MACE SECURITY INTERNATIONAL INC, 10KSB, 1999-04-14

MACE SECURITY INTERNATIONAL INC
10KSB, 1999-04-14
INDUSTRIAL ORGANIC CHEMICALS

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Form 10-KSB

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934

For the fiscal year ended December 31, 1998

|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from _________ to ________

MACE SECURITY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

03-0311630 0-22810
(I.R.S. Employer Identification No.) (Commission File Number)

160 Benmont Avenue, Bennington, Vermont 05201
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (802) 447-1503
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock

Check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No | |

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B (ss.229.405) is not contained herein, and no disclosure will be
contained, to the best of registrant's knowledge, in definite proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB | |.

The registrant's net sales for 1998 from continuing operations were
$2,404,221. As of April 2, 1999 the aggregate market value of the voting
stock held by non-affiliates of the registrant, based on the closing price of
6 11/16 on that date, was $31,806,860. As of April 2, 1999 the registrant had
issued and outstanding 7,203,000 shares of Common Stock.
<PAGE>

PART I

ITEM 1. BUSINESS

The following can be interpreted as including forward looking statements
under the Private Securities Litigation Reform Act of 1995. Such statements
are typically identified by the words "intends", "plans", "anticipates",
"believes", "expects", or words of similar import. Various important factors
that could cause actual results to differ materially from those expressed in
the forward looking statements are identified below and may vary
significantly based on a number of factors including, but not limited to,
marketing success, product development, production, manufacturing costs,
competitive conditions, change in economic conditions of the various markets
the Company serves as well as changes in potential transactions that have not
been fully negotiated and evidenced by executed agreements or approved by the
Board of Directors or stockholders. Actual future results may differ
materially from those suggested in the following statements.

GENERAL

Mace Security International, Inc. (the "Company") is a well known producer of
less-lethal defense sprays for the Consumer Market and a marketer of Consumer
safety and security products.

The Company was incorporated in Vermont in December of 1987 under the name
Mark Sport, Inc. after Jon E. Goodrich, the Company's President and CEO, and
a former principal stockholder obtained an exclusive license to produce and
market defense sprays to the Consumer Market under the Mace(R) brand
trademark within the continental United States, and a non-exclusive license
to market defense sprays under the Mace(R) trademark outside of the
continental United States. In 1992, this license was renegotiated to include
a purchase option.

The Company changed its name to Mace Security International, Inc. in
September 1993. In November 1993, prior to its initial public offering, it
merged into a new company incorporated in the state of Delaware.

The Company exercised its option to purchase the Mace(R) trademark and, in
December 1993, the Company paid in full all amounts due under its promissory
note for the purchase of all rights, title and interest to the Mace(R) brand
and related trademarks. In March 1994, the Company acquired certain assets
and liabilities of the Federal Laboratories division of TransTechnology
Corporation, which were operated by the Company as part of its Law
Enforcement division until July 14, 1998, when the Law Enforcement division
was sold.

PRODUCTS AND LINES OF MERCHANDISE

Consumer Products. The Consumer division of the Company designs, markets and
sells its consumer product line for use in protection of the home and
automobile, and for personal and child protection. These products include a
line of defense sprays, personal alarms, whistles, and window and door locks
alarms. The defense sprays, the Company's most well known products, include
tear gas sprays, pepper sprays and sprays with both tear gas and pepper
solution. The Company's consumer market includes mass merchants/department
stores, consumer catalogues and guns/sporting goods, hardware, auto,
convenience, and drug stores.

Each market category is reached through dedicated in-house sales managers,
and/or through a nationwide network of manufacturers' representatives. Market
categories are also reached through catalogue, magazine and trade publication
advertising, internet website and promotion at industry trade shows. The
Company also sells directly to wholesale distributors and to certain large
department stores. Mail order and specialty accounts are handled directly by
the Company.
<PAGE>

Mace Anti Crime Bureau(R). Mace Anti Crime Bureau(R) ("MACB"), an extension
of the Consumer division, develops and markets security products and
literature primarily for the financial community. In 1997, MACB completed
product development of a "dye-pack" used by financial institutions for
robbery protection. The "dye pack" system developed by MACB has features not
offered by its competitors and is offered at a lower price than its
competitors' product. It was introduced to trade shows in the fall of 1997 as
"MaceCash(TM)". MACB is also in the process of developing other safeguard
devices for use by financial institutions and armored cars in the physical
transportation of cash and by other customers for safeguarding valuables,
such as jewelry. Other services provided by MACB to financial institutions
are state-of-the-art training videos and crisis response materials. MACB's
market includes financial institutions and related businesses throughout the
world. Sales efforts for MaceCash(TM) in the domestic market are being
conducted through direct marketing and the use of independent sales
representatives and distributors as well as exhibitions at national trade
shows and advertisement in trade publications. International marketing
efforts are being conducted primarily through sales personnel in the United
Kingdom and a worldwide network of independent distributors.

