
certain rights with respect to the registration of its shares of Common Stock
under the Securities Act. If the Company proposes to register any of its
securities under the Securities Act, Globe is entitled to notice of such
registration and is entitled to include, at the Company's expense, all or a
portion of its shares therein, subject to certain conditions. Globe also may,
subject to certain conditions, require the Company, on not more than 2 occasions
(not including this offering), at the Company's expense, to file a registration
statement on Form S-1 under the Securities Act with respect to its shares of
Common Stock, and the Company is required to use its best efforts to effect the
registration. In addition, Globe may, subject to certain conditions, require the
Company, on not more than two occasions per year, at the Company's expense, to
register its shares on Forms S-2 and S-3 when such forms become available to the
Company.

56
<PAGE>
UNDERWRITING

The Company and the Selling Stockholder have entered into an Underwriting
Agreement (the "Underwriting Agreement") with the underwriters listed in the
table below (the "Underwriters"), for whom William Blair & Company, L.L.C. is
acting as representative (the "Representative"). Subject to the terms and
conditions set forth in the Underwriting Agreement, the Company and the Selling
Stockholder have agreed to sell to each of the Underwriters, and each of the
Underwriters has severally agreed to purchase from the Company and the Selling
Stockholder, the number of shares of Common Stock set forth opposite each
Underwriter's name in the table below.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
William Blair & Company, L.L.C.............................................

-----------------
Total.................................................................. 3,420,000
-----------------
-----------------
</TABLE>

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters have agreed to purchase all of the Common Stock being sold pursuant
to the Underwriting Agreement if any is purchased (excluding shares covered by
the over-allotment option granted therein). In the event of a default by any
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
purchase commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.

The Representative has advised the Company and the Selling Stockholder that
the Underwriters propose to offer the Common Stock to the public initially at
the public offering price set forth on the cover page of this Prospectus and to
selected dealers at such price less a concession of not more than $ per
share. Additionally, the Underwriters may allow, and such dealers may re-allow,
a concession not in excess of $ per share to certain other dealers. After the
initial public offering, the public offering price and other selling terms may
be changed by the Representative.

The Company and the Selling Stockholders have granted to the Underwriters an
option, exercisable within 30 days after the date of this Prospectus, to
purchase up to an aggregate of an additional 137,950 and 375,050 shares,
respectively, of Common Stock at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters purchase
any of such additional shares pursuant to this option, each Underwriter will be
committed to purchase such additional shares in approximately the same
proportion as set forth in the table above. The Underwriters may exercise the
option only for the purpose of covering over-allotments, if any, made in
connection with the distribution of the Common Stock offered hereby.

The Company, the Selling Stockholders and all other current stockholders of
the Company have agreed not to sell, contract to sell or otherwise dispose of
any shares of Common Stock or securities convertible into Common Stock (except
Common Stock issued pursuant to options to be granted and issued upon
consummation of the offering) for a period of 180 days after the date of this
Prospectus, without the written consent of the Representative, except for the
Common Stock offered hereby. See "Shares Eligible For Future Sale -- Rule 144."

There has been no public market for the Common Stock prior to the offering.
The initial public offering price of the shares of Common Stock will be
determined by negotiation between the Company, the Selling Stockholder and the
Representative. Among the factors to be considered in determining the initial
public offering price are prevailing market and economic conditions, revenues
and earnings

57
<PAGE>
of the Company, estimates of the business potential and prospects of the
Company, the present state of the Company's business operations, an assessment
of the Company's management and the consideration of the above factors in
relation to market valuations of selected publicly-traded companies.

The Representative has informed the Company that the Underwriters will not,
without customer authority, confirm sales to any accounts over which they
exercise discretionary authority.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof.

The Company has applied to have the Common Stock approved for quotation and
trading on the Nasdaq National Market under the symbol "DHMS."

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by McDermott, Will & Emery, Chicago, Illinois. Certain
legal matters will be passed upon for the Underwriters by Gardner, Carton &
Douglas, Chicago, Illinois.

EXPERTS

The financial statements of the Company for the period from June 1, 1993
(inception of operations) to December 31, 1993 and as of December 31, 1994 and
1995 and for the years ended December 31, 1994 and 1995 included in this
Prospectus and the Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement.
Statements made in the Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete; with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement and the exhibits thereto
may be inspected, without charge, at the public reference facilities maintained
by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Northwestern
Atrium Center, 500 West Madison Street, Room 1400, Chicago, IL 60661, and 7
World Trade Center, Suite 1300, New York, NY 10048. Copies of such material can
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.

58
<PAGE>
DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Audited Financial Statements:
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995............................................... F-3
Consolidated Statements of Operations for the period from June 1, 1993 (inception of operations) to
December 31, 1993 and for the years ended December 31, 1994 and 1995...................................... F-4
Consolidated Statements of Changes in Common Stockholders' Equity for the period from June 1, 1993
(inception of operations) to December 31, 1993 and for the years ended December 31, 1994 and 1995......... F-5
Consolidated Statements of Cash Flows for the period from June 1, 1993 (inception of operations) to
December 31, 1993 and for the years ended December 31, 1994 and 1995...................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
Unaudited Financial Statements:
Unaudited Condensed Consolidated Balance Sheet at March 31, 1996........................................... F-14
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 1995 and
1996...................................................................................................... F-15
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1995 and
1996...................................................................................................... F-16
Notes to Unaudited Condensed Consolidated Financial Statements............................................. F-17
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Diamond Home Services, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Diamond Home
Services, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, changes in common stockholders'
equity, and cash flows for the period from June 1, 1993 (inception of
operations) to December 31, 1993 and for the two years ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Diamond Home Services, Inc. and Subsidiaries at December 31, 1994 and 1995, and
the consolidated results of their operations and their cash flows for the period
from June 1, 1993 (inception of operations) to December 31, 1993 and for the two
years ended December 31, 1995, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Chicago, Illinois

February 23, 1996, except as to the
first paragraph of Note 1 for which
the date is April 18, 1996
and Note 14 for which the date is
April 8, 1996

F-2
<PAGE>
DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................................ $ 5,048 $ 4,715
Accounts receivable...................................................................... 3,548 3,931
Prepaids and other current assets........................................................ 530 567
Deferred income taxes.................................................................... 496 404
--------- ---------
Total current assets....................................................................... 9,622 9,617
Property and equipment..................................................................... 847 1,732
Less: Accumulated depreciation............................................................. (95) (295)
--------- ---------
Net property and equipment................................................................. 752 1,437
Intangible assets, net..................................................................... 17,791 17,395
Deferred income taxes...................................................................... 491 1,051
Other...................................................................................... 619 643
--------- ---------
Total assets............................................................................... $ 29,275 $ 30,143
--------- ---------
--------- ---------
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................................... $ 4,897 $ 7,643
Borrowings under bank line of credit..................................................... 7,283 --
Accrued liabilities...................................................................... 2,808 5,434
Due to stockholders...................................................................... 2,054 1,354
Income taxes payable..................................................................... 904 --
--------- ---------
Total current liabilities.................................................................. 17,946 14,431
Long-term liabilities:
Warranty................................................................................. 2,201 3,652
Retention................................................................................ 576 965
Due to stockholders...................................................................... 6,216 4,862
--------- ---------
Total long-term liabilities................................................................ 8,993 9,479
Commitments and contingencies (Notes 10 and 11)............................................ -- --
Preferred stock, at redemption price....................................................... 1,400 1,400
Common stockholders' equity:
Common stock $.001 par value; 25,000,000 shares authorized; 6,249,950 shares issued and
outstanding............................................................................. 6 6
Additional paid-in capital............................................................... 119 983
Officer notes receivable................................................................. -- (707)
Treasury stock, at cost (268,750 shares in treasury in 1994)............................. (5) --
Retained earnings........................................................................ 816 4,551
--------- ---------
Total common stockholders' equity.......................................................... 936 4,833
--------- ---------
Total liabilities and common stockholders' equity.......................................... $ 29,275 $ 30,143
--------- ---------
--------- ---------
</TABLE>

See accompanying notes.

F-3
<PAGE>
DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JUNE 1 TO DECEMBER 31, 1993
AND THE YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................................ $ 20,548 $ 94,186 $ 124,848
Cost of sales............................................................ 12,588 56,139 72,245
--------- --------- -----------
Gross profit............................................................. 7,960 38,047 52,603
Operating expenses:
Selling, general and administrative expenses........................... 9,113 34,821 45,305
Amortization expense................................................... 26 275 503
--------- --------- -----------
Operating profit (loss).................................................. (1,179) 2,951 6,795
Interest expense, net.................................................... -- 39 410
--------- --------- -----------
Income (loss) before income taxes........................................ (1,179) 2,912 6,385
Income tax provision..................................................... -- 917 2,650
--------- --------- -----------
Net income (loss)........................................................ $ (1,179) $ 1,995 $ 3,735
--------- --------- -----------
--------- --------- -----------
</TABLE>

See accompanying notes.

F-4
<PAGE>
DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 1 TO DECEMBER 31, 1993
AND THE YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
ADDITIONAL OFFICER RETAINED
COMMON PAID-IN NOTES TREASURY EARNINGS
STOCK CAPITAL RECEIVABLE STOCK (DEFICIT) TOTAL
----------- ----------- ----------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock (June 1, 1993).............. $ 10 $ 190 $ -- $ -- $ -- $ 200
Net loss -- 1993.............................. -- -- -- -- (1,179) (1,179)
----- ----- ----------- ----- --------- ---------
December 31, 1993............................. 10 190 -- -- (1,179) (979)
Purchase and retire stock..................... (4) (71) -- -- -- (75)
Purchase of stock for treasury................ -- -- -- (5) -- (5)
Net income -- 1994............................ -- -- -- -- 1,995 1,995
----- ----- ----------- ----- --------- ---------
December 31, 1994............................. 6 119 -- (5) 816 936
Sale of treasury stock........................ -- 864 (869) 5 -- --
Repayment of officer notes.................... -- -- 162 -- -- 162
Net income -- 1995............................ -- -- -- -- 3,735 3,735
----- ----- ----------- ----- --------- ---------
December 31, 1995............................. $ 6 $ 983 $ (707) $ -- $ 4,551 $ 4,833
----- ----- ----------- ----- --------- ---------
----- ----- ----------- ----- --------- ---------
</TABLE>

See accompanying notes.

F-5
<PAGE>
DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JUNE 1 TO DECEMBER 31, 1993
AND THE YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1993 1994 1995
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net income (loss).............................................................. $ (1,179) $ 1,995 $ 3,735
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization.............................................. 44 393 706
Deferred income taxes...................................................... -- (987) (468)
Other...................................................................... (377) (225) 37
Changes in operating assets and liabilities:
Accounts receivable...................................................... (1,830) (1,718) 163
Prepaids and other assets................................................ (194) (335) (37)
Accounts payable......................................................... 2,065 2,832 2,746
Accrued expenses......................................................... 743 2,035 2,120
Income taxes payable..................................................... -- 904 (904)
Warranty................................................................. 308 1,893 1,957
Retention................................................................ 112 463 389
--------- ---------- ---------
Net cash provided by (used in) operating activities.......................... (308) 7,250 10,444
Investing activities
Capital expenditures......................................................... (244) (573) (888)
Loans originated............................................................. -- -- (546)
Organizational costs......................................................... (262) -- (107)
Cash value of life insurance................................................. -- (17) (61)
Acquisition spending......................................................... -- (240) --
--------- ---------- ---------
Net cash used in investing activities........................................ (506) (830) (1,602)
Financing activities
Payments on notes receivable from officers for treasury stock................ -- -- 162
Borrowings (repayment) of bank line of credit................................ 1,187 6,096 (7,283)
Borrowings from (payments to) stockholders................................... -- 8,270 (2,054)
Proceeds from issuance of common stock....................................... 200 -- --
Proceeds from issuance of preferred stock.................................... 1,400 -- --
Payments for purchase of common stock........................................ -- (17,711) --
--------- ---------- ---------
Net cash provided by (used in) financing activities.......................... 2,787 (3,345) (9,175)
--------- ---------- ---------
Net increase (decrease) in cash and cash equivalents......................... 1,973 3,075 (333)
Cash and cash equivalents at beginning of period............................. -- 1,973 5,048
--------- ---------- ---------
Cash and cash equivalents at end of period................................... $ 1,973 $ 5,048 $ 4,715
--------- ---------- ---------
--------- ---------- ---------
Supplemental cash flow disclosure:
Interest paid.............................................................. $ -- $ 78 $ 233
--------- ---------- ---------
--------- ---------- ---------
Income taxes paid.......................................................... $ -- $ 1,000 $ 4,082
--------- ---------- ---------
--------- ---------- ---------
</TABLE>

See accompanying notes.

F-6
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ARE IN THOUSANDS)

1. BUSINESS AND ORGANIZATION
Diamond Home Services, Inc., formerly Diamond Exteriors, Inc. (Home Services
or the Company) is a majority-owned subsidiary of Globe Building Materials, Inc.
(Globe) and was incorporated on May 13, 1993. Effective April 18, 1996, the
Company transferred substantially all of its assets and liabilities to its newly
formed wholly-owned subsidiary, Diamond Exteriors, Inc. (Exteriors), as a
capital contribution and Exteriors made a dividend to the Company of all of the
capital stock of its two wholly-owned subsidiaries, Marquise Financial Services,
Inc. (Marquise), which was incorporated in Delaware on July 14, 1995 and
Solitaire Home Heating and Cooling, Inc. (Solitaire), which was incorporated in
Delaware on November 27, 1995. The accompanying financial statements are
presented as if such transfer and dividend had taken place on June 1, 1993.
Accordingly, the accompanying consolidated financial statements include the
accounts of the Company's wholly-owned subsidiaries, Exteriors, Marquise and
Solitaire, collectively referred to as the Company.

The Company provides in-home direct sales and marketing for installed home
improvement products, through direct consumer marketing under a license between
Exteriors and Sears, Roebuck and Co. (Sears), for the sale, furnishing and
installation of roofing, gutters, doors, fencing, and related installed exterior
home improvement products. The Company commenced its roofing, door, and related
exterior home improvement business on June 1, 1993, and entered into its first
license with Sears on that date. During 1994, the Company was granted the
license for fencing in certain additional markets. In conjunction with obtaining
the fencing license, certain assets were acquired from the former licensee. See
Note 10 for information regarding Marquise.

Exteriors has negotiated a new three-year license agreement with Sears
effective January 1, 1996. License fees are based on gross sales and vary by
product. License fees approximated $1,160,000, $7,400,000, and $13,000,000 in
1993, 1994, and 1995.

On September 23, 1994, the Company and its stockholders approved and adopted
a Stock Purchase Agreement. The agreement resulted in the Company's purchase of
4,018,800 shares of common stock in exchange for cash and notes payable totaling
$10.9 million, non-interest-bearing agreements with stockholders providing
$2,770,100 in equal monthly installments over five years beginning January 1995
and performance notes payable to the stockholders totaling $4,000,000 and
bearing interest at 9% per annum effective January 1, 1995. The performance
notes are payable as to both principal and interest in annual amounts following
each of the years 1995 through 1999 if annual earnings, as defined, through 1999
equal or exceed $6,000,000, $8,000,000, $11,000,000, $14,000,000, and
$17,000,000, respectively. No interest will accrue or be paid if earnings do not
equal the predetermined bases. Any performance note principal not paid because
of failure to achieve the required earnings through 1999 will be paid in the
event cumulative earnings, as defined, equal or exceed $56,000,000 before
December 31, 2009. Such performance notes are subordinate to the bank line of
credit. The Company met the 1995 annual earnings requirement related to the
performance notes. In the event of an initial public offering of its common
stock, the Company will use its best efforts to pay the entire unpaid principal
and interest due on the performance notes at the time of an offering.

The stock acquisitions described above have been reflected in the
accompanying financial statements using the purchase method of accounting as if
Globe made the acquisitions and pushed-down its basis to the Company. Globe, by
virtue of an agreement among the stockholders affording Globe the right to elect
a majority of the Board of Directors of the Company, has had and continues to
exercise control over the Company. This agreement will terminate upon
consummation of the offering. The cost of the shares purchased in excess of
their par value and the direct costs incurred by the Company have been assigned
to goodwill which is classified on the balance sheet as intangible assets.

F-7
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS)

1. BUSINESS AND ORGANIZATION (CONTINUED)
The Company retired 3,750,050 shares of the common stock in 1994. The
remaining shares (268,750) were sold on a subscription basis to employees on
January 2, 1995, in exchange for $5,000 in cash and stock subscription notes
receivable totaling approximately $864,000. The notes bear interest at 7%
payable annually.

The preferred stock of the Company and approximately 80% of the Company's
outstanding common stock were owned by Globe at December 31, 1995 (approximately
83% at December 31, 1994).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after eliminating significant intercompany
accounts and transactions.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and time deposits. The Company
considers all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is based on the
straight-line method over the estimated useful lives of five to seven years.

REVENUE RECOGNITION

The Company recognizes revenue upon completion of each installation and
receipt from the customer of a signed certificate of satisfaction.

GOODWILL

The Company amortizes goodwill over 40 years. The Company at each balance
sheet date evaluates for recognition of potential impairment of its recorded
goodwill against the current and undiscounted expected future cash flows.
Impairment in recorded goodwill is charged to income when identified.

Goodwill at December 31, 1994 and December 31, 1995, was $17,608,000 and
$17,157,000, net of accumulated amortization of $223,000 and $674,000.

WARRANTY

The Company warrants its installed home improvement products and services to
meet certain manufacturing and material and labor specifications. The warranty
policy is unique for each installed product and service, ranges from 2 to 10
years, is generally for the material cost and labor, and requires the owner to
meet certain preconditions such as proof of purchase. The Company accrues for
estimated warranty costs based on an analysis of historical claims data.

ORGANIZATIONAL COSTS

Organizational costs are included in intangible assets and amortized on the
straight-line method over five years.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

F-8
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECLASSIFICATIONS

Certain reclassifications have been made in the 1993 and 1994 consolidated
financial statements to conform to the 1995 classifications.

3. PROPERTY AND EQUIPMENT
The cost of property and equipment at December 31 is as follows:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Equipment......................................................... $ 746 $ 1,182
Leasehold improvements............................................ -- 341
Furniture and fixtures............................................ 101 209
--------- ---------
$ 847 $ 1,732
--------- ---------
--------- ---------
</TABLE>

4. ADVERTISING

The Company capitalizes and amortizes direct-response advertisement costs
over its expected period of future benefits, generally one to three months
(I.E., the period between when the sale is made and the installation is
completed). Direct-response advertising consists primarily of print media and
radio advertisements for the Company's home improvement services. Advertising
costs are expensed as incurred or when the advertising first runs.

At December 31, 1994 and 1995, $550,000 and $500,000 of deferred
direct-response advertising costs was reported as noncurrent assets. Net
advertising expense was $1,688,000, $6,132,000, and $6,239,000 in 1993, 1994,
and 1995.

5. ACCRUED LIABILITIES
The components of accrued liabilities at December 31 are as follows:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Payroll and payroll-related.................................... $ 2,531 $ 3,979
Warranty....................................................... 103 609
Interest payable to stockholders............................... 34 360
Other.......................................................... 140 486
--------- ---------
$ 2,808 $ 5,434
--------- ---------
--------- ---------
</TABLE>

6. DEBT
At December 31, 1994, the Company had $7,283,000 outstanding under a
$12,500,000 bank line of credit, which was repaid as of the expiration date on
July 31, 1995. Interest on bank borrowings was payable monthly at the bank's
prime rate plus 2.75% (11.25% at December 31, 1994). Borrowings were secured by
substantially all of the Company's assets.

Effective February 6, 1996, the Company reestablished a bank line of credit
for maximum borrowings of $15,000,000. Interest on bank borrowings is payable
monthly at the bank's prime rate or at LIBOR plus 1.5%. The bank line of credit
requires the Company to maintain defined levels of equity and working capital,
and certain financial ratios, and limits the payment of dividends to common
stockholders.

Non-interest-bearing agreements with stockholders provide for the payment of
$2,770,100 in equal monthly installments over five years beginning January 1995.
The Company made payments to

F-9
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS)

6. DEBT (CONTINUED)
stockholders of $554,000 during 1995 related to the non-interest-bearing
agreements. Also included in amounts due to stockholders are performance notes
totaling $4,000,000 and bearing interest at 9% per annum effective January 1,
1995 (see Note 1). All amounts due to stockholders are subordinate to the bank
line of credit.

The Company's debt approximates fair value at December 31, 1995.

7. INCOME TAXES
For the period from September 23, 1994 through December 31, 1994 and for the
year ended December 31, 1995, the Company is included in the consolidated U.S.
federal income tax return of Globe. A tax-sharing agreement exists between the
Company and Globe specifying the allocation and payment of liabilities and
benefits arising from the filing of a consolidated tax return. The impact of the
tax allocation method requires the Company to pay its share of the consolidated
U.S. federal tax liability if it has taxable income, and to be compensated for
losses or credits for benefits which are utilized to reduce the consolidated tax
liability. There would be no difference in the Company's tax liability if a
tax-sharing agreement did not exist.

The provision (benefit) for the year ended December 31 is as follows:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Current:
Federal...................................................... $ 1,519 $ 2,567
State........................................................ 385 551
Deferred:
Federal...................................................... (813) (385)
State........................................................ (174) (83)
--------- ---------
$ 917 $ 2,650
--------- ---------
--------- ---------
</TABLE>

No current or deferred taxes were recorded in 1993 since a valuation
allowance was established to offset net deferred tax assets at December 31,
1993.

A reconciliation of the Company's provision for income taxes based on the
federal statutory income tax rate to the Company's effective tax rate is as
follows:

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Federal statutory income tax rate.............................. 34.0% 34.0%
Increase (decrease) resulting from:
State income tax, net of federal tax benefit................. 4.8 4.8
Goodwill amortization........................................ 2.6 2.0
Utilization of federal tax loss carryforward................. (12.9) --
Other, net................................................... 3.0 0.7
----- -----
Effective tax rate............................................. 31.5% 41.5%
----- -----
----- -----
</TABLE>

Deferred tax assets and liabilities are recognized for the expected future
tax impact of temporary differences between the carrying amounts and the tax
basis of assets and liabilities.

F-10
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS)

7. INCOME TAXES (CONTINUED)
The significant components of deferred tax assets and liabilities at
December 31 are as follows:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Warranty..................................................... $ 887 $ 1,640
Other........................................................ 599 473
--------- ---------
Total deferred tax assets...................................... 1,486 2,113
Deferred tax liabilities:
Advertising.................................................. (315) (235)
Depreciation................................................. (30) (120)
Other........................................................ (154) (303)
--------- ---------
Total deferred tax liabilities................................. (499) (658)
--------- ---------
Net deferred tax assets........................................ $ 987 $ 1,455
--------- ---------
--------- ---------
</TABLE>

8. EMPLOYEE BENEFIT PLAN
The Company has one defined-contribution plan that covers substantially all
employees. Annual contributions are determined by formula based on earnings.
Since inception, there have been no contributions to the Plan.

9. CONSUMER FINANCING
Marquise began operations on November 20, 1995. Marquise provides consumer
financing through direct consumer loans to customers of the Company. Finance
receivables are payable through monthly installments and may be secured or
unsecured. Marquise's first billings for monthly installments to consumers
occurred on January 9, 1996. Interest income from finance receivables is
recognized using the interest method. Accrual of interest income on finance
receivables is suspended when a loan is contractually delinquent for 90 days or
more and resumes when the loan becomes contractually current. No interest income
was recorded during 1995. Provisions for credit losses are charged to income in
amounts sufficient to maintain the allowance at a level considered adequate to
cover the losses of principal and interest in the existing portfolio. It is
Marquise's policy to charge off finance receivables when they are 210 days past
due.

The following summarized financial information for Marquise is before
elimination of intercompany transactions in consolidation.

F-11
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS)

9. CONSUMER FINANCING (CONTINUED)
Financial position at December 31:
<TABLE>
<CAPTION>
1995
---------
<S> <C>
Assets
Accounts receivable....................................................... $ 542
Other assets.............................................................. 127
---------
Total assets............................................................ $ 669
---------
---------
Liabilities and stockholder's equity
Due to Diamond Exteriors, Inc............................................. $ 442
Other liabilities......................................................... 3
---------
Total liabilities....................................................... 445
Stockholder's equity...................................................... 224
---------
Total liabilities and stockholder's equity.............................. $ 669
---------
---------
Operations for the period ended December 31:

1995
---------
<S> <C>
Total finance and other income............................................. $ --
Other costs and expenses.................................................. (43)
---------
Loss before income tax benefit............................................ (43)
Income tax benefit........................................................ 17
---------
Net loss.................................................................. $ (26)
---------
---------
Cash flows for the period ended December 31:
<CAPTION>

1995
---------
<S> <C>
Net cash used in operating activities..................................... $ (36)
Net cash used in investing activities..................................... (656)
Net cash provided by financing activities................................. 692
---------
Cash at December 31, 1995................................................. $ --
---------
---------
</TABLE>

10. COMMITMENTS
The Company leases certain real property and equipment under long-term
noncancelable leases expiring at various dates through 2001. Future minimum
lease payments under noncancelable operating leases with initial terms of one
year or more consisted of the following at December 31, 1995:

<TABLE>
<S> <C>
1996....................................................... $ 857
1997....................................................... 655
1998....................................................... 424
1999....................................................... 270
2000....................................................... 178
Thereafter................................................. 107
---------
Total minimum lease payments............................... $ 2,491
---------
---------
</TABLE>

Rent expense was $280,000, $685,000, and $850,000 in 1993, 1994, and 1995.

F-12
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS)

10. COMMITMENTS (CONTINUED)
During 1994, the Company entered into agreements with certain employees
providing for the payment of $4,230,000 in equal monthly installments over five
years beginning January 1995, contingent on the continued employment of each
employee. During 1995, payments of $861,000 were made to the related employee
group and one employee resigned forfeiting $274,000 in payments. The remaining
liability of $3,095,000 for such contingent payments is not reflected in the
consolidated financial statements at December 31, 1995.

11. CONTINGENCIES
The Company is involved in various legal actions arising in the ordinary
course of business. Although management cannot predict the ultimate outcome of
these matters with certainty, it believes, after taking into consideration legal
counsel's evaluation of such actions, that the outcome of these matters will not
have a material effect on the financial position or operations of the Company.

12. PREFERRED STOCK
The preferred stock of the Company consists of 20,000 authorized shares, of
which 1,400 shares are outstanding and issued to Globe. The preferred stock is
nonvoting and redeemable upon a liquidation or sale of control of the Company,
or at any time at the Company's option, at $1,000 per share. The preferred stock
is not subject to dividend payments.

13. RELATED PARTY TRANSACTIONS

The Company has an agreement with Globe for the performance of various
administrative services. In consideration for such services, the Company pays
management fees based on annual net sales, as defined. The Company believes that
the cost of such services, on a stand-alone basis, approximates the management
fees incurred by the Company in 1994 and 1995. The Company incurred management
fees of $464,000 and $558,000 for 1994 and 1995, of which $54,000 and $18,000
were payable at December 31, 1994 and 1995. No management agreement existed in
1993.

14. SUBSEQUENT EVENT

On April 8, 1996 the Board of Directors of the Company approved the
reclassification and split of each share of its Class A Voting Common Stock and
Class B Nonvoting Common Stock into 50 shares of Common Stock to be effected
immediately prior to the offering. The accompanying financial statements are
presented as if the reclassification and split had taken place on June 1, 1993.

F-13
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEEET
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA (1)
MARCH 31, 1996 MARCH 31, 1996
--------------- --------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 46 $ 46
Accounts receivable........................................................... 6,184 6,184
Finance company accounts receivable........................................... 7,427 7,427
Prepaids and other current assets............................................. 717 717
Deferred income taxes......................................................... 427 427
--------------- --------------
Total current assets............................................................ 14,801 14,801
Net property and equipment...................................................... 1,492 1,492
Intangible assets, net.......................................................... 17,286 17,286
Deferred income taxes........................................................... 1,063 1,063
Other........................................................................... 866 866
--------------- --------------
Total assets.................................................................... $ 35,508 $ 35,508
--------------- --------------
--------------- --------------
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities...................................... $ 11,034 $ 11,034
Borrowings under bank line of credit.......................................... 7,706 7,706
Due to stockholders........................................................... 1,354 9,954
--------------- --------------
Total current liabilities....................................................... 20,094 28,694
Long-term liabilities:
Warranty and retention........................................................ 4,971 4,971
Due to stockholders........................................................... 3,861 3,861
--------------- --------------
Total long-term liabilities..................................................... 8,832 8,832
Preferred stock, at redemption price............................................ 1,400 1,400
Common stockholders' equity..................................................... 5,182 (3,418 )
--------------- --------------
Total liabilities and common stockholders' equity............................... $ 35,508 $ 35,508
--------------- --------------
--------------- --------------
</TABLE>

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

(1) Pro forma to reflect the payment by the Company of the $8.6 million special,
one-time dividend to existing stockholders (including management
stockholders and Globe). See "Use of Proceeds" and "Certain Transactions --
Transactions with Globe and Globe Affiliates."

See notes to condensed consolidated financial statements

F-14
<PAGE>

DIAMOND HOME SERVICES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Net sales.................................................................................. $ 22,362 $ 27,093
Cost of sales.............................................................................. 13,096 15,293
--------- ---------
Gross profit............................................................................... 9,266 11,800
Selling, general and administrative expenses............................................... 8,884 10,932
Operating interest expense................................................................. 0 22
Amortization expense....................................................................... 126 132
--------- ---------
Operating profit........................................................................... 256 714
Interest expense........................................................................... 186 66
--------- ---------
Income before income taxes................................................................. 70 648
Income tax provision....................................................................... 71 299
--------- ---------
Net income (loss).......................................................................... $ (1) $ 349
--------- ---------
--------- ---------
</TABLE>

See notes to condensed consolidated financial statements

F-15
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Operating activities
Net income (loss)........................................................................... $ (1) $ 349
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization........................................................... 155 197
Deferred income taxes................................................................... (347) (35)
Changes in operating assets and liabilities:
Accounts receivable and other assets.................................................. (114) (3,172)
Accounts payable and accrued expenses................................................. 235 (2,043)
Warranty and retention................................................................ 514 354
--------- ---------
Net cash provided by (used in) operating activities....................................... 442 (4,350)

Investing activities
Loans originated.......................................................................... -- (6,881)
Capital expenditures...................................................................... (224) (120)
Organizational costs...................................................................... -- (23)
--------- ---------
Net cash used by investing activities..................................................... (224) (7,024)

Financing activities
Borrowings (repayment) of bank line of credit............................................. (5,099) 7,706
Payments to stockholders.................................................................. (167) (1,001)
--------- ---------
Net cash (used in) provided by financing activities....................................... (5,266) 6,705
--------- ---------
Net decrease in cash and cash equivalents................................................. (5,048) (4,669)
Cash and cash equivalents at beginning of period.......................................... 5,048 4,715
--------- ---------
Cash and cash equivalents at end of period................................................ $ -- $ 46
--------- ---------
--------- ---------
Supplemental cash flow disclosure:
Interest paid........................................................................... $ 65 $ 378
--------- ---------
--------- ---------
Income taxes paid....................................................................... $ 548 $ 94
--------- ---------
--------- ---------
</TABLE>

See notes to condensed consolidated financial statements

F-16
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. For further information, refer to the consolidated financial statements
included elsewhere herein.

2. SIGNIFICANT ACCOUNTING POLICIES

Credit participation fees paid by Sears and its affiliates are recognized in
the period the receivables are placed with Sears and its affiliates, without
recourse to the Company, utilizing the discounted present value of the
contractual payment stream. Approximately 71% of the total credit participation
fee earned is received in cash during the first three years.

3. CONSUMER FINANCING

The Company's consumer finance subsidiary, Marquise Financial, began
operations on November 20, 1995. Marquise Financial provides consumer financing
through direct consumer loans to customers of the Company. Finance receivables
are payable through monthly installments and may be secured or unsecured.
Marquise Financial's first billings for monthly installments to consumers
occurred on January 9, 1996. Interest income from finance receivables is
recognized using the interest method. Accrual of interest income on finance
receivables is suspended when a loan is contractually delinquent for 90 days or
more and resumes when the loan becomes contractually current. No interest income
was recorded during 1995. Provisions for credit losses are charged to income in
amounts sufficient to maintain the allowance at a level considered adequate to
cover the losses of principal and interest in the existing portfolio. It is
Marquise Financial's policy to charge off finance receivables when they are 210
days past due. Interest income for the three months ended March 31, 1996 was not
material.

The following summarized condensed financial information for Marquise
Financial is before eliminations of intercompany transactions in consolidation:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
--------------- -----------
<S> <C> <C>
ASSETS:
Cash and financing receivables................................................ $ 542 $ 7,473
Other current assets.......................................................... 5 41
Intangibles (net)............................................................. 122 122
----- -----------
$ 669 $ 7,636
----- -----------
----- -----------

LIABILITIES AND STOCKHOLDER'S EQUITY:
Due to Diamond................................................................ $ 442 $ 7,456
Other......................................................................... 3 39
----- -----------
Total liabilities......................................................... 445 7,495
Total stockholder's equity.................................................... 224 141
----- -----------
Total liabilities and stockholder's equity................................ $ 669 $ 7,636
----- -----------
----- -----------
</TABLE>

F-17
<PAGE>

DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)

3. CONSUMER FINANCING (CONTINUED)

Results of operations for the three months ended March 31, 1996:

<TABLE>
<S> <C>
Financing income............................................................ $ 39
General and administrative expenses......................................... 177
---------
Loss before tax benefit................................................. (138)
Income tax benefit.......................................................... 55
---------
Net loss................................................................ $ 83
---------
---------
</TABLE>

Cash flow for the three months ended March 31, 1996:

<TABLE>
<S> <C>
Net cash used in operating activities...................................... $ (83)
Net cash used in investing activities...................................... (6,885)
Net cash provided by financing activities.................................. 7,014
---------
Cash at March 31, 1996................................................. $ 46
---------
---------
</TABLE>

F-18
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 14
Dividend Policy................................ 14
Capitalization................................. 15
Dilution....................................... 16
Selected Consolidated Financial and Operating
Data.......................................... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 19
Business....................................... 28
Management..................................... 41
Certain Transactions........................... 47
Principal and Selling Stockholders............. 53
Description of Capital Stock................... 54
Shares Eligible for Future Sale................ 55
Underwriting................................... 57
Legal Matters.................................. 58
Experts........................................ 58
Additional Information......................... 58
Index to Consolidated Financial Statements..... F-1
</TABLE>

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

UNTIL , 1996 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

3,420,000 SHARES

[DIAMOND HOME SERVICES LOGO]

COMMON STOCK

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

PROSPECTUS

, 1996

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

WILLIAM BLAIR & COMPANY

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following are the estimated expenses (other than the SEC registration
fee, NASD filing fee and the Nasdaq National Market application fee) of the
issuance and distribution of the securities being registered, all of which will
be paid by the Company.

<TABLE>
<CAPTION>
SEC registration fee............................................. $ 17,631
<S> <C>
NASD filing fee.................................................. 5,613
Nasdaq National Market application fee........................... 39,593
Printing expenses................................................ 100,000
Fees and expenses of counsel..................................... 200,000
Fees and expenses of accountants................................. 100,000
Transfer agent and registrar fees................................ 4,000
Blue sky fees and expenses....................................... 15,000
Miscellaneous.................................................... 18,163
---------
Total........................................................ $ 500,000
</TABLE>

The Company intends to pay all expenses of registration, issuance and
distribution, excluding underwriters' discounts and commissions, with respect to
the shares being sold by the Selling Stockholder and, in the event that the
underwriters exercise the over-allotment option, the Company will pay all
expenses of registration, issuance and distribution of the shares of Common
Stock sold by certain of the Company's other stockholders, excluding
underwriters' discounts and commissions and fees and expenses of such
stockholders' counsel.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under Delaware law, a corporation may indemnify any person who was or is a
party or is threatened to be made a party to an action (other than an action by
or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the corporation's request, as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys' fees)
that are actually and reasonably incurred by him ("Expenses"), and judgments,
fines and amounts paid in settlement that are actually and reasonably incurred
by him, in connection with the defense or settlement of such action, provided
that he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. Although Delaware law permits a corporation to indemnify
any person referred to above against Expenses in connection with the defense or
settlement of an action by or in the right of the corporation, provided that he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests, if such person has been judged
liable to the corporation, indemnification is only permitted to the extent that
the Court of Chancery (or the court in which the action was brought) determines
that, despite the adjudication of liability, such person is entitled to
indemnity for such Expenses as the court deems proper. The determination as to
whether a person seeking indemnification has met the required standard of
conduct is to be made (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum or
(2) if there are no such directors or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders. The
General Corporation Law of the State of Delaware also provides for mandatory
indemnification of any director, officer, employee or agent against Expenses to
the extent such person has been successful in any proceeding covered by the
statute. In addition, the General Corporation Law of the State of Delaware
provides the general authorization of advancement of a director's or officer's
litigation expenses in lieu of requiring the authorization of such advancement
by the board of directors in specific cases, and

II-1
<PAGE>
that indemnification and advancement of expenses provided by the statute shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement or otherwise.

The Company's Amended By-Laws provide for indemnification of the Company's
directors and officers, to the fullest extent not prohibited by the Delaware
law.

The Company has entered into agreements to indemnify its directors and
certain of its officers, in addition to the indemnification provided for in the
Company's Amended By-Laws. These agreements, among other things, will indemnify
the Company's directors and such officers for all direct and indirect expenses
and costs (including, without limitation, all reasonable attorneys' fees and
related disbursements, other out of pocket costs and reasonable compensation for
time spent by such persons for which they are not otherwise compensated by the
Company or any third person) and liabilities of any type whatsoever (including,
but not limited to, judgments, fines and settlement fees) actually and
reasonably incurred by such person in connection with either the investigation,
defense, settlement or appeal of any threatened, pending or completed action,
suit or other proceeding, including any action by or in the right of the
corporation, arising out of such person's services as a director or officer of
the Company or as a director, officer, employee or other agent of, any
subsidiary of the Company or any other company or enterprise to which the person
provides services at the request of the Company if such director or officer
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to the best interests of the Company and, with respect to any
criminal action or proceeding, if he or she had no reasonable cause to believe
his or her conduct was unlawful. The Company believes that these provisions and
agreements are necessary to attract and retain talented and experienced
directors and officers.

The Company maintains liability insurance for the benefit of its directors
and officers.

Under the terms of the Underwriting Agreement, the Underwriters have agreed
to indemnify, under certain conditions, the Company, its directors, certain of
its officers and persons who control the Company within the meaning of the
Securities Act of 1933, as amended (the "Securities Act") against certain
liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Set forth below is information as to securities of the Company issued or
sold by the Company within the past three years which were not registered under
the Securities Act and were issued upon the exemption from registration provided
by Section 4(2) or Section 3(a)(9) of the Securities Act or pursuant to Rule 701
promulgated under the Securities Act. No underwriters were involved in any of
the sales so there were no underwriting discounts or commissions.

1. In June 1993, pursuant to Section 4(2) of the Securities Act, the
Company issued an aggregate of 5,000 shares of Class A Voting Common Stock, par
value $1.00 per share, and 95,000 shares of Class B Nonvoting Common Stock, par
value $1.00 per share, to certain of the Company's managers in exchange for
$100,000.

2. In July 1993, pursuant to Section 4(2) of the Securities Act, the
Company issued 5,000 shares of Class A Voting Common Stock and 95,000 shares of
Class B Nonvoting Common Stock to Globe, an accredited investor, in exchange for
$100,000.

3. In July 1993, pursuant to Section 4(2) of the Securities Act, the
Company issued to Globe, an accredited investor, 1,400 shares of Series A
Preferred Stock, par value $1.00 per share, in exchange for $1.4 million.

4. In January 1995, the Company issued an aggregate of 268 shares of Class
A Voting Common Stock and 5,107 shares of Class B Nonvoting Common Stock to
certain of the Company's managers in accordance with Rule 701 promulgated under
the Securities Act, in exchange for cash for the par value and secured
promissory notes from such managers payable for an aggregate of $869,295, or
$161.73 per share purchased.

II-2
<PAGE>
5. Immediately prior to the offering, pursuant to Section 3(a)(9) of the
Securities Act, the Company will reclassify and split each outstanding share of
Class A Voting Common Stock and Class B Nonvoting Common Stock into 50 shares of
Common Stock, $.001 par value per share.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1* Form of Amended and Restated Certificate of Incorporation of Diamond Home Services, Inc.
3.2* Form of Amended and Restated By-Laws of Diamond Home Services, Inc.
5.1** Opinion of McDermott, Will & Emery regarding legality
10.1* Registration Rights Agreement between Diamond Home Services, Inc. and Globe Building
Materials, Inc.
10.1(a) Amendment to Registration Rights Agreement between Diamond Home Service Inc. and Globe
Building Materials, Inc.
10.2* Form of Indemnity Agreement between Diamond Home Services, Inc. and its directors and
certain officers.
10.3** License Agreement between Sears, Roebuck and Co. and Diamond Exteriors, Inc., dated January
1, 1996.
10.4* Lease between Diamond Home Services, Inc. and Haldun Square Partners dated May 3, 1995.
10.5* Form of Agreement between Diamond Home Services, Inc. and each of the following managers of
Diamond Home Services, Inc.: Frank Cianciosi, Jerome Cooper, James M. Gillespie, Rodger
Ibach, Marvin Lerman and Ronald Schurter.
10.6* Form of Agreement between Diamond Home Services, Inc. and certain of its managers.
10.7* Diamond Home Services, Inc. Incentive Stock Option Plan.
10.8* Diamond Home Services, Inc. 1996 Nonemployee Director Stock Option Plan.
10.9 Credit Agreement between American National Bank and Trust Company of Chicago and Diamond
Home Services, Inc.
10.9(a) First Waiver and Consent to Loan and Security Agreement between Diamond Home Services, Inc.
and American National Bank and Trust Company of Chicago.
10.9(b) First Amendment, Waiver and Consent to Loan and Security Agreement between Diamond Home
Services, Inc. and American National Bank and Trust Company of Chicago.
10.9(c)** Assignment, Delegation and Assumption Agreement among Diamond Home Services, Inc. Diamond
Exteriors, Inc. and American National Bank of Trust Company of Chicago.
10.10** Settlement Agreement between Diamond Home Services, Inc. and Donald Griffin.
10.11 License Agreement between Globe Building Materials, Inc. and Diamond Home Services, Inc.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------
21.2* Subsidiaries of Diamond Home Services, Inc.
<S> <C>
23.1 Consent of Ernst & Young LLP
23.2** Consent of McDermott, Will & Emery (included in Exhibit 5.1)
24.1* Power of Attorney (included with the signature page to the registration statement)
</TABLE>

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

* Previously filed.

** To be filed by amendment.

(b) Financial Statement Schedules:

None.

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to provide to the
representative of the Underwriters at the closings specified in the Underwriting
Agreement certificates in such denominations and registered in such names as
required by such representative to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

(c) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, (i) the information omitted
from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective and (ii) each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Chicago, Illinois on
May 28, 1996.

DIAMOND HOME SERVICES, INC.

By: /s/ RICHARD G. REECE
-------------------------------------
Richard G. Reece
CHIEF FINANCIAL OFFICER AND TREASURER

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- --------------------------------------------------- ----------------------------------------------- -----------------------

*
---------------------------------------- Chairman of the Board, Chief Executive Officer May 28, 1996
C. Stephen Clegg and President (Principal Executive Officer)

/S/ RICHARD G. REECE
---------------------------------------- Chief Financial Officer and Treasurer May 28, 1996
Richard G. Reece (Principal Financial and Accounting Officer)

*
---------------------------------------- Director May 28, 1996
James Bere

*
---------------------------------------- Director May 28, 1996
Jacob Pollock

*
---------------------------------------- Director May 28, 1996
George A. Stinson

*
---------------------------------------- Director May 28, 1996
James M. Gillespie

* By Power of Attorney

/S/ RICHARD G. REECE
----------------------------------------
Richard G. Reece
ATTORNEY-IN-FACT
</TABLE>

II-5
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
1.1 Form of Underwriting Agreement
3.1* Form of Amended and Restated Certificate of Incorporation of Diamond Home Services, Inc.
3.2* Form of Amended and Restated By-Laws of Diamond Home Services, Inc.
5.1** Opinion of McDermott, Will & Emery regarding legality
10.1* Registration Rights Agreement between Diamond Home Services, Inc. and Globe Building
Materials, Inc.
10.1(a) Amendment to Registration Rights Agreement between Diamond Home Service Inc. and Globe
Building Materials, Inc.
10.2* Form of Indemnity Agreement between Diamond Home Services, Inc. and its directors and
certain officers.
10.3** License Agreement between Sears, Roebuck and Co. and Diamond Exteriors, Inc., dated January
1, 1996.
10.4* Lease between Diamond Home Services, Inc. and Haldun Square Partners dated May 3, 1995.
10.5* Form of Agreement between Diamond Home Services, Inc. and each of the following managers of
Diamond Home Services, Inc.: Frank Cianciosi, Jerome Cooper, James M. Gillespie, Rodger
Ibach, Marvin Lerman and Ronald Schurter.
10.6* Form of Agreement between Diamond Home Services, Inc. and certain of its managers.
10.7* Diamond Home Services, Inc. Incentive Stock Option Plan.
10.8* Diamond Home Services, Inc. 1996 Nonemployee Director Stock Option Plan.
10.9 Credit Agreement between American National Bank and Trust Company of Chicago and Diamond
Home Services, Inc.
10.9(a) First Waiver and Consent to Loan and Security Agreement between Diamond Home Services, Inc.
and American National Bank and Trust Company of Chicago.
10.9(b) First Amendment, Waiver and Consent to Loan and Security Agreement between Diamond Home
Services, Inc. and American National Bank and Trust Company of Chicago.
10.9(c)** Assignment, Delegation and Assumption Agreement among Diamond Home Services, Inc. Diamond
Exteriors, Inc. and American National Bank of Trust Company of Chicago.
10.10** Settlement Agreement between Diamond Home Services, Inc. and Donald Griffin.
10.11 License Agreement between Globe Building Materials, Inc. and Diamond Home Services, Inc.
21.2* Subsidiaries of Diamond Home Services, Inc.
23.1 Consent of Ernst & Young LLP
23.2** Consent of McDermott, Will & Emery (included in Exhibit 5.1)
24.1* Power of Attorney (included with the signature page to the registration statement)
</TABLE>

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

* Previously filed.

** To be filed by amendment.

<PAGE>
exh 1.1
DIAMOND HOME SERVICES, INC.

3,420,000 Shares Common Stock*

UNDERWRITING AGREEMENT

_______________, 1996

WILLIAM BLAIR & COMPANY, L.L.C.
As Representative of the Several
Underwriters Named in Schedule A
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606

Ladies and Gentlemen:

SECTION 1. INTRODUCTORY. Diamond Home Services, Inc. ("COMPANY") a
Delaware corporation, has an authorized capital stock consisting of 4,000,000
shares of Preferred Stock, $.001 par value, of which no shares were outstanding
as of ____________, 1996 and 20,000,000 shares, $.001 par value, of Common Stock
("COMMON STOCK"), of which 6,249,950 shares were outstanding as of such date.
The Company proposes to issue and sell 2,687,000 shares of its authorized but
unissued Common Stock, and GBM, Inc. ("GBM"), a Delaware corporation and wholly-
owned subsidiary of Globe Building Materials, Inc., a Delaware corporation,
proposes to sell 733,000 shares of the Company's issued and outstanding Common
Stock to the several underwriters named in Schedule A as it may be amended by
the Pricing Agreement hereinafter defined ("UNDERWRITERS"), who are acting
severally and not jointly. Globe Building Materials, Inc and its subsidiaries,
including GBM, are herein collectively referred to as "Globe." Collectively,
such total of 3,420,000 shares of Common Stock proposed to be sold by the
Company and GBM is hereinafter referred to as the "FIRM SHARES." In addition,
Mr. Donald Griffin and Mr. Rodger Ibach (collectively, the "Individual Selling
Stockholders") and GBM and the Company (Globe, GBM and the Individual Selling
Stockholders are sometimes collectively referred to as the "Selling
Stockholders") propose to grant to the Underwriters an option to purchase up to
an aggregate 513,000 additional shares of Common Stock ("OPTION SHARES") as
provided in Section 5 hereof. The Firm Shares and, to the extent such option is
exercised, the Option Shares, are hereinafter collectively referred to as the
"SHARES."

You have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon as you deem advisable after the registration statement
hereinafter referred to becomes effective, if it has not yet become effective,
and the Pricing Agreement hereinafter defined has been executed and delivered.

Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company, the Selling Stockholders and the Representative,
acting on behalf of the several Underwriters, shall enter into an agreement
substantially in the form of Exhibit A hereto (the "PRICING AGREEMENT"). The
Pricing Agreement may take the form of an exchange of any standard form of
written telecommunication between the Company, the Selling Stockholders and the
Representative and shall specify such applicable information as is indicated in
Exhibit A hereto. The offering of the Shares will

*Plus an option to acquire from the Company and the Individual Selling
Stockholders up to 513,000 additional shares to cover overallotments.

<PAGE>

be governed by this Agreement, as supplemented by the Pricing Agreement.
From and after the date of the execution and delivery of the Pricing
Agreement, this Agreement shall be deemed to incorporate the Pricing
Agreement.

The Company and the Selling Stockholders hereby confirm their
agreements with the Underwriters as follows:

SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the several Underwriters that:

(a) A registration statement on Form S-1 (File No. 333-3822) and a
related preliminary prospectus with respect to the Shares have been
prepared and filed with the Securities and Exchange Commission
("COMMISSION") by the Company in conformity with the requirements of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "1933 ACT;" all references herein
to specific rules are rules promulgated under the 1933 Act); the Company
has so prepared and has filed such amendments thereto, if any, and such
amended preliminary prospectuses as may have been required to the date
hereof and will file such additional amendments thereto and such amended
prospectuses as may hereafter be required. There have been or will
promptly be delivered to you two signed copies of such registration
statement and amendments, two copies of each exhibit filed therewith, and
conformed copies of such registration statement and amendments (but without
exhibits) and of the related preliminary prospectus or prospectuses and
final forms of prospectus for each of the Underwriters.

Such registration statement (as amended, if applicable) at the time it
becomes effective and the prospectus constituting a part thereof (including
the information, if any, deemed to be part of the registration statement at
the time of effectiveness pursuant to Rule 430A(b) and/or Rule 434(d)), as
from time to time amended or supplemented, are hereinafter referred to as
the "REGISTRATION STATEMENT" and the "PROSPECTUS," respectively, except
that if any revised prospectus shall be provided to the Underwriters by the
Company for use in connection with the offering of the Shares which differs
from the Prospectus on file at the Commission at the time the Registration
Statement became or becomes effective (whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b)),
the term "Prospectus" shall refer to such revised prospectus from and after
the time it was provided to the Underwriters for such use. If the Company
elects to rely on Rule 434 of the 1933 Act, all references to "Prospectus"
shall be deemed to include, without limitation, the form of prospectus and
the term sheet, taken together, provided to the Underwriters by the Company
in accordance with Rule 434 of the 1933 Act (the "RULE 434 PROSPECTUS").
Any registration statement (including any amendment or supplement thereto
or information which is deemed to be a part thereof) filed by the Company
under Rule 462(b) (the "RULE 462(b) REGISTRATION STATEMENT") shall be
deemed to be part of the "Registration Statement" as defined herein, and
any prospectus (including any amendment or supplement thereto or
information which is deemed a part thereof) included in such registration
statement shall be deemed to be a part of the "Prospectus" as defined
herein, as appropriate. The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder are hereinafter
collectively referred to as the "EXCHANGE ACT."

(b) The Commission has not issued any order preventing or suspending
the use of any preliminary prospectus, and each preliminary prospectus has
conformed in all material respects with the requirements of the 1933 Act
and, as of its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements

(2)

<PAGE>

therein not misleading; and when the Registration Statement became or
becomes effective, and at all times subsequent thereto, up to the First
Closing Date or the Second Closing Date hereinafter defined, as the case
may be, the Registration Statement, including the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b) or Rule 434(d), if applicable, and the Prospectus and any
amendments or supplements thereto, contained or will contain all statements
that are required to be stated therein in accordance with the 1933 Act and
in all material respects conformed or will in all material respects conform
to the requirements of the 1933 Act, and neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, included or
will include any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the
Company makes no representation or warranty as to information contained in
or omitted from any preliminary prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriter through the Representative specifically for use
in the preparation thereof.

(c) The Company and its subsidiaries have been duly incorporated and
are validly existing as corporations in good standing under the laws of
their respective places of incorporation, with corporate power and
authority to own their properties and conduct their business as described
in the Prospectus; the Company and each of its subsidiaries are duly
qualified to do business as foreign corporations under the corporation law
of, and are in good standing as such in, each jurisdiction in which they
own or lease substantial properties, have an office, or in which
substantial business is conducted and such qualification is required except
in any such case where the failure to so qualify or be in good standing
would not have a material adverse effect upon the Company and its
subsidiaries taken as a whole; and no proceeding of which the Company has
knowledge has been instituted in any such jurisdiction, revoking, limiting
or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.

(d) Except as disclosed in the Registration Statement, the Company
owns directly or indirectly 100 percent of the issued and outstanding
capital stock of each of its subsidiaries, free and clear of any claims,
liens, encumbrances or security interests and all of such capital stock has
been duly authorized and validly issued and is fully paid and
nonassessable.

(e) The issued and outstanding shares of capital stock of the Company
as set forth in the Prospectus have been duly authorized and validly
issued, are fully paid and nonassessable, and conform to the description
thereof contained in the Prospectus.

(f) The Shares to be sold by the Company have been duly authorized
and when issued, delivered and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and will conform to the
description thereof contained in the Prospectus.

(g) The making and performance by the Company of this Agreement and
the Pricing Agreement have been duly authorized by all necessary corporate
action and will not violate any provision of the Company's charter or
bylaws and will not result in the breach, or be in contravention, of any
provision of any material agreement, franchise, license, indenture,
mortgage, deed of trust, or other material instrument to which the Company
or any subsidiary is a party or by which the Company, any subsidiary or the
property of any of them may be bound or affected, or any order, rule or
regulation applicable to the Company or any subsidiary of any

(3)

<PAGE>

court or regulatory body, administrative agency or other governmental body
having jurisdiction over the Company or any subsidiary or any of their
respective properties, or any order of any court or governmental agency or
authority entered in any proceeding to which the Company or any subsidiary
was or is now a party or by which it is bound. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and
delivery of this Agreement or the Pricing Agreement or the consummation
of the transactions contemplated herein or therein, except for compliance
with the 1933 Act and blue sky laws applicable to the public offering of
the Shares by the several Underwriters and clearance of such offering
with the National Association of Securities Dealers, Inc. ("NASD"). This
Agreement has been duly executed and delivered by the Company.

(h) The accountants who have expressed their opinions with respect to
certain of the financial statements and schedules included in the
Registration Statement are independent accountants as required by the 1933
Act.

(i) The consolidated financial statements and schedules of the
Company included in the Registration Statement present fairly the
consolidated financial position of the Company as of the respective dates
of such financial statements, and the consolidated results of operations
and cash flows of the Company for the respective periods covered thereby,
all in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
in the Prospectus; and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein. The financial information set forth in the Prospectus under
"Selected Consolidated Financial and Operating Data" presents fairly, on
the basis stated in the Prospectus, the information set forth therein.

The pro forma financial information included in the Prospectus
presents fairly the information shown therein, has been prepared in
accordance with generally accepted accounting principles and the
Commission's rules and guidelines with respect to pro forma information,
has been properly compiled on the pro forma basis described therein, and in
the opinion of the Company, the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate under the
circumstances.

(j) Neither the Company nor any subsidiary is in violation of its
charter or in default under any consent decree, or in default with respect
to any material provision of any lease, loan agreement, franchise, license,
permit or other contract obligation to which it is a party; and, to the
Company's knowledge, there does not exist any state of facts which
constitutes an event of default as defined in such documents or which, with
notice or lapse of time or both, would constitute such an event of default,
in each case, except for defaults which neither singly nor in the aggregate
are material to the Company and its subsidiaries taken as a whole.

(k) There are no material legal or governmental proceedings pending,
or to the Company's knowledge, threatened to which the Company or any
subsidiary is or may be a party or of which material property owned or
leased by the Company or any subsidiary is or may be the subject, or
related to environmental or discrimination matters which are not disclosed
in the Prospectus, or which question the validity of this Agreement or the
Pricing Agreement or any action taken or to be taken pursuant hereto or
thereto.

(l) There are no holders of securities of the Company having rights
to registration thereof or preemptive rights to purchase Common Stock
except as disclosed in the Prospectus.

(4)

<PAGE>

Holders of registration rights who
are not Selling Stockholders have waived such rights with respect to the
offering being made by the Prospectus.

(m) The Company and each of its subsidiaries have good and marketable
title to all the properties and assets reflected as owned in the financial
statements hereinabove described (or elsewhere in the Prospectus), subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except
those, if any, reflected in such financial statements (or elsewhere in the
Prospectus) or which are not material to the Company and its subsidiaries
taken as a whole. The Company and each of its subsidiaries hold their
respective leased properties which are material to the Company and its
subsidiaries taken as a whole under valid and binding leases.

(n) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares.

(o) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
contemplated by the Prospectus, the Company and its subsidiaries, taken as
a whole, have not incurred any material liabilities or obligations, direct
or contingent, nor entered into any material transactions not in the
ordinary course of business and there has not been any material adverse
change in their condition (financial or otherwise) or results of operations
nor any material change in their capital stock, short-term debt or
long-term debt.

(p) The Company agrees not to sell, contract to sell or otherwise
dispose of any Common Stock or securities convertible into Common Stock
(except Common Stock issued pursuant to currently outstanding options,
warrants or convertible securities and stock options issued as of the
effective date of the Registration Statement) for a period of 180 days
after this Agreement becomes effective without the prior written consent of
the Representative. The Company has obtained similar agreements from each
of its officers and directors.

(q) There is no material document of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required.

(r) The Company together with its subsidiaries owns and possesses all
right, title and interest in and to, or has duly licensed or otherwise
lawfully acquired from third parties, all trademarks, copyrights and other
proprietary rights ("TRADE RIGHTS") material to the business of the Company
and each of its subsidiaries taken as a whole. Neither the Company nor any
of its subsidiaries has received any notice of infringement,
misappropriation or conflict from any third party as to such material Trade
Rights which has not been resolved or disposed of and neither the Company
nor any of its subsidiaries has infringed, misappropriated or otherwise
conflicted with material Trade Rights of any third parties, which
infringement, misappropriation or conflict would have a material adverse
effect upon the condition (financial or otherwise) or results of operations
of the Company and its subsidiaries taken as a whole.

(s) The conduct of the business of the Company and each of its
subsidiaries is in compliance in all respects with applicable federal,
state, local and foreign laws and regulations, except where the failure to
be in compliance would not have a material adverse effect upon the

(5)

<PAGE>

condition (financial or otherwise) or results of operations of the Company
and its subsidiaries taken as a whole.

(t) All offers and sales of the Company's capital stock prior to the
date hereof were at all relevant times exempt from the registration
requirements of the 1933 Act and were duly registered with or the subject
of an available exemption from the registration requirements of the
applicable state securities or blue sky laws.

(u) The Company has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereon, and
there is no tax deficiency that has been, or to the knowledge of the
Company might be, asserted against the Company or any of its properties or
assets that would or could be expected to have a material adverse affect
upon the condition (financial or otherwise) or results of operations of the
Company and its subsidiaries taken as a whole, other than any such taxes as
are being contested in good faith.

(v) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act to register the Common Stock thereunder,
has filed an application to list the Shares on the Nasdaq National Market,
and has received notification that the listing has been approved, subject
to notice of issuance or sale of the Shares, as the case may be.

(w) The Company is not, and does not intend to conduct its business
in a manner in which it would become, an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended ("INVESTMENT
COMPANY ACT").

(x) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported in
the Prospectus, if any, concerning the Company's business with Cuba or with
any person or affiliate located in Cuba changes in any material way, the
Company will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.

SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING
STOCKHOLDERS.

(a) Globe represents and warrants to, and agrees with, the Company
and the Underwriters that:

(i) GBM has, and on the First Closing Date and the Second
Closing Date, each as hereinafter defined, will have, valid marketable
title to the Shares proposed to be sold by GBM hereunder on such dates
and each of Globe and GBM have full right, power (corporate and other)
and authority to enter into this Agreement and the Pricing Agreement
and to sell, assign, transfer and deliver such Shares hereunder, free
and clear of all voting trust arrangements, liens, encumbrances,
equities, claims and community property rights; the execution and
delivery of this Agreement and the Pricing Agreement have been duly
authorized by all necessary corporate action of Globe and GBM; this
Agreement and the Pricing Agreement have been duly executed and
delivered by or on behalf of Globe and GBM; and upon delivery of and
payment for such Shares hereunder,

(6)

<PAGE>

the Underwriters will acquire valid
marketable title thereto, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and community
property rights.

(ii) GBM and Globe have not taken and will not take,
directly or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares.

(iii) GBM and Globe agree with the Company and the
Underwriters not to sell, contract to sell or otherwise dispose of any
Common Stock for a period of 180 days after this Agreement becomes
effective without the prior written consent of the Representative.

(iv) GBM and Globe represent and warrant to, and agree
with, the Underwriters to the same effect as the representations and
warranties of the Company set forth in Section 2 of this Agreement.

(v) In order to document the Underwriter's compliance with
the reporting and withholding provisions of the Internal Revenue Code
of 1986, as amended, with respect to the transactions herein
contemplated, GBM agrees to deliver to you prior to or on the First
Closing Date, as hereinafter defined, a properly completed and
executed United States Treasury Department Form W-8 or W-9 (or other
applicable form of statement specified by Treasury Department
regulations in lieu thereof).

(b) Each of the Individual Selling Stockholders, severally and not
jointly, represents and warrants to, and agrees with, the Company and the
Underwriters that:

(i) Such Individual Selling Stockholder has, and on the
Second Closing Date hereinafter defined will have, valid marketable
title to the Shares proposed to be sold by such Individual Selling
Stockholder hereunder on such date and full right, power and authority
to enter into this Agreement and the Pricing Agreement and to sell,
assign, transfer and deliver such Shares hereunder, free and clear of
all voting trust arrangements, liens, encumbrances, equities, claims
and community property rights; this Agreement and the Pricing
Agreement have been duly executed and delivered by or on behalf of
such Individual Selling Stockholder; and upon delivery of and payment
for such Shares hereunder, the Underwriters will acquire valid
marketable title thereto, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and community
property rights.

(ii) Such Individual Selling Stockholder has not taken
and will not take, directly or indirectly, any action designed to or
which might be reasonably expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Shares.

(iii) Such Individual Selling Stockholder has executed and
delivered a Power of Attorney ("POWER OF ATTORNEY") among such
Individual Selling Stockholder, C. Stephen Clegg and Ann Crowley
Patterson (the "AGENTS"), naming the Agents as such Individual Selling
Stockholder's attorneys-in-fact (and, by the execution by any Agent of
this Agreement, such Agent hereby represents and warrants that he or
she has been duly appointed as attorney-in-fact by such Individual
Selling Stockholder pursuant to the

(7)

<PAGE>

Power of Attorney) for the purpose
of entering into and carrying out this Agreement and the Pricing
Agreement, and the Power of Attorney has been duly executed by such
Individual Selling Stockholder and a copy thereof has been delivered
to you.

(iv) Such Individual Selling Stockholder further
represents, warrants and agrees that such Individual Selling
Stockholder has deposited in custody, under a Custody Agreement
("CUSTODY AGREEMENT") with Ann Crowley Patterson, as custodian
("CUSTODIAN"), certificates in negotiable form for the Shares to be
sold hereunder by such Individual Selling Stockholder, for the purpose
of further delivery pursuant to this Agreement. Such Individual
Selling Stockholder agrees that the Shares to be sold by such
Individual Selling Stockholder on deposit with the Custodian are
subject to the interests of the Company and the Underwriters, that the
arrangements made for such custody, and the appointment of the Agents
pursuant to the Power of Attorney, are to that extent irrevocable, and
that the obligations of such Individual Selling Stockholder hereunder
and under the Power of Attorney and the Custody Agreement shall not be
terminated except as provided in this Agreement, the Power of Attorney
or the Custody Agreement by any act of such Individual Selling
Stockholder, by operation of law, whether by death or incapacity, or
in the case of an estate or trust, by the death or incapacity of any
executor or trustee or the termination of such estate or trust, or by
the occurrence of any other event. If such Individual Selling
Stockholder or any executor or trustee should die or become
incapacitated, or if any other event should occur before the delivery
of the Shares hereunder, the documents evidencing Shares then on
deposit with the Custodian shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement as if such
death, incapacity or other event had not occurred, regardless of
whether or not the Custodian shall have received notice thereof. Each
Agent has been authorized by such Individual Selling Stockholder to
execute and deliver this Agreement and the Pricing Agreement and the
Custodian has been authorized to receive and acknowledge receipt of
the proceeds of sale of the Shares to be sold by such Individual
Selling Stockholder against delivery thereof and otherwise act on
behalf of such Individual Selling Stockholder. The Custody Agreement
has been duly executed by such Individual Selling Stockholder and a
copy thereof has been delivered to you.

(v) Each preliminary prospectus, as of its date, (A) insofar
as information therein has related to such Individual Selling
Stockholder and is based on information furnished to the Company by or
on behalf of such Individual Selling Stockholder expressly for use
therein, and (B) to the actual knowledge of such Individual Selling
Stockholder, in all other respects, has not included any untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and neither
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, (A) insofar as information therein has related to
such Individual Selling Stockholder and is based on information
furnished to the Company by or on behalf of such Individual Selling
Stockholder expressly for use therein, and (B) to the actual knowledge
of such Individual Selling Stockholder, in all other respects,
included or will include any untrue statement of a material fact or
omitted or will omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided that the preceding clause shall not have any effect if
information has been given by such Individual Selling Stockholder to
the Company and the Representative in writing which would eliminate or
remedy any such untrue statement or omission.

(8)

<PAGE>

(vi) Such Individual Selling Stockholder agrees with the
Company and the Underwriters not to sell, contract to sell or
otherwise dispose of any Common Stock for a period of 180 days after
this Agreement becomes effective without the prior written consent of
the Representative.

(vii) In order to document the Underwriter's compliance
with the reporting and withholding provisions of the Internal Revenue
Code of 1986, as amended, with respect to the transactions herein
contemplated, such Individual Selling Stockholder agrees to deliver to
you prior to or on the Second Closing Date, as hereinafter defined, a
properly completed and executed United States Treasury Department Form
W-8 or W-9 (or other applicable form of statement specified by
Treasury Department regulations in lieu thereof).

(viii) Such Individual Selling Stockholder represents and
warrants to, and agrees with, the Company and the Underwriters, to the
actual knowledge of such Individual Selling Stockholder, that the
representations and warranties of the Company set forth in Section 2
of this Agreement are true and correct in all material respects.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. The
Representative, on behalf of the several Underwriters, represents and warrants
to the Company and the Selling Stockholders that the information set forth
(a) on the cover page of the Prospectus with respect to price, underwriting
discount and terms of the offering and (b) under "Underwriting" in the
Prospectus was furnished to the Company by and on behalf of the Underwriters for
use in connection with the preparation of the Registration Statement and is
correct and complete in all material respects. The Representative represents
and warrants that it has been authorized by each of the other Underwriters as
the Representative to enter into this Agreement on its behalf and to act for it
in the manner herein provided.

SECTION 5. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and GBM, severally and
not jointly, agree to sell to the Underwriters named in Schedule A hereto, and
the Underwriters agree, severally and not jointly, to purchase from the Company
and GBM, respectively, 2,687,000 Firm Shares from the Company and the 733,000
Firm Shares from GBM hereto at the price per share set forth in the Pricing
Agreement. The obligation of each Underwriter to the Company shall be to
purchase from the Company that number of full shares which (as nearly as
practicable, as determined by you) bears to 2,687,000, the same proportion as
the number of Shares set forth opposite the name of such Underwriter in Schedule
A hereto bears to the total number of Firm Shares to be purchased by all
Underwriters under this Agreement. The obligation of each Underwriter to GBM
shall be to purchase from GBM the number of full shares which (as nearly as
practicable, as determined by you) bears to 733,000, the same proportion as the
number of Shares set forth opposite the name of such Underwriter in Schedule A
hereto bears to the total number of Firm Shares to be purchased by all
Underwriters under this Agreement. The initial public offering price and the
purchase price shall be set forth in the Pricing Agreement.

At 9:00 A.M., Chicago Time, on the fourth business day, if permitted
under Rule 15c6-1 under the Exchange Act (or the third business day if required
under Rule 15c6-1 under the Exchange Act or unless postponed in accordance with
the provisions of Section 11 hereof) following the date the Registration
Statement becomes effective (or, if the Company has elected to rely upon Rule
430A, the fourth business day, if permitted under Rule 15c6-1 under the Exchange
Act (or the third business day if required under Rule 15c6-1 under the Exchange
Act) after execution of the Pricing Agreement), or such other time not later
than ten business days after such date as you and the Company may agree, the

(9)

<PAGE>

Company and Globe will deliver to you at the offices of counsel for the Company
or through the facilities of The Depository Trust Company for the accounts of
the several Underwriters, certificates representing the Firm Shares to be sold
by them, respectively, against payment of the purchase price therefor by wire
transfer or certified or bank cashier's checks in Federal funds (same-day funds)
payable, as appropriate, to the order of the Company and GBM. Such time of
delivery and payment is herein referred to as the "FIRST CLOSING DATE." The
certificates for the Firm Shares so to be delivered will be in such
denominations and registered in such names as you request by notice to the
Company and Globe prior to 10:00 A.M., Chicago Time, on the third full business
day preceding the First Closing Date, and will be made available at the
Company's expense for checking and packaging by the Representative at
10:00 A.M., Chicago Time, on the first full business day preceding the First
Closing Date. Payment for the Firm Shares so to be delivered shall be made at
the time and in the manner described above at the offices of counsel for the
Company.

In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company, GBM and the Individual Selling Stockholders hereby grant an
option to the several Underwriters to purchase, severally and not jointly, up to
an aggregate of 513,000 Option Shares, at the same purchase price per share to
be paid for the Firm Shares, for use solely in covering any overallotments made
by the Underwriters in the sale and distribution of the Firm Shares. The option
granted hereunder may be exercised at any time (but not more than once) within
30 days after the date of the initial public offering upon notice by you to the
Company, Globe and the Agents setting forth the aggregate number of Option
Shares as to which the Underwriters are exercising the option, the names and
denominations in which the certificates for such shares are to be registered and
the time and place at which such certificates will be delivered. Such time of
delivery (which may not be earlier than the First Closing Date), being herein
referred to as the "SECOND CLOSING DATE," shall be determined by you, but if at
any time other than the First Closing Date, shall not be earlier than three nor
later than 10 full business days after delivery of such notice of exercise. The
number of Option Shares to be purchased from the Company, GBM and the Individual
Selling Stockholders are set forth in Schedule B hereto. If less than all
Option Shares are to be purchased, the Option Shares to be purchased shall be
purchased (i) first from GBM, (ii) next pro rata from the Individual Selling
Stockholders and (iii) to the extent the number of Option Shares to be purchased
exceeds the number of Option Shares to be sold hereunder by GBM and the
Individual Selling Stockholders, the remaining Option Shares shall be purchased
from the Company. The number of Option Shares to be purchased by each
Underwriter shall be determined by multiplying the number of Option Shares to be
sold by the Company, GBM and the Individual Selling Stockholders pursuant to
such notice of exercise by a fraction, the numerator of which is the number of
Firm Shares to be purchased by such Underwriter as set forth opposite its name
in Schedule A and the denominator of which is the total number of Firm Shares
(subject to such adjustments to eliminate any fractional share purchases as you
in your absolute discretion may make). Certificates for the Option Shares will
be made available at the Company's expense for checking and packaging at
10:00 A.M., Chicago Time, on the first full business day preceding the Second
Closing Date. The manner of payment for and delivery of the Option Shares shall
be the same as for the Firm Shares as specified in the preceding paragraph.

You have advised the Company and the Selling Stockholders that each
Underwriter has authorized you to accept delivery of its Shares, to make payment
and to receipt therefor. You, individually and not as the Representative of the
Underwriters, may make payment for any Shares to be purchased by any Underwriter
whose funds shall not have been received by you by the First Closing Date or the
Second Closing Date, as the case may be, for the account of such Underwriter,
but any such payment shall not relieve such Underwriter from any obligation
hereunder.

(10)

<PAGE>

SECTION 6. COVENANTS OF THE COMPANY. The Company covenants and
agrees that:

(a) The Company will advise you and the Selling Stockholders promptly
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose, or of any notification of the suspension of
qualification of the Shares for sale in any jurisdiction or the initiation
or threatening of any proceedings for that purpose, and will also advise
you and the Selling Stockholders promptly of any request of the Commission
for amendment or supplement of the Registration Statement, of any
preliminary prospectus or of the Prospectus, or for additional information,
and will not file any amendment or supplement to the Registration
Statement, to any preliminary prospectus or to the Prospectus of which you
and the Selling Stockholders have not been furnished with a copy prior to
such filing or to which you reasonably object.

(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the 1933 Act any event occurs as a result of
which the Prospectus, including any amendments or supplements, would
include an untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus, including any amendments or supplements thereto and including
any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Shares which differs
from the prospectus on file with the Commission at the time of
effectiveness of the Registration Statement, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) to comply with
the 1933 Act, the Company promptly will advise you thereof and will
promptly prepare and file with the Commission an amendment or supplement
which will correct such statement or omission or an amendment which will
effect such compliance; and, in case any Underwriter is required to deliver
a prospectus nine months or more after the effective date of the
Registration Statement, the Company upon request, but at the expense of
such Underwriter, will prepare promptly such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section
10(a)(3) of the 1933 Act.

(c) Neither the Company nor any of its subsidiaries will, prior to
the earlier of the Second Closing Date or termination or expiration of the
related option, incur any liability or obligation, direct or contingent, or
enter into any material transaction, other than in the ordinary course of
business, except as contemplated by the Prospectus.

(d) Neither the Company nor any of its subsidiaries will acquire any
capital stock of the Company prior to the earlier of the Second Closing
Date or termination or expiration of the related option nor will the
Company declare or pay any dividend or make any other distribution upon the
Common Stock payable to stockholders of record on a date prior to the
earlier of the Second Closing Date or termination or expiration of the
related option, except in either case as contemplated by the Prospectus.

(e) Not later than 45 days after the end of the first quarter ending
more than one year from the effective date of the Registration Statement,
the Company will make generally available to its security holders an
earnings statement (which need not be audited) covering a period of at
least 12 months beginning after the effective date of the Registration
Statement, which will satisfy the provisions of the last paragraph of
Section 11(a) of the 1933 Act.

(11)

<PAGE>

(f) During such period as a prospectus is required by law to be
delivered in connection with offers and sales of the Shares by an
Underwriter or dealer, the Company will furnish to you at its expense,
subject to the provisions of subsection (b) hereof, copies of the
Registration Statement, the Prospectus, each preliminary prospectus and all
amendments and supplements to any such documents in each case as soon as
available and in such quantities as you may reasonably request, for the
purposes contemplated by the 1933 Act.

(g) The Company will cooperate with the Underwriters in qualifying or
registering the Shares for sale under the blue sky laws of such
jurisdictions as you designate, and will continue such qualifications in
effect so long as reasonably required for the distribution of the Shares.
The Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any such jurisdiction where
it is not currently qualified or where it would be subject to taxation as a
foreign corporation.

(h) During the period of five years hereafter, the Company will
furnish you and, upon your request, each of the other Underwriters with a
copy (i) as soon as practicable after the filing thereof, of each report
filed by the Company with the Commission, any securities exchange or the
NASD; (ii) as soon as practicable after the release thereof, of each
material press release in respect of the Company; and (iii) as soon as
available, of each report of the Company mailed to stockholders.