The Company has entered into a letter of intent for the sale of substantially
all the assets of its MACB division for approximately $1,100,000. Only
certain liabilities of the division will be assumed by the purchaser. The
Company will retain the cash and accounts receivable from this division.
There are no definitive agreements executed and the terms of the letter of
intent are not binding with respect to this proposed transaction.
Additionally, the purchaser's obligation to acquire the MACB division is
conditional on its obtaining financing sufficient to effect this transaction.
(See below "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resource - Proposed Sale of
Assets of MACB").

Franchising. Mace Security is attempting to increase sales and expand its
distribution channels by franchising Mace Security Centers(TM) retail stores.
The Mace Security Centers(TM) will offer Mace(R) brand products and a wider
range of out-sourced products than are marketed by the Company, including
home security systems, surveillance equipment, child monitors, and other home
and personal security devices. The Company launched its franchise program for
Mace Security Centers(TM) in mid 1998 and has sold two franchises, one in
South Africa and one in Chile. Franchising is not currently a significant
source of revenue.

Department of Defense Contract. Notwithstanding its sale of its Law
Enforcement division in July 1998, the Company continues to manufacture
products to fill orders under its contract with the Department of Defense,
which is not assignable and, therefor, could not be sold with the rest of the
Law Enforcement division assets. The Department of Defense contract calls for
the production of 40 MM cartridges and is due to expire August 31, 1999.
Revenue realized from this contract has been treated as income (loss) from
discontinued operations.

The Company's Long Term Goal. The Company's long term goal is to increase the
market value of its shares on the NASDAQ Stock Market, thereby maximizing
shareholder value.

In that regard, The Company has entered into an agreement with Louis D.
Paolino, Jr. to become its Chairman and Chief Executive Officer. He will
bring with him an entirely new management team. Mr. Paolino, a graduate of
Drexel University with a B.S. in Civil Engineering, was formerly the
Chairman, President and CEO of Eastern Environmental Services, Inc., a solid
waste management services company from June 1996 through December 1999. When
Mr. Paolino joined Eastern in June 1996, Eastern's sales for that fiscal year
totaled $7.6 million with a market value of less than $10 million and with a
stock price of $1.50. Eastern was recently acquired by Waste Management, Inc.
wherein Eastern shareholders received $32 of value per share of Eastern.
Before that time, Mr. Paolino was President of Soil Remediation of
Philadelphia, Inc., a company engaged in the business of treating
contaminated soil and which was sold to USA Waste Services, Inc., a waste
management corporation, in September 1993. From September 1993 to June 1996,
Mr. Paolino served as Vice President of USA Waste Services, Inc. From
November 1995 to January 1996, Mr. Paolino served on the Board of Directors
of Metal Management, Inc., formerly known as General Parametrics Corp., a
publicly traded company. THE SUCCESS OF EASTERN ENVIRONMENTAL HAS NO BEARING
ON, AND SHOULD NOT BE CONSIDERED AN INDICATION OF, THE POTENTIAL FUTURE
RESULTS OF OPERATIONS FOR THE COMPANY.

As a condition to his agreement to serve as CEO, the Company's current Board
of Directors, other than Mr. Goodrich, will resign and be replaced by a new
Board selected by Mr. Paolino.

Also, Mr. Paolino has agreed to purchase 3,735,000 shares of the Company's
Common Stock. A portion of such shares are expected to be purchased by
members of Mr. Paolino's management team, by assignment of Mr. Paolino's
right to purchase such shares.
<PAGE>

As a condition to Mr. Paolino's agreement to purchase the shares, the Company
has entered into employment agreements with certain members of the new
management team selected by Mr. Paolino. Pursuant to the employment
agreements, each new member of the management was granted options to purchase
shares of the Company's Common Stock. The employment agreements specify that
the new management will be entitled to only nominal compensation until the
sale of the 3,735,000 shares is consummated. In the event the sale of the
Paolino Shares does not occur, the employment agreements terminate and the
options will automatically be cancelled.