(i) The Company will use the net proceeds received by it from the
sale of the Shares being sold by it in the manner specified in the
Prospectus.

(j) If, at the time of effectiveness of the Registration Statement,
any information shall have been omitted therefrom in reliance upon Rule
430A and/or Rule 434, then immediately following the execution and delivery
of the Pricing Agreement, the Company will prepare, and file or transmit
for filing with the Commission in accordance with such Rule 430A, Rule
424(b) and/or Rule 434, as the case may be, copies of an amended prospectus
or term sheet, as the case may be, or, if required by such Rule 430A, or
Rule 434, as the case may be, a post-effective amendment to the
Registration Statement (including an amended prospectus), containing all
information so omitted. If required, the Company will prepare and file, or
transmit for filing, a Rule 462(b) Registration Statement immediately
following the execution and delivery of the Pricing Agreement. If a 462(b)
Registration Statement is filed, the Company shall make payment of, or
arrange for payment of, the additional registration fee owing to the
Commission required by Rule 111.

(k) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National Market
and will file with the Commission in a timely manner all reports on Form SR
required by Rule 463 and will furnish you copies of any such reports as
soon as practicable after the filing thereof.

SECTION 7. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective as to
all of its provisions or is terminated, the Company agrees to pay (i) all costs,
fees and expenses (other than legal fees and disbursements of counsel for the
Underwriters and the expenses incurred by the Underwriters) incurred in
connection with the performance of the Company's obligations hereunder,
including without limiting the generality of the foregoing, all fees and
expenses of legal counsel for the Company and of the Company's independent
accountants, all costs and expenses incurred in connection with the preparation,
printing, filing and distribution of the Registration Statement, each
preliminary prospectus and the Prospectus (including all

(12)

<PAGE>

exhibits and financial statements) and all amendments and supplements
provided for herein, this Agreement, the Pricing Agreement and the Blue
Sky Memorandum, (ii) all costs, fees and expenses (including legal fees
not to exceed $15,000 and disbursements of counsel for the Underwriters)
incurred by the Underwriters in connection with qualifying or registering all
or any part of the Shares for offer and sale under blue sky laws, including
the preparation of a blue sky memorandum relating to the Shares and
clearance of such offering with the NASD; and (iii) all fees and expenses of
the Company's transfer agent, printing of the certificates for the Shares
and all transfer taxes, if any, with respect to the sale and delivery of the
Shares to the several Underwriters. Except as provided in this Section 7,
Section 9, Section 11 and Section 14 hereof, the Underwriters shall pay all
of their own expenses, including the fees and disbursements of their
counsel (excluding those relating to qualification, registration or exemption
under the Blue Sky laws, the Blue Sky Memorandum referred to above and
clearance of the offering with the NASD).

The provisions of this Section shall not affect any agreement which
the Company and the Selling Stockholders may make for the allocation or sharing
of such expenses and costs.

SECTION 8. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Firm Shares
on the First Closing Date and the Option Shares on the Second Closing Date shall
be subject to the accuracy of the representations and warranties on the part of
the Company and the Selling Stockholders herein set forth as of the date hereof
and as of the First Closing Date or the Second Closing Date, as the case may be,
to the accuracy of the statements of officers of the Company made pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder, and to the following
additional conditions:

(a) The Registration Statement shall have become effective either
prior to the execution of this Agreement or not later than 1:00 P.M.,
Chicago Time, on the first full business day after the date of this
Agreement, or such later time as shall have been consented to by you but in
no event later than 1:00 P.M., Chicago Time, on the third full business day
following the date hereof; and prior to the First Closing Date or the
Second Closing Date, as the case may be, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending
or, to the knowledge of the Company, the Selling Stockholders or you, shall
be contemplated by the Commission. If the Company has elected to rely upon
Rule 430A and/or Rule 434, the information concerning the initial public
offering price of the Shares and price-related information shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) within the
prescribed period and the Company will provide evidence satisfactory to the
Representative of such timely filing (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rules 430A and 424(b)). If a Rule
462(b) Registration Statement is required, such Registration Statement
shall have been transmitted to the Commission for filing and become
effective within the prescribed time period and, prior to the First Closing
Date, the Company shall provide evidence of such filing and effectiveness
in accordance with Rule 462(b).

(b) The Shares shall have been qualified for sale under the blue sky
laws of such states as shall have been specified by the Representative.

(c) The legality and sufficiency of the authorization, issuance and
sale or transfer and sale of the Shares hereunder, the validity and form of
the certificates representing the Shares, the execution and delivery of
this Agreement and the Pricing Agreement, and all corporate

(13)

<PAGE>

proceedings and
other legal matters incident thereto, and the form of the Registration
Statement and the Prospectus (except financial statements) shall have been
approved by counsel for the Underwriters exercising reasonable judgment.

(d) You shall not have advised the Company that the Registration
Statement or the Prospectus or any amendment or supplement thereto,
contains an untrue statement of fact, which, in the opinion of counsel for
the Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein
or necessary to make the statements therein not misleading.

(e) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred any change, or any development involving a
prospective change, in or affecting particularly the business or properties
of the Company or its subsidiaries, whether or not arising in the ordinary
course of business, which, in the reasonable judgment of the
Representative, makes it impractical or inadvisable to proceed with the
public offering or purchase of the Shares as contemplated hereby.

(f) There shall have been furnished to you, as Representative of the
Underwriters, on the First Closing Date or the Second Closing Date, as the
case may be, except as otherwise expressly provided below:

(i) An opinion of McDermott, Will & Emery, counsel for the
Company and for Globe, addressed to the Underwriters and dated
the First Closing Date or the Second Closing Date, as the case
may be, to the effect that:

(1) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Delaware with corporate power and corporate
authority to own its properties and conduct its business as
described in the Prospectus; and the Company has been duly
qualified to do business as a foreign corporation under the
corporation law of, and is in good standing as such in, every
jurisdiction where the ownership or leasing of property, or the
conduct of its business requires such qualification except where
the failure so to qualify would not have a material adverse
effect upon the condition (financial or otherwise) or results of
operations of the Company and its subsidiaries taken as a whole;

(2) an opinion to the same general effect as clause (1)
of this subparagraph (i) in respect of each subsidiary of the
Company;

(3) all of the issued and outstanding capital stock of
each subsidiary of the Company has been duly authorized, validly
issued and is fully paid and nonassessable, and, except as
disclosed in the Registration Statement, the Company owns
directly or indirectly 100 percent of the outstanding capital
stock of each subsidiary, and to the knowledge of such counsel,
such stock is owned free and clear of any claims, liens,
encumbrances or security interests;

(4) the authorized capital stock of the Company, of
which there is outstanding the amount set forth in the
Registration Statement and Prospectus (except for subsequent
issuances, if any, pursuant to stock options or other rights

(14)

<PAGE>

referred to in the Prospectus), conforms as to legal matters in
all material respects to the description thereof in the
Registration Statement and Prospectus;

(5) the issued and outstanding capital stock of the
Company has been duly authorized and validly issued and is fully
paid and nonassessable;

(6) the certificates for the Shares to be delivered
hereunder are in due and proper form, and when duly countersigned
by the Company's transfer agent and delivered to you or upon your
order against payment of the agreed consideration therefor in
accordance with the provisions of this Agreement and the Pricing
Agreement, the Shares represented thereby will be duly authorized
and validly issued, fully paid and nonassessable;

(7) the Registration Statement has become effective
under the 1933 Act, and, to the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the
1933 Act, and the Registration Statement (including the
information deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A(b) and/or Rule
434(d), if applicable), the Prospectus and each amendment or
supplement thereto (except for the financial statements and other
statistical or financial data included therein as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the 1933 Act; nothing
has come to the attention of such counsel that would cause them
to believe that either the Registration Statement (including the
information deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A(b) and/or Rule
434(d), if applicable) or the Prospectus, or the Registration
Statement or the Prospectus as amended or supplemented (except as
aforesaid), as of their respective effective or issue dates,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the
Prospectus as amended or supplemented, if applicable, as of the
First Closing Date or the Second Closing Date, as the case may
be, contained any untrue statement of a material fact or omitted
to state any material fact necessary to make the statements
therein not misleading in light of the circumstances under which
they were made; the statements in the Registration Statement and
the Prospectus summarizing statutes, rules and regulations are
accurate and fairly and correctly present the information
required to be presented by the 1933 Act or the rules and
regulations thereunder, in all material respects and such counsel
does not know of any statutes, rules and regulations required to
be described or referred to in the Registration Statement or the
Prospectus that are not described or referred to therein as
required; and such counsel does not know of any legal or
governmental proceedings pending or threatened against the
Company required to be described in the Prospectus which are not
described as required, nor of any contracts or documents of a
character required to be described in the Registration Statement
or Prospectus or to be filed as exhibits to the Registration
Statement which are not described or filed, as required;

(8) the statements under the captions "Business - Sears
License Agreement," "Management - Stock Option Plans," "Certain
Transactions,"

(15)

<PAGE>

"Description of Capital Stock" and "Shares
Eligible for Future Sale" in the Prospectus, insofar as such
statements constitute a summary of documents referred to therein
or matters of law, are accurate summaries and fairly and
correctly present, in all material respects, the information
called for with respect to such documents and matters;

(9) this Agreement and the Pricing Agreement and the
performance of the Company's obligations hereunder have been duly
authorized by all necessary corporate action and this Agreement
and the Pricing Agreement have been duly executed and delivered
by and on behalf of the Company, and are legal, valid and binding
agreements of the Company, except as enforceability of the same
may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights and
by the exercise of judicial discretion in accordance with general
principles applicable to equitable and similar remedies and
except as to those provisions relating to indemnities and
contribution for liabilities arising under the 1933 Act as to
which no opinion need be expressed; and no approval,
authorization or consent of any public board, agency, or
instrumentality of the United States or of any state or other
jurisdiction is necessary in connection with the issue or sale of
the Shares by the Company pursuant to this Agreement (other than
under the 1933 Act, applicable blue sky laws and the rules of the
NASD) or the consummation by the Company of any other
transactions contemplated hereby;

(10) the execution and performance of this Agreement
will not contravene any of the provisions of, or result in a
default under, any agreement, franchise, license, indenture,
mortgage, deed of trust, or other instrument known to such
counsel, of the Company or any of its subsidiaries or by which
the property of any of them is bound and which contravention or
default would be material to the Company and its subsidiaries
taken as a whole; or violate any of the provisions of the charter
or bylaws of the Company or any of its subsidiaries or, so far as
is known to such counsel, violate any statute, order, rule or
regulation of any regulatory or governmental body having
jurisdiction over the Company or any of its subsidiaries;

(11) with respect to Globe and GBM, this Agreement and
the Pricing Agreement have been duly authorized by all necessary
corporate action and this Agreement and the Pricing Agreement
have been duly executed and delivered by or on behalf of Globe
and GBM; and the performance of this Agreement and the Pricing
Agreement and the consummation of the transactions herein
contemplated by the Globe and GBM will not violate any provision
of Globe's or GBM's charter or by-laws and will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any indenture, mortgage,
deed of trust, note agreement or other agreement or instrument
known to such counsel to which Globe or GBM is a party or by
which it is bound or to which any of the property of Globe or GBM
is subject, or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over Globe or GBM or any of its properties; and no
consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of
the transactions contemplated by this

(16)

<PAGE>

Agreement and the Pricing
Agreement in connection with the sale of Shares to be sold by GBM
hereunder, except such as have been obtained under the 1933 Act
and such as may be required under applicable blue sky laws in
connection with the purchase and distribution of such Shares by
the Underwriters and the clearance of such offering with the
NASD;

(12) Globe and GBM have full right, power and
authority to enter into this Agreement and the Pricing Agreement
and to sell, transfer and deliver the Shares to be sold on the
First Closing Date and Second Closing Date by GBM hereunder and
hold such Shares, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and community
property rights whatsoever, and upon payment for, and delivery of
certificates representing, the Shares, and assuming the
Underwriters acquire the Shares in good faith without notice of
any adverse claim, the Underwriters who have purchased the Shares
will hold the Shares free of any adverse claims;

(13) this Agreement and the Pricing Agreement are
legal, valid and binding agreements of Globe and GBM except as
enforceability of the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights and by the exercise of judicial
discretion in accordance with general principles applicable to
equitable and similar remedies and except with respect to those
provisions relating to indemnities or contribution for
liabilities arising under the 1933 Act, as to which no opinion
need be expressed; and

(14) the Company is not an "investment company" or a
person "controlled by" an "investment company" within the meaning
of the Investment Company Act.

In rendering such opinion, such counsel may state that
they are relying upon the certificate of Harris Trust and Savings
Bank, the transfer agent for the Common Stock, as to the number of
shares of Common Stock at any time or times outstanding, and that
insofar as their opinion under clause (7) above relates to the
accuracy and completeness of the Prospectus and Registration
Statement, it is based upon a general review with the Company's
representative and independent accountants of the information
contained therein, without independent verification by such counsel of
the accuracy or completeness of such information. Such counsel may
also rely upon the opinions of other competent counsel and, as to
factual matters, on certificates of Globe and of officers of the
Company and of state officials, in which case their opinion is to
state that they are so doing and copies of said opinions or
certificates are to be attached to the opinion unless said opinions or
certificates (or, in the case of certificates, the information
therein) have been furnished to the Representative in other form.

(ii) An opinion of Barack, Ferrazzano, Kirschbaum &
Perlman and an opinion of counsel for Donald Griffin and Rodger
Ibach, respectively, addressed to the Underwriters and dated the
Second Closing Date to the effect that:

(1) with respect to such Individual Selling Stockholder,
this Agreement and the Pricing Agreement have been duly executed
and delivered by the Agent on behalf of such Individual Selling
Stockholder, such Agent has been duly and

(17)

<PAGE>

validly authorized to
carry out all the transactions contemplated herein and in the
Pricing Agreement on behalf of such Individual Selling
Stockholder and the performance of this Agreement and the Pricing
Agreement and the consummation of the transactions herein
contemplated by such Individual Selling Stockholder will not
result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
indenture, mortgage, deed of trust, note agreement or other
agreement or instrument known to such counsel to which such
Individual Selling Stockholder is a party or by which it is bound
or to which any of the property of such Individual Selling
Stockholder is subject, or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over such Individual Selling Stockholder or any of
its properties; and no consent, approval, authorization or order
of any court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
and the Pricing Agreement in connection with the sale of Shares
to be sold by such Individual Selling Stockholder hereunder,
except such as have been obtained under the 1933 Act and such as
may be required under applicable blue sky laws in connection with
the purchase and distribution of such Shares by the Underwriters
and the clearance of such offering with the NASD;

(2) such Individual Selling Stockholder has full right,
power and authority to enter into this Agreement and the Pricing
Agreement and to sell, transfer and deliver the Shares to be sold
on the Second Closing Date by such Individual Selling Stockholder
hereunder and hold such Shares, free and clear of all voting
trust arrangements, liens, encumbrances, equities, claims and
community property rights whatsoever, and upon payment for, and
delivery of certificates representing, the Shares, and assuming
the Underwriters acquire the Shares in good faith without notice
of any adverse claim, the Underwriters who have purchased the
Shares will hold the Shares free of any adverse claims; and

(3) this Agreement and the Pricing Agreement are legal,
valid and binding agreements of such Individual Selling
Stockholder except as enforceability of the same may be limited
by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights and by the exercise of
judicial discretion in accordance with general principles
applicable to equitable and similar remedies and except with
respect to those provisions relating to indemnities or
contribution for liabilities arising under the 1933 Act, as to
which no opinion need be expressed.

(iii) A certificate of the chief executive officer and the
principal financial officer of the Company, dated the First Closing
Date or the Second Closing Date, as the case may be, to the effect
that:

(1) the representations and warranties of the Company
set forth in Section 2 of this Agreement are true and correct as
of the date of this Agreement and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to such
Closing Date; and

(18)

<PAGE>

(2) the Commission has not issued an order preventing or
suspending the use of the Prospectus or any preliminary
prospectus filed as a part of the Registration Statement or any
amendment thereto; no stop order suspending the effectiveness of
the Registration Statement has been issued; and to the best
knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or contemplated under
the 1933 Act.

The delivery of the certificate provided for in this
subparagraph shall be and constitutes a representation and warranty of
the Company as to the facts required in the immediately foregoing
clauses (1) and (2) of this subparagraph to be set forth in said
certificate.

(iv) A certificate of the chief executive officer of
Globe and GBM dated the First Closing Date or the Second Closing Date,
as the case may be, to the effect that the representations and
warranties of Globe set forth in Section 3(a) of this Agreement are
true and correct as of such date and Globe and GBM each have complied
with all the agreements and satisfied all the conditions on the part
of Globe and GBM to be performed or satisfied at or prior to such
date.

(v) At the time the Pricing Agreement is executed and also
on the First Closing Date or the Second Closing Date, as the case may
be, there shall be delivered to you a letter addressed to you, as
Representative of the Underwriters, from Ernst & Young LLP,
independent accountants, the first one to be dated the date of the
Pricing Agreement, the second one to be dated the First Closing Date
and the third one (in the event of a second closing) to be dated the
Second Closing Date, to the effect set forth in Schedule C. There
shall not have been any change or decrease specified in the letters
referred to in this subparagraph which makes it impractical or
inadvisable in the judgment of the Representative to proceed with the
public offering or purchase of the Shares as contemplated hereby.

(vi) At the time the Pricing Agreement is executed, there
shall be delivered to you a letter from each stockholder and executive
officer of the Company that is not a Selling Stockholder, in which
each such person agrees not to sell, contract to sell or otherwise
dispose of any Common Stock or securities convertible into Common
Stock (except Common Stock issued pursuant to currently outstanding
options) for a period of 180 days after the date of such letter
without the prior written consent of the Representative.

(vii) Such opinion or opinions of Gardner, Carton &
Douglas, counsel for the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, with respect to the
incorporation of the Company, the validity of the Shares to be sold by
the Company, the Registration Statement and the Prospectus and other
related matters as you may reasonably require, and the Company shall
have furnished to such counsel such documents and shall have exhibited
to them such papers and records as they reasonably request for the
purpose of enabling them to pass upon such matters.

(viii) Such further certificates and documents as you may
reasonably request.

All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Gardner, Carton & Douglas, counsel for the

(19)

<PAGE>

Underwriters, which approval shall not be unreasonably withheld. The
Company shall furnish you with such manually signed or conformed copies of
such opinions, certificates, letters and documents as you request.

If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification to the Company and
the Selling Stockholders without liability on the part of any Underwriter or the
Company or the Selling Stockholders, except for the expenses to be paid or
reimbursed by the Company pursuant to Sections 7 and 9 hereof and except to the
extent provided in Section 11 hereof.

SECTION 9. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale to
the Underwriters of the Shares on the First Closing Date is not consummated
because any condition of the Underwriters' obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of the
Company or the Selling Stockholders to perform any agreement herein or to comply
with any provision hereof, unless such failure to satisfy such condition or to
comply with any provision hereof is due to the default or omission of any
Underwriter, the Company agrees to reimburse you and the other Underwriters upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been reasonably incurred by you and
them in connection with the proposed purchase and the sale of the Shares. Any
such termination shall be without liability of any party to any other party
except that the provisions of this Section, Section 7 and Section 11 shall at
all times be effective and shall apply.

SECTION 10. EFFECTIVENESS OF REGISTRATION STATEMENT. You, the
Company and the Selling Stockholders will use your, its and their best efforts
to cause the Registration Statement to become effective, if it has not yet
become effective, and to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement and, if such stop order be issued,
to obtain as soon as possible the lifting thereof.

SECTION 11. INDEMNIFICATION. (a) The Company and Globe, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the 1933 Act
or the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become subject
under the 1933 Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company and/or Globe, as the case may be), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, including the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant to Rule
430A and/or Rule 434(d), if applicable, any preliminary prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and will reimburse each Underwriter and each such controlling person for any
legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that neither the Company
nor Globe will be liable in any such case to the extent that (i) any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representative, specifically for use therein; or (ii) if such statement or
omission was contained or made in any preliminary prospectus and

(20)

<PAGE>

corrected in the Prospectus and (1) any such loss, claim, damage or
liability suffered or incurred by any Underwriter (or any person who
controls any Underwriter) resulted from an action, claim or suit by any
person who purchased Shares which are the subject thereof from such
Underwriter in the offering and (2) such Underwriter failed to deliver or
provide a copy of the Prospectus to such person at or prior to the
confirmation of the sale of such Shares in any case where such delivery
is required by the 1933 Act. In addition to their other obligations
under this Section 11(a), the Company and Globe agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or
any alleged statement or omission, described in this Section 11(a), they
will reimburse the Underwriters on a quarterly basis for all reasonable
legal and other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's and Globe's obligation
to reimburse the Underwriters for such expenses and the possibility that
such payments might later be held to have been improper by a court of
competent jurisdiction. This indemnity agreement will be in addition to any
liability which the Company and Globe may otherwise have.

Each Individual Selling Stockholder, severally and not jointly, agrees
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the 1933 Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter or such controlling person may become subject under the 1933
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise (including in settlement of any litigation if such
settlement is effected with the written consent of such Individual Selling
Stockholder), insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, including the information deemed to be part of the Registration
Statement at the time of effectiveness pursuant to Rule 430A and/or Rule 434(d),
if applicable, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Individual
Selling Stockholder specifically for use therein; and will reimburse each
Underwriter and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that such Individual Selling Stockholder will not be
liable in any such case to the extent that (i) any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representative,
specifically for use therein; or (ii) if such statement or omission was
contained or made in any preliminary prospectus and corrected in the Prospectus
and (1) any such loss, claim, damage or liability suffered or incurred by any
Underwriter (or any person who controls any Underwriter) resulted from an
action, claim or suit by any person who purchased Shares which are the subject
thereof from such Underwriter in the offering and (2) such Underwriter failed to
deliver or provide a copy of the Prospectus to such person at or prior to the
confirmation of the sale of such Shares in any case where such delivery is
required by the 1933 Act. In addition to its other obligations under this
Section 11(a), each Individual Selling Stockholder agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 11(a), it will
reimburse the Underwriters on a quarterly basis for all reasonable legal and
other

(21)

<PAGE>

expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
such Individual Selling Stockholder's obligation to reimburse the Underwriters
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. This indemnity
agreement will be in addition to any liability which such Individual Selling
Stockholder may otherwise have.

(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each Selling Stockholder and each person, if any, who controls
the Company or each Selling Stockholder within the meaning of the 1933 Act or
the Exchange Act, against any losses, claims, damages or liabilities to which
the Company, or any such director, officer, Selling Stockholder or controlling
person may become subject under the 1933 Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in the
Registration Statement, any preliminary prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto in reliance upon and in conformity with Section 4 of this
Agreement or any other written information furnished to the Company by such
Underwriter through the Representative specifically for use in the preparation
thereof; and will reimburse any legal or other expenses reasonably incurred by
the Company, or any such director, officer, Selling Stockholder or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action. In addition to their other obligations under this
Section 11(b), the Underwriters agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in this Section 11(b), they will reimburse the Company
and each Selling Stockholder on a quarterly basis for all reasonable legal and
other expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Underwriters' obligation to reimburse the Company and each Selling
Stockholder for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.

(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party except to the extent that
the indemnifying party was prejudiced by such failure to notify. In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, or the indemnified and indemnifying parties may have
conflicting interests which would make it

(22)

<PAGE>

inappropriate for the same counsel to represent both of them, the
indemnified party or parties shall have the right to select separate
counsel to assume such legal defense and otherwise to participate in
the defense of such action on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to such indemnified party
of its election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defense in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel, approved by the
Representative in the case of paragraph (a) representing all indemnified
parties not having different or additional defenses or potential
conflicting interest among themselves who are parties to such action),
(ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or
(iii) the indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying party. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability arising out of such proceeding.

(d) If the indemnification provided for in this Section is
unavailable to an indemnified party under paragraphs (a) or (b) hereof in
respect of any losses, claims, damages or liabilities referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, such Selling Stockholder and the Underwriters from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, such Selling Stockholder and the Underwriters in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
respective relative benefits received by the Company, the Selling Stockholders
and the Underwriters shall be deemed to be in the same proportion in the case of
the Company and a Selling Stockholder, as the total price paid to the Company
and such Selling Stockholder for the Shares by the Underwriters (net of
underwriting discount but before deducting expenses), and in the case of the
Underwriters as the underwriting discount received by them bears to the total of
such amounts paid to the Company and the Selling Stockholders and received by
the Underwriters as underwriting discount in each case as contemplated by the
Prospectus. The relative fault of the Company and each Selling Stockholder and
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the Company
or by such Selling Stockholder or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages and liabilities referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim.

The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the

(23)

<PAGE>

immediately preceding paragraph. Notwithstanding the provisions of this
Section, no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section are several in proportion to their
respective underwriting commitments and not joint.

(e) The provisions of this Section shall survive any termination of
this Agreement.

(f) The Company and the Selling Stockholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to their respective amounts of such liability for which they each
shall be responsible.

(g) No Selling Stockholder will be liable in any such case in respect
of any such losses, claims, damages, liabilities or expenses unless the
Underwriter or controlling person seeking indemnification from such Selling
Stockholder hereunder shall have previously or contemporaneously sought
indemnification from the Company in respect thereof (except that the foregoing
condition precedent requiring an Underwriter or a controlling person to so seek
indemnification from the Company shall not be applicable if such Underwriter or
controlling person is prohibited from being indemnified by the Company (or from
seeking such indemnification) by the effect of any order, decree, stay,
injunction, statute, legal process or other matter of law).

(h) In no event shall the aggregate liability of Globe under this
Agreement for indemnification, contribution and reimbursement of expenses and/or
breach of any representation or warranty contained in Section 3(a)(iv) exceed an
amount equal to the proceeds received by GBM with respect to the Shares sold to
the Underwriters hereunder plus [$16.4] million.

(i) In no event shall the liability of an Individual Selling
Stockholder under this Agreement for indemnification, contribution and
reimbursement of expenses and/or breach of any representation or warranty
contained in Section 3(b) exceed the proceeds received by such Individual
Selling Stockholder with respect to the Shares sold by such Individual Selling
Stockholder hereunder.

SECTION 12. DEFAULT OF UNDERWRITERS. It shall be a condition to the
agreement and obligation of the Company and the Selling Stockholders to sell and
deliver the Shares hereunder, and of each Underwriter to purchase the Shares
hereunder, that, except as hereinafter in this paragraph provided, each of the
Underwriters shall purchase and pay for all Shares agreed to be purchased by
such Underwriter hereunder upon tender to the Representative of all such Shares
in accordance with the terms hereof. If any Underwriter or Underwriters default
in their obligations to purchase Shares hereunder on the First Closing Date and
the aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed 10 percent of the total number of
Shares which the Underwriters are obligated to purchase on the First Closing
Date, the Representative may make arrangements satisfactory to the Company and
the Selling Stockholders for the purchase of such Shares by other persons,
including any of the Underwriters, but if no such arrangements are made by such
date the nondefaulting Underwriters shall be obligated severally, in proportion
to their respective commitments hereunder, to purchase the Shares which such
defaulting Underwriters agreed but failed to purchase on such date. If any
Underwriter or Underwriters so default and the aggregate number of Shares with
respect to which such default or defaults occur is more than the above
percentage and

(24)

<PAGE>

arrangements satisfactory to the Representative and the Company
and Globe for the purchase of such Shares by other persons are not made within
36 hours after such default, this Agreement will terminate without liability on
the part of any nondefaulting Underwriter or the Company or the Selling
Stockholders, except for the expenses to be paid by the Company pursuant to
Section 7 hereof and except to the extent provided in Section 11 hereof.

In the event that Shares to which a default relates are to be
purchased by the nondefaulting Underwriters or by another party or parties, the
Representative or the Company shall have the right to postpone the First Closing
Date for not more than seven business days in order that the necessary changes
in the Registration Statement, Prospectus and any other documents, as well as
any other arrangements, may be effected. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability
for its default.

SECTION 13. EFFECTIVE DATE. This Agreement shall become effective
immediately as to Sections 7, 9, 11 and 14 at the time at which the Pricing
Agreement is executed and delivered, unless such a day is a Saturday, Sunday or
holiday (and in that event this Agreement shall become effective at such hour on
the business day next succeeding such Saturday, Sunday or holiday); but this
Agreement shall nevertheless become effective at such earlier time after the
Pricing Agreement is executed and delivered as you may determine on and by
notice to the Company and the Selling Stockholders or by release of any Shares
for sale to the public. For the purposes of this Section, the Shares shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Shares or upon the release by you of
telegrams (i) advising Underwriters that the Shares are released for public
offering, or (ii) offering the Shares for sale to securities dealers, whichever
may occur first.

SECTION 14. TERMINATION. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof:

(a) This Agreement may be terminated by the Company by notice to you
and the Selling Stockholders or by you by notice to the Company and the
Selling Stockholders at any time prior to the time this Agreement shall
become effective as to all its provisions, and any such termination shall
be without liability on the part of the Company or the Selling Stockholders
to any Underwriter (except for the expenses to be paid or reimbursed
pursuant to Section 7 hereof and except to the extent provided in Section
11 hereof) or of any Underwriter to the Company or the Selling Stockholders
(except to the extent provided in Section 11 hereof).

(b) This Agreement may also be terminated by you prior to the First
Closing Date, and the option referred to in Section 5, if exercised, may be
canceled at any time prior to the Second Closing Date, by notice to the
Company if (i) trading in securities on the New York Stock Exchange shall
have been suspended or minimum prices shall have been established on such
exchange, or (ii) a banking moratorium shall have been declared by
Illinois, New York, or United States authorities, or (iii) there shall have
been any change in financial markets or in political, economic or financial
conditions which, in the opinion of the Representative, either renders it
impracticable or inadvisable to proceed with the offering and sale of the
Shares on the terms set forth in the Prospectus or materially and adversely
affects the market for the Shares, or (iv) there shall have been an
outbreak of major armed hostilities between the United States and any
foreign power which in the opinion of the Representative makes it
impractical or inadvisable to offer or sell the Shares. Any termination
pursuant to this paragraph (b) shall be without liability on the part of
any Underwriter to the Company or the Selling Stockholders (except to the
extent provided in Section 11 hereof) or on the part of the Company to any
Underwriter or

(25)

<PAGE>

the Selling Stockholders (except for expenses to be paid or
reimbursed pursuant to Section 7 hereof and except to the extent provided
in Section 11 hereof).

SECTION 15. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Stockholders as
the case may be, and will survive delivery of and payment for the Shares sold
hereunder.

SECTION 16. NOTICES. All communications hereunder will be in
writing and, if sent to the Underwriters will be mailed, delivered or
telegraphed and confirmed to you c/o William Blair & Company, L.L.C., 222 West
Adams, Chicago, Illinois 60606, with a copy to Glenn W. Reed, Gardner, Carton &
Douglas, 321 North Clark Street, Chicago, Illinois 60610; if sent to the
Company will be mailed, delivered or telegraphed and confirmed to the Company at
its corporate headquarters with a copy to Grant A. Bagan, P.C., McDermott, Will
& Emery, 227 West Monroe Street, Chicago, Illinois 60606; if sent to Globe will
be mailed, delivered or telegraphed and confirmed to Globe at 2230 Indianapolis
Blvd., Whiting, Indiana 46394, with a copy to Grant A. Bagan, P.C., McDermott,
Will & Emery, 227 West Monroe, Chicago, Illinois 60606; and if sent to the
Individual Selling Stockholders will be mailed, delivered or telegraphed and
confirmed to the Agents and the Custodian at such address as they have
previously furnished to the Company and the Representative with a copy to David
R. Selmer, Barack, Ferrazzano, Kirschbaum & Perlman, 333 West Wacker Drive,
Suite 2700, Chicago, Illinois 60606.

SECTION 17. SUCCESSORS. This Agreement and the Pricing Agreement
will inure to the benefit of and be binding upon the parties hereto and their
respective successors, personal representatives and assigns, and to the benefit
of the officers and directors and controlling persons referred to in Section 11,
and no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Shares as such from any of
the Underwriters merely by reason of such purchase.

SECTION 18. REPRESENTATION OF UNDERWRITERS. You will act as
Representative for the several Underwriters in connection with this financing,
and any action under or in respect of this Agreement taken by you will be
binding upon all the Underwriters.

SECTION 19. PARTIAL UNENFORCEABILITY. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.

SECTION 20. APPLICABLE LAW. This Agreement and the Pricing
Agreement shall be governed by and construed in accordance with the laws of the
State of Illinois.

(26)

<PAGE>

If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters including you, all in accordance with
its terms.

Very truly yours,

DIAMOND HOME SERVICES, INC.

By:
--------------------------------
Chief Executive Officer

GBM, INC.

By:
--------------------------------

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

GLOBE BUILDING MATERIALS, INC.

By:
---------------------------
Chief Executive Officer

INDIVIDUAL SELLING STOCKHOLDERS
listed on Schedule B

By:
----------------------------
Agent and Attorney-in-Fact

The foregoing Agreement is hereby
confirmed and accepted as of
the date first above written.

WILLIAM BLAIR & COMPANY, L.L.C.

Acting as Representative of the
several Underwriters named in
Schedule A.

By: William Blair & Company, L.L.C.

By:
-----------------------------------

(27)

<PAGE>

SCHEDULE A

Number of Firm
Shares to be
Underwriter Purchased
- ----------- ---------
William Blair & Company, L.L.C...........................

---------
TOTAL 3,420,000
---------
---------

(28)

<PAGE>

SCHEDULE B

Number of Number of
Firm Shares Option Shares
to be Sold to be Sold
---------- ----------

Company 2,687,000 137,950

GBM, Inc. 733,000 100,000

Donald Griffin 0 138,700

Rodger Ibach 0 136,350
---------- ----------
TOTAL 3,420,000 513,000
---------- ----------
---------- ----------

(29)

<PAGE>

SCHEDULE C

Comfort Letter of Ernst & Young LLP

(1) They are independent public accountants with respect to the Company
and its subsidiaries within the meaning of the 1933 Act.

(2) In their opinion the consolidated financial statements and schedules
of the Company and its subsidiaries included in the Registration Statement and
the consolidated financial statements of the Company from which the information
presented under the caption "Selected Consolidated Financial and Operating Data"
has been derived which are stated therein to have been examined by them comply
as to form in all material respects with the applicable accounting requirements
of the 1933 Act.

(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company and its subsidiaries responsible for financial
and accounting matters as to transactions and events subsequent to December 31,
1995, a reading of minutes of meetings of the stockholders and directors of the
Company and its subsidiaries since December 31, 1995, a reading of the latest
available interim unaudited consolidated financial statements of the Company and
its subsidiaries (with an indication of the date thereof) and other procedures
as specified in such letter, nothing came to their attention which caused them
to believe that (i) the unaudited consolidated financial statements of the
Company and its subsidiaries included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act or that such unaudited financial statements are not
fairly presented in accordance with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements included in the Registration Statement, (ii) the pro forma financial
amounts included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of Rule 11-02 of Regulation
S-X and that the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements and (iii) at a
specified date not more than five days prior to the date thereof in the case of
the first letter and not more than two business days prior to the date thereof
in the case of the second and third letters, there was any change in the capital
stock or long-term debt or short-term debt (other than normal payments) of the
Company and its subsidiaries on a consolidated basis or any decrease in
consolidated net current assets or consolidated stockholders' equity as compared
with amounts shown on the latest unaudited balance sheet of the Company included
in the Registration Statement or for the period from the date of such balance
sheet to a date not more than five days prior to the date thereof in the case of
the first letter and not more than two business days prior to the date thereof
in the case of the second and third letters, there were any decreases, as
compared with the corresponding period of the prior year, in consolidated net
sales, consolidated income before income taxes or in the total or per share
amounts of consolidated net income except, in all instances, for changes or
decreases which the Prospectus discloses have occurred or may occur or which are
set forth in such letter.

(4) They have carried out specified procedures, which have been agreed to
by the Representative, with respect to certain information in the Prospectus
specified by the Representative, and on the basis of such procedures, they have
found such information to be in agreement with the general accounting records of
the Company and its subsidiaries.

(30)

<PAGE>

EXHIBIT A

DIAMOND HOME SERVICES, INC.

3,420,000 Shares Common Stock*

PRICING AGREEMENT

, 1996

WILLIAM BLAIR & COMPANY, L.L.C.
As Representative of the Several
Underwriters
c/o William Blair & Company, L.L.C.
135 South LaSalle Street
Chicago, Illinois 60603

Ladies and Gentlemen:

Reference is made to the Underwriting Agreement dated
_________________, 1996 (the "UNDERWRITING AGREEMENT") relating to the sale by
the Company and the Selling Stockholders and the purchase by the several
Underwriters for whom William Blair & Company, L.L.C. is acting as
representative (the "REPRESENTATIVE"), of the above Shares. All terms herein
shall have the definitions contained in the Underwriting Agreement except as
otherwise defined herein.

Pursuant to Section 5 of the Underwriting Agreement, the Company and
the Selling Stockholders agree with the Representative as follows:

1.The initial public offering price per share for the Shares shall be
$__________.

2.The purchase price per share for the Shares to be paid by the
several Underwriters shall be $_____________, being an amount equal to the
initial public offering price set forth above less $____________ per share.

Schedule A is amended as follows:

*Plus an option to acquire up to 513,000 additional shares to cover
overallotments.

(31)

<PAGE>

Very truly yours,

DIAMOND HOME SERVICES, INC.

By:
-------------------------------------
Chief Executive Officer

GBM, INC.

By:

GLOBE BUILDING MATERIALS, INC.

By:
Chief Executive Officer

INDIVIDUAL SELLING STOCKHOLDERS
listed on Schedule B to the
Underwriting Agreement

By:
--------------------------------
Agent and Attorney-in-Fact

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

WILLIAM BLAIR & COMPANY, L.L.C.

Acting as Representative of the
several Underwriters

By: William Blair & Company, L.L.C.

By:
-----------------------------------
(32)

<PAGE>
AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT

This Amendment to the Registration Rights Agreement (the "Agreement") date
as of April 10, 1996, between Diamond Home Services, Inc., a Delaware
corporation and Globe Building Materials, Inc., a Delaware corporation is date
this ___ day of May, 1996.

Pursuant to Section 9(e) of the Agreement, and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree that, as used throughout the Agreement, all references to
"Globe" shall refer to Globe Building Materials, Inc., a Delaware corporation,
together with its affiliates, including but not limited to, its wholly-owned
subsidiary, GBM, Inc., a Delaware corporation.

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

DIAMOND HOME SERVICE, INC.

By: /s/ Ann Crowley Patterson
------------------------------------
Its: Vice President - Administration
------------------------------------

GLOBE BUILDING MATERIALS, INC.

By: /s/ C. Stephen Clegg
------------------------------------
Its: Chairman and Chief Executive Officer
------------------------------------

<PAGE>
LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement, dated as of February 6, 1996 (this
"Agreement"), is by and between Diamond Exteriors, Inc., a Delaware corporation
(the "COMPANY"), and American National Bank and Trust Company of Chicago, a
national banking association (the "BANK").

W I T N E S S E T H:

WHEREAS, the Company desires to borrow an aggregate principal amount
of up to Fifteen Million and No/100 Dollars ($15,000,000.00) from the Bank, and
the Bank is willing to make certain loans to the Company of up to such amount
upon the terms and conditions set forth herein;

WHEREAS, to induce the Bank to extend credit hereunder, the Company
has agreed to secure its obligations hereunder to the Bank by granting the Bank
a first priority, perfected security interest in all of its assets; and

WHEREAS, the Bank is willing to extend credit to the Company only upon
the terms and conditions set forth herein;

NOW THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of the Company by the Bank, the parties hereto hereby
agree as follows:

SECTION 1. DEFINITIONS.

1.1 GENERAL TERMS. When used herein, the following terms have the
following meanings:

"ACCOUNT DEBTOR" means the Person who is obligated on or under an
Account.

"ACCOUNTS" means all present and future accounts receivables and other
rights of the Company to payment for goods sold or leased or for services
rendered that are not evidenced by instruments or chattel paper, whether or not
they have been earned by performance.

"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if such first Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other

<PAGE>

Person, whether through ownership of voting securities, by contract or
otherwise.

"AGREEMENT" has the meaning set forth in the PREAMBLE.

"AUTHORIZED OFFICER" means the Chairman of the Board of Directors, the
Chief Executive Officer, the President, the Chief Financial Officer or the
Treasurer of the Company.

"BANK" has the meaning set forth in the PREAMBLE.

"BANK PARTIES" has the meaning set forth in SECTION 13.6.

"BASE RATE" means at any time and from time to time the rate of
interest per annum that the Bank most recently announces as its base rate at
Chicago, Illinois, which rate shall not necessarily be the lowest rate of
interest that the Bank charges its customers.
"BASE RATE LOAN" means any Loan at the Base Rate.

"BENEFIT PLAN" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which the Company
or any ERISA Affiliate is, or within the immediately preceding six (6) years
was, an "employer" as defined in Section 3(5) of ERISA.

"BLOCKED DEPOSIT ACCOUNTS" has the meaning set forth in SECTION 7.4.

"BREAKAGE COSTS" has the meaning set forth in SECTION 4.6(B).

"BUSINESS DAY" means any day of the year on which the Bank is open for
business in Chicago, Illinois.

"CAPITAL LEASES" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that would,
in accordance with GAAP, be required to be classified and accounted for as a
capital lease on the balance sheet of such Person.

"CAPITALIZED LEASE OBLIGATIONS" means any amount payable with respect
to any lease of any tangible or intangible property (whether real, personal or
mixed), however denoted, which either (i) is required by GAAP to be reflected as
a liability on the face of the balance sheet of the lessee thereunder or
(ii) based on actual circumstances existing and ascertainable, either at the
commencement of the term of such lease or at any subsequent time at which any
property becomes subject thereto, can reasonably be anticipated to impose on
such lessee substantially the same economic risks and burdens, having

<PAGE>

regard to such lessee's obligations and the lessor's rights thereunder both
during and at the termination of such lease, as would be imposed on such
lessee by any lease which is required to be so reflected or by the ownership
of the leased property.

"CASH COLLATERAL ACCOUNT" has the meaning set forth in SECTION 7.4.

"CASH FLOW COVERAGE RATIO" means the ratio of (i) Earnings Before
Interest and Taxes, plus (A) all increases (or minus all decreases) in deferred
taxes of the Company in such period, plus (B) any unused reserves established
for warranty claims, minus (C) capital expenditures that are not funded by
Capital Leases incurred during such period or by Loan proceeds, minus (D) taxes
actually paid by the Company for such period or amounts paid to Globe by the
Company under the Tax Sharing Agreement for such period to (ii) the sum of (A)
total principal and interest paid on Indebtedness in such period (but not
including any payments of principal on the Revolving Loans unless made to reduce
the Revolving Credit Limit under SECTION 5.1(a)) and (B) without duplication of
amounts included in CLAUSE (ii)(A), payments made with respect to Capital Leases
and other Indebtedness.

"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Sections 9601 ET SEQ., any amendments thereto, any
successor statutes, and any regulations or guidance promulgated thereunder.

"CLAIM" means any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Damages and Costs, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.

"CLOSING DATE" means the date of this Agreement.

"COLLATERAL" means all real and personal property and/or rights on or
in which a Lien is presently, or is hereafter granted to the Bank (or to any
agent, trustee or other party acting on the Bank's behalf) pursuant to this
Agreement, any of the Related Documents or any other instruments or documents
provided for herein or therein or delivered or to be delivered hereunder or
thereunder or in connection herewith or therewith.

"COLLECTING AGENTS" means collectively, the banks identified on
SCHEDULE 7.4 hereto, Discover Card Services, Inc., Mastercard, VISA, Sears
Roebuck and Co. and the Finance Company.

"COMPANY" has the meaning set forth in the PREAMBLE.

"COMPANY RELEASEES" has the meaning set forth in SECTION 13.20.

<PAGE>

"COMPLIANCE CERTIFICATE" has the meaning set forth in SECTION 9.1(c).

"COMPUTER HARDWARE AND SOFTWARE" means (a) all computer and other
electronic data processing hardware, whether now owned, licensed or leased or
hereafter acquired by the Company, integrated computer systems, central
processing units, memory units, display terminals, printers, features, computer
elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories and all
peripheral devices and other related computer hardware; (b) all software
programs, whether now owned, licensed or leased or hereafter acquired by the
Company, designed for use on the computers and electronic data processing
hardware described in CLAUSE (a) above, including, without limitation, operating
system software, utilities and application programs in whatsoever form (source
code and object code in magnetic tape, disk or hard copy format or any other
listings whatsoever); (c) all firmware associated therewith, whether now owned,
licensed or leased or hereafter acquired by the Company; and (d) all
documentation for such hardware, software and firmware described in the
preceding clauses (a), (b) and (c), whether now owned, licensed or leased or
hereafter acquired by the Company, including, without limitation, flow charts,
logic diagrams, manuals, specifications, training materials, charts and pseudo
codes.

"CONTAMINANT" means any solid waste, pollutant, hazardous substance,
Hazardous Material, toxic substance, hazardous waste, special waste, petroleum
(including natural gas) or petroleum-derived substance or waste, asbestos,
polychlorinated biphenyls (PCBs), or any constituent of any such substance or
waste, and includes but is not limited to these terms as defined in federal,
state or local laws or regulations.

"CONVERT," "CONVERSION," and "CONVERTED" mean a conversion of Base
Rate Loans to a LIBOR Loans or vice versa pursuant to SECTION 4.8.

"CREDIT COMMITMENT" means, collectively, the Finance Company Line of
Credit, the Investment Loan Credit Commitment and the Revolving Loan Commitment.

"CREDIT FACILITY" means, collectively, the aggregate of the Revolving
Credit Limit, the Investment Loan Credit Limit and the Finance Company Line
Limit.

"CREDIT TERMINATION DATE" means the later of the Finance Company Line
Termination Date, the Investment Loan Credit Termination Date or the Revolving
Credit Termination Date.

"CURRENT RATIO" means the ratio of (a) the Company's current assets
(disregarding any of the Company's intangible

<PAGE>

assets as described in the definition of "TANGIBLE NET WORTH") to (b) the
Company's current liabilities.

"DAMAGES AND COSTS" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation, attorney,
expert and consulting fees and costs of investigation, feasibility or Remedial
Action studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future.

"DOLLAR(S)" and the sign "$" means lawful money of the United States
of America.

"EARNINGS BEFORE INTEREST AND TAXES" means, for each preceding 12
month period, the Company's earnings before nonrecurring items, amortization,
interest, depreciation and taxes as set forth in the Company's statements of
income and retained earnings for such period.

"ELIGIBLE SHORT-TERM INVESTMENTS" means investments made by the Bank
at the direction of the Company in investments maturing on or before the 90th
day following the date of investment in (a) obligations issued or
unconditionally guaranteed by the United States or any agency thereof,
(b) certificates of deposit of Bank, or (c) commercial paper with a rating of at
least "Prime-1" by Moody's Investors Service and "A-1" by Standard & Poor's
Corporation, in each case, subject to a first perfected Lien in the Bank's favor
and not subject to any other Lien whatsoever, except for Permitted Liens.

"EMPLOYMENT AGREEMENTS" means, collectively, without taking into
account any amendment, modification or supplement thereto without the Bank's
prior written consent, the Executive Employment Agreements dated June 22, 1993
by and between the Company and certain management employees as amended by
Amendment No. 1 to Executive Employment Agreement dated as of September 23, 1994
and the Agreements dated as of September 23, 1994 by and between the Company and
certain management employees.

"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law derived from or relating to CERCLA; the Clean Water Act, as
amended, 33 U.S.C. Section 1251, ET SEQ.; the Clean Air Act, as amended,
42 U.S.C. Section 7401, ET SEQ.; OSHA; RCRA; any so-called "Superfund" or
"Superlien" law or any other federal, state, local and foreign Requirements of
Law relating to health and safety, pollution or protection of the environment,
including without limitation, Requirements of Law relating to reclamation of
land and waterways and Requirements of Law relating to emissions, discharges,
releases and threatened

<PAGE>

releases of Contaminants into the environment (including without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Contaminants, or
otherwise relating to worker health and safety or public health and safety,
in each case material to the ownership or operation of the Property.

"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or Safety
Requirements of Law, or (ii) Damages and Costs incurred by such governmental
entity in response to a Release or threatened Release of a Contaminant into the
environment.

"ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable Requirement
of Law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the transfer, sale, lease or closure of any Property or
the transfer of any deed for any Property for environmental reasons, including,
but not limited to, any so-called "Industrial Site Recovery Acts" or
"Responsible Property Transfer Acts."

"ERISA" means the Employee Retirement Income Security Act of 1974, any
amendments thereto, any successor statutes, and any regulations or guidance
promulgated thereunder.

"ERISA AFFILIATE" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Company; (ii) partnership, or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Company; and
(iii) member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as the Company, any corporation described
in CLAUSE (i) above or any partnership, trade or business described in
CLAUSE (ii) above.

"EVENT OF DEFAULT" means any of the events described in SECTION 12.1.

"EXCESS CASH FLOW" means for any period (i) Earnings Before Interest
and Taxes, plus (A) all increases (or minus all decreases) in deferred taxes of
the Company in such period, plus (B) any unused reserves established for
warranty claims, minus (C) capital expenditures that are not funded by Capital
Leases incurred during such period or by Loan proceeds, minus (D) taxes actually
paid by the Company for such period or amounts paid to Globe by the Company
under the Tax Sharing Agreement for such period MINUS (ii) the sum of (A) total
principal and interest paid on Indebtedness in such period (but not including
any payments of principal on the Revolving Loans unless made to reduce the
Revolving Credit Limit under SECTION 5.1(a)) and

<PAGE>

(B) without duplication of amounts included in CLAUSE (ii)(A), payments made
with respect to Capital Leases and other Indebtedness.

"FINANCE COMPANY" means Marquise Financial Services, Inc., a Delaware
corporation.

"FINANCE COMPANY LINE LIMIT" means $5,000,000 less any permanent
reductions pursuant to SECTION 5.1(b).

"FINANCE COMPANY LINE OF CREDIT" has the meaning set forth in
SECTION 2.3.

"FINANCE COMPANY LINE REPAYMENT DATE" means each date asset-backed
commercial paper is issued pursuant to the Securitization Documentation.

"FINANCE COMPANY LINE TERMINATION DATE" means (a) March 1, 1997 or (b)
such other date as the Finance Company Line of Credit terminates pursuant to
SECTION 12.2.

"FINANCE COMPANY LOANS" has the meaning set forth in SECTION 2.3.

"FINANCE COMPANY LOAN NOTE" has the meaning set forth in SECTION 3.3.

"FUNDING ARRANGEMENTS" has the meaning set forth in SECTION 4.6(b).

"GAAP" means the generally accepted accounting principles to be
applied in the preparation of the audited consolidated financial statements of
the Company as of December 31, 1995 with such changes thereto as (i) shall be
consistent with the then-effective principles promulgated or adopted by the
Financial Accounting Standards Board and its predecessors and successors and
(ii) shall be concurred in by the independent certified public accountants of
recognized standing certifying any financial statements of the Company.

"GENERAL INTANGIBLES" means all general intangibles, choses in action,
causes of action and all other intangible personal property of the Company of
every kind and nature wherever located and whether presently owned or hereafter
acquired by Company (other than Accounts).

"GLOBE" means Globe Building Materials, Inc., a Delaware corporation.

"GLOBE DEMAND NOTES" means, collectively, the demand notes, each
substantially in the form of Exhibit I, made by Globe in favor of the Company.

<PAGE>

"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

"HAZARDOUS MATERIAL" means any chemical, substance, material, object,
condition, waste or combination thereof which is or may be hazardous to human
health or safety or to the environment due to its radioactivity, ignitability,
corrosivity, reactivity, explosivity, toxicity, carcinogenicity, infectiousness
or other harmful or potentially harmful properties or effects, including,
without limitation, all of those chemicals, substances, materials, objects,
conditions, wastes or combinations thereof which are now or become listed,
defined or regulated in any manner by any federal, state or local law based
upon, directly or indirectly, such properties or effects.

"INDEBTEDNESS" with respect to any Person means, as of the date of
determination thereof, (a) all of such Person's indebtedness for borrowed money
or for the deferred purchase price of property or services (except indebtedness
owing to trade creditors in the ordinary course of business and which is due
within 75 days after original invoice date), (b) all indebtedness of such Person
or any other Person secured by any Lien with respect to any property or asset
owned or held by such Person, regardless whether the indebtedness secured
thereby shall have been assumed by such Person, (c) all indebtedness of other
Persons which such Person has directly or indirectly guaranteed (whether by
discount or otherwise), endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted with recourse to such Person or
with respect to which such Person is otherwise directly or indirectly liable,
including, without limitation, indebtedness in effect guaranteed by such Person
through any agreement (contingent or otherwise) to (i) purchase, repurchase or
otherwise acquire such Indebtedness or any security therefor, (ii) provide funds
for the payment or discharge of such indebtedness or any other liability of the
obligor of such indebtedness (whether in the form of loans, advances, stock
purchases, capital contribution or otherwise), (iii) maintain the solvency of
any balance sheet or other financial condition of the obligor of such
indebtedness, or (iv) make payment for any products, materials or supplies or
for any transportation or services regardless of the nondelivery or
nonfurnishing thereof, if in any such case the purpose or intent of such
agreement is to provide assurance that such indebtedness will be paid or
discharged or that any agreements relating thereto will be complied with or that
the holders of such indebtedness will be protected against loss in respect
thereof, (d) all of such Person's Capitalized Lease Obligations, (e) all actual
or contingent reimbursement obligations with respect to letters of credit issued
for such Person's account, (f) all of such Person's obligations under interest
rate hedging agreements

<PAGE>

and (g) all of such Person's Redeemable Stock, as measured by the maximum
fixed repurchase price thereof which has a mandatory redemption date prior to
the Credit Termination Date. For purposes of the preceding CLAUSE (g), the
maximum fixed repurchase price of any Redeemable Stock which does not have a
fixed repurchase price shall be calculated in accordance with the terms of
such Redeemable Stock as if such Redeemable Stock were repurchased on any
date on which Indebtedness shall be required to be determined hereunder. For
purposes of determining Indebtedness for the financial covenants set forth in
SECTIONS 9.7, 9.9, 9.10, 9.11 and 9.17, any contingent obligations will be
determined in accordance with GAAP.

"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 13.6.

"INTELLECTUAL PROPERTY" means all past, present and future: trade
secrets and other proprietary information; trademarks, trade names, service
marks, business names, designs, logos, indicia, and/or other source and/or
business identifiers and the goodwill of the business relating thereto and all
registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including, without limitation, copyrights for
computer programs) and copyright registrations which have heretofore been or may
hereafter be issued throughout the world and all tangible property embodying the
copyrights; unpatented inventions (whether or not patentable); patent
applications and patents; license agreements related to any of the foregoing set
forth in this definition and income therefrom; books, records, writings,
computer tapes or disks, flow diagrams, specification sheets, source codes,
object codes and other physical manifestations, embodiments or incorporations of
the foregoing set forth in this definition; the right to sue for all past,
present and future infringements of any of the foregoing set forth in this
definition; and all common law and other rights throughout the world in and to
all of the foregoing set forth in this definition.

"INTEREST PERIOD" means, for each LIBOR Loan, (A) initially, the
period commencing on the date of such LIBOR Loan or the date of the Conversion
of any Base Rate Loan into a LIBOR Loan and ending on the last day of the period
selected by the Company pursuant to the provisions below and (B) thereafter, if
such Loan is continued, in whole or in part, as a LIBOR Loan, a period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Company pursuant to the
provisions below. The duration of each such Interest Period shall be 30, 60, 90
or 180 days, in each case as the Company may, upon notice received by the Bank
not later than 11:00 A.M. (Chicago time) on the third Business Day prior to the
first day of such Interest Period, select; PROVIDED, HOWEVER, that:

<PAGE>

(i) the Company may not select any Interest Period for a LIBOR Loan
that ends after the Credit Termination Date applicable to such LIBOR Loan;

(ii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
unless the result of such extension would be to extend such Interest Period
into another calendar month, in which event such Interest Period shall end
on the immediately preceding Business Day; and

(iii) on and after the Credit Termination Date applicable to a LIBOR
Loan, the Interest Period for such LIBOR Loan shall be selected by the Bank
in its sole discretion.

"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986
and the regulations promulgated thereunder, as amended from time to time, and
any successor statute and/or regulations.

"IRS" shall mean the Internal Revenue Service and any successor
department or agency.

"INVESTMENT LOAN CREDIT COMMITMENT" has the meaning set forth in
SECTION 2.2.

"INVESTMENT LOAN CREDIT LIMIT" means an amount equal to $5,000,000
less any permanent reductions pursuant to SECTION 5.1(c).

"INVESTMENT LOAN CREDIT REPAYMENT DATE" means each date the Finance
Company makes a principal payment to the Company under the Working Capital Note
Agreement and Working Capital Note.

"INVESTMENT LOAN CREDIT TERMINATION DATE" means the earlier of (i)
March 1, 1998 or (ii) such other date as the Investment Loan Credit Commitment
terminates pursuant to SECTION 12.2.

"INVESTMENT LOANS" has the meaning set forth in SECTION 2.2.

"INVESTMENT LOAN NOTE" has the meaning set forth in SECTION 3.2.

"LIABILITIES" means any and all of the Company's obligations to the
Bank, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or

<PAGE>

hereafter existing, or due or to become due, which arise out of or in
connection with this Agreement or the Related Documents.

"LIBOR" means, for any Interest Period for each LIBOR Loan, the rate
of interest per annum at which deposits in U.S. Dollars are offered in London,
England to prime banks in the London interbank market at 11:00 A.M. (London
time) two Business Days prior to the first day of such Interest Period for a
period equal to such Interest Period, as quoted by the Bank.

"LIBOR LOAN" means any Loan at LIBOR.

"LICENSE AGREEMENT" has the meaning set forth in SECTION 9.29, and
includes all amendments, modifications and supplements thereto.

"LIEN" means any mortgage, deed of trust, collateral assignment,
pledge, lien, security interest or other charge, encumbrance or preferential
arrangement, including the retained security title of a conditional vendor or
lessor, mechanics liens, materialmen's liens and other claims for lien made by
parties claiming to have provided labor or materials with respect to property.

"LOANS" means collectively, the Revolving Loans, the Investment Loans
and the Finance Company Loans, and individually, any Revolving Loan, any
Investment Loan or any Finance Company Loan.

"LOCK BOX ACCOUNTS" means collectively, the Cash Collateral Account
and the Blocked Deposit Accounts.

"MANAGEMENT AGREEMENT" means the Management Agreement dated September
15, 1994 between the Company and Globe, and all related agreements, documents
and instruments.

"MANAGEMENT NOTES" means, without taking into account any amendment,
modification or supplement thereto without the Bank's prior written consent,
$4,000,000 in aggregate principal amount of performance term notes due at the
dates specified therein payable to certain tier I management employees.

"MARGIN STOCK" has the meaning given to such term in Regulation U.

"MATERIAL ADVERSE EFFECT" means any material adverse effect on (a) the
financial condition, credit, business, prospects, properties or operations of
the Company, (b) the ability of the Company to perform its obligations under
this Agreement or any Related Document to which it is a party on a timely basis,
or (c) the value of the Collateral or its worth as collateral security.

<PAGE>

"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by the Company or any ERISA Affiliate.

"NOTES" means collectively, the Revolving Note, the Investment Loan
Note and Finance Company Loan Note and individually, the Revolving Note, the
Investment Loan Note or the Finance Company Loan Note.

"NONTANGIBLE COLLATERAL" means, collectively, all Collateral other
than Computer Hardware and Software, Goods and the Property.

"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.

"PERMITTED LIENS" means (i) Liens for current taxes and duties not
delinquent or for taxes being contested in good faith and by appropriate
proceedings and with respect to which the Company has provided for and is
maintaining adequate reserves in accordance with GAAP, (ii) Liens that arise in
the ordinary course of business for sums not due or sums which the Company is
contesting in good faith and by appropriate proceedings and with respect to
which the Company has provided for and is maintaining adequate reserves in
accordance with GAAP, but which do not involve any deposits or advances or
borrowed money or the deferred purchase price of property or services,
(iii) Liens in the Bank's favor, (iv) Liens created in connection with a
purchase money security interest, provided that if any equipment, goods or
inventory in which a purchase money security interest is taken is sold to a
third party resulting in an Account, such Account shall not be an Eligible
Account until the holder of the purchase money security interest has been paid
in full for such equipment, goods or inventory, (v) deposits under workmen's
compensation, unemployment insurance, social security and other similar laws, or
to secure the performance of bids, tenders or contracts or to secure statutory
obligations or surety or appeals bonds, or to secure indemnity, performance or
other similar bonds each as may arise in the ordinary course of business, (vi)
Liens in favor of GDAF Associates as indicated on the UCC Financing Statement
file-stamped August 26, 1993 of record with the Texas Secretary of State, or
(vii) Liens disclosed on SCHEDULE 8.9 hereto.

"PERMIT" means any permit, approval, authorization, license, variance,
or permission required from a Governmental Authority under an applicable
Requirement of Law.

"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.

<PAGE>

"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
in respect of which the Company or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.

"PLEDGED NOTES" has the meaning set forth in SECTION 7.2.

"PLEDGED STOCK" has the meaning set forth in SECTION 7.2.

"PROPERTY" means any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by the Company (including any surface water thereon or
adjacent thereto, and soil and groundwater thereunder).

"REDEEMABLE STOCK" means any equity security (or option or warrant
related thereto) that by its terms or otherwise is required to be purchased or
redeemed at any time prior to the date which falls 60 days after the Credit
Termination Date, or is redeemable at the option of the holder thereof at any
time prior to the date which falls 60 days after the Credit Termination Date.

"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System and any successor rule or regulation of similar import as
in effect from time to time.

"RELATED DOCUMENTS" means, collectively, the Notes, the Trademark
Security Agreement, the Subordination Agreement and all other documents,
instruments, agreements and certificates executed by the Company pursuant to or
in connection with this Agreement.

"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, emptying, escaping, injection, deposit, dumping, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment or into
or out of any Property, including the movement of Contaminants through or in the
air, soil, surface water, groundwater or Property.

"REMEDIAL ACTION" means actions to (i) clean up, remove, treat or in
any other way address Contaminants in the indoor or outdoor environment;
(ii) prevent the Release or threat of Release or minimize the further Release of
Contaminants; or (iii) investigate and determine the nature and extent of a
Release of a Contaminant and to design a remedial response and (iv) conduct
post-remedial investigation, monitoring, operation and maintenance and care.

"REPORT OF ACCOUNTS" means a report in form and substance reasonably
satisfactory to the Bank (which may at the

<PAGE>

Bank's discretion include copies of original invoices) listing the Company's
Accounts, to be delivered to the Bank by the Company pursuant to SECTION
9.1(d).

"REPORTABLE EVENT" means any of the events described in Section 4043
of ERISA or the regulations thereunder for which the thirty-day notice
requirement has not been waived by the PBGC.

"REQUIREMENTS OF LAW" means any federal, state or local law, rule or
regulations, permit, order, license, decree, guidance, directive or other
binding determination of any Governmental Authority.

"REVOLVING CREDIT LIMIT" means an amount equal to $5,000,000 less any
permanent reductions pursuant to SECTION 5.1(a).

"REVOLVING CREDIT TERMINATION DATE" means the earlier of (i) the
maturity date of the Revolving Note, as the same may be replaced, amended or
supplemented, or (ii) such other date on which the Revolving Loan Commitment
shall terminate pursuant to SECTION 12.2.

"REVOLVING LOAN(S)" has the meaning set forth in SECTION 2.1.

"REVOLVING LOAN COMMITMENT" has the meaning set forth in SECTION 2.1.

"REVOLVING NOTE" has the meaning set forth in SECTION 3.1.

"SECURITIZATION DOCUMENTATION" means, collectively, the Special
Purpose Note Agreement, the Special Purpose Note and all agreements, documents,
certificates and instruments executed in connection with the securitization of
the Company's or the Finance Company's Accounts.

"SPECIAL PURPOSE NOTE" means a promissory note, substantially in the
form of EXHIBIT J, made by the Finance Company in favor of the Company, pursuant
to the terms and conditions of the Special Purpose Note Agreement.

"SPECIAL PURPOSE NOTE AGREEMENT" means an agreement between the
Company and the Finance Company, substantially in the form of EXHIBIT K,
pursuant to which the Company agrees to, among other things, loan the proceeds
of all Finance Company Loans to the Finance Company.

"STOCKHOLDER AGREEMENT" means the Diamond Exteriors, Inc.
Stockholders' Agreement dated June 22, 1993 by and among the Company, Globe and
the other persons listed on the signature pages thereto, as amended by Amendment
Number One to Diamond

<PAGE>

Exteriors, Inc. Stockholders' Agreement, dated August 1, 1993, as further
amended by Amendment Number Two to Diamond Exteriors, Inc. Stockholders'
Agreement, dated September 23, 1994, without regard to further amendments,
modifications or supplements except those amendments, modifications or
supplements permitted under SECTION 9.25.

"SUBORDINATION AGREEMENT" means the Subordination Agreement of even
date herewith executed by each of the tier I management employees listed on the
signature page thereto and the Company in favor of the Bank.

"SUBSIDIARY" means any Person of which more than fifty percent (50%)
of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such Person, regardless whether at the
time stock of any other class or classes of such Person shall have or might have
voting power by reason of the happening of any contingency (or in the case of a
Person which is not a corporation, fifty percent (50%) or more of the equity
interest of such Person) is at the time, directly or indirectly, owned by the
Company.

"TANGIBLE NET WORTH" means, with respect to any Person at any time,
such Person's net worth (determined in accordance with GAAP, which includes
account receivables and, if such Person is the Company, the Indebtedness
evidenced by the Management Notes and the capitalized portion of the $5,500,000
in the aggregate of Indebtedness owed by the Company to certain management
employees with respect to an aggregate $1,400,000 annual payment in cash or life
insurance premium equivalent commencing December 31, 1995 and continuing through
December 31, 1999 as provided in the employment agreements with such management
employees) after subtracting therefrom the aggregate amount of any intangible
assets of the Company, including, without limitation, covenants not to compete,
prepayments, deferred charges, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, brand names.

"TAX SHARING AGREEMENT" means the Tax Sharing Agreement effective
September 15, 1994 between the Company and Globe, and all related agreements,
documents and instruments.

"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan, (ii) the withdrawal of the Company or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Company or such ERISA Affiliate was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the
imposition of an obligation arising under Section 4041 of ERISA on the Company
or any ERISA Affiliate to provide affected parties with a written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA, (iv) the PBGC's institution of proceedings to
terminate a Benefit Plan, (v) any event or condition which might constitute
grounds

<PAGE>

under Section 4042 of ERISA for the termination of or the appointment of a
trustee to administer any Benefit Plan or (vi) the partial or complete
withdrawal of the Company or any ERISA Affiliate from a Multiemployer Plan.

"TRADEMARK SECURITY AGREEMENT" means an agreement between the Company
and the Bank substantially in the form of EXHIBIT L.

"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
effect in the State of Illinois on the date of this Agreement; PROVIDED,
HOWEVER, as used in SECTION 13.17 hereof, "UNIFORM COMMERCIAL CODE" shall mean
the Uniform Commercial Code as in effect from time to time in the applicable
state.

"UNMATURED EVENT OF DEFAULT" means any event that has occurred that,
with lapse of time or notice or lapse of time and notice, will constitute an
Event of Default if it continues uncured.

"UNUSED FACILITY FEE" has the meaning set forth in SECTION 4.4.

"VALUE" means (i) with respect to any Inventory, the lesser of the
wholesale market value thereof or the Company's cost thereof calculated on a
first-in, first-out basis, (ii) with respect to Equipment, such Equipment's
liquidation value, and (iii) with respect to any Property, such Property's
market value as established by the Bank from time to time by independent
appraisal conducted by an appraiser selected by the Bank.

"WELFARE PLAN" means a "welfare plan", as such term is defined in
ERISA.

"WORKING CAPITAL" means the excess of (a) the Company's current assets
(disregarding any of the Company's intangible assets as described in the
definition of "TANGIBLE NET WORTH") over (b) the difference of the Company's
current liabilities minus any reserves established for warranty claims.

"WORKING CAPITAL NOTE" means a promissory note, substantially in the
form of EXHIBIT M, made by the Finance Company in favor of the Company, pursuant
to the terms and conditions of the Working Capital Note Agreement.

"WORKING CAPITAL NOTE AGREEMENT" means an agreement between the
Company and the Finance Company, substantially in the form of EXHIBIT N,
pursuant to which the Company agrees to, among other things, loan the proceeds
of all but $500,000 of the Investment Loans to the Finance Company.

1.2 ACCOUNTING TERMS. Any accounting term used in this Agreement and
not specifically defined herein has the

<PAGE>

meanings customarily given them in accordance with GAAP. If changes in GAAP
shall be mandated by the Financial Accounting Standards Board or shall be
recommended by the Company's certified public accountants, and such changes
would materially modify the interpretation or computation of the financial
covenants contemplated by this Agreement at the time of execution hereof,
then in such event such changes shall not be followed in calculating the
financial covenants.

1.3 OTHER TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. All
capitalized terms contained in this Agreement (and that are not otherwise
specifically defined herein) have the meanings provided by the Uniform
Commercial Code to the extent the same are used or defined therein.

SECTION 2. CREDIT COMMITMENT; CREDIT BORROWING PROCEDURES.

2.1 REVOLVING LOAN COMMITMENT. On the terms and subject to the
conditions set forth in this Agreement, the Bank agrees to make revolving
loans (collectively, "REVOLVING LOANS") to the Company from time to time
before the Revolving Credit Termination Date in such aggregate amounts as the
Company may from time to time request but not exceeding at any one time
outstanding the Revolving Credit Limit. Each Revolving Loan to the Company
shall be in an integral multiple of $1,000. The proceeds of each Revolving
Loan shall be deposited in immediately available funds in the Company's
operating account with the Bank on the day such Revolving Loan is made.
Within the Revolving Loan limits set forth above, the Company may borrow,
prepay pursuant to SECTION 5, repay pursuant to SECTION 6 and reborrow
pursuant to this SECTION 2. The aggregate amount outstanding of all
Revolving Loans together with all accrued and unpaid interest thereon shall
be due and payable on the Revolving Credit Termination Date. The Bank's
commitment to make Revolving Loans is referred to as the "REVOLVING LOAN
COMMITMENT."

2.2 INVESTMENT CREDIT COMMITMENT. On the terms and subject to the
conditions set forth in this Agreement, the Bank agrees to make revolving loans
(collectively, the "INVESTMENT LOANS") to the Company from time to time before
the Investment Loan Credit Termination Date in aggregate amounts as the Company
may from time to time request but not exceeding at any one time outstanding the
Investment Loan Credit Limit. Each Investment Loan shall be in a minimum amount
of $250,000 and an integral multiple of $50,000. The proceeds of each
Investment Loan shall be deposited in immediately available funds in the
Company's operating account with the bank on the day such Investment Loan is
made. Within the Investment Loan limits set forth above, the Company may
borrow, prepay pursuant to SECTION 5, repay pursuant to SECTION 6 and reborrow
pursuant to this SECTION 2. The aggregate amount outstanding of all Investment
Loans together

<PAGE>

with all accrued and unpaid interest thereon shall be due and payable on the
Investment Loan Credit Termination Date. The Bank's commitment to make the
Investment Loan is referred to as the "INVESTMENT LOAN CREDIT COMMITMENT."

2.3 FINANCE COMPANY LINE OF CREDIT. On the terms and subject to the
conditions contained in this Agreement, the Bank may from time to time in its
sole and absolute discretion make one or more loans (collectively, "FINANCE
COMPANY LOANS") to the Company in aggregate amounts not exceeding at any one
time outstanding the Finance Company Line Limit. Each Finance Company Loan
shall be in a minimum amount of $250,000 and an integral multiple of $50,000.
The proceeds of each Finance Company Loan shall be deposited in immediately
available funds in the Company's operating account with the Bank on the day such
Finance Company Loan is made. Within the Finance Company Loan limits set forth
above, the Company may borrow, prepay pursuant to SECTION 5, repay pursuant to
SECTION 6 and reborrow pursuant to this SECTION 2 until the Finance Company Line
Termination Date. The aggregate amount outstanding of all Finance Company Loans
together with all accrued and unpaid interest thereon shall be due and payable
on the Finance Company Line Termination Date. The line of credit the Bank may
make available pursuant to this SECTION 2.3 is referred to as the "FINANCE
COMPANY LINE OF CREDIT."

2.4 LOAN BORROWING PROCEDURES. The Bank shall have received, (1) by
1:00 p.m. (Chicago time) on the Business Day on which an advance is to be made
for Base Rate Loans or (2) by 11:00 a.m. (Chicago time) on the third Business
Day prior to the Business Day on which the advance is to be made for LIBOR Loans
(i) irrevocable telephonic notice of each proposed Loan borrowing, specifying
the amount of such advance and (ii) in the case of a request for a LIBOR Loan,
the date of such LIBOR Loan and the duration of the Interest Period for such
LIBOR Loan; PROVIDED, HOWEVER, that only four LIBOR Loans may be outstanding at
any time. Each request for a Loan shall automatically constitute a
representation and warranty by the Company that, as of the date of such
requested Loan, all conditions precedent to the making of such Loan set forth in
SECTION 11 shall be satisfied. Each borrowing of a Loan shall be on a Business
Day.

SECTION 3. NOTES EVIDENCING LOANS.

3.1 REVOLVING NOTE. The Revolving Loans shall be evidenced by a note
(as such note may be amended, modified, restated or supplemented from time to
time, and together with any renewals thereof or exchanges or substitutions
therefor, the "REVOLVING NOTE"), substantially in the form of EXHIBIT A, with
appropriate insertions, dated the Closing Date (or such other date prior thereto
as shall be reasonably satisfactory to the Bank) and made payable to the order
of the Bank in a principal

<PAGE>

amount equal to the Revolving Credit Limit. The date and amount of each
Revolving Loan made by the Bank and of each repayment of principal thereof
received by the Bank shall be recorded by the Bank in its records, or, at its
option, on the schedule attached to the Revolving Note. The aggregate unpaid
principal amount so recorded shall be rebuttable presumptive evidence of the
principal amount owing and unpaid on the Revolving Note. The failure so to
record any such amount or any error in so recording any such amount, however,
shall not limit or otherwise affect the Company's obligations hereunder or
under the Revolving Note to repay the principal amount of the Revolving Loans
together with all interest accruing thereon.

3.2 INVESTMENT LOAN NOTE. The Investment Loans shall be evidenced by
a note (as such note may be amended, modified, restated or supplemented from
time to time, together with any renewals thereof or exchanges or substitutions
therefor, the "INVESTMENT LOAN NOTE"), substantially in the form of EXHIBIT B,
with appropriate insertions, dated the Closing Date (or such other date prior
thereto as shall be reasonably satisfactory to the Bank) and made payable to the
order of the Bank in a principal amount equal to the Investment Loan Credit
Limit. The date and amount of each Investment Loan made by the Bank and of each
repayment of principal thereof received by the Bank shall be recorded by the
Bank in its records, or, at its option, on the schedule attached to the
Investment Loan Note. The aggregate unpaid principal amount so recorded shall
be rebuttable presumptive evidence of the principal amount owing and unpaid on
the Investment Loan Note. The failure so to record any such amount or any error
in so recording any such amount, however, shall not limit or otherwise affect
the Company's obligations hereunder or under the Investment Loan Note to repay
the principal amount of the Investment Loans together with all interest accruing
thereon.

3.3 FINANCE COMPANY LOAN NOTE. The Finance Company Loans shall be
evidenced by a note (as such note may be amended, modified, restated or
supplemented from time to time, together with any renewals thereof or exchanges
or substitutions therefor, the "FINANCE COMPANY LOAN NOTE"), substantially in
the form of EXHIBIT C, with appropriate insertions, dated the Closing Date and
made payable to the order of the Bank in a principal amount equal to the Finance
Company Loan Limit. The date and amount of each repayment of principal thereon
received by the Bank shall be recorded by the Bank in its records, or, at its
option, on the schedule attached to such Finance Company Loan Note. The
aggregate unpaid principal amount so recorded shall be rebuttable presumptive
evidence of the principal amount owing and unpaid on such Finance Company Loan
Note. The failure so to record any such amount or any error in so recording any
such amount, however, shall not limit or otherwise affect the Company's
obligations hereunder or under such Finance Company Loan Note to

<PAGE>

repay the principal amount of such Finance Company Loan together with all
interest accruing thereon.

3.4 INTEREST; DUE DATE EXTENSION. The Notes shall provide for the
payment of interest as provided in SECTION 4. If any payment of principal of,
or interest on, any Note falls due on a day that is not a Business Day, then
such due date shall be extended to the next following Business Day, and
additional interest shall accrue and be payable for the period of such
extension.

SECTION 4. INTEREST; FEES; BALANCES.

4.1 INTEREST RATES ON LOANS.

(a) The Company shall pay to the Bank interest on the outstanding
principal balance of each Revolving Loan at a rate per annum equal to (i) during
such periods as such Revolving Loan is a Base Rate Loan, the Base Rate and
(ii) during such periods as such Revolving Loan is a LIBOR Loan, the sum of
LIBOR applicable to such periods plus one and one-half percent (1.50%);
PROVIDED, HOWEVER, that, if any principal of any Revolving Loan is not paid when
due (whether by acceleration or otherwise), the unpaid principal amount of such
Revolving Loan shall bear interest after such due date until paid at a rate per
annum equal to the applicable interest rate in effect from time to time for such
Revolving Loan PLUS three and one-half percent (3.50%).

(b) The Company hereby promises to pay interest on the unpaid
principal amount of each Investment Loan for the period commencing on the date
of such Investment Loan until such loan is paid in full at a rate per annum
equal to (i) during such periods as such Investment Loan is a Base Loan, the
Base Rate and (ii) during such periods such Investment Loan is a LIBOR Loan, the
sum of the LIBOR applicable to such periods plus one and one-half percent
(1.50%); PROVIDED, HOWEVER, that, in the event that any principal of any
Investment Loan is not paid when due (whether by acceleration or otherwise), the
unpaid principal amount of such Investment Loan shall bear interest after such
due date until paid at a rate per annum equal to the Base Rate PLUS three and
one-half percent (3.50%).

(c) The Company hereby promises to pay interest on the unpaid
principal amount of each Finance Company Loan for the period commencing on the
date of such Finance Company Loan until such loan is paid in full at a rate per
annum equal (i) during such periods as such Finance Company Loan is a Base Rate
Loan, the Base Rate and (ii) during such periods as such Finance Company Loan is
a LIBOR Loan, the sum of LIBOR applicable to such periods plus one and one-half
percent (1.50%); PROVIDED, HOWEVER, that, in the event that any principal of any
Finance Company Loan is not paid when due (whether by acceleration or
otherwise), the

<PAGE>

unpaid principal amount of such Finance Company Loan shall bear interest
after such due date until paid at a rate per annum equal to the Base Rate
PLUS three and one-half percent (3.50%).

4.2 INTEREST PAYMENT DATES. Accrued interest on each Loan shall be
payable on the last Business Day of each calendar month and at maturity, whether
by acceleration or otherwise, commencing on the last day of the month in which
such Loan is made. After maturity, whether by acceleration, on the stated
maturity date or otherwise, accrued interest on all Loans shall be payable on
demand.

4.3 COMPUTATION OF INTEREST. Interest on all Loans shall be payable
monthly in arrears not later than the last day of each calendar month, and shall
be computed on the basis of a 360-day year for the actual number of days
elapsed.

4.4 UNUSED FACILITY FEE. The Company agrees to pay to the Bank an
unused facility fee equal to one-quarter of one percent (0.25%) per annum on (i)
the difference between the Investment Loan Credit Limit and the aggregate
principal amount outstanding of all Investment Loans and (ii) the difference
between the Revolving Credit Limit and the aggregate principal amount
outstanding of all Revolving Loans (the "UNUSED FACILITY FEE"). The Unused
Facility Fee shall be computed on the basis of a year consisting of 360 days and
shall be payable as of the last Business Day of each calendar month, in arrears,
from the Closing Date until the Credit Termination Date.

4.5 MAINTENANCE OF BALANCES. The Company acknowledges that the Bank
will charge the Company customary and reasonable monthly service charges for
various services performed by the Bank in connection with any aspect of the
relationship between the Company and the Bank, and the Company hereby agrees
that if such service charges arising in any month exceed the credit to the
Company in that month arising from earnings attributable to funds on deposit
with the Bank in demand deposit accounts, such service charge deficiency shall
be deducted by the Bank from the Company's operating account.

4.6 INCREASED COSTS.

(a) If, with respect to LIBOR Loans, due to either (i) the
introduction of or any change in or in the interpretation of any Requirements of
Law or (ii) compliance with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to the Bank of agreeing to make or making,
funding or maintaining any LIBOR Loans, then the Company shall from time to
time, upon demand by the Bank, pay to the Bank additional amounts sufficient to
compensate the Bank for such actual increased cost. A certificate as to the
amount of such increased cost, submitted to the Company by the Bank, shall be

<PAGE>

conclusive and binding for all purposes, absent manifest error. If the
Company so notifies the Bank within five (5) Business Days after the Bank
notifies the Company of any increased cost pursuant to the foregoing
provisions of this SECTION 4.6(a), the Company may either (a) prepay in full
all LIBOR Loans of the Bank then outstanding in accordance with SECTION 5.2
and, additionally, reimburse the Bank for such increased cost in accordance
with this SECTION 4.6(a) or (b) Convert all LIBOR Loans then outstanding into
Base Rate Loans, in accordance with SECTION 4.8 and, additionally, reimburse
the Bank for such increased cost in accordance with this SECTION 4.6(a).

(b) The Company understands that in connection with the Bank charging
interest hereunder based on LIBOR, the Bank may enter into funding arrangements
with third parties ("FUNDING ARRANGEMENTS") on terms and conditions which could
result in substantial losses to the Bank if such LIBOR funds do not remain
outstanding at the interest rates provided herein for the entire Interest Period
with respect to which the LIBOR has been fixed. Consequently, if any LIBOR Loans
are repaid in whole or in part prior to the last day of such Interest Period, at
the option of the Company or upon acceleration, the Company shall indemnify and
hold harmless the Bank from and against and in respect of any and all losses,
costs and expenses (such losses, costs and expenses, are collectively referred
to herein as the "BREAKAGE COSTS") resulting from, or arising out of or imposed
upon or incurred by the Bank by reason of the liquidation or reemployment of
funds acquired or committed to be acquired by the Bank to fund such LIBOR Loans
pursuant to the Funding Arrangements. The amount of any Breakage Costs
resulting in an obligation of the Company to make a payment pursuant to the
foregoing sentence shall not include any losses attributable to lost profit to
the Bank but shall represent the excess, if any, of (x) the Bank's cost of
borrowing the LIBOR funds pursuant to the Funding Arrangements over (y) the
return to the Bank on its reinvestment of such funds; PROVIDED that, if the Bank
terminates any Funding Arrangements in respect of the LIBOR funds, the amount of
such Breakage Costs shall include the cost to the Bank of such termination. In
reinvesting any funds borrowed by the Bank pursuant to the Funding Arrangements,
the Bank shall take into consideration the remaining maturity of such
borrowings. As promptly as practicable under the circumstances, the Bank shall
provide the Company with its written calculation of all Breakage Costs payable
pursuant to this SECTION 4.6(b), and such calculation shall be binding on the
parties hereto.

4.7 CAPITAL ADEQUACY. If the Bank shall have determined that (a) the
adoption or implementation after the date hereof of any applicable law, treaty,
governmental (or quasi-governmental) rule, regulation, order or guideline
regarding capital adequacy, including, without limitation, the regulations set
forth at 12 C.F.R. Part 208 (Appendix A) and 12 C.F.R. Part 225 (Appendix A), or
any change therein, or any

<PAGE>

change in the interpretation or application thereof, or (b) compliance by the
Bank with any request or directive regarding capital adequacy (whether or not
having the force of law and whether or not failure to comply therewith would
be unlawful provided that compliance is in accordance with normal banking
practice) from any domestic or foreign central bank or governmental agency or
body having jurisdiction, does or shall have the effect of increasing the
amount of capital required to be maintained by the Bank or any corporation
controlling the Bank with respect to this Agreement and thereby reducing the
rate of return on the Bank's capital as a consequence of its obligations
under this Agreement, then from time to time, within five (5) days after
demand from the Bank, including a certificate setting forth in reasonable
detail the manner of calculation of the reduction in the rate of return on
such Bank's capital and claiming compensation pursuant to this SECTION 4.7,
the Company shall pay to the Bank, such additional amount or amounts as will
compensate the Bank for such reduction to the extent that the Bank is not
already compensated by an increase in the Base Rate. A certificate as to the
amount of such compensation, submitted to the Company by the Bank, shall,
absent manifest error, be final, conclusive and binding for all purposes. In
determining such amount, the Bank may use any reasonable averaging and
attribution method.

4.8 VOLUNTARY CONVERSION OF LOANS. The Company may on any Business
Day, upon notice given to the Bank not later than 11:00 A.M. (Chicago time) on
the third Business Day prior to the date of the proposed Conversion and subject
to the provisions of SECTIONS 4.6 and 4.9, Convert Base Rate Loans to LIBOR
Loans or vice versa; PROVIDED, HOWEVER, that each such Conversion shall be in an
amount of at least $ 100,000 and in integral multiples of $100,000; PROVIDED,
FURTHER, that any Conversion of any LIBOR Loans into Base Rate Loans shall be
made on, and only on, the last day of an Interest Period for such LIBOR Loans;
PROVIDED, FURTHER, that no Conversion of Base Rate Loans into LIBOR Loans shall
be made upon the occurrence and continuance of an Event of Default or an
Unmatured Event of Default; PROVIDED, FURTHER, that only four LIBOR Loans may be
outstanding at any time. Each such notice of a Conversion shall be irrevocable
and shall, within the restrictions specified above, specify (i) the date of such
Conversion, (ii) the Loans to be Converted and (iii) if such Conversion is into
LIBOR Loans, the duration of the Interest Period for each such LIBOR Loan.

4.9 INTEREST RATE DETERMINATION AND PROTECTION.

(a) If, with respect to any LIBOR Loans, the Bank reasonably
determines and notifies the Company that the LIBOR for any Interest Period for
such LIBOR Loans will not adequately reflect the cost to the Bank of making,
funding or maintaining its LIBOR Loans for such Interest Period,

<PAGE>

(1) each LIBOR Loan will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Loan, and

(2) the obligation of the Bank to make, or to Convert Loans into,
LIBOR Loans shall be suspended until the Bank shall notify the Company that
the circumstances causing such suspension no longer exist.

(b) If the Company shall fail to select the duration of any Interest
Period for any LIBOR Loans in accordance with the provisions contained in the
definition of "Interest Period," the Bank will forthwith so notify the Company
and such LIBOR Loans will automatically, on the last day of the then existing
Interest Period therefor, Convert into Base Rate Loans.

SECTION 5. REDUCTION OR TERMINATION OF CREDIT FACILITY;
PREPAYMENTS.

5.1 REDUCTION OR TERMINATION OF THE CREDIT FACILITY BY THE COMPANY.

(a) The Company may from time to time on at least five (5) Business
Days' prior written notice received by the Bank permanently reduce the amount of
the Revolving Credit Limit but only upon repayment of the amount, if any, by
which the aggregate unpaid principal amount of the Revolving Note exceeds the
then reduced amount of the Revolving Credit Limit. Any such reduction shall be
in an aggregate amount of $500,000 or an integral multiple thereof. The Company
may at any time on like notice terminate the Revolving Loan Commitment upon
payment in full of the Revolving Note.

(b) The Company may from time to time on at least five (5) Business
Days' prior written notice received by the Bank permanently reduce the amount of
the Finance Company Line Limit; PROVIDED, HOWEVER, that the then reduced amount
of the Finance Company Line Limit shall exceed the aggregate unpaid principal
amount outstanding of the Finance Company Line Note. Any such reduction shall
be in an aggregate amount of $500,000 or an integral multiple thereof. Any
reduction in the Finance Company Line Limit requested pursuant to this
SECTION 5.1(b) shall become effective as of the first Business Day of the next
fiscal quarter following the request.

(c) The Investment Loan Credit Limit shall be permanently reduced by
an amount of $250,000 on the last Business Day of each fiscal quarter commencing
September 30, 1997 and continuing for each fiscal quarter until the Investment
Loan Credit Termination Date.

<PAGE>

(d) If the Company permanently reduces the Credit Facility pursuant
to this SECTION 5.1 on or before March 1, 1997 due to the Company's refinancing
of its obligations with a bank, commercial finance company or similar
institution (other than the Bank or its affiliates), then such reduction shall
be accompanied by an additional amount as liquidated damages equal to 2%
multiplied by the amount of the Credit Facility; PROVIDED, HOWEVER, that the
Company may undertake an initial public offering and permanently reduce the
Credit Facility with the proceeds of such an initial public offering without
incurring such liquidated damages.

5.2 OPTIONAL PREPAYMENT OF LOANS. Except as provided in
SECTION 5.1(d), the Company may from time to time prepay any Loans in whole or
in part without premium or penalty.

5.3 MANDATORY PREPAYMENT OF LOANS.

(a) The Company agrees (i) that, if at any time the aggregate unpaid
principal amount of the Revolving Loans shall exceed the Revolving Credit Limit,
the Company will forthwith make a mandatory prepayment of principal of the
Revolving Loans in an amount equal to such excess; (ii) that, if at any time the
aggregate unpaid principal amount of the Finance Company Loans shall exceed the
Finance Company Line Limit, the Company will forthwith make a mandatory
prepayment of principal of the Finance Company Loans in an amount equal to such
excess; and (iii) that, if at any time the aggregate unpaid principal amount of
the Investment Loans shall exceed the Investment Loan Credit Limit, the Company
will forthwith make a mandatory prepayment of principal of the Investment Loans
in an amount equal to such excess. Each such mandatory prepayment shall be
without premium or penalty.

(b) The Company agrees that the Bank, in its sole discretion, shall
apply amounts received by the Bank in the Lock Box Accounts on account of the
Liabilities in the manner set forth in the following sentence. The Bank shall
have the exclusive right to apply and re-apply any and all such payments as the
Bank in its sole discretion may deem advisable. All such payments shall be made
without premium or penalty.

(c) The Company agrees (i) that on each Finance Company Line
Repayment Date the Company shall make a mandatory prepayment of outstanding
principal of all Finance Company Loans equal to the amount the Company receives
from the Finance Company pursuant to the terms and conditions of the Special
Purpose Note Agreement and the Special Purpose Note and (ii) that on each
Investment Loan Credit Repayment Date the Company shall make a mandatory
prepayment of outstanding principal of all Investment Loans in excess of
$500,000 equal to the amount the Company receives from the Finance Company
pursuant to the terms and

<PAGE>

conditions of the Working Capital Note Agreement and the Working Capital Note.

5.4 INTEREST ON PRINCIPAL PREPAID. Any prepayment or payment of any
Loan prepaid or paid in accordance with SECTION 5 shall include accrued interest
to the date of prepayment or payment, as applicable, on the principal amount
being prepaid or paid.

SECTION 6. MAKING OF PAYMENTS.

6.1 MAKING OF PAYMENTS. All payments (including those made pursuant
to SECTION 5) of principal of, or interest on, any Note and of any fees shall be
made in immediately available funds by the Company to the Bank. All such
payments shall be made to the Bank at its principal office in Chicago, not later
than 2:00 p.m., Chicago time, on the date due; funds received after that hour
shall be deemed to have been received by the Bank on the next following Business
Day.

6.2 DEPOSITS TO THE COMPANY'S ACCOUNT. The Bank shall have the right
to deposit all proceeds of the Loans to the Company's Account Number 4260619
with the Bank and shall have the right to charge such account (or any other
account in the Company's name) for all other Liabilities due from and then
payable by the Company.

6.3 SETOFF.

(a) In addition to the Bank's rights with respect to the Lock Box
Accounts, the Company agrees that, if at any time (i) any amount owing by it
under this Agreement or any Related Document is then due and payable to the Bank
or (ii) any Event of Default shall have occurred and be continuing, then the
Bank or the holder of any Note, in its discretion, may apply to the payment of
the Liabilities any and all balances, credits, deposits, accounts or moneys of
the Company then or thereafter with the Bank or such holder.

(b) Without limitation of SECTION 6.3(a), and in addition to the
Bank's rights with respect to the Lock Box Accounts, the Company agrees that,
upon and after the occurrence of any Event of Default and during the
continuation thereof, the Bank is hereby authorized, at any time and from time
to time, without notice to the Company, (i) to set off against and to
appropriate and apply to the payment of the Liabilities (whether matured or
unmatured, fixed or contingent or liquidated or unliquidated) any and all
amounts which the Bank is obligated to pay over to the Company (whether matured
or unmatured, and, in the case of deposits, whether general or special, time or
demand and however evidenced) and (ii) pending any such action, to the extent
necessary, to hold such amounts as Collateral to secure

<PAGE>

such Liabilities and to dishonor any and all checks and other items drawn
against any deposits so held as the Bank in its sole discretion may elect.

(c) In addition to the Bank's right of setoff described in SECTIONS
6.3(a) and 6.3(b), in the event of an Unmatured Event of Default, except for
Unmatured Events of Default relating to defaults arising under SECTIONS 12.1(f)
and 12.1(K), and during the continuation thereof, the Bank shall have the right
to freeze any and all balances, credits, deposits, or accounts of the Company
then maintained at or in the possession of the Bank and to refuse to pay any
checks issued by the Company against such deposits. Such funds shall be held by
Bank as cash collateral.

SECTION 7. COLLATERAL

7.1 GRANT OF SECURITY INTEREST. As collateral security for the
performance and payment of all Liabilities, the Company hereby grants, conveys,
mortgages, hypothecates, pledges, sets over, transfers and assigns to the Bank,
and grants to the Bank a continuing lien upon and security interest in, all of
the Company's right, title and interest in and to the following property,
wherever located, whether now or hereafter existing, owned, licensed, leased (to
the extent of the Company's leasehold interest therein), consigned (to the
extent of the Company's ownership interest therein), arising or acquired
including, without limitation, all of the Company's:

(a) Accounts;

(b) Certificated Securities;

(d) Computer Hardware and Software and all rights with respect
thereto, including, without limitation, any and all licenses, options,
warranties, service contracts, program services, test rights, maintenance
rights, support rights, improvement rights, renewal rights and
indemnifications, and any substitutions, replacements, additions or model
conversions of any of the foregoing;

(e) Deposit Accounts;

(f) Documents;

(g) General Intangibles (including, without limitation, (i) all of
the Company's Intellectual Property, (ii) any rights of the Company arising
from time to time to receive payment under a billing to a Person
representing such Person's obligation to reimburse the Company for

<PAGE>

indebtedness paid or to be paid by the Company for such Person's account,
(iii) any rights of the Company arising out of leases, licenses and
contracts which are not Accounts and (iv) tax refunds);

(h) Goods (including, without limitation, all its Consumer Goods,
Equipment, Farm Products, Fixtures and Inventory and all of the foregoing
located on the premises described on SCHEDULE 8.20 hereto, BUT EXCLUDING
all Hazardous Materials, PROVIDED that this reference to Hazardous
Materials shall not constitute evidence of the Bank's knowledge of the
existence of any Hazardous Materials of the Company); together with all
accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor and all accessories, parts and other
property used in connection therewith;

(i) Instruments;

(j) Insurance policies, including claims or rights to payment
thereunder;

(k) Liens, guaranties and other rights and privileges pertaining to
any of the Collateral;

(l) Money (of every jurisdiction whatsoever);

(m) Right, title and interest in any Goods, the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under, any Account,
any General Intangible, or any Chattel Paper or any Instrument; and

(n) Uncertificated Securities;

together with all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing, embodying,
incorporating or referring to, any of the foregoing, and all proceeds, products,
offspring, rents, issues, profits and returns of and from any of the foregoing;
PROVIDED, HOWEVER, that the Company shall not be deemed under this SECTION 7.1
to grant to the Bank a security interest in any contract to which the Company is
a party which is a mortgage, lease agreement or license agreement pursuant to
which the Company is prohibited from pledging or otherwise granting to a third
party a security interest in such contract or pursuant to which, by its express
terms, the rights of the Company thereunder are substantially diminished or
impaired as a result of a pledge thereof.

7.2 PLEDGE. In order to secure the full and complete payment and
performance by the Company of its Liabilities, the Company hereby pledges and
grants to the Bank a continuing Lien

<PAGE>

and security interest in (i) all of the outstanding shares of capital stock
of any Subsidiary currently or hereafter owned by the Company or any other
Person of which the Company acquires any capital stock having voting power
(or in the case of a Person which is not a corporation, any equity interest
in such Person (the "PLEDGED STOCK"), (ii) any securities, dividends or
distributions and any other right or property at any time and from time to
time receivable or otherwise distributed in respect of or in exchange for any
or all of the Pledged Stock and any other property substituted or exchanged
therefor, (iii) all of the notes described in SCHEDULE 7.2 hereto, if any,
including any amendment, modification, renewal or replacement of any such
notes, and including, without limitation, the Special Purpose Note, the
Working Capital Note and any Globe Demand Note (collectively, the "PLEDGED
NOTES"), and (iv) any and all proceeds of the foregoing. The Company shall
deliver to the Bank the certificates representing the Pledged Stock endorsed
in blank or accompanied by appropriate instruments of transfer or assignment
in blank, and the Pledged Notes, duly endorsed in blank. The Bank shall not
have any duty to assure that all certificates representing the Pledged Stock
or instruments representing the Pledged Notes have been delivered to it or
any obligation whatsoever with respect to the care, custody or protection of
any certificates or instruments which may be delivered to it except only to
exercise the same care in physically safekeeping such certificates or
instruments as it would exercise in the ordinary course of its own business.
The Bank shall not be obligated to preserve or protect any rights with
respect to the Pledged Stock or Pledged Notes or to receive or give any
notice with respect thereto whether or not the Bank is deemed to have
knowledge of such matters. In addition, the Bank, in its sole and absolute
discretion, may retain as additional Collateral or release to the Company,
from time to time, such portion or all of the monies, reserves and proceeds
received by the Bank with respect to the Collateral as the Bank may
determine. All such monies, reserves and proceeds and other property of the
Company in the Bank's possession at any time are hereby pledged by such
Company to the Bank as additional Collateral hereunder.

7.3 GRANT OF LICENSE TO USE GENERAL INTANGIBLES. Solely for the
purpose of enabling the Bank to exercise rights and remedies hereunder at such
time as the Bank shall be lawfully entitled to exercise such rights and
remedies, the Company hereby grants to the Bank an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to the
Company) to use, assign, license or sublicense any of the General Intangibles
(including, without limitation, the Company's Intellectual Property), now owned
or hereafter acquired by the Company, and wherever the same may be located,
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof, unless by

<PAGE>

granting to the Bank such aforementioned rights the Company's rights with
respect to such General Intangibles would be substantially diminished or
impaired.

7.4 LOCK BOX ACCOUNTS.

(a) Except as noted in the next succeeding sentence, the Company
shall establish, and shall continue to maintain, the following deposit accounts,
blocked deposit accounts and lock boxes: (a) with the Bank at the Bank's office
at 33 North LaSalle Street, Chicago, Illinois 60690, in the name of the Company
but under the sole dominion and control of the Bank a certain deposit account,
Account Number 4260627 (the "CASH COLLATERAL ACCOUNT") and (b) with those
certain banks identified on SCHEDULE 7.4 hereto, in the name of the Company but
under the sole dominion and control of the Bank, those certain blocked deposit
accounts listed on SCHEDULE 7.4 hereto (the "BLOCKED DEPOSIT ACCOUNTS"). The
Company represents and warrants that it has no lock box accounts or deposit
accounts other than the Lock Box Accounts and covenants and agrees that
throughout the term of this Agreement, it shall not maintain any lock box or
deposit accounts other than the Lock Box Accounts and that all cash and other
proceeds of Collateral shall be deposited in the Lock Box Accounts in accordance
with the terms of this Agreement. Notwithstanding the preceding sentence, the
Company may establish Blocked Deposit Accounts after the date hereof provided
that the Company obtain the prior written consent of the Bank, that such Blocked
Deposit Accounts conform to the provisions of this Agreement and that the Bank
receive a fully executed letter substantially in the form of EXHIBIT D.

(b) The Company has heretofore delivered to the Bank fully executed
letters substantially in the form attached to EXHIBIT D hereto executed by each
of the banks listed on SCHEDULE 7.4 hereto, irrevocably instructing the bank to
deposit in the Company's Blocked Deposit Account, immediately upon receipt
thereof, all monies, checks, notes, drafts or funds received by it and to
transfer the same to the Cash Collateral Account via an ACH credit or wire
transfer at the end of each Business Day. On or before the 30th day following
the date hereof, the Company shall take all actions necessary to close any
Blocked Deposit Account with respect to which the Company has not delivered to
the Bank a fully executed letter substantially in the form attached to EXHIBIT D
hereto within such 30-day period.

(c) The Company hereby agrees that all payments made to such Blocked
Deposit Accounts or otherwise received by Bank, whether on the Accounts or as
proceeds of other Collateral or otherwise will be the sole and exclusive
property of Bank and will be applied on account of the Liabilities. All cash
payments received by the Bank at its offices in Chicago, Illinois (in the Cash
Collateral Account or otherwise), including, without limitation, payments made
by ACH credit or wire transfer of

<PAGE>

immediately available funds received by the Bank on or before 2:00 p.m. will
be credited to the Company's account immediately upon receipt. All cash
payments received after 2:00 p.m. will be credited to the Company's account
the following Business Day after receipt.

(d) The Company and any Affiliates, shareholders, directors,
officers, employees, agents or those Persons acting for or in concert with the
Company shall, acting as trustee for Bank, receive, as the sole and exclusive
property of Bank, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into the
possession or under the control of the Company or any Affiliates, shareholders,
directors, officers, employees, agents or those Persons acting for or in concert
with the Company and immediately upon receipt thereof, the Company shall remit
the same or cause the same to be remitted, in kind, to the Bank, at the Bank's
address set forth on the signature page hereof.

(e) The Company has heretofore delivered to the Bank fully executed
card processing sales agreements with the Company with respect to Mastercard and
VISA, each in form and substance satisfactory to the Bank, irrevocably
instructing Mastercard and VISA to direct to the Cash Collateral Account at the
end of each Business Day via an ACH credit or wire transfer all payments and
credits which would otherwise be made to the Company on such Business Day
pursuant to such agreements. With the prior written consent of the Bank (which
will not be unreasonably withheld or delayed), the Company may enter into
additional third party financing agreements, in form and substance reasonably
satisfactory to the Bank, irrevocably instructing such third parties to direct
all payments to the Cash Collateral Account as provided in the preceding
sentence.

(f) The Company hereby pledges and grants to the Bank, as security
for the Liabilities, a security interest in all funds deposited in the Lock Box
Accounts and all interest or other income on such funds or investments. All of
such interest or other income shall constitute part of the Collateral hereunder.

7.5 PROCESSING, SALE, COLLECTIONS, ETC.

(a) Upon the occurrence of an Event of Default and during the
continuation thereof the Bank may revoke the Company's right to: (i) in the
ordinary course of its business, at its own expense, sell, lease or furnish
under contracts of service any of the Inventory normally held by the Company for
such purpose, and use and consume, in the ordinary course of its business, any
raw materials, work in process or materials normally held by the Company for
such purpose, (ii) subject to the provisions of this SECTION 7 relating to the
Lock Box Accounts, at its own expense, collect, as and when due, all amounts due
with respect to any of

<PAGE>

the Nontangible Collateral, including the taking of such action with respect
to such collection as the Bank may reasonably request or, in the absence of
such request, as the Company may deem advisable, and (iii) grant, in the
ordinary course of business, to any party obligated on any of the Nontangible
Collateral, any rebate, refund or allowance to which such Person may be
lawfully entitled, and may accept, in connection therewith, the return of
Goods, the sale or lease of which shall have given rise to such Nontangible
Collateral.

(b) The Company shall instruct Account Debtors of its Accounts to
make payments to the Cash Collateral Account as directed by the Bank. The
Company shall cause all cash and other proceeds of Collateral received by the
Company to be deposited or otherwise credited, as soon as reasonably
practicable, but in any event not later than the first Business Day after
receipt, in the Cash Collateral Account, as provided in this Agreement or in any
of the Related Documents. All such collections shall be the Bank's property to
be applied against the Liabilities, and not the Company's property.

(c) The Bank shall apply all funds in the Cash Collateral Account
against the Liabilities on the date of receipt if the funds are received by the
Bank by 2:00 p.m. Funds received after 2:00 p.m. will be applied against the
Liabilities on the first Business Day after the day received.

7.6 TRUST FOR THE BANK. Subject to the provisions of this SECTION 7
relating to the Lock Box Accounts and to SECTION 7.5, (a) the Company shall
hold, upon express trust as trustee for the Bank, all monies, checks (except for
checks received by the Company directly from a customer that are held by the
Company for forwarding to Sears, Roebuck and Co.), notes, drafts, Chattel Paper
and other Instruments or writings for the payment of money (properly endorsed,
where required, so that the Bank may collect such items) and all other payments
for and/or proceeds of Collateral which may come into the possession or under
the control of the Company (or any of its shareholders, directors, officers,
employees, agents, or other Persons acting for or in concert with the Company),
(b) the Company shall remit and deliver, or cause to be remitted and delivered,
the same, in kind, to the Bank, and (c) except as the Bank may otherwise consent
in writing, any such items which the Company may receive will not be commingled
with any other of its funds or property, but will be held separate and apart
from its own funds or property and upon express trust for the Bank until
delivery is made to the Bank. Any of the foregoing will be applied to the
Liabilities as set forth in this Agreement.

7.7 ASSEMBLY OF COLLATERAL. Upon the request of the Bank, the
Company agrees, in the case of an Event of Default and during the continuation
thereof, to assemble, at its expense, all its Inventory, Equipment and other
Goods (other than Fixtures and

<PAGE>

Hazardous Materials) at a convenient place or places acceptable to the Bank.

7.8 REPLACEMENT LIENS. If and to the extent that a perfected
security interest hereunder in any Collateral shall cease to be perfected for
any reason whatsoever (including, without limitation, the sale of Inventory or
release of all or any balance in the Lock Box Accounts or use or disposition by
the Company of any proceeds of Collateral), then such Collateral (referred to in
this paragraph as "RELEASED COLLATERAL") shall be deemed thereby released from
the security interest hereunder in exchange, as of the time of such release, for
any other Collateral of equivalent value in which a perfected security interest
hereunder is being obtained contemporaneously or has been most recently
obtained, but only to the extent such other Collateral does not represent
Collateral in exchange for which any previously released.

7.9 ACQUISITION OF OTHER LIENS. The Bank, in its sole and absolute
discretion, without waiving or releasing any of the Company's obligations,
liabilities or duties under this Agreement may at any time, upon the occurrence
of an Event of Default and during the continuation thereof, but shall be under
no obligation to, pay, acquire and/or accept an assignment of any Lien asserted
by any other Person against the Collateral. All sums paid by the Bank in
respect thereto and all costs, fees and expenses, including reasonable
attorneys' fees, court costs, expenses and other charges relating thereto
incurred by the Bank on account thereof shall be part of the Liabilities and
shall be payable by the Company to the Bank on demand.

7.10 TERMINATION OF SECURITY INTEREST AND LIENS. The Bank's security
interest and other Liens in, on and to the Collateral shall terminate when all
the Liabilities have been finally and fully paid and performed, at which time
the Bank shall reassign and redeliver (or cause to be reassigned and
redelivered) to the Company, or to such Person as the Company shall designate,
against receipt, such of the Collateral (if any) assigned by the Company to the
Bank as shall not have been sold or otherwise applied by the Bank pursuant to
the terms hereof and shall still be held by it hereunder, together with
appropriate instruments of reassignment and release. Any such reassignment
shall be without recourse upon or representation or warranty by the Bank and
shall be at the Company's cost and expense.

7.11 REASONABLE CARE. The Bank shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as the Company requests in
writing, but the Bank's failure to comply with any such request shall not of
itself be deemed a failure to exercise reasonable care, and no failure of the
Bank to preserve or protect any rights with respect to such Collateral against
prior parties, or to do any

<PAGE>

act with respect to the preservation of such Collateral not so requested by
the Company, shall be deemed a failure to exercise reasonable care in the
custody or preservation of such Collateral.

7.12 THE COMPANY TO REMAIN LIABLE. The Company hereby expressly
agrees that, anything herein to the contrary notwithstanding, it shall remain
liable under each contract, agreement, interest or obligation assigned to the
Bank hereunder to observe and perform all of the conditions and obligations to
be observed and performed by the Company thereunder, all in accordance with and
pursuant to the terms and provisions thereof. The Bank shall not have any duty,
responsibility, obligation or liability under any such contract, agreement,
interest or obligation by reason of or arising out of the assignment thereof to
the Bank or the granting to the Bank of a security interest therein or the
Bank's receipt of any obligation pursuant hereto, nor shall the Bank be required
or obligated in any manner to perform or fulfill any of the Company's
obligations thereunder or pursuant thereto, or to make any payment, or to make
any inquiry as to the nature or sufficiency of any payment received by it or the
sufficiency of any performance of any party under any such contract, agreement,
interest or obligation, or to present or file any claim, or to take any action
to collect or enforce any performance or the payment of any amounts which may
have been assigned to it, in which it may have been granted a security interest
or to which it may be entitled at any time.

7.13 INFORMATION. The Company agrees that the Bank and any of the
Bank's officers, employees, agents or auditors shall have the right, at
reasonable intervals after the date hereof, to make reasonable inquiries (by
mail, telephone, telegraph, telecopier or otherwise) of any Person with respect
to the validity, amount or any other matter (including, without limitation, the
assertion by Account Debtors of claims, offsets and counterclaims) concerning
any of the Collateral; PROVIDED, HOWEVER, that, absent an Event of Default and
the continuation thereof, the Bank will only verify individual invoices in
excess of $7,500.

SECTION 8. REPRESENTATIONS AND WARRANTIES.

To induce the Bank to enter into this Agreement and to make Loans
hereunder, the Company represents and warrants to the Bank that:

8.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly existing and in good standing under the laws of the State of Delaware; and
the Company is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction where such qualification is
required because of the nature of its activities or properties and where, in
such

<PAGE>

jurisdiction, failure to qualify could reasonably be expected to have a
Material Adverse Effect.

8.2 AUTHORIZATION; NO CONFLICT. The Company's execution, delivery
and performance of this Agreement and each of the Related Documents to which it
is a party and the consummation of the transactions contemplated by this
Agreement and each of the Related Documents are within the Company's corporate
powers, have been duly authorized by all necessary corporate action, require no
governmental, regulatory or other approval, and do not and will not contravene
or conflict with any provision of (i) law, (ii) any judgment, decree or order
binding upon the Company, or (iii) the Company's certificate of incorporation or
by-laws, and do not and will not contravene or conflict with, or cause any Lien
to arise under, any provision of any agreement or instrument binding upon the
Company or upon any property of the Company in any manner that could reasonably
be expected to a Material Adverse Effect.

8.3 VALIDITY AND BINDING NATURE. This Agreement and the Related
Documents to which the Company is a party are (or, when duly executed and
delivered, will be) the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and general
principles of equity.

8.4 FINANCIAL STATEMENTS.

(a) All balance sheets, statements of operations and other financial
data which have been or shall hereafter be furnished to the Bank for the
purposes of or in connection with this Agreement do and will present fairly the
financial condition of the Persons involved as of the dates thereof and the
results of their operations for the period(s) covered thereby.

(b) The Company's unaudited balance sheet as of November 30, 1995,
and the related statements of the Company's income and retained earnings,
respectively, copies of which have been furnished to the Bank, fairly present
the Company's financial condition as at such date and the results of the
Company's operations for the period ended on such date, all in accordance with
GAAP (but absent footnote disclosures and year-end adjustments for interim
reports), consistently applied. Since November 30, 1995, there has been no
material adverse change in such condition or operations.

8.5 LITIGATION AND CONTINGENT LIABILITIES.

(a) Except as disclosed on SCHEDULE 8.5, no litigation (including,
without limitation, derivative actions), arbitration proceedings, governmental
proceedings or

<PAGE>

investigations or regulatory proceedings that claim monetary damages in
excess of (i) $100,000 in any single proceeding or (ii) $500,000 in aggregate
for all such proceedings are pending or threatened (in writing and of which
an officer of the Company has knowledge) against the Company, nor does the
Company know of any basis for any of the foregoing. In addition, there are
no inquiries, formal or informal, which might give rise to such actions,
proceedings or investigations.

(b) The Company has obtained all licenses, permits, franchises and
other governmental authorizations necessary to the ownership of its properties
or to the conduct of its businesses, a failure to obtain or violation of which
could reasonably be expected to, in the aggregate, have a Material Adverse
Effect.

(c) The Company has no material contingent liabilities not provided
for or disclosed in the financial statements referred to in SECTION 8.4(b).

8.6 PRINCIPAL PLACE OF BUSINESS. As of the date hereof, the
principal place of business and chief executive office of the Company is located
at the address set forth on the signature page hereof. If any change in the
principal place of business and chief executive office of the Company occurs,
the Company shall promptly notify the Bank thereof. As of the date hereof, the
books and records of the Company and all records of account are located at the
principal place of business and chief executive office of the Company, and if
any change in such location occurs, the Company shall promptly notify the Bank
thereof.

8.7 SUBSIDIARIES; DIVISIONS. The Company has no Subsidiaries nor
divisions (other than the Company's regional offices which the Company refers to
as divisions) nor is the Company engaged in any joint venture or partnership
with any Person.

8.8 EMPLOYEE BENEFIT PLANS. Neither the Company nor any ERISA
Affiliate maintains or contributes to any Benefit Plan or Multiemployer Plan
other than those listed on SCHEDULE 8.8 hereto. Each Plan maintained by the
Company which is intended to be qualified under Section 401(a) of the Internal
Revenue Code as currently in effect has been determined by the IRS to be so
qualified or an application for determination of qualified status will be made
to the IRS prior to the end of the applicable remedial amendment period under
Section 401(b) of the Internal Revenue Code and, to the best knowledge of the
Company, each such Plan for which such determination is to be made has been
operated in conformance with the Tax Reform Act of 1986 and subsequent
legislation. Neither the Company nor any ERISA Affiliate maintains or
contributes to any employee welfare benefit plan within the meaning of Section
3(1) of ERISA which provides benefits to employees after termination of
employment other than

<PAGE>

as required by Section 601 of ERISA. To the best knowledge of the Company,
the Company has not breached any of the responsibilities, obligations or
duties imposed on it by ERISA, the Internal Revenue Code and regulations
promulgated thereunder with respect to any Plan. All of the Company's ERISA
Affiliates have complied in all respects with the responsibilities,
obligations and duties imposed on them by ERISA and the Internal Revenue Code
and the rules and regulations promulgated thereunder with respect to any Plan
where the failure to comply could reasonably be expected to have a Material
Adverse Effect. No Benefit Plan has incurred any accumulated funding
deficiency (as defined in Section 302(a)(2) of ERISA and Section 412(a) of
the Internal Revenue Code), whether waived or not waived. Neither the
Company, nor any fiduciary of any Plan which is not a Multiemployer Plan (i)
has engaged in a nonexempt "prohibited transaction" described in Section 406
of ERISA or Section 4975 of the Internal Revenue Code or (ii) has taken or
failed to take any action which would constitute or result in a Termination
Event either of which could reasonably be expected to have a Material Adverse
Effect. The Company is not subject to any liability under Sections 4063,
4064, 4069, 4204 or 4212(c) of ERISA. The Company has not incurred any
liability to the PBGC which remains outstanding other than the payment of
premiums, and there are no premium payments which have become due which are
unpaid. No ERISA Affiliate of the Company has incurred with respect to any
Plan any liability to the PBGC or a Multiemployer Plan which could reasonably
be expected to have a Material Adverse Effect. Schedule B to the most recent
annual report filed with the IRS with respect to each Benefit Plan and
furnished to the Bank is complete and accurate. Since the date of each such
Schedule B, there has been no material adverse change in the funding status
or financial condition of the Benefit Plan relating to such Schedule B. The
Company has not (x) failed to make a required contribution or payment to a
Multiemployer Plan or (y) made a complete or partial withdrawal under
Sections 4203 or 4205 of ERISA from a Multiemployer Plan. Neither the
Company nor any ERISA Affiliate has failed, or been treated as having failed
under Section 412(m)(5) of the Internal Revenue Code, to make a required
installment or any other required payment under Section 412 of the Internal
Revenue Code on or before the due date for such installment or other payment.
The additional funding requirements of Section 412(l) of the Internal
Revenue Code and Section 302(d) of ERISA do not apply to any Benefit Plan for
the current plan year. The Company is not required to provide security to a
Benefit Plan under Section 401(a)(29) of the Internal Revenue Code due to a
Plan amendment that results in an increase in current liability for the plan
year. The Company has not, by reason of the transactions contemplated hereby,
any obligation to make any payment to any employee pursuant to any Plan or
existing contract or arrangement. The Company has given to the Bank copies
of all of the following that the Bank has requested: each Benefit Plan and
related trust agreement (including all amendments to such Plan and trust) in
existence or

<PAGE>

committed to as of the date hereof and in respect of which the Company or
any ERISA Affiliate is currently an "employer" as defined in Section 3(5) of
ERISA, and the most recent summary plan description, actuarial report,
determination letter issued by the IRS and Form 5500 filed in respect of each
such Benefit Plan in existence; a listing of all of the Multiemployer Plans
currently contributed to by the Company or any ERISA Affiliate with the
aggregate amount of the most recent annual contributions required to be made
by the Company and all ERISA Affiliates to each such Multiemployer Plan, any
information which has been provided to the Company or an ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan and the
collective bargaining agreement pursuant to which such contributions are
required to be made; each employee welfare benefit plan within the meaning
of Section 3(l) of ERISA which provides benefits to employees after
termination of employment other than as required by Section 601 of ERISA, the
most recent summary plan description for such plan and the aggregate amount
of the most recent annual payments made to terminated employees under each
such Plan.

8.9 TITLE TO ASSETS. The Company has good and indefeasible title to
its assets, including the Collateral, free and clear of all Liens except the
Permitted Liens.

8.10 INVESTMENT COMPANY ACT. The Company is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.

8.11 PUBLIC UTILITY HOLDING COMPANY ACT. The Company is not a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

8.12 REGULATION U. The Company is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying Margin Stock nor will the Company use any of the
proceeds of any of the Loans to purchase or carry Margin Stock.

8.13 BUSINESS LOAN. The Loans constitute "business loans" coming
within the definition and purview of 815 ILCS 205/4.

8.14 ENVIRONMENTAL COMPLIANCE. Except as disclosed on SCHEDULE 8.14
hereto and made a part hereof:

(a) the Property and operations of the Company comply in all respects
with all applicable Environmental, Health and Safety Requirements of Law;

<PAGE>

(b) the Company has obtained all environmental, health and safety
Permits necessary for its Property and its operations, and all such Permits
are in good standing and the Company is currently in compliance with all
terms and conditions of such Permits;

(c) neither the Company nor any of its current or former Property or
operations is, or has been, subject to any investigation by, order from or
agreement or negotiations with any Person (including without limitation any
prior owner or operator of the Company and/or the Property) respecting
(i) any Environmental, Health or Safety Requirements of Law, (ii) any
Remedial Action or (iii) any Claims or Damages and Costs arising from the
Release or threatened Release of a Contaminant into the environment;

(d) none of the Property or operations of the Company is or has been
subject to any judicial or administrative proceeding, order, judgment,
decree or settlement alleging or addressing a violation of or a liability
under any Environmental, Health or Safety Requirements of Law;

(e) the Company has not filed any notice under any applicable
Requirement of Law:

(i) reporting a Release of a Contaminant under Section 103(a) of
CERCLA, any state equivalent, or other similar federal or state spill
reporting requirements;

(ii) indicating past or present treatment, storage or disposal
of a hazardous waste, as that term is defined under 40 CFR Part 261 or
any state equivalent as required by Section 103(c) of CERCLA or any
state equivalent; or

(iii) indicating or reporting a violation of any applicable
Environmental, Health or Safety Requirements of Law or an exceedance
or excursion from the terms and conditions of any Permit;

(f) none of the Company's current or former Property is listed or
proposed for listing on the National Priorities List ("NPL") pursuant to
CERCLA or on the Comprehensive Environmental Response Compensation
Liability Information System List ("CERCLIS") or any similar state list of
sites at which the need for Remedial Action is under consideration;

(g) The Company has not sent or arranged for the transport of any
Contaminant to a NPL site or a proposed NPL site or to a CERCLIS site;

<PAGE>

(h) there is not now, nor to the knowledge of the Company has there
ever been on or in the Property:

(i) any treatment, recycling, storage or disposal of any
hazardous waste, as that term is defined under 40 CFR Part 261 or any
state equivalent, requiring a permit under 40 CFR Part 264 or 265, or
any state equivalent;

(ii) any landfill, waste pile, or surface impoundment;

(iii) any underground storage tank; or

(iv) any asbestos containing material;

(i) there has been no use or handling of any polychlorinated
biphenyls (PCBs) in hydraulic oils, electrical transformers or other
equipment owned or operated by the Company;

(j) the Company has not received any notice or claim to the effect
that it or they are or may be liable to any Person as a result of the
Release or threatened Release of a Contaminant into the environment;

(k) there have been no Releases of any Contaminants to the
environment from any Property by the Company, except those Releases
permitted under applicable Environmental, Health and Safety Requirements of
Law, under applicable approvals, permits and reporting requirements, and
only then in strict compliance with the requirements of those permits;

(l) the Company is not subject to Remedial Action and has no
contingent liability in connection with any Release or threatened Release
of any Contaminants into the environment;

(m) no Environmental Lien has attached to any Property of the
Company;

(n) none of the products the Company manufactures, distributes or
sells, or ever has manufactured, distributed or sold, contains asbestos; or

(o) this financing will not result in the Company's Property becoming
subject to any Environmental Property Transfer Act, or to the extent such
acts are applicable to any such Property, the Company has fully complied
with the requirements of such acts.

No time limitation shall apply to any representations or warranties the Company
has made in this SECTION 8.14.

<PAGE>

8.15 ACCURACY OF INFORMATION. All factual information heretofore or
contemporaneously furnished by or on behalf of the Company to the Bank for
purposes of or in connection with this Agreement or any transaction contemplated
hereby is, and all other factual information hereafter furnished by or on behalf
of the Company to the Bank will be, true and accurate in all material respects
on the date as of which such information is dated or certified, and the Company
has not omitted and will not omit any material fact necessary to prevent such
information from being false or misleading in any material respect. The Company
has disclosed to the Bank in writing all facts which could reasonably be
expected to have a Material Adverse Effect.

8.16 FAIR CONSIDERATION; SOLVENCY. The Company has received fair
consideration in exchange for the Company's assumption of the Liabilities. The
Company is not "insolvent," nor will the Company's incurrence of obligations,
direct or contingent, to repay the Loans render the Company "insolvent." For
purposes of this SECTION 8.16, a company is "insolvent" if (a) the "present fair
salable value" (as defined below) of its assets is less than the amount that
will be required to pay its probable liability on its existing debts and other
liabilities (including contingent liabilities) as they become absolute and
matured; (b) the property of such company constitutes unreasonably small capital
for it to carry out its business as now conducted and as proposed to be
conducted including the capital needs of such company; (c) such company intends
to, or believes that it will, incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be
received by such company and amounts to be payable on or in respect of debt of
such company), or the cash available to such company after taking into account
all other anticipated uses of the cash of such company is anticipated to be
insufficient to pay all such amounts on or in respect of debt of such company
when such amounts are required to be paid; or (d) such company believes that
final judgments against it in actions for money damages will be rendered at a
time when, or in an amount such that, such company will be unable to satisfy any
such judgments promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered), or the cash
available to such company after taking into account all other anticipated uses
of the cash of such company (including the payments on or in respect of debt
referred to in CLAUSE (c) of this SECTION 8.16), is anticipated to be
insufficient to pay all such judgments promptly in accordance with their terms.
For purposes of this SECTION 8.16, the following terms have the following
meanings: (i) the term "DEBTS" includes any legal liability, whether matured or
unmatured, liquidated, absolute, fixed or contingent, (ii) the term "PRESENT
FAIR SALABLE VALUE" of a company's assets means the amount which may be
realized, within a reasonable time, either through collection or sale of such
assets at their regular

<PAGE>

market value and (iii) the term "REGULAR MARKET VALUE" means the amount which
a capable and diligent businessman could obtain for the property in question
within a reasonable time from an interested buyer who is willing to purchase
under ordinary selling conditions.

8.17 TAX STATUS. The Company has made or filed all income and other
tax returns, reports and declarations required by any jurisdiction to which any
of them are subject, has paid all taxes, assessments and other charges shown or
determined to be due on such returns, reports and declarations (other than those
being diligently contested in good faith by appropriate proceedings), and have
set aside adequate reserves against liability for taxes, assessments and charges
applicable to periods subsequent to those covered by such returns, reports and
declarations.

8.18 NO DEFAULT. No event has occurred and no condition exists which,
upon the execution and delivery of, or consummation of any transaction
contemplated by, this Agreement or any Related Document, or upon the funding of
any Loan, will constitute an Event of Default or Unmatured Event of Default.

8.19 COMPLIANCE WITH APPLICABLE LAWS. The Company is in compliance
with the requirements of all applicable laws, rules, regulations, and orders of
all governmental authorities (Federal, state, local or foreign, and including,
without limitation, environmental laws, rules, regulations and orders), a breach
of which could reasonably be expected to have a Material Adverse Effect.

8.20 LOCATION OF COLLATERAL. The address of the location of the
Company's records concerning Nontangible Collateral and the addresses of the
Company's own premises are as set forth on SCHEDULE 8.20 hereto, and the
Company's Goods are located at the addresses listed on SCHEDULE 8.20 hereto.
The Company does not have any assets that may be characterized as Inventory
under the Uniform Commercial Code other than Inventory the Company acquires
periodically as a result of a subcontractor's failure to complete a project,
such Inventory being held by the Company for less than ten (10) days prior to
being installed by the replacement subcontractor hired to complete such
projects. SCHEDULE 8.20 hereto identifies those locations at which the Company
has Collateral with a Value in excess of $25,000. None of the Collateral (other
than the Company's Accounts and General Intangibles) has, within the four (4)
months preceding the date of this Agreement, been located at any place other
than the Company's own premises at the addresses listed on SCHEDULE 8.20 hereto.

8.21 NAMES. The cover page to this Agreement lists the legal name by
which the Company is now known and was previously known. The Company has not
been known by any legal

<PAGE>

name different from the one set forth on the cover page of this Agreement.
The only trade names by which the Company is known are "Sears Roofing and
Doors by Diamond Exteriors," "Sears Fencing by Diamond Exteriors," "Sears
Garage Doors by Diamond Exteriors" and "Diamond Exteriors."

8.22 GOVERNMENT CONTRACTS. The Company is not a party to any federal,
state or local government contract.

8.23 OTHER AGREEMENTS. The Company is not in default under any
agreement, contract, lease, or commitment to which it is a party or by which it
is bound, the effect of which could reasonably be expected to have a Material
Adverse Effect. The Company knows of no dispute regarding any agreement,
contract, lease or commitment which could reasonably be expected to have a
Material Adverse Effect.

8.24 EMPLOYEE CONTROVERSIES.

(a) There are no controversies pending or, to the best of Company's
knowledge, threatened, between Company and any of its respective employees,
other than employee grievances arising in the ordinary course of business which
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect;

(b) The Company is in compliance with all federal and state laws
respecting employment and employment terms, conditions and practices, the
failure with which to comply could reasonably be expected to have a Material
Adverse Effect; and

(c) The Company has no union representation questions, material
grievances outside the ordinary course of business, or discrimination or unfair
labor practice complaint pending or threatened (in writing) against it.

8.25 PATENTS, LICENSES. The Company possesses adequate licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles, tradenames and similar assets to continue to conduct
its business as heretofore conducted by it and all such licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and tradenames are listed on SCHEDULE 8.25 hereto.

8.26 SECURITIES MATTERS. The making of the Loans, the application of
the proceeds and repayment thereof by the Company and the consummation of the
transactions contemplated by this Agreement and the Related Documents will not
violate any provision of any federal or state securities statutes, rules or
regulations, or any order issued by the Securities and Exchange Commission
(collectively, the "SECURITIES LAWS"). The Company agrees to indemnify the Bank
and hold the Bank harmless from the

<PAGE>

claims of any Persons in connection with any of the Securities Laws and
relating to the Loans or the transactions contemplated by this Agreement and
the Related Documents, unless such claim arises from the wilful misconduct of
the Bank.

SECTION 9. COVENANTS.

Until the expiration or termination of the Credit Commitment and
thereafter until all Liabilities are paid in full, the Company agrees that,
unless at any time the Bank shall otherwise expressly consent in writing, it
will:

9.1 REPORTS, CERTIFICATES AND OTHER INFORMATION. Furnish to the
Bank:

(a) AUDIT REPORT. On or before the 90th day after each of the
Company's fiscal years, a copy of financial statements of the Company and
the Finance Company prepared in conformity with GAAP accompanied by an
unqualified annual audit report, duly certified by independent certified
public accountants of nationally recognized standing selected by the
Company or the Finance Company, as applicable, with the Bank's reasonable
consent. Concurrently with the delivery of the foregoing financial
statements and annual audit report (i) a certificate of the aforesaid
certified public accountants certifying to the Bank that based upon their
examination of the affairs of the Company or the Finance Company, as
applicable, performed in connection with the preparation of said financial
statements and audited annual report, they are not aware of the occurrence
or existence of any condition or event which constitutes or upon notice or
lapse of time or both would constitute an Event of Default or, if they are
aware thereof, the nature thereof and (ii) a certificate from the Company's
Chief Financial Officer containing a computation of, and showing compliance
with, each of the financial ratios and restrictions contained in this
SECTION 9 and to the effect that, in making the examination necessary for
the signing of the certificate, he/she has not become aware of any Event of
Default or Unmatured Event of Default that has occurred and is continuing
or, if he/she has become aware of any such event, describing it and the
steps, if any, being taken to cure it.

(b) INTERIM REPORTS. On or before the 45th day after the end of each
month, a copy of unaudited financial statements of the Company and the
Finance Company prepared in a manner consistent with the financial
statements referred to in SECTION 9.1(A), signed by an Authorized Officer
or a counterpart at the Finance Company and consisting of at least
consolidating balance sheets as at the close of such month and statements
of earnings for such

<PAGE>

month and for the period from the beginning of such fiscal year to the
close of such month.

(c) CERTIFICATES. At the Bank's option, contemporaneously with the
furnishing of each annual financial statement and each monthly statement
provided for in this SECTION 9.1, a duly completed certificate in the form
of EXHIBIT E with appropriate insertions (each such certificate herein
called a "COMPLIANCE CERTIFICATE") dated the date of such annual financial
statement or such monthly statement and signed by an Authorized Officer,
which Compliance Certificate shall state that no Event of Default or
Unmatured Event of Default has occurred and is continuing, or, if there is
any such event, shall describe it and the steps, if any, being taken to
cure it. In addition, except in the case of a Compliance Certificate dated
the date of such annual financial statement, the Compliance Certificate
shall contain a computation of, and show compliance with, each of the
financial ratios and restrictions contained in this SECTION 9.

(d) REPORT OF ACCOUNTS. Not less frequently than weekly a Report of
Accounts listing all Accounts generated by the Company during the prior
week.

(e) REPORTS TO SEC AND TO SHAREHOLDERS. Promptly upon the filing or
making thereof, copies of each filing and report made by or concerning the
Company with or to any securities exchange or the Securities and Exchange
Commission, and of each material communication from the Company to its
shareholders generally.

(f) NOTICE OF DEFAULT, LITIGATION. Forthwith upon learning of the
occurrence of either of the following, written notice thereof which
describes the same and the steps being taken by the Company with respect
thereto: (i) the occurrence of an Event of Default or an Unmatured Event
of Default or, (ii) the institution of, or any adverse determination in,
any litigation, arbitration proceeding or governmental proceeding in which
any injunctive relief is sought or in which money damages are sought in
excess of (a) $100,000 in any single proceeding or (b) $500,000 in
aggregate for all such proceedings.

(g) ERISA REPORTING. (i) The following information where the
occurrence of one or more of the following events could reasonably be
expected to have, singly or in the aggregate, a Material Adverse Effect:
(A) as soon as possible, and in any event within five (5) days after the
Company or any ERISA Affiliate knows or has reason to know that a
Termination Event has occurred (or, with respect to a Termination Event
which is a Reportable Event referred to in Section 4043(b)(3) of ERISA, if
the Company or any ERISA

<PAGE>

Affiliate is subject to Section 4043(b) of ERISA, within five (5) days
after the Company or any ERISA Affiliate knows or has reason to know
that notice of such a Reportable Event has been given to the PBGC, if
earlier), a written statement of an Authorized Officer of the Company
describing such Termination Event and the action, if any, which the
Company or any ERISA Affiliate has taken, is taking or proposes to take
with respect thereto, and when known, any action taken or threatened by
the IRS, the DOL or PBGC with respect thereto; (B) as soon as possible,
and in any event within five (5) days after the Company or any ERISA
Affiliate knows or has reason to know that a prohibited transaction
(defined in Section 406 of ERISA and section 4975 of the Internal
Revenue Code) has occurred, a statement of an Authorized Officer
describing such transaction and the action which the Company or any
ERISA Affiliate has taken, is taking or proposes to take with respect
thereto; (C) promptly upon, and in any event within five (5) days after,
the filing thereof with the IRS, a copy of each funding waiver request
filed with respect to any Benefit Plan and all communications received
by the Company or any ERISA Affiliate with respect to such request; (D)
promptly upon, and in any event within five (5) days of the occurrence
thereof, notification of any increases in the benefits of any existing
Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which the Company or any ERISA Affiliate
was not previously contributing; (E) promptly upon, and in any event
within five (5) days after, receipt by the Company or any ERISA
Affiliate of the PBGC's intention to terminate a Benefit Plan or to have
a trustee appointed to administer a Benefit Plan, copies of each such
notice; (F) promptly upon, and in any event within five (5) days after,
receipt by the Company or any ERISA Affiliate of any unfavorable
determination letter from the IRS regarding the qualification of a Plan
under Section 401(a) of the Internal Revenue Code, copies of such
letter; (G) promptly upon, and in any event within five (5) days after,
receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan regarding the imposition of withdrawal liability,
copies of each such notice; (H) promptly upon, and in any event within
five (5) days after, the Company or any ERISA Affiliate fails, or is
treated as having failed under Section 412(m)(5) of the Internal Revenue
Code, to make a required installment or any other required payment under
Section 412 of the Internal Revenue Code on or before the due date for
such installment or payment, a notification of such failure; (I) as soon
as possible, and in any event within five (5) days after the Company or
any ERISA Affiliate knows or has reason to know that the additional
funding requirements of Section 412(l) of the Internal Revenue Code and
Section 302(d) of ERISA apply to any Benefit Plan for a plan year, a
notification of such application; and (J) promptly upon, and in any
event

<PAGE>

within five (5) days after, the Company or any ERISA Affiliate
knows or has reason to know (1) a Multiemployer Plan has been terminated,
(2) the administrator or plan sponsor of a Multiemployer Plan intends to
terminate a Multiemployer Plan, or (3) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan; and (ii) the following information regardless of
Material Adverse Effect: (A) promptly upon, and in any event within
fifteen (15) days after, the filing thereof with the DOL, IRS or PBGC,
copies of each annual report (form 5500 series), including Schedule B
thereto, filed with respect to each Benefit Plan; and (B) promptly upon,
and in any event within fifteen (15) days after, receipt by the Company or
any ERISA Affiliate of each actuarial report for any Benefit Plan or
Multiemployer Plan and each annual report for any Multiemployer Plan,
copies of each such report. For purposes of this SECTION 9.1(G), the
Company and any ERISA Affiliate shall be deemed to know all facts known by
the Administrator of any Plan of which the Company or any ERISA Affiliate
is the plan sponsor.

(h) NOTICE OF MOVEMENT OF GOODS, CHANGE OF ADDRESS AND CHANGE OF
NAME. Furnish notice in writing to the Bank, as soon as possible and in
any event within five (5) days (i) after removal of more than $20,000 worth
of the Company's mobile Goods from the state in which such mobile Goods
were previously located; (ii) after the occurrence of any change in the
address of the Company's locations (as described on SCHEDULE 8.20 hereto),
(iii) after the occurrence of any change in the Company's name or (iv)
after the occurrence of any change in the information set forth on the
Schedules attached to this Agreement.

(i) LICENSE AGREEMENT. Furnish to the Bank certified copies of the
License Agreement and all amendments, modifications or supplements thereto
within three (3) Business Days of execution.

(j) CHANGES OF BILLING LOCATIONS. Ten Business Days prior to
changing the location from which Accounts are billed to a location other
than Woodstock, Illinois, written notice of the proposed change and a list
of all new billing locations.

(k) SECURITIZATION, DOCUMENTATION. Furnish to the Bank all notices,
reports or other documentation received under the Securitization
Documentation outside of the ordinary course of business (but including
Account Schedules (as defined in the Special Purpose Agreement)) within 3
days of receiving such notice, report or other documentation.

<PAGE>

(l) OTHER INFORMATION. Such other information concerning the Company
as the Bank may reasonably request from time to time, including without
limitation, a schedule identifying each Eligible Account.

9.2 CORPORATE EXISTENCE AND FRANCHISES. Except as otherwise
expressly permitted in this Agreement, maintain in full force and effect its
separate existence and all rights, licenses, leases and franchises reasonably
necessary to the conduct of its business.

9.3 BOOKS, RECORDS AND INSPECTIONS. Maintain complete and accurate
books and records, permit the Bank to have access, upon reasonable notice, with
reasonable frequency and during ordinary business hours, to the Company's books
and records, and permit the Bank to inspect the Company's properties and
operations.

9.4 INSURANCE.

(a) Maintain such insurance (i) as is described on SCHEDULE 9.4
hereto, (ii) as may be required by Requirements of Law, the Related Documents or
otherwise reasonably requested by the Bank, and (iii) as may be customarily
maintained by similarly situated companies.

(b) All insurance policies shall be in form, and amounts and issued
by companies reasonably satisfactory to the Bank. The insurance companies shall
have a minimum Policy holder's rating of "B", a minimum financial size rating of
XII or such other rating acceptable to the Bank in the current edition of Best
Insurance Reports and shall be licensed to do business in the State of Illinois.
All insurance policies shall provide that loss thereunder shall be payable to
the Bank as its interest may appear for application to the Liabilities, and
shall, where appropriate, (i) include standard waiver of subrogation
endorsements, (ii) provide that the coverage shall not be terminated or
materially modified without thirty (30) days' advance written notice to the
Bank, and (iii) provide that no claims be paid thereunder to any Person other
than the Bank without ten (10) days' advance written notice to the Bank. Such
policies or certificates thereof shall, if the Bank so requests, be deposited
with or furnished to the Bank.

(c) In the event that the Company fails to maintain any insurance
required by this Agreement or pay any premium relating thereto, the Bank may,
without waiving or releasing any of the Company's obligations or any Event of
Default, but is not obligated to, obtain such insurance and pay such premiums
and take any other action with respect thereto which the Bank reasonably deems
advisable. All sums so disbursed by the Bank, including reasonable attorneys'
fees, court costs and expenses and other charges relating thereto, shall be part
of the

<PAGE>

Liabilities and shall be payable by the Company to the Bank on demand.

9.5 TAXES AND LIABILITIES. Promptly pay when due all taxes, duties,
assessments, license fees, registration fees and other liabilities (including
all general and special taxes, assessments, water or sewer charges, "tap on"
fees, and other charges of every kind and nature whatsoever levied or assessed
against the Property or any part thereof or any interest therein or obligation
or instrument secured by the Property), except such taxes, duties, assessments,
license fees, registration fees and other liabilities as the Company is
diligently contesting in good faith and by appropriate proceedings; PROVIDED
that the Company has provided for and is maintaining adequate reserves with
respect thereto in accordance with GAAP.

9.6 LIMITS ON CREDIT COMMITMENTS. Not permit (a) the aggregate
outstanding principal amount of the Revolving Loans to exceed the then-current
Revolving Credit Limit or (b) the aggregate outstanding principal amount of
Finance Company Loans to exceed the then-current Finance Company Line Limit.

9.7 TANGIBLE NET WORTH. Not permit Tangible Net Worth to be less
than the stated amount for each corresponding period listed below, calculated at
the end of each month during such period:

DATE TANGIBLE NET WORTH
Closing Date to March 31, 1996 ($10,000,000)

April 1, 1996 to June 30, 1996 ($10,000,000)

July 1, 1996 to September 30, ($9,000,000)
1996
October 1, 1996 to December 31, ($9,000,000)
1996

January 1, 1997 to June 30, 1997 ($7,250,000)

July 1, 1997 to Credit ($5,520,000)
Termination Date

9.8 INDEBTEDNESS. Not incur or permit to exist any Indebtedness
except (i) the Loans, (ii) Capitalized Lease Obligations not to exceed $750,000
in the aggregate at any time outstanding, (iii) current accounts payable arising
in the ordinary course of business, including accounts payable to Affiliates
relating solely to the Tax Sharing Agreement or the Management Agreement,
(iv) Redeemable Stock held by Management Stockholders (as defined in the
Stockholder Agreement) to the extent the Company is required to redeem such
Redeemable Stock pursuant to the Stockholder Agreement and provided that, at
such time as the Redeemable Stock is required to be redeemed, the Company will
report such Redeemable Stock as Indebtedness of the Company on its financial
statements, (v) other Indebtedness

<PAGE>

outstanding on the date hereof or hereafter incurred in connection with
Permitted Liens, (vi) Indebtedness created under the Management Notes and
(vii) $5,500,000 in the aggregate of Indebtedness owed by the Company to
certain management employees with respect to an aggregate $1,400,000 annual
payment in cash or life insurance premium equivalent commencing December 31,
1995 and continuing through December 31, 1999 as provided in the employment
agreements with such management employees.

9.9 WORKING CAPITAL. Not permit the Company's Working Capital to be
less than the stated amount for each corresponding period listed below,
calculated at the end of each month during such period:

DATE WORKING CAPITAL
Closing Date to March 31, 1996 ($8,000,000)

April 1, 1996 to June 30, 1996 ($8,000,000)

July 1, 1996 to September 30, ($6,000,000)
1996
October 1, 1996 to December 31, ($6,000,000)
1996

January 1, 1997 to June 30, 1997 ($5,000,000)

July 1, 1997 to Credit ($3,000,000)
Termination Date

9.10 CURRENT RATIO. Not permit the Current Ratio to be less than the
stated ratio for each corresponding period listed below, calculated at the end
of each month during such period:

DATE CURRENT RATIO
Closing Date to March 31, 1996 0.40:1

April 1, 1996 to June 30, 1996 0.40:1

July 1, 1996 to September 30, 0.40:1
1996
October 1, 1996 to December 31, 0.60:1
1996

January 1, 1997 to June 30, 1997 0.60:1

July 1, 1997 to Credit 0.80:1
Termination Date

9.11 CASH FLOW COVERAGE. Not permit the Cash Flow Coverage Ratio to
be less than 1.3:1 calculated as of the end of each month through the Credit
Termination Date measured over the immediately preceding twelve-month period
ending on such calculation date.

<PAGE>

9.12 DIVIDEND RESTRICTIONS. Not make any payment in cash, property or
other assets upon or in respect of any shares of any class of its capital stock
including, without limiting the foregoing, payments as dividends and payments
for the purpose of redeeming, purchasing or otherwise acquiring any shares of
any class of its capital stock, including in the term "stock" any warrant or
option or other right to purchase such stock, or making any other distribution
in respect as any such shares of stock or set aside any funds for any such
purpose; PROVIDED, HOWEVER, the Company may repurchase its capital stock held by
employees of the Company upon their retirement, termination, disability or death
so long as such repurchase does not violate any of the financial covenants
contained in SECTION 9 and could not reasonably be expected to result in a
Material Adverse Effect.

9.13 LIENS. Not create or permit to exist any Lien with respect to
any assets now owned or hereafter acquired except Permitted Liens.

9.14 GUARANTIES, LOANS, ADVANCES OR INVESTMENTS. Not become or be a
guarantor or surety of, or otherwise become or be responsible in any manner
(whether by agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to any undertaking of any other Person, or make or
permit to exist any loans or advances to, or investments in, any other Person,
except for (a) the endorsement, in the ordinary course of collection, of
instruments payable to it or to its order, (b) Eligible Short-Term Investments,
(c) guaranties of which the Bank is the beneficiary, (d) stock, obligations or
securities received in settlement of debts owing to the Company in the ordinary
course of business; (e) investments which are also Indebtedness permitted by
SECTION 9.8; (f) purchases or acquisitions permitted by SECTION 9.16; (g) loans,
advances, investments, guarantees or accommodation obligations not otherwise
permitted by this SECTION 9.14 in an aggregate outstanding principal amount not
to exceed $25,000; (h) if no Loans are outstanding, investments in municipal or
corporate bonds with a rating equal to "A" by Standard & Poor's or common stock
in any company traded on a national securities exchange or quoted on NASDAQ; (i)
a loan to Diamond Home Services, Inc. not to exceed $500,000, to be used as a
capital contribution to the Finance Company; (j) the loan evidenced by the
Special Purpose Note Agreement and the Special Purpose Note; (k) the loan
evidenced by the Working Capital Note Agreement or the Working Capital Note; or
(l) loans to Globe evidenced by a Globe Demand Note and not exceeding, in the
aggregate, the greater of (i) $5,000,000 or (ii) 50% of Excess Cash Flow;
PROVIDED, HOWEVER, that all Eligible Short-Term Investments held by or issued to
the Company shall be pledged to the Bank, in a manner satisfactory to the Bank,
as security for the Liabilities; and PROVIDED, FURTHER, HOWEVER, that in no
event shall the Company acquire pursuant to

<PAGE>

SECTION 9.14(H) hereof more than 5% of the outstanding common stock of any
company traded on a national securities exchange or quoted on NASDAQ.

9.15 CHANGE IN NATURE OF BUSINESS. Not make any material change in
the nature of its business carried on as of the date first stated above. For
purposes hereof, the existing business shall be characterized as the retail sale
and installation of residential home improvement materials, the retail sale and
installation of light commercial improvement materials and other housing
improvement services.

9.16 MERGERS, CONSOLIDATIONS, SALES. Not be a party to any merger,
consolidation or exchange of stock, or purchase or otherwise acquire all or
substantially all of the assets or stock of any class of, or any partnership or
joint venture interest in, any other Person, or sell, transfer, convey or lease
all or any substantial part of its assets, or sell or assign, with or without
recourse, any receivables (other than for collection of delinquent Accounts in
the ordinary course of business); PROVIDED, HOWEVER, that the Company may
undertake a stock exchange whereby the holders of all of the Company's
outstanding stock exchange such stock for stock of Diamond Home Services, Inc.
if, after such exchange, (i) Diamond Home Services, Inc. is the record and
beneficial owner of all outstanding stock of the Company, and (ii) each holder
of the outstanding stock of Diamond Home Services, Inc. owns such stock in the
same percentage of the total outstanding stock of Diamond Home Services, Inc. as
such holder held of the outstanding stock of the Company before such exchange.

9.17 CAPITAL EXPENDITURES. Not expend between the Closing Date and
Credit Termination Date (a) an aggregate amount in excess of $1,150,000 for the
purchase of the Company's principal place of business and chief executive
offices located at the address set forth on the signature page hereof or (b) an
aggregate amount for other capital expenditures, whether funded by Capital
Leases or otherwise, in excess of $1,000,000 per year.

9.18 EMPLOYEE BENEFIT PLANS. Not, and will not permit any ERISA
Affiliate, to the extent that such ERISA Affiliate's act or failure to act could
have a material adverse effect, to: (a) engage in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Internal Revenue Code
for which a statutory or class exemption is not available or a private exemption
has not been previously obtained from the DOL; (b) permit to exist any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the Internal Revenue Code), with respect to any Benefit Plan whether or
not waived; (c) fail to pay timely required contributions or annual installments
due with respect to any waived funding deficiency to any Benefit Plan; (d)
terminate any Benefit Plan which would result in any liability of the Company or
any ERISA Affiliate

<PAGE>

under Title IV of ERISA; (e) fail to make any contribution or payment to any
Multiemployer Plan which the Company or any ERISA Affiliate may be required
to make under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto; (f) amend a Benefit Plan resulting in an increase in
current liability for the plan year such that the Company or any ERISA
Affiliate is required to provide security to such Benefit Plan under Section
401(a)(29) of the Internal Revenue Code; or (g) fail, or be treated as having
failed under Section 412(m)(5) of the Internal Revenue Code, to pay any
required installment under Section 412 of the Internal Revenue Code on or
before the due date for such installment or other payment. The Company
shall, and shall cause each ERISA Affiliate to, establish, maintain and
operate all Plans to comply in all material respects with the provisions of
ERISA, the Internal Revenue Code, and all other applicable laws, and the
regulations and interpretations thereunder and the respective requirements of
the governing documents for such Plans.

9.19 USE OF PROCEEDS.

(a) Not use or permit the use of any proceeds of any Revolving Loan
other than for the Company's general corporate purposes, to support the
Company's working capital and for loans to Globe under Globe Demand Notes.

(b) Not use or permit the use of any proceeds of any Investment Loan
other than (i) for loans to Diamond Homes Services, Inc. not exceeding
$500,000 to fund a capital contribution to the Finance Company and (ii) as
a loan to the Finance Company pursuant to the Working Capital Note
Agreement.

(c) Not use or permit the use of any proceeds of any Finance Company
Loan other than as a loan to the Finance Company pursuant to the Special
Purpose Note Agreement.

(d) Not use or permit the use of any proceeds of any Loan other than
solely for the purposes specified in 815 ILCS 205/4; not use or permit the
direct or indirect use of any proceeds of or with respect to the Loans for
the purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying" (within the meaning of Regulation U) Margin Stock; and to the
extent, if any, that any of the Collateral is being acquired with Loan
proceeds, arrange for disbursement of Loan proceeds from the Bank directly
to the seller of such Collateral.

(e) Not use or permit the use of any proceeds of any Loan for the
repayment of principal or interest of any Management Note.

<PAGE>

9.20 TRANSACTIONS WITH AFFILIATES. Not enter into any transaction
with any Affiliate except (a) transactions in the ordinary course of business
and on terms and conditions at least as favorable to the Company as the terms
and conditions that would apply in a similar transaction with a Person who is
not an Affiliate, (b) the Tax Sharing Agreement, (c) the Management Agreement,
(d) an agreement with The Handy Craftsman, Inc. pursuant to which the Company
leases space and prepays payroll in an amount not exceeding $25,000 in the
aggregate, (e) the Working Capital Note Agreement and the Working Capital Note,
(f) the Securitization Documentation, (g) the Globe Demand Notes and (h) the
loan to Diamond Homes Services, Inc. to fund a capital contribution to the
Finance Company.

9.21 OTHER AGREEMENTS. Not enter into any agreement containing any
provision which would be violated or breached by the performance of its
obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith or which would violate or
breach any provision hereof or of any such instrument or document.

9.22 COMPLIANCE WITH APPLICABLE LAWS. Comply with the requirements of
all applicable laws, rules, regulations, and orders of all governmental
authorities (Federal, state, local or foreign and including, without limitation,
Environmental Laws), a breach of which could reasonably be expected to have a
Material Adverse Effect, except where the Company is contesting an alleged
breach in good faith and by proper proceedings and for which the Company is
maintaining adequate reserves in accordance with GAAP.

9.23 ENVIRONMENTAL COMPLIANCE.

(a) The Company shall not become subject to any Damages and Costs
arising out of or related to (i) the Release or threatened Release at any
location of any Contaminant into the environment, or any Remedial Action in
response thereto, or (ii) any violation of any Environmental, Health and Safety
Requirements of Law.

(b) The Company shall use its best efforts to conduct its business so
as to comply in all respects with all Requirements of Law and all restrictive
covenants, and shall obtain as needed all Permits necessary for its operation
and maintain such in good standing. In the event Contaminants are located in,
on, under or about the Property of the Company, the Company shall promptly
undertake Remedial Action with respect to such Contaminants satisfactory to the
Bank in compliance with Environmental, Health and Safety Requirements of Law;
PROVIDED, HOWEVER, that nothing contained in this SECTION 9.23 shall prevent the
Company from contesting, diligently and in good faith by appropriate legal
proceedings, any such law, regulation, interpretation thereof or application
thereof; PROVIDED, FURTHER,

<PAGE>

that the Company shall comply with the order of any Governmental Authority
relating to such laws unless the Company shall currently be prosecuting an
appeal or proceedings for review and shall have secured a stay of enforcement
or execution or other arrangement postponing enforcement or execution pending
such appeal or proceedings for review. If the Company shall (i) receive
notice that any violation of any Environmental, Health or Safety Requirements
of Law may have been committed or is about to be committed by the Company,
(ii) receive notice that any administrative or judicial complaint or order
has been filed or is about to be filed against the Company alleging
violations of any Environmental, Health or Safety Requirements of Law or
requiring the Company to take any action in connection with the release of
Contaminants into the environment or (iii) receive any notice from any
Governmental Authority or private party alleging that the Company may be
liable or responsible for Damages and Costs associated with a response to or
cleanup of a Release of a Contaminant, or (iv) be required to notify or
report to any Governmental Authority any release of a Contaminant, the
Company shall provide the Bank with a copy of such notice or report within 15
days of the Company's receipt thereof. Within 15 days of the Company having
learned of the enactment, promulgation or application of any Environmental,
Health or Safety Requirements of Law, including, without limitation, any
changes in or refusal to reissue existing permits, the Company shall provide
the Bank with notice thereof.

(c) At the request of the Bank, the Company shall, at the Company's
sole cost and expense, provide a written report of an environmental audit of
Property designated by the Bank (which shall not include any Property leased by
the Company) conducted by an environmental engineer reasonably acceptable to the
Bank and in content reasonably satisfactory to the Bank, which report must
comply with generally accepted standards, including, without limitation,
applicable ASTM standards, and which investigation must be consistent with good
commercial or customary practice and, without limitation, verify to the Bank's
reasonable satisfaction the compliance of the Company's Property and operations
with applicable Environmental, Health or Safety Requirements of Law and the
absence of Contaminants in containers (including underground storage tanks),
structures, soil, surface water, and groundwater on or under the Property. Any
instance of noncompliance identified in such written report shall be subject to
the requirements of SECTION 9.23. In the event that such written report
identifies any Contaminants, the Company shall, promptly undertake Remedial
Action satisfactory to the Bank in compliance with Environmental, Health and
Safety Requirements of Law.

9.24 SUBSIDIARIES. Not create or allow to exist any Subsidiaries.

9.25 STOCKHOLDER AGREEMENT. Not amend, modify or

<PAGE>

supplement the Stockholder Agreement without the prior written consent of the
Bank (which will not be unreasonably withheld or delayed), provided, however,
that amendments, modifications or supplements thereto that merely add
additional stockholders to the Stockholder Agreement do not require the
Bank's consent.

9.26 MANAGEMENT NOTES AND EMPLOYMENT AGREEMENTS.

(a) Not (i) amend, modify or supplement any Management Note,
(ii) consent to the transfer, assignment or other disposition of any Management
Note or (iii) voluntarily prepay any Management Note, without the prior written
consent of the Bank (which will not be unreasonably withheld or delayed); or

(b) Not amend, modify or supplement the Employment Agreements without
the prior written consent of the Bank (which will not be unreasonably withheld
or delayed); or

9.27 FISCAL YEAR. Not amend, change or modify the Company's fiscal
year.

9.28 SECURITIZATION DOCUMENTATION. After their execution and
delivery, not amend, change or modify any of the Securitization Documentation
without the prior written consent of the Bank (which will not be unreasonably
withheld or delayed).

9.29 SEARS LICENSING AGREEMENT. Enter into a license agreement (the
"LICENSE AGREEMENT") with Sears, Roebuck and Co., in form and substance
satisfactory to the Bank, no later than March 1, 1996.

9.30 OTHER DOCUMENTS. Not amend, change or modify either the Working
Capital Note Agreement, the Working Capital Note, the Tax Sharing Agreement or
the Management Agreement without the prior written consent of the Bank.

9.31 GLOBE DEMAND NOTES. Not advance funds under a Globe Demand Note
unless there is a minimum availability under the Revolving Loan Commitment of
$1,500,000. If any principal amount is outstanding under the Globe Demand Notes
and the availability under the Revolving Loan Commitment falls below $1,500,000,
then the Company will immediately demand (and receive) payment under the Globe
Demand Notes in an amount equal to the difference between $1,500,000 and the
availability under the Revolving Loan Commitment. The Company will not amend,
change or modify any Globe Demand Note without the prior written consent of the
Bank (which will not be unreasonably withheld or delayed).

<PAGE>

SECTION 10. COVENANTS; COLLATERAL.

10.1 DELIVERY OF DOCUMENTS AND INSTRUMENTS. Deliver to the Bank,
forthwith upon the Company's receipt, all Instruments (excluding notes issued by
employees of the Company to purchase capital stock of the Company), Documents
and certificates of title with respect to any Collateral, and will hold such
Instruments, Documents and certificates, pending such delivery, in trust for the
Bank, separate and distinct from any of the Company's other property; and
deliver to the Bank from time to time, forthwith upon the Bank's request, such
stock powers and similar documents, satisfactory in form and substance to the
Bank, with respect to the Collateral as the Bank may request.

10.2 LOCATION OF COLLATERAL.

(a) INVENTORY AND GOODS. Keep all its Inventory, to the extent there
is any, and other Goods, unless the Bank shall otherwise consent in writing, at
the premises listed on SCHEDULE 8.20 hereto; PROVIDED, HOWEVER, that upon the
Bank's request the Company's Inventory and other Goods shall be kept separate
from the Inventory and other Goods of those Persons (other than the Company)
using such premises and shall be clearly and conspicuously designated as being
the sole property of the Company (for example, by posting signs or by affixing
the Company's name on its Inventory and other Goods).

(b) RECORDS OF NONTANGIBLE COLLATERAL. Keep at the address so
indicated on SCHEDULE 8.20 hereto records concerning all Nontangible Collateral,
which records will be of such character as will enable the Bank or its designees
to determine at any time the status thereof, and the Company will not, unless
the Bank shall otherwise consent in writing, duplicate any such records at any
other address.

(c) COLLATERAL LOCATED AT HEADQUARTERS OF THE COMPANY. To the extent
that any of the Collateral is or becomes located at the headquarters of the
Company in Woodstock, Illinois and such premises becomes subject to lien or a
mortgage in favor of any Person other than the Company (other than Permitted
Liens), provide the Bank, within 45 days of the Closing Date, with a Waiver
Agreement substantially in the form of EXHIBIT F hereto executed by the

<PAGE>

owner and/or mortgagee of such premises, unless waived in writing by the
Bank. If the Company subleases its headquarters (or any portion thereof), it
will provide the Bank, within 10 days of subletting, with a replacement
Waiver Agreement substantially in the form of EXHIBIT F hereto executed by
the owner and/or mortgagee of such premises, unless waived in writing by the
Bank.

10.3 MAINTENANCE OF COLLATERAL. At all times keep all of its
Inventory, Equipment and other Goods (as applicable) in good repair and
condition and in good working or running order, excluding ordinary wear and
tear.

10.4 NOTATION OF SECURITY INTEREST. Upon the Bank's request,
(a) stamp on its records concerning the Collateral (and/or enter in its computer
records concerning the Collateral) and add on all Chattel Paper constituting a
portion of the Collateral a notation, in form and substance satisfactory to the
Bank, of the Bank's security interest hereunder and (b) cause to be noted on the
applicable certificate, in the event any of its Equipment is covered by a
certificate of title, the Bank's security interest in the Equipment covered
thereby.

10.5 TRANSFERS TO THIRD PARTIES. Except for the sale or lease of
Inventory in the ordinary course of its business, not sell, transfer, lease,
assign, license, sublicense, abandon or otherwise dispose of, or create or
permit to exist any Lien on, any Collateral, including the Property, to or in
favor of anyone other than the Bank and other than Permitted Liens; PROVIDED
that, so long as no Event of Default or Unmatured Event of Default shall have
occurred and be continuing, the Company may, in the ordinary course of its
business, dispose of Equipment having a fair market value at the time of
disposition not in excess of $50,000 in the aggregate for all such dispositions
in any of the Company's fiscal years.

10.6 DEFEND TITLE TO COLLATERAL. Defend and warrant the Company's
title to, and the quiet and peaceful possession of, the Collateral against all
Persons and against all claims and demands whatsoever to the extent commercially
reasonable to do so.

10.7 FURTHER ASSURANCES. Execute such Uniform Commercial Code
financing statements and other documents and pay all costs for filing or
recording the same or this Agreement in all public offices deemed reasonably
necessary or appropriate by the Bank, and do such further acts and things, and
execute and deliver to the Bank such additional conveyances, assignments,
agreements and instruments as the Bank may reasonably request in order to
(i) establish and maintain a valid, perfected security interest in the
Collateral in favor of the Bank to secure performance and payment of the
Liabilities, (ii) carry out the purposes of this Agreement or any Related
Document, or (iii) better assure and confirm unto the Bank its rights, powers
and remedies hereunder or under any Related Document.

<PAGE>

10.8 PAYMENT OF ACCOUNTS. Not, as a policy matter, permit payments to
be made on Accounts or with respect to Inventory, except payments delivered by
or for the Company to the Bank or to the Lock Box Accounts.

SECTION 11. CONDITIONS OF LENDING.

The Bank's obligation to make any Loan is subject to the following
conditions precedent:

11.1 INITIAL REVOLVING LOANS; INITIAL INVESTMENT LOANS. The Bank's
obligation to make any initial Revolving Loan or any initial Investment Loan is,
in addition to the conditions precedent specified in SECTION 11.3, subject to
the satisfaction of each of the following conditions precedent:

(a) FEES AND EXPENSES. The Company shall have paid all fees owed to
the Bank and/or Affiliates of the Bank and reimbursed the Bank for all
expenses due and payable hereunder on or before the date of such Loans
including, without limitation, the Bank's reasonable counsel fees provided
for in SECTION 13.5 to the extent such counsel shall have requested payment
of such fees. Additionally, the Company shall have paid to the Bank all
other fees owed to the Bank to the extent such fees are due and payable.

(b) DOCUMENTS. The Bank shall have received all of the following,
each duly executed and delivered and dated the Closing Date or such earlier
date as shall be reasonably satisfactory to the Bank, in form and substance
satisfactory to the Bank:

(1) RELATED DOCUMENTS. This Agreement, the Revolving Note, the
Investment Loan Note, the Trademark Security Agreement and such other
Related Documents as the Bank may require. This Agreement and/or
financing statements shall have been filed in all jurisdictions that
the Bank deems necessary or advisable.

(2) RESOLUTIONS. Certified copies of resolutions of the
Company's Board of Directors and, where required, shareholders,
authorizing or ratifying the execution, delivery and performance of
this Agreement, the Related Documents, the Working Capital Note
Agreement and any other documents provided for herein or therein to be
executed by the Company.

(3) CONSENTS. Certified copies of all documents evidencing any
necessary corporate action, consents and governmental approvals, if
any, with respect to this Agreement, the Related Documents, the
Working Capital

<PAGE>

Note Agreement and any other documents provided for
herein or therein to be executed by the Company.

(4) INCUMBENCY AND SIGNATURES. A certificate of the Secretary
of the Company certifying the names of the officer or officers of the
Company authorized to sign this Agreement, the Working Capital Note
Agreement and the Related Documents together with a sample of the true
signature of each such officer. The Bank may conclusively rely on
each such certificate until formally advised by a like certificate of
any changes therein.

(5) FINANCIAL CONDITION CERTIFICATE. A Financial Condition
Certificate substantially in the form of EXHIBIT G.

(6) OPINIONS OF COUNSEL. An opinion of each of the Company's
and the Finance Company's legal counsel, covering the matters set
forth on EXHIBIT H.

(7) CONSTITUTIVE DOCUMENTS. Copies of the certificate of
incorporation and by-laws of the Company and Finance Company certified
by the Secretary of the Company or the Finance Company, as applicable.

(8) FORMS UCC-1 AND UCC-2; TERMINATION STATEMENTS. If requested
by the Bank, forms UCC-1 and UCC-2 from the Company covering the
Collateral, together with such termination statements and other
documents as the Bank deems necessary or appropriate, shall have been
delivered for filing in all jurisdictions that the Bank deems
necessary or advisable.

(9) INSURANCE CERTIFICATES. Certificates from the Company's
insurance carriers evidencing that all required insurance coverage is
in effect, each designating the Bank as loss payee or additional
insured thereunder.

(10) FINANCE COMPANY DOCUMENTS. The Working Capital Note
Agreement and the Working Capital Note.

(11) OTHER. Such other documents as the Bank may reasonably
request.

11.2 INITIAL FINANCE COMPANY LOANS. The Bank's obligation to make any
initial Finance Company Loan is, in addition to the conditions precedent
specified in SECTIONS 11.1 and 11.3, subject to the Bank receiving all of the
following, each duly executed and delivered and dated such date as is

<PAGE>

reasonably satisfactory to the Bank, in form and substance satisfactory to
the Bank:

(a) SECURITIZATION DOCUMENTATION. The Special Purpose Note
Agreement, the Special Purpose Note and the other Securitization
Documentation as the Bank may require.

(b) RESOLUTIONS. Certified copies of resolutions of the Board of
Directors and where required, shareholders, of the Company the Finance
Company, authorizing or ratifying the execution, delivery and performance
of the Securitization Documentation and any other documents provided for
therein.

(c) CONSENTS. Certified copies of all documents evidencing any
necessary corporate action, consents and governmental approvals, if any,
with respect to the Securitization Documentation, and any other documents
provided therein.

(d) OPINION OF COUNSEL. Opinion of the Company's and the Finance
Company's legal counsel, covering such matters as the Bank and its counsel
may reasonably require.

(e) OTHER. Such other documents as the Bank may reasonably require.

11.3 ALL LOANS. The Bank's obligation to make any initial Loans, and
each subsequent Loan is subject to the following conditions precedent that:

(a) NO DEFAULT, ETC. (i) No Event of Default or Unmatured Event of
Default shall have occurred and be continuing or will result from the
making of such Loan, (ii) the Company's warranties contained in SECTION 6
(except as may be updated in accordance with SECTION 9.1(H)) shall be true
and correct as of the date of such requested Loan with the same effect as
though made on the date thereof, (iii) the aggregate principal amount of
the Loans (after giving effect to such Loan) shall not exceed the limit
applicable to such Loan and (iv) there shall have been no circumstances or
notice of circumstances which, in the aggregate, have or could reasonably
be expected to have a Material Adverse Effect since the date of the
previous Loan made hereunder or notice of any prospective Material Adverse
Effect with respect to any insurance maintained by the Company.

(b) LITIGATION. (i) The Company shall have disclosed in writing to
the Bank all existing or threatened claims, litigation (including, without
limitation, derivative actions), arbitration proceedings or governmental
proceedings that in the aggregate claim monetary damages in

<PAGE>

excess of $100,000 in any single proceeding or (b) $500,000 in the
aggregate for all such proceedings (ii) the Company shall have disclosed
any and all material developments that have occurred with respect to any
previously disclosed claims, litigation (including, without limitation,
derivative actions), arbitration proceedings or governmental proceedings
and (iii) the Bank shall not have reasonably determined that any existing
or threatened claims, litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings (or any
material development in connection therewith) could reasonably be expected
to have a Material Adverse Effect.

(c) NO INVESTMENTS. The Bank shall have received evidence
satisfactory in form and substance to the Bank that the Company has
liquidated its position or disposed of any investments permitted solely by
SECTION 9.14(H) hereof.

(d) ACCESS TO COMMERCIAL PAPER MARKET. If the subsequent Loan is a
Finance Company Loan, no circumstances shall exist which would prevent the
issuance of asset-backed commercial paper under the Securitization
Documentation, and no previously issued asset-backed commercial paper under
the Securitization Documentation is in default.

(e) OTHER. The Bank shall have received such other documents as the
Bank may reasonably request in support of such requested Loan.

SECTION 12. EVENTS OF DEFAULT AND THEIR EFFECT

12.1 EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:

(a) NONPAYMENT OF LOANS AND REIMBURSEMENT OBLIGATIONS. Default in
the payment when due of the principal of or interest on any Loan or the
payment when due of any fees or any other amounts payable by the Company
hereunder.

(b) NONPAYMENT OF OTHER INDEBTEDNESS. Default in the payment when
due (subject to any applicable grace period), whether by acceleration or
otherwise, of any other Indebtedness in excess of $150,000, or guaranteed
by, the Company or default in the performance or observance of any
obligation or condition with respect to any such other Indebtedness if the
effect of such default is to accelerate the maturity of any such
Indebtedness or cause any of such Indebtedness to be prepaid, purchased or
redeemed or to permit the holder or holders thereof, or any trustee or
agent for such holders, to cause such Indebtedness to become

<PAGE>

due and payable prior to its expressed maturity or to cause such
Indebtedness to be prepaid, purchased or redeemed.

(c) OTHER MATERIAL OBLIGATIONS. Default in the payment when due, or
in the performance or observance of, any material obligation of, or
condition agreed to by, the Company with respect to any material purchase
or lease of goods or services if such default could reasonably be expected
to have a Material Adverse Effect (except only to the extent that the
Company is contesting the existence of any such default in good faith and
by appropriate proceedings).

(d) BANKRUPTCY OR INSOLVENCY. The Company becomes insolvent or
generally fails to pay, or admits in writing its inability to pay, debts as
they become due; or the Company applies for, consents to, or acquiesces in
the appointment of, a trustee, receiver or other custodian for the Company
or any property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence,
a trustee, receiver or other custodian is appointed for the Company or for
a substantial part of the property of any thereof and is not discharged
within 60 days; or any bankruptcy, reorganization, debt arrangement, or
other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is commenced in respect of the
Company and if such case or proceeding is not commenced by the Company it
is consented to or acquiesced in by the Company or remains for 60 days
undismissed; or the Company takes any corporate action to authorize, or in
furtherance of, any of the foregoing.

(e) SPECIFIED NONCOMPLIANCE WITH THIS AGREEMENT. Failure by the
Company to comply with or to perform under SECTIONS 9.6 through and
including 9.21 and SECTION 9.26 hereunder.

(f) OTHER NONCOMPLIANCE WITH THIS AGREEMENT. Failure by the Company
to comply with or to perform any provision of this Agreement (and not
constituting an Event of Default under any of the other provisions of this
SECTION 12) and continuance of such failure for 20 days after notice
thereof to the Company from the Bank or the holder of any Note.

(g) REPRESENTATIONS AND WARRANTIES. Any representation or warranty
made by the Company herein or in any Related Document is breached or is
false or misleading in any material respect, or any schedule, certificate,
financial statement, report, notice, or other writing furnished by the
Company to the Bank is false or misleading in any material respect on the
date as of which the facts therein set forth are stated or certified.

<PAGE>

(h) EMPLOYEE BENEFIT PLANS. (i) Institution by the PBGC, the Company
or any other Person of steps to terminate a Plan or to reorganize, withdraw
from or terminate a Multiemployer Plan if as a result of such
reorganization, withdrawal or termination, the Company could be required to
make a contribution to such Plan, Multiemployer Plan, or could incur a
liability or obligation to such Plan, Multiemployer Plan, the PBGC or any
other Person, in excess of $250,000, or (ii) a contribution failure occurs
with respect to any Plan sufficient to give rise to a lien under Section
302(f) of ERISA.

(i) LIENS; RELATED DOCUMENTS. The Company shall fail to comply with
or to perform any provision of any of the Related Documents; or any of the
Related Documents or any Lien granted by the Company to the Bank in this
Agreement shall fail to remain in full force and effect without the Bank's
consent or due to a reason other than negligence on the part of the Bank;
or any action shall be taken to discontinue any of the Related Documents or
any Lien granted by the Company to the Bank in this Agreement or to assert
the invalidity of any thereof.

(j) SEARS LICENSING AGREEMENT. There shall have been a cancellation
or non-renewal of the License Agreement.

(k) JUDGMENTS. There shall be entered against the Company one or
more judgments or decrees in excess of $100,000 for any one judgement or
decrees or $500,000 in the aggregate for all such judgments or decrees at
any one time outstanding for the Company, excluding those judgments or
decrees (i) that shall have been stayed, vacated or bonded, (ii) that shall
have been outstanding less than 30 days from the entry thereof, (iii) for
and to the extent to which the Company as applicable, is insured and with
respect to which the insurer specifically has assumed responsibility in
writing or (iv) for and to the extent to which the Company is otherwise
indemnified if the terms of such indemnification are satisfactory to the
Bank.

(l) CHANGE IN CONTROL. The present management group of the Company
and Globe cease to own, directly or indirectly, in the aggregate at least
fifty-five percent (55%) of the voting common stock of the Company or the
members of the Board of Directors of the Company designated by either the
present management group of the Company or Globe cease to constitute a
majority of the Board of Directors of the Company; PROVIDED, HOWEVER, that
any of the foregoing events shall not constitute an Event of Default
unless, in the Bank's reasonable discretion, such event results in a
Material Adverse Effect.

<PAGE>

(m) LOCK BOX ACCOUNTS. Sears Roebuck and Co. shall have ceased
making payments due the Company to the Cash Collateral Account via ACH
Credit or via Electric Funds Transfer.

(n) FINANCE COMPANY. Diamond Home Services, Inc. shall fail to
directly control 100% of the Finance Company.

(o) SECURITIZATION DOCUMENTATION. There shall have been a default or
an event of default, as defined in and under any of the Securitization
Documentation, whether or not such default or event of default has been
waived.

(p) FINANCE COMPANY DOCUMENTS. There shall have been a default or an
event of default, as defined in and under the Working Capital Note
Agreement, whether or not such default or event of default has been waived.

(q) BANKRUPTCY OR INSOLVENCY OF THE FINANCE COMPANY. The Finance
Company becomes insolvent or generally fails to pay, or admits in writing
its inability to pay, debts as they become due; or the Finance Company
applies for, consents to, or acquiesces in the appointment of, a trustee,
receiver or other custodian for the Finance Company or any property
thereof, or makes a general assignment for the benefit of creditors; or, in
the absence of such application, consent or acquiescence, a trustee,
receiver or other custodian is appointed for the Finance Company or for a
substantial part of the property of any thereof and is not discharged
within 60 days; or any bankruptcy, reorganization, debt arrangement, or
other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is commenced in respect of the
Finance Company and if such case or proceeding is not commenced by the
Finance Company it is consented to or acquiesced in by the Finance Company
or remains for 60 days undismissed; or the Finance Company takes any
corporate action to authorize, or in furtherance of, any of the foregoing.

12.2 EFFECT OF EVENT OF DEFAULT.

12.2.1 ACCELERATION.

(a) If any Event of Default described in SECTION 12.1(D) shall
occur, the Credit Commitment (if it has not theretofore terminated) shall
immediately terminate and all Loans, Notes and all other Liabilities shall
become immediately due and payable, all without presentment, demand or
notice of any kind.

(b) If any other Event of Default shall occur, the Bank may declare
the Credit Commitment (if it has not

<PAGE>

theretofore terminated) to be terminated and all Loans, Notes and all other
Liabilities to be due and payable, whereupon the Credit Commitment shall
immediately terminate and all Loans, Notes and all other Liabilities shall
become immediately due and payable, all without presentment, demand or
notice of any kind.

12.2.2 NONTANGIBLE COLLATERAL. Upon the occurrence and during the
continuance of an Event of Default or an Unmatured Event of Default, except for
Unmatured Events of Default relating to defaults arising under SECTIONS 12.1(F)
and 12.1(K), the Bank shall have the right, in its sole and absolute discretion,
without notice thereof to the Company: (i) to notify any or all obligors,
including without limitation Account Debtors, that the Nontangible Collateral
has been assigned to the Bank and that the Bank has a security interest therein;
(ii) to direct such obligors, including without limitation Account Debtors, to
make all payments due or to become due from them to the Company upon the
Nontangible Collateral directly to the Bank; and (iii) to enforce payment of and
collect, by legal proceedings or otherwise, the Nontangible Collateral in the
name of the Bank and the Company. Furthermore, the Company agrees, promptly
upon the Bank's request after the occurrence of any Event of Default or
Unmatured Event of Default, except for Unmatured Events of Default relating to
defaults arising under SECTIONS 12.1(F) and 12.1(K), and during the continuation
thereof, to notify at its own expense all obligors to make payment to the Bank
of any amounts due or to become due to the Company with respect to the
Nontangible Collateral. The Bank shall have the right, after the occurrence of
any Event of Default or Unmatured Event of Default, except for Unmatured Events
of Default relating to defaults arising under SECTIONS 12.1(F) and 12.1(K), and
during the continuation thereof, without notice, to take control, in any manner,
of any item of payment or proceeds referred to in SECTION 12.2.6(A).

12.2.3 NOTICE. The Company hereby expressly waives, to the fullest
extent permitted by applicable law, any and all notices, advertisements,
hearings or process of law in connection with the Bank's exercise of any of its
rights and remedies upon an Event of Default. If any notification of intended
disposition of any of the Collateral is required by law, such notification, if
mailed, shall be deemed reasonably and properly given if mailed at least ten
(10) days before disposition, postage prepaid, and addressed to the Company
either at its address shown below or at any other address of the Company
appearing on the Bank's records.

12.2.4 APPLICATION OF PROCEEDS. Any proceeds of any disposition by
the Bank of any of the Collateral may be applied by the Bank to the payment of
expenses in connection with the Collateral, including reasonable attorneys'
fees, legal expenses, and expenses of any repairs to any realty or other
property to

<PAGE>

which any Collateral may be affixed or be a part, and any balance of
such proceeds may be applied by the Bank toward the payment of such of the
Liabilities, and in such order of application, as the Bank, in its sole
discretion, may from time to time elect. Any excess proceeds remaining after
payment in full of the Liabilities shall be returned to the Company.

12.2.5 POSSESSION; COLLECTION; SALE.

(a) Without limiting any other provision of this Agreement, upon
the occurrence and during the continuation of an Event of Default, the Bank
(i) may enter upon any premises where the Collateral or any part thereof may be,
and may take possession of all or any part of the Collateral; (ii) may, without
being responsible for loss or damage, except for damage caused by the Bank's
gross negligence or willful misconduct, hold, store, keep idle, use, lease,
operate or otherwise use or permit the use of the same or any part thereof for
such time and upon such terms as the Bank may deem to be commercially
reasonable; (iii) may sell or dispose of all or any part of the Collateral other
than the Property free from any and all claims of the Company or of any other
Person claiming by, through, or under the Company, at law or in equity, at one
or more public or private sales in such place or places, at such time or times,
and upon such terms as the Bank may fix, with or without advertisement of any
such sale or other disposition; and (iv) may demand, collect and retain, for
application against the Liabilities all hire, earnings, and all other sums due
and to become due in respect of the Collateral from any Person whomsoever. The
Bank shall be responsible to account only for those net earnings (if any) which
arise from such use or sale after the Bank charges against all receipts from
such use or sale, by court proceedings or pursuant to CLAUSE (III) of this
SECTION 12.2.5(A) or otherwise, all costs and expenses of, and damages or losses
by reason of, such use or sale.

(b) The Company agrees that in any sale of any of the Collateral
other than the Property the Bank is authorized to comply with any limitation or
restriction in connection with such sale as counsel may advise the Bank is
necessary to avoid any violation of applicable law (including, without
limitation, compliance with such procedures as may restrict the number of
prospective bidders or purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to Persons who will represent and agree that they are purchasing
for their own account or investment and not with a view to the distribution or
resale of such Collateral), or to obtain any required approval of the sale or of
the purchaser by any governmental or regulatory authority or official, and the
Company further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Bank be liable or accountable to the Company for

<PAGE>

any discount allowed by reason of the fact that such Collateral was sold in
compliance with any such limitation or restriction.

12.2.6 ENDORSEMENT BY BANK; SETOFF. In addition to the Bank's rights
with respect to the Lock Box Accounts, the Company agrees that, if at any time
any Event of Default or Unmatured Event of Default except Unmatured Events of
Default relating to defaults arising under SECTIONS 12.1(F) and 12.1(K), shall
have occurred and be continuing:

(a) The Bank or the holder of any Note, in its sole discretion, may
take control of and is authorized to endorse the Company's name to any item
of payment for or proceeds of Collateral, and apply to the payment of the
Liabilities any and all balances, credits, deposits, accounts or moneys of
the Company then or thereafter with the Bank or such holder; and

(b) Without limitation of SECTION 12.2.6(A), The Bank is hereby
authorized, without notice to the Company, (i) in the case of an Event of
Default, to set off against and to appropriate and apply to the payment of
the Liabilities (whether matured or unmatured, fixed or contingent or
liquidated or unliquidated) any and all amounts which the Bank is obligated
to pay over to the Company (whether matured or unmatured, and, in the case
of deposits, whether general or special, time or demand and however
evidenced) and (ii) pending any such action, to the extent necessary, to
hold such amounts as Collateral to secure such Liabilities and to dishonor
any and all checks and other items drawn against any deposits so held as
the Bank in its sole discretion may elect.

SECTION 13. GENERAL.

13.1 WAIVER; AMENDMENTS, MARSHALLING.

(a) No delay on the part of the Bank or the holder of any Note in
the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by either of them of any right, power
or remedy preclude other or further exercise thereof, or the exercise of any
other right, power or remedy.

(b) No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or any Related Document shall in any
event be effective unless the same shall be in writing and signed and delivered
by the Bank, and then any such amendment, modification, waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.

<PAGE>

(c) The Bank, from time to time, whether before or after any of the
Liabilities shall become due and payable, without notice to the Company, may
take any or all of the following actions: (i) retain or obtain a Lien on any
property, in addition to the Collateral, to secure payment and performance of
any of the Liabilities, (ii) retain or obtain the primary or secondary liability
of any Person, in addition to the Company, with respect to any of the
Liabilities, (iii) extend or renew for any period (whether or not longer than
the original period) any of the Liabilities or release or compromise any
obligation of any nature of any Person with respect hereto or thereto,
(iv) release its Lien on, or surrender, release or permit any substitution or
exchange for all or any part of any property, securing payment and performance
of any of the Liabilities, or compromise or extend or renew for any period
(whether or not longer than the original period) or release, compromise, alter
or exchange any obligations of any nature of any Person with respect to any such
property, and (v) resort to the Collateral for payment of any of the Liabilities
regardless of whether it (A) shall have resorted to any other property securing
payment and performance of the Liabilities or (B) shall have proceeded against
any Person primarily or secondarily liable on any of the Liabilities (all of the
actions referred to in preceding clauses (A) and (B) being hereby expressly
waived by the Company).

(d) No release of the security interest in the Collateral or any
part thereof granted to the Bank in SECTION 7 of this Agreement shall in any way
alter, vary or diminish the force, effect or security interest created by this
Agreement against the balance of the Collateral.

13.2 NOTICES. Except as otherwise provided in SECTION 2.2, all
notices hereunder shall be in writing. Notices given by mail shall be deemed to
have been given three (3) Business Days after the date sent if sent by
registered or certified mail, postage prepaid, and:

(a) IF TO THE COMPANY, addressed to the Company at its address
shown below its signature hereto, with a copy to Ann Crowley Patterson,
Esq. at 500 North Western Avenue, Suite 212, Lake Forest, Illinois 60045;
or

(b) IF TO THE BANK, addressed to the Bank at the address shown
below its signature hereto;

or in the case of each party, such other address as such party, by written
notice received by the other party to this Agreement, may have designated as its
address for notices. Notices given by facsimile shall be deemed to have been
given when sent. Notices given by personal delivery shall be deemed to have
been given when delivered. The Bank shall be entitled to rely upon all
telephonic notices given pursuant to SECTION 2.2 and the Company

<PAGE>

shall hold the Bank harmless from any loss, cost or expense ensuing from any
such reliance.

13.3 COMPUTATIONS. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for
purposes of this Agreement such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP. In the event that any change in GAAP at any time or
from time to time after the Closing Date shall, in the opinion of the Bank in
its sole discretion, affect the manner of preparation of the financial
statements or other financial information to be delivered by the Company
pursuant to SECTION 9.1 or calculations made in connection with the definitions,
financial covenants or other provisions of this Agreement, the Company and the
Bank shall promptly amend the reporting requirements, financial covenants,
definitions and other provisions required by such change in GAAP. Any such
amendments agreed to by the Company and the Bank pursuant to this SECTION 13.3
shall constitute amendments to this Agreement.

13.4 REGULATION U. The Bank represents that it, in good faith, is
not relying either directly or indirectly upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.

13.5 COSTS, EXPENSES AND TAXES.

(a) The Company agrees to pay on demand all of the Bank's
reasonable out-of-pocket costs and expenses (including the reasonable fees and
out-of-pocket expenses of the Bank's counsel and of local counsel, if any, who
may be retained by said counsel) in connection with the preparation, execution,
delivery and administration of this Agreement, the Related Documents and all
other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith (including, without limitation,
all amendments, supplements and waivers executed and delivered pursuant hereto
or in connection herewith). The Company further agrees that the Bank, in its
sole discretion, may deduct all such unpaid amounts from any amount received by
the Bank for payment on the Liabilities or from the aggregate proceeds of the
Loans.

(b) The Company agrees to pay on demand all of the reasonable costs
and expenses which the Bank incurs in any manner or way with respect to the
following if at any time after the date of this Agreement the Bank: (i) employs
counsel for advice or other representation (A) with respect to the amendment or
enforcement of this Agreement or the Related Documents, or with respect to the
Company or any Collateral securing the Liabilities hereunder, or (B) to
represent the Bank in any litigation, contest, dispute, suit or proceeding or to
commence, defend or

<PAGE>

intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit or proceeding (whether instituted by the Bank, the
Company, any guarantor or any other Person) in any way or respect relating to
this Agreement, the Related Documents, the Company's affairs or any
Collateral, including but not limited to any suit to foreclose a Lien on any
Collateral, and any probate or bankruptcy proceeding; (ii) takes any action
to protect, collect, sell, liquidate or otherwise dispose of any Collateral;
and/or (iii) seeks to enforce or enforces any of the Bank's rights and
remedies with respect to the Company, any Collateral or any guarantor.
Without limiting the generality of the foregoing, such expenses, costs,
charges and fees include: reasonable fees, costs and expenses of attorneys,
accountants and consultants; court costs and expenses; court reporter fees,
costs and expenses; long distance telephone charges; telegram and telecopier
charges; and expenses for travel, lodging and food.

(c) The Company further agrees to pay, and to save the Bank
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Agreement, the Related
Documents, the borrowings hereunder, the issuance of the Notes or of any other
instruments or documents provided for herein or recorded or to be recorded or
delivered or to be delivered hereunder or in connection herewith.

(d) The Company further agrees to pay to the Bank any and all
reasonable fees, costs and expenses which the Bank incurs in connection with the
opening and maintaining of the Lock Box Accounts or other similar payment
collection mechanisms established for the Company and depositing for collection
any check or item of payment received by and/or delivered to any Collecting
Agent or the Bank on account of the Liabilities. The Company shall reimburse
the Bank for any amounts paid to any Collecting Agent arising out of any
required indemnification by the Bank of such Collecting Agent in the operation
of a Lock Box Account.

(e) All of the Company's obligations provided for in SECTION 13.13
and this SECTION 13.5 shall be Liabilities, and shall survive repayment of the
Loans, cancellation of the Notes, or any termination of this Agreement or any
Related Document.

(f) In connection with the Bank's right to inspect the Company's
books and records pursuant to SECTION 9.3 of this Agreement, the Company further
agrees to pay to the Bank any and all reasonable fees, costs and expenses which
the Bank incurs in examining the Company's books and records in an amount equal
to $300 per day for each person employed to perform such examination.

13.6 INDEMNIFICATION. In consideration of the Bank's execution and
delivery of this Agreement and the Bank's agreement

<PAGE>

to extend the Credit Commitment, the Company hereby agrees to indemnify,
exonerate and hold the Bank and each of its officers, directors, employees
and agents (herein collectively called the "BANK PARTIES" and individually
called a "BANK PARTY") free and harmless from and against any and all
actions, causes of action, suits, losses, costs (including, without
limitation, all documentary or other stamp taxes or duties), liabilities and
damages, and expenses in connection therewith (irrespective of whether such
Bank Party is a party to the action for which indemnification hereunder is
sought) (the "INDEMNIFIED LIABILITIES"), including, without limitation,
reasonable attorneys' fees and disbursements, incurred by the Bank Parties or
any of them as a result of, or arising out of, or relating to:

(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan;

(b) the execution, delivery, performance, administration or
enforcement of this Agreement and the Related Documents in accordance with
their respective terms by any of the Bank Parties;

(c) the presence on or under the Property of any Hazardous Material
or underground storage tank, or any releases or discharges of any Hazardous
Material, on, under or from the Property (including residual contamination
thereon or thereunder), or affecting natural resources; or the performance
of any activity undertaken on or off the Property or relating to the
generation, use, handling, treatment, removal, storage, decontamination,
clean-up, transport or disposal of any Hazardous Material at any time
located on or under the Property, irrespective whether (i) the Company or
any of its employees, agents, contractors or subcontractors, (ii) any
predecessor in title, or any employees, agents, contractors or
subcontractors of the predecessor in title, or (iii) any third Persons
occupying or present on the Property who engaged in such activity prior to,
during or subsequent to the term of this Agreement or whether such
activities were or will be taken in accordance with applicable laws,
regulations, codes and ordinances; or

(d) any misrepresentation or breach of any warranty or covenant
herein;

except for any such Indemnified Liabilities arising solely on account of such
Bank Party's gross negligence or willful misconduct. If and to the extent that
the foregoing agreements described in this SECTION 13.6 may be unenforceable for
any reason, the Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable

<PAGE>

law. All of the Company's obligations under this SECTION 13.6 shall survive
repayment of the Loans, cancellation of the Notes, or any termination of this
Agreement or any Related Document.

13.7 CAPTIONS AND REFERENCES. The recitals to this Agreement
(except for definitions) and the section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.

13.8 REFERENCES TO SUBSIDIARIES. The provisions of this Agreement
relating to Subsidiaries shall apply only during such times as the Company has
one or more Subsidiaries.

13.9 COUNTERPARTS. This Agreement and any amendment or supplement
hereto or any waiver granted in connection herewith may be executed in any
number of counterparts and by the different parties on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.

13.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Company, the Bank and their respective successors and assigns, and shall
inure to the benefit of the Company, the Bank and the Bank's successors and
assigns. The Company shall have no right to assign its rights or delegate its
duties under this Agreement.

13.11 PRIOR AGREEMENTS. The terms and conditions set forth in this
Agreement shall supersede all prior agreements, discussions, correspondence,
memoranda and understandings (whether written or oral) of the Company and the
Bank concerning or relating to the subject matter of this Agreement.

13.12 ASSIGNMENTS; PARTICIPATIONS.

(a) The Bank shall have the right to assign to one or more banks or
other financial institutions all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of the
Credit Commitment, the Loans, and the Notes) and the Related Documents. Upon
any such assignment, (i) the assignee shall become a party hereto and, to the
extent of such assignment, have all rights and obligations of the Bank hereunder
and under the Related Documents and (ii) the Bank shall, to the extent of such
assignment, relinquish its rights and be released from its obligations hereunder
and under the Related Documents. The Company hereby agrees to execute and
deliver such documents, and to take such other actions, as the Bank may
reasonably request to accomplish the foregoing.

(b) In addition to the assignments permitted in CLAUSE (A) of this
SECTION 13.12, the Bank and any assignee

<PAGE>

pursuant to CLAUSE (A) above shall have the right to grant participations to
one or more banks or other financial institutions in or to any Loan hereunder
(and the Related Documents) and the Notes held by the Bank or such assignee
without notice to or consent from the Company. No holder of a participation
in all or any part of the Loans (and the Related Documents) or the Notes
shall have any rights under this Agreement; PROVIDED, HOWEVER, that, to the
extent permitted by applicable law, each holder of a participation shall have
the same rights as the Bank under SECTION 12.2.6.

(c) The Company hereby consents to the disclosure of any
information obtained in connection herewith (i) by the Bank, to any bank or
other financial institution which is an assignee or potential assignee pursuant
to CLAUSE (A) above, and (ii) by the bank and any assignee pursuant to
CLAUSE (A) above, to any bank or other financial institution which is a
participant or potential participant pursuant to CLAUSE (B) above, it being
understood that the Bank and each assignee shall advise any such bank or other
financial institution of its obligation to keep confidential any nonpublic
information disclosed to it pursuant to this SECTION 13.12. The Bank shall
advise the Company of each bank or other financial institution which becomes an
assignee pursuant to CLAUSE (A) above, and the Bank and each assignee, as
applicable, shall advise the Company of each bank or other financial institution
which becomes a participant pursuant to CLAUSE (B) above.

13.13 BANK MAY PERFORM. The Bank may from time to time, at its
option, perform any of the Company's agreements hereunder which the Company
shall fail to perform and take any other action which the Bank deems reasonably
necessary for the maintenance or preservation of any of the Collateral or its
interest therein, without waiving or releasing any of the Company's obligations
or any Event of Default. The Company agrees to reimburse the Bank forthwith for
all of the Bank's expenses in connection with the foregoing together with
interest thereon at a rate per annum equal to the Base Rate from time to time in
effect plus 4.0% from the date incurred until reimbursed by the Company.

13.14 NO LIMITATION ON OBLIGATIONS AND RIGHTS. All of the Company's
obligations and all of the Bank's rights, powers and remedies expressed herein
are in addition to all other obligations, rights, powers and remedies required
of or possessed by them, including, without limitation, those provided by
applicable law or in any other written instrument or agreement relating to any
of the Liabilities or security therefor.

13.15 EQUITABLE RELIEF. THE COMPANY RECOGNIZES THAT, IN THE EVENT
THE COMPANY FAILS TO PERFORM, OBSERVE OR DISCHARGE ANY OF ITS OBLIGATIONS OR
LIABILITIES UNDER THIS AGREEMENT, ANY REMEDY AT LAW MAY PROVE TO BE INADEQUATE
RELIEF TO THE BANK;

<PAGE>

THEREFORE, THE COMPANY AGREES THAT THE BANK, IF THE BANK SO REQUESTS, SHALL
BE ENTITLED TO TEMPORARY AND PERMANENT INJUNCTIVE RELIEF IN ANY SUCH CASE
WITHOUT THE NECESSITY OF PROVING ACTUAL DAMAGES.

13.16 CONTINUING AGREEMENT. This Agreement shall in all respects be
a continuing Agreement and shall remain in full force and effect until the
Credit Commitment shall have finally expired or terminated, and the Company
shall have made final payment in full of all Liabilities.

13.17 FILING OF FINANCING STATEMENT. At the Bank's option, this
Agreement, or a carbon, photographic or other reproduction of this Agreement or
of any Uniform Commercial Code financing statement covering the Collateral or
any portion thereof shall be sufficient as a Uniform Commercial Code financing
statement and may be filed as such.
13.18 POWER OF ATTORNEY. The Company, irrevocably, hereby
designates, makes, constitutes and appoints the Bank (and all other parties
designated by the Bank) as the Company's true and lawful agent (and
attorney-in-fact), with power, without notice to the Company and at any time
after the occurrence of an Event of Default or Unmatured Event of Default,
except for Unmatured Events of Default relating to defaults arising under
SECTIONS 12.1(F) and 12.1(K), and during the continuation thereof, and in the
Company's or the Bank's name: (i) to demand payment of the Nontangible
Collateral; (ii) to enforce payment of the Nontangible Collateral by legal
proceedings or otherwise; (iii) to exercise all of the Company's rights and
remedies with respect to the collection of the Nontangible Collateral; (iv) to
settle, adjust, compromise, extend or renew the Nontangible Collateral; (v) to
settle, adjust or compromise any legal proceedings brought to collect the
Nontangible Collateral; (vi) to sell or assign the Nontangible Collateral upon
such terms, for such amounts and at such time or times as the Bank deems
advisable; (vii) to discharge and release the Nontangible Collateral; (viii) to
take control, in any manner, of any item or payment or proceeds referred to in
SECTION 12.2.6(A); (ix) to prepare, file and sign the Company's name on any
notice of lien, assignment or satisfaction of lien or similar document in
connection with the Nontangible Collateral; (x) to prepare, file and sign the
Company's name on any proof of claim in bankruptcy or similar document against
any obligor; (xi) to do all acts and things necessary to fulfill the Company's
obligations under this Agreement; (xii) to endorse the Company's name upon any
of the items of payment or proceeds referred to in SECTION 12.2.6(A) and to
deposit the same to the Bank's account to and on account of the Liabilities;
(xiii) to endorse the Company's name upon any Chattel Paper, Document,
Instrument, invoice, freight bill, bill of lading or similar document or
agreement relating to the Accounts; (xiv) to sign the Company's name to
verifications of the Nontangible Collateral and notices thereof to obligors.
The

<PAGE>

Bank may also, without notice to the Company, exercise the powers referred to
in CLAUSES (XII) AND (XIII) prior to the occurrence of an Event of Default or
an Unmatured Event of Default. All powers of attorney granted herein or in
any Related Document are powers coupled with an interest and cannot be
revoked or altered without the Bank's written consent.

13.19 MODIFICATION OF FINANCIAL COVENANTS. The Company agrees that
should it undertake an initial public offering, the Bank may make reasonable
modifications to the financial covenants contained in SECTIONS 9.7, 9.9, 9.10,
9.11, and 9.17.

13.20 WAIVER. IN CONSIDERATION OF THE FINANCIAL ACCOMMODATIONS MADE
BY THE BANK, THE COMPANY ON BEHALF OF ITSELF AND ALL OF ITS PRESENT AND FUTURE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES, ATTORNEYS,
SHAREHOLDERS, AND THEIR RESPECTIVE SUCCESSORS, HEIRS AND ASSIGNS (INDIVIDUALLY
AND COLLECTIVELY REFERRED TO HEREIN AS "COMPANY RELEASEES"), IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND FOREVER RELEASES AND DISCHARGES THE BANK PARTIES, OF
AND FROM ANY AND ALL PAST AND PRESENT CAUSES OF ACTIONS, INTERESTS, RIGHTS,
LIABILITIES, LOSSES, DAMAGES, COSTS AND EXPENSES, OF ANY TYPE OR NATURE
WHATSOEVER (WHETHER LEGAL, CONTRACTUAL, EQUITABLE, CONTINGENT OR OTHERWISE),
WHETHER KNOWN OR UNKNOWN, WHETHER ASSERTED OR UNASSERTED, NOW OR HEREAFTER
ARISING WITH RESPECT TO ANY FEE ARRANGEMENT BETWEEN THE BANK AND THE COMPANY
ENTERED INTO PRIOR TO THE DATE HEREOF.

13.21 GOVERNING LAW; JURY TRIAL; SEVERABILITY.

(a) THIS AGREEMENT AND EACH NOTE SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, SUBJECT TO THE APPLICABILITY OF THE UNIFORM COMMERCIAL CODE OF
ANY STATE IN WHICH ANY OF THE COMPANY'S GOODS MAY BE LOCATED AT ANY GIVEN TIME.
Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under such law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. All obligations of the Company and
rights of the Bank and any other holders of the Notes, which obligations and
rights are described herein or in the Notes, shall be in addition to and not in
limitation of those provided by applicable law.

(b) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE RELATED DOCUMENTS, THE LOANS OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE

<PAGE>

DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (ii) ARISING FROM ANY
DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT, THE
RELATED DOCUMENTS, THE LOANS, OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.

(c) THE COMPANY IRREVOCABLY AGREES THAT, SUBJECT TO THE BANK'S SOLE
AND ABSOLUTE ELECTION, ANY ACTION OR PROCEEDING IN ANY WAY, MANNER OR RESPECT
ARISING OUT OF THIS AGREEMENT, THE RELATED DOCUMENTS, THE LOANS OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY
DISPUTE OR CONTROVERSY ARISING IN CONNECTION WITH OR RELATED TO THIS AGREEMENT,
THE RELATED DOCUMENTS, THE LOANS OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT SHALL BE LITIGATED ONLY IN THE COURTS HAVING SITUS WITHIN THE CITY OF
CHICAGO, THE STATE OF ILLINOIS, AND THE COMPANY HEREBY CONSENTS AND SUBMITS TO
THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SUCH CITY
AND STATE. THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST THE COMPANY BY THE BANK IN
ACCORDANCE WITH THIS SECTION 13.21.

(d) If and to the extent any provision of any Related Document
(other than any addendum executed to supplement or amend this Agreement) is
inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall control.

<PAGE>

Delivered at Chicago, Illinois as of the day and year first above
written.

DIAMOND EXTERIORS, INC.

By: /s/ Alan Miller
---------------------------
Name: Alan Miller
Title: Chief Financial Officer

222 East Church Street
Diamond Plaza
Woodstock, Illinois 60098
Attention: Donald G. Griffin
Telephone: (815) 334-1414
Telecopy: (815) 334-1421

AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO

By: /s/ John W. Patterson
----------------------------
Name: John W. Patterson
Title: Second Vice President

33 North LaSalle Street
Chicago, Illinois 60690
Attention: Lori H. Igleski
Telephone: (312) 661-5000
Telecopy: (312) 853-0290

<PAGE>

LOAN AND SECURITY AGREEMENT

DATED AS OF FEBRUARY 6, 1996

BETWEEN

DIAMOND EXTERIORS, INC.

AND

AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO

<PAGE>

TABLE OF CONTENTS

PAGE

SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 General Terms . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 16
1.3 Other Terms Defined in the Uniform Commercial Code . . . . . 17

SECTION 2. CREDIT COMMITMENT; CREDIT BORROWING PROCEDURES. . . . . . . . 17
2.1 Revolving Loan Commitment . . . . . . . . . . . . . . . . . . 17
2.2 Investment Credit Commitment. . . . . . . . . . . . . . . . . 17
2.3 Finance Company Line of Credit . . . . . . . . . . . . . . . 18
2.4 Loan Borrowing Procedures . . . . . . . . . . . . . . . . . . 18

SECTION 3. NOTES EVIDENCING LOANS . . . . . . . . . . . . . . . . . . . 18
3.1 Revolving Note . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Investment Loan Note. . . . . . . . . . . . . . . . . . . . . 19
3.3 Finance Company Loan Note . . . . . . . . . . . . . . . . . . 19
3.4 Interest; Due Date Extension . . . . . . . . . . . . . . . . 20

SECTION 4. INTEREST; FEES; BALANCES . . . . . . . . . . . . . . . . . . 20
4.1 Interest Rates on Loans . . . . . . . . . . . . . . . . . . . 20
4.2 Interest Payment Dates . . . . . . . . . . . . . . . . . . . 21
4.3 Computation of Interest . . . . . . . . . . . . . . . . . . . 21
4.4 Unused Facility Fee . . . . . . . . . . . . . . . . . . . . . 21
4.5 Maintenance of Balances . . . . . . . . . . . . . . . . . . . 21
4.6 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . 22
4.8 Voluntary Conversion of Loans . . . . . . . . . . . . . . . . 23
4.9 Interest Rate Determination and Protection . . . . . . . . . 23

SECTION 5. REDUCTION OR TERMINATION OF CREDIT FACILITY;
PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Reduction or Termination of the Credit Facility by the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Optional Prepayment of Loans . . . . . . . . . . . . . . . . 25
5.3 Mandatory Prepayment of Loans . . . . . . . . . . . . . . . . 25
5.4 Interest on Principal Prepaid . . . . . . . . . . . . . . . . 26

SECTION 6. MAKING OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . 26
6.1 Making of Payments . . . . . . . . . . . . . . . . . . . . . 26
6.2 Deposits to the Company's Account . . . . . . . . . . . . . . 26
6.3 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

SECTION 7. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Grant of Security Interest . . . . . . . . . . . . . . . . . 27
7.2 Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 Grant of License to Use General Intangibles . . . . . . . . . 29
7.4 Lock Box . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Processing, Sale, Collections, etc. . . . . . . . . . . . . . 31
7.6 Trust for the Bank . . . . . . . . . . . . . . . . . . . . . 32

<PAGE>

TABLE OF CONTENTS
(continued)

PAGE

7.7 Assembly of Collateral . . . . . . . . . . . . . . . . . . . 32
7.8 Replacement Liens . . . . . . . . . . . . . . . . . . . . . . 33
7.9 Acquisition of Other Liens . . . . . . . . . . . . . . . . . 33
7.10 Termination of Security Interest and Liens . . . . . . . . . 33
7.11 Reasonable Care . . . . . . . . . . . . . . . . . . . . . . . 33
7.12 The Company to Remain Liable . . . . . . . . . . . . . . . . 34
7.13 Information . . . . . . . . . . . . . . . . . . . . . . . . . 34

SECTION 8. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 34
8.1 Organization and Good Standing . . . . . . . . . . . . . . . 34
8.2 Authorization; No Conflict . . . . . . . . . . . . . . . . . 35
8.3 Validity and Binding Nature . . . . . . . . . . . . . . . . . 35
8.4 Financial Statements . . . . . . . . . . . . . . . . . . . . 35
8.5 Litigation and Contingent Liabilities . . . . . . . . . . . . 35
8.6 Principal Place of Business . . . . . . . . . . . . . . . . . 36
8.7 Subsidiaries; Divisions . . . . . . . . . . . . . . . . . . . 36
8.8 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 36
8.9 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 38
8.10 Investment Company Act . . . . . . . . . . . . . . . . . . . 38
8.11 Public Utility Holding Company Act . . . . . . . . . . . . . 38
8.12 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . 38
8.13 Business Loan . . . . . . . . . . . . . . . . . . . . . . . . 38
8.14 Environmental Compliance . . . . . . . . . . . . . . . . . . 38
8.15 Accuracy of Information . . . . . . . . . . . . . . . . . . . 41
8.16 Fair Consideration; Solvency . . . . . . . . . . . . . . . . 41
8.17 Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.18 No Default . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.19 Compliance with Applicable Laws . . . . . . . . . . . . . . . 42
8.20 Location of Collateral . . . . . . . . . . . . . . . . . . . 42
8.21 Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.22 Government Contracts . . . . . . . . . . . . . . . . . . . . 43
8.23 Other Agreements . . . . . . . . . . . . . . . . . . . . . . 43
8.24 Employee Controversies . . . . . . . . . . . . . . . . . . . 43
8.25 Patents, Licenses . . . . . . . . . . . . . . . . . . . . . . 43
8.26 Securities Matters . . . . . . . . . . . . . . . . . . . . . 43

SECTION 9. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1 Reports, Certificates and Other Information . . . . . . . . . 44
9.2 Corporate Existence and Franchises . . . . . . . . . . . . . 48
9.3 Books, Records and Inspections . . . . . . . . . . . . . . . 48
9.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5 Taxes and Liabilities . . . . . . . . . . . . . . . . . . . . 49
9.6 Limits on Credit Commitments . . . . . . . . . . . . . . . . 49
9.7 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . 49
9.8 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 49
9.9 Working Capital . . . . . . . . . . . . . . . . . . . . . . . 50
9.10 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . 50

<PAGE>

TABLE OF CONTENTS
(continued)

PAGE

9.11 Cash Flow Coverage . . . . . . . . . . . . . . . . . 50
9.12 Dividend Restrictions . . . . . . . . . . . . . . . . 51
9.13 Liens . . . . . . . . . . . . . . . . . . . . . . . . 51
9.14 Guaranties, Loans, Advances or Investments . . . . . 51
9.15 Change in Nature of Business . . . . . . . . . . . . 52
9.16 Mergers, Consolidations, Sales . . . . . . . . . . . 52
9.17 Capital Expenditures . . . . . . . . . . . . . . . . 52
9.18 Employee Benefit Plans . . . . . . . . . . . . . . . 52
9.19 Use of Proceeds . . . . . . . . . . . . . . . . . . . 53
9.20 Transactions with Affiliates . . . . . . . . . . . . 54
9.21 Other Agreements . . . . . . . . . . . . . . . . . . 54
9.22 Compliance with Applicable Laws . . . . . . . . . . . 54
9.23 Environmental Compliance . . . . . . . . . . . . . . 54
9.24 Subsidiaries . . . . . . . . . . . . . . . . . . . . 55
9.25 Stockholder Agreement . . . . . . . . . . . . . . . . 55
9.27 Fiscal Year . . . . . . . . . . . . . . . . . . . . . 56
9.28 Securitization Documentation. . . . . . . . . . . . . 56
9.29 Sears Licensing Agreement. . . . . . . . . . . . . . 56
9.30 Other Documents. . . . . . . . . . . . . . . . . . . 56
9.31 Globe Demand Notes. . . . . . . . . . . . . . . . . . 56

SECTION 10. COVENANTS; COLLATERAL . . . . . . . . . . . . . . . . . . . . 57
10.1 Delivery of Documents and Instruments . . . . . . . . 57
10.2 Location of Collateral . . . . . . . . . . . . . . . 57
10.3 Maintenance of Collateral . . . . . . . . . . . . . . 58
10.4 Notation of Security Interest . . . . . . . . . . . . 58
10.5 Transfers to Third Parties . . . . . . . . . . . . . 58
10.6 Defend Title to Collateral . . . . . . . . . . . . . 58
10.7 Further Assurances . . . . . . . . . . . . . . . . . 58
10.8 Payment of Accounts . . . . . . . . . . . . . . . . . 59

SECTION 11. CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . 59
11.1 Initial Revolving Loans; Initial Investment
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.2 Initial Finance Company Loans. . . . . . . . . . . . 60
11.3 All Loans . . . . . . . . . . . . . . . . . . . . . . 61

SECTION 12. EVENTS OF DEFAULT AND THEIR EFFECT . . . . . . . . . . . . . 62
12.1 Events of Default . . . . . . . . . . . . . . . . . . 62
12.2 Effect of Event of Default . . . . . . . . . . . . . 65

SECTION 13. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
13.1 Waiver; Amendments, Marshalling . . . . . . . . . . . 68
13.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 69
13.3 Computations . . . . . . . . . . . . . . . . . . . . 70
13.4 Regulation U . . . . . . . . . . . . . . . . . . . . 70
13.5 Costs, Expenses and Taxes . . . . . . . . . . . . . . 70

iii

<PAGE>

TABLE OF CONTENTS
(continued)

PAGE

13.6 Indemnification . . . . . . . . . . . . . . . . . . . 71
13.7 Captions and References . . . . . . . . . . . . . . . 73
13.8 References to Subsidiaries . . . . . . . . . . . . . 73
13.9 Counterparts . . . . . . . . . . . . . . . . . . . . 73
13.10 Successors and Assigns . . . . . . . . . . . . . . . 73
13.11 Prior Agreements . . . . . . . . . . . . . . . . . . 73
13.12 Assignments; Participations . . . . . . . . . . . . . 73
13.13 Bank May Perform . . . . . . . . . . . . . . . . . . 74
13.14 No Limitation on Obligations and Rights . . . . . . . 74
13.15 EQUITABLE RELIEF . . . . . . . . . . . . . . . . . . 74
13.16 Continuing Agreement . . . . . . . . . . . . . . . . 75
13.17 Filing of Financing Statement . . . . . . . . . . . . 75
13.18 Power of Attorney . . . . . . . . . . . . . . . . . . 75
13.19 Modification of Financial Covenants. . . . . . . . . 76
13.20 WAIVER . . . . . . . . . . . . . . . . . . . . . . . 76
13.21 GOVERNING LAW; JURY TRIAL; SEVERABILITY . . . . . . . 76

<PAGE>

EXHIBITS

Exhibit A Form of Revolving Note

Exhibit B Form of Investment Loan Note

Exhibit C Form of Finance Company Loan Note

Exhibit D Form of Blocked Deposit Account Agreement

Exhibit E Form of Compliance Certificate

Exhibit F Form of Waiver Agreement

Exhibit G Form of Financial Condition Certificate

Exhibit H List of Matters to be Covered by Company's Counsel Opinion

Exhibit I Form of Globe Demand Note

Exhibit J Form of Special Purpose Note

Exhibit K Form of Special Purpose Note Agreement

Exhibit L Form of Trademark Security Agreement

Exhibit M Form of Working Capital Note

Exhibit N Form of Working Capital Note Agreement

<PAGE>

SCHEDULES

Schedule 7.2 Pledged Notes

Schedule 7.4 Blocked Deposit Accounts

Schedule 8.5 Litigation and Contingent Liabilities

Schedule 8.8 Employee Benefit Plans

Schedule 8.9 Title to Assets; Permitted Liens

Schedule 8.14 Environmental Matters

Schedule 8.20 Location of Collateral

Schedule 8.25 Patents, Licenses

Schedule 9.4 Insurance

<PAGE>

FIRST WAIVER AND CONSENT TO LOAN AND SECURITY AGREEMENT

This First Waiver and Consent to Loan and Security Agreement, made as
of April 22, 1996 (this "WAIVER"), is by and between Diamond Exteriors, Inc (the
"COMPANY") and American National Bank and Trust Company of Chicago (the "BANK").
Capitalized terms used in this Waiver and not otherwise defined have the
meanings assigned to such terms in the Loan Agreement (as defined below).

W I T N E S S E T H:

WHEREAS, the Company and the Bank are parties to the Loan and Security
Agreement dated as of February 6, 1996 (as such agreement may be amended,
restated, supplemented or otherwise modified from time to time, the "LOAN
AGREEMENT");

WHEREAS, under the Loan Agreement, the Bank agreed to make, in its
sole and absolute discretion, Finance Company Loans to the Company in aggregate
amounts not exceeding $5,000,000 at any one time outstanding, subject to the
conditions precedent set forth in Section 11.2 of the Loan Agreement; and

WHEREAS, the Bank has agreed to waive certain of the conditions
precedent set forth in Section 11.2 of the Loan Agreement and make Finance
Company Loans to the Company in aggregate amounts not exceeding $2,000,000 at
any one time outstanding, on the terms, and subject to the conditions, set forth
in this Waiver;

NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

SECTION 1. WAIVER AND CONSENT

Subject to the completion of the conditions to effectiveness set forth
in SECTION 2 of this Waiver, the Bank waives the conditions to funding set forth
in subsections 11.2(a) and 11.2(b) of the Loan Agreement; it being understood,
however, that notwithstanding anything in the Loan Agreement to the contrary,
the Bank has no obligation whatsoever to make Finance Company Loans exceeding
$2,000,000 at any one time outstanding until all of the conditions set forth in
Section 11.2 of the Loan Agreement have been satisfied. Subject to the
completion of the conditions to effectiveness set forth in SECTION 2 of this
Waiver, the Bank agrees and consents that the Finance Company may use the
proceeds of any Special Purpose Loan (as defined in the Special Purpose Note
Agreement) to generate accounts receivable.

<PAGE>

SECTION 2. CONDITIONS TO EFFECTIVENESS

The obligation of the Bank to make the waivers contemplated by this
Amendment, and the effectiveness thereof, are subject to the Bank having
received all of the following, each duly executed and dated the date of this
Waiver (or such other date as shall be satisfactory to the Bank) in form and
substance satisfactory to the Bank:

(a) FIRST WAIVER. This Waiver.

(b) FINANCE COMPANY LOAN NOTE. The Finance Company Loan Note
substantially in the form of Exhibit C to the Loan Agreement.

(c) OTHER CONDITIONS. All the other documents and condition to
funding set forth in Section 11.2 of the Loan Agreement (other than those
specifically waived in SECTION 1 of this Waiver).

(d) OTHER. Such other documents as the Bank may reasonably
request.

SECTION 3. MISCELLANEOUS

3.1 CAPTIONS. The recitals to this Waiver (except for definitions)
and the section captions used in this Waiver are for convenience only, and shall
not affect the construction of this Waiver.

3.2 GOVERNING LAW; SEVERABILITY. THIS WAIVER SHALL BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. Wherever
possible, each provision of this Waiver shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Waiver shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Waiver.

3.3 COUNTERPARTS. This Waiver may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Waiver.

3.4 SUCCESSORS AND ASSIGNS. This Waiver shall be binding upon the
Company and the Bank and their respective successors and assigns, and shall
inure to the sole benefit of the Company and the Bank and their successors and
assigns. The Company shall have no right to assign its rights or delegate its
duties under this Waiver.

-2-

<PAGE>

3.5 COSTS, EXPENSES AND TAXES. The Company affirms and acknowledges
that Section 13.5 of the Loan Agreement applies to this Waiver and the
transactions and agreements and documents contemplated hereunder.

* * *

-3-

<PAGE>

Delivered at Chicago, Illinois, as of the day and year first above
written.

DIAMOND EXTERIORS, INC.

By: /s/ Richard G. Reece
--------------------------
Name: Richard G. Reece
Title: Assistant Treasurer

AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO

By: /s/ John W. Patterson
---------------------------
Name: John W. Patterson
Title: Second Vice President

<PAGE>

FIRST AMENDMENT, WAIVER AND CONSENT TO
LOAN AND SECURITY AGREEMENT

This First Amendment, Waiver and Consent to Loan and Security
Agreement, made as of May 3, 1996 (this "AGREEMENT"), is by and between Diamond
Exteriors, Inc (the "COMPANY") and American National Bank and Trust Company of
Chicago (the "BANK"). Capitalized terms used in this Agreement and not
otherwise defined have the meanings assigned to such terms in the Loan Agreement
(as defined below).

W I T N E S S E T H:

WHEREAS, the Bank, under the First Waiver and Consent to Loan and
Security Agreement dated April 22, 1996, agreed to waive certain of the
conditions precedent set forth in Section 11.2 of the Loan Agreement and make
Finance Company Loans to the Company in aggregate amounts not exceeding
$2,000,000;

WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Bank has agreed to waive certain of the conditions precedent set
forth in Section 11.2 of the Loan Agreement and make Finance Company Loans to
the Company up to the Finance Company Line Limit; and

WHEREAS, the Bank and the Company have agreed to amend the Loan
Agreement to establish June 30, 1996, as a deadline for the Company to execute
and deliver the Securitization Documentation, which deadline will constitute an
affirmative covenant under the Loan Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
Company and the Bank agree as follows:

<PAGE>

SECTION 1. AMENDMENTS TO LOAN AGREEMENT

On the date this Agreement becomes effective, after satisfaction by
the Company of each of the conditions set forth in SECTION 4 of this Agreement
(the "CLOSING DATE"), SECTION 9.28 of the Loan Agreement is amended by deleting
such section in its entirety and replacing it as follows:

9.28 SECURITIZATION DOCUMENTATION. Execute and deliver no later than
June 30, 1996, the Securitization Documentation (in form and substance
satisfactory to the Bank) and, after such execution and delivery, not
amend, change or modify any of the Securitization Documentation without the
prior written consent of the Bank (which will not be unreasonably withheld
or delayed).

SECTION 2. WAIVER AND CONSENT

On the Closing Date, the Bank waives the conditions to funding set
forth in subsections 11.2(a), 11.2(b) and 11.2(d) of the Loan Agreement and
agrees to make Finance Company Loans to the Company up to the Finance Company
Line Limit. On and after the Closing Date, the Bank agrees and consents that
the Finance Company may use the proceeds of any Special Purpose Loan (as defined
in the Special Purpose Note Agreement) to generate accounts receivable.

SECTION 3. REPRESENTATIONS AND WARRANTIES

To induce the Bank to enter into this Agreement and to extend future
credit under the Loan Agreement, as amended by this Agreement, the Company
represents and warrants to the Bank that:

1.1 DUE AUTHORIZATION, ETC. The execution, delivery and performance
by the Company of this Agreement are within its corporate powers, have been duly
authorized by all necessary corporate action, have received all necessary
governmental, regulatory or other approvals (if any is required), and do not and
will not contravene or conflict with any provision of (i) any law, (ii) any
judgment, decree or order, or (iii) its articles or certificate of incorporation
or by-laws, and do not and will not contravene or conflict with, or cause any
lien to arise under, any provision of any agreement or instrument binding upon
the Company or upon any of its property. This Agreement and the Loan Agreement,
as amended by this Agreement, are the legal, valid and binding obligations of
the Company, enforceable against it in accordance with their respective terms.

1.2 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. As of the Closing
Date, (a) no Unmatured Event of Default or Event of Default under the Loan
Agreement, as amended by this Agreement, has occurred and is continuing or will
result from the amendments set forth in this Agreement and (b) the
representations and

-2-

<PAGE>

warranties of the Company contained in the Loan Agreement
are true and correct.

SECTION 4. CONDITIONS TO EFFECTIVENESS

The obligation of the Bank to make the amendments, waivers and
consents contemplated by this Agreement, and the effectiveness thereof, are
subject to the following:

4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement are true and correct as of
the Closing Date.

4.2 DOCUMENTS. The Bank has received all of the following, each duly
executed and dated as of the Closing Date (or such other date as is satisfactory
to the Bank) in form and substance satisfactory to the Bank:

(A) FIRST AMENDMENT, WAIVER AND CONSENT. This Agreement.

(B) OMNIBUS AMENDMENT TO INTERCOMPANY AGREEMENTS. An executed copy
of an omnibus amendment to intercompany agreements, substantially in the
form of EXHIBIT A to this Agreement.

(C) SECRETARY'S CERTIFICATE. A certificate of the Secretary of the
Company as to (i) no amendments or modifications to the Company's
certificate of incorporation or by-laws since February 6, 1996, and
(ii) resolutions of the board of directors of the Company authorizing or
ratifying the execution, delivery and performance of this Agreement.

(D) OTHER CONDITIONS. All the other documents and condition to
funding set forth in Section 11.2 of the Loan Agreement (other than those
specifically waived in SECTION 2 of this Agreement).

(E) OTHER. Such other documents as the Bank may reasonably
request.

SECTION 5. MISCELLANEOUS

5.1 CAPTIONS. The recitals to this Agreement (except for
definitions) and the section captions used in this Agreement are for convenience
only, and do not affect the construction of this Agreement.

5.2 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT IS A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. Wherever
possible, each provision of this Agreement must be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this

-3-

<PAGE>

Agreement is prohibited by or invalid under such law, such provision is
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

5.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart is deemed to be an original, but all such counterparts together
constitute but one and the same Agreement.

5.4 SUCCESSORS AND ASSIGNS. This Agreement is binding upon the
Company and the Bank and their respective successors and assigns, and inures to
the sole benefit of the Company and the Bank and their successors and assigns.
The Company cannot assign its rights or delegate its duties under this
Agreement.

5.5 REFERENCES. From and after the Closing Date, each reference in
the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein," or
words of like import, and each reference in the Loan Agreement or any other
Financing Agreement to the Loan Agreement or to any term, condition or provision
contained "thereunder," "thereof," "therein," or words of like import, mean and
are a reference to the Loan Agreement (or such term, condition or provision, as
applicable) as amended, supplemented, restated or otherwise modified by this
Agreement.

5.6 CONTINUED EFFECTIVENESS. Notwithstanding anything contained in
this Agreement, the terms of this Agreement are not intended to and do not serve
to effect a novation as to the Loan Agreement. The Company and the Bank
expressly do not intend to extinguish the Loan Agreement. Instead, it is the
express intention of the Company and the Bank to reaffirm the indebtedness
created under the Loan Agreement. The Loan Agreement, as amended by this
Agreement, remains in full force and effect and the terms and provisions thereof
are ratified and confirmed.

5.7 COSTS, EXPENSES AND TAXES. The Company affirms and acknowledges
that Section 13.5 of the Loan Agreement applies to this Agreement and the
transactions and agreements and documents contemplated under this Agreement.

* * *

-4-

<PAGE>

Delivered at Chicago, Illinois, as of the day and year first above
written.

DIAMOND EXTERIORS, INC.

By: /s/ Richard G. Reece
--------------------------
Name: Richard G. Reece
Title: Assistant Treasurer

AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO

By: /s/ John W. Patterson
---------------------------
Name: John W. Patterson
Title: Second Vice President

<PAGE>

EXHIBIT A

FORM OF OMNIBUS AMENDMENT TO INTERCOMPANY AGREEMENTS

[ATTACHED]

<PAGE>
LICENSE AGREEMENT

THIS AGREEMENT is made and entered into this ____ day of __________,
1996, by and between Globe Building Materials, Inc., a Delaware corporation (the
"LICENSOR") and Diamond Home Services, Inc. a Delaware corporation (the
"LICENSEE").

WHEREAS, Licensor is the controlling stockholder of Licensee;

WHEREAS, Licensor owns and/or controls the use of the name "DIAMOND
SHIELD", variations thereof and logos related thereto (collectively, the
"MARK"); and

WHEREAS, the parties have agreed that Licensor will grant Licensee an
exclusive, royalty-free license permitting Licensee and its subsidiaries to use
the Mark;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:

1. GRANT. Licensor hereby grants to Licensee and its
subsidiaries an exclusive, royalty-free right and license to use the
Mark in connection with the respective businesses of Licensee and its
subsidiaries.

2. TERM. The term of the license granted hereunder shall be
perpetual.

3. TITLE. Licensee agrees that:

(a) the Mark is the property of Licensor; and

(b) nothing contained herein shall be construed to
give Licensee any right, title or interest in and to the
Mark (except the right and license to use the Mark in
accordance with the terms of this Agreement).

4. ASSIGNMENT. This Agreement shall not be assigned by Licensee
without the express prior written consent of Licensor.

5. MISCELLANEOUS. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the
state of Illinois.

* * *

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed all as of the day first above written.

GLOBE BUILDING MATERIALS, INC. DIAMOND HOME SERVICES, INC.

By: /s/ C. Stephen Clegg By: /s/ Ann Crowley Patterson
------------------------------------ ------------------------------
Its: Chairman and Chief Executive Officer Its: Vice President-Administration
------------------------------------ ------------------------------

-2-

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Consolidated Financial and Operating Data" and "Experts" and to the use of our
report dated February 23, 1996, except as to the first paragraph of Note 1 for
which the date is April 18, 1996 and Note 14 for which the date is April 8,
1996, in Amendment No. 1 to the Registration Statement (Form S-1) and related
Prospectus of Diamond Home Services, Inc. and Subsidiaries for the registration
of up to 3,933,000 shares of its common stock.

Chicago, Illinois
May 28, 1996

Ernst & Young LLP

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 4,715 46
<SECURITIES> 0 0
<RECEIVABLES> 3,931 13,611
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,617 14,801
<PP&E> 1,732 1,852
<DEPRECIATION> 295 360
<TOTAL-ASSETS> 30,143 35,508
<CURRENT-LIABILITIES> 14,431 20,094
<BONDS> 0 0
0 0
1,400 1,400
<COMMON> 282 282
<OTHER-SE> 4,551 4,900
<TOTAL-LIABILITY-AND-EQUITY> 30,143 35,508
<SALES> 124,848 27,093
<TOTAL-REVENUES> 124,848 27,093
<CGS> 72,245 15,293
<TOTAL-COSTS> 45,305 10,954
<OTHER-EXPENSES> 503 132
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 410 66
<INCOME-PRETAX> 6,385 648
<INCOME-TAX> 2,650 299
<INCOME-CONTINUING> 3,735 349
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,735 349
<EPS-PRIMARY> .53 .05
<EPS-DILUTED> 0 0

</TABLE>