As an additional condition to Mr. Paolino's agreement to purchase the shares,
substantially simultaneously with such sale, the Company will sell in a
private placement 1,850,000 shares of the Company's Common Stock. The shares
will not be registered under the Securities Act of 1933, and thus, will not
be freely tradable for a period of at least one year from the closing of the
sale of the shares.

The sales of the above-referenced 5,585,000 shares will result in a total
capital investment by Mr. Paolino, members of Mr. Paolino's management team
and others of approximately $8.83 million.

Following the stock sales, Mr. Paolino will become the Company's largest
shareholder and Jon E. Goodrich will become Vice President of the existing
business, Mace(R) Consumer sales, which is expected to continue to operate in
Bennington, Vermont.

As a condition to the referenced stock purchases, the Company will
substantially simultaneously with the stock sales acquire by merger American
Wash Services, Inc., a company headed by Mr. Paolino. The purchase price for
American Wash will be cash of $4,687,500, 628,362 shares of the Company's
Common Stock and the issuance to Mr. Paolino and his designee of assignable
warrants to purchase a total of 1,825,000 shares of the Company's Common
Stock.. The total consideration to be paid to the Company upon the exercise
of all such warrants is approximately $2,791,000. The warrants will not be
exercisable until the expiration of 120 days following the closing and will
have terms of 64 months. The shares issued in the merger and issuable under
the warrants will not be registered under the Securities Act of 1933, and
thus, will not be freely tradable for a period of at least one year from the
closing of the sale of the shares.

The Company's obligation to complete the transactions is conditioned on,
among other things, approval by the Company's Board of Directors and
shareholders, continued listing on the NASDAQ National Market System, a due
diligence investigation and receipt of a fairness opinion covering the merger
and the sale of shares.

The Company believes the addition of a new car wash division will produce an
exciting new profit center and at the same time serve as an additional retail
distribution location for the Company's "impulse" personal protection
products.

It is anticipated that the transactions will be approved by the Company's
shareholders by written consent. The transactions are expected to close
twenty days following the distribution of an Information Statement regarding
the transactions and related matters. (See "Business- The Company's Long Term
Goal " and "Executive Compensation-Change in Control").

COMPETITION

The Company faces intense competition in the consumer market. Domestically,
there continues to be a number of companies marketing defense sprays to
civilian consumers. While the Company continues to offer defense spray
products that Management believes distinguish themselves through brand name
recognition, superior product features and formulations and research and
development, the Consumer division has experienced a sales decline for these
products. The Company attributes this decline not only to the strong
competition, but also to lower demand in general. Moreover, the Company was
not successful in its brief entry into the retail market in late 1997. The
Company closed its retail stores in the third quarter of 1998. ( See below
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources").

PRODUCTION

Substantially all of the Company's manufacturing processes are performed
at the Company's Bennington, Vermont facility. The Company's defense spray
products are manufactured on an aerosol filling machine. Most products are
packaged in sealed, tamper resistant "clamshells." The KinderGard(R) product
line is primarily manufactured by an unrelated company and packaged on-site
at the Vermont facility. Operating results of the KinderGard(R) product line
are immaterial at this time.

There are numerous potential suppliers of the components and parts required
in the Company's production process. The Company has developed strong
beneficial long-term relationships with many of its suppliers including the
following: Allplax, Inc., Moldamatic, Inc., Piper Impact, Inc., Amber
International, Inc. and Springfield Printing, Inc. In addition, the Company
purchases for resale a variety of products produced by others including
whistles, alarms, and window and door locks, among others.

MAJOR CUSTOMERS

The Company's top ten customers represented approximately 19% of the total
net sales in 1998. No single customer accounted for over 10% of those sales.

TRADEMARKS/PATENTS

The Company began marketing products in 1988 under the Mace(R) brand name and
related trademarks pursuant to an exclusive license for sales of defense
sprays to the Consumer Market in the continental United States, and a
non-exclusive license for sales to the Consumer Market worldwide. The license
agreement was renegotiated in 1992 to include a purchase option. The Company
exercised this option and purchased outright the Mace(R) brand name and
related trademarks (Pepper Mace(R), Chemical Mace(R), Mace . . . Just in
Case(R), CS Mace(TM) and Magnum Mace(TM)). In conjunction with this purchase,
the Company acquired a non-exclusive worldwide license to promote a patented
pepper spray formula in both markets. There are approximately five years
remaining on the license.
<PAGE>

The Company acquired a patent and trademark to the Big Jammer(R) door brace,
as part of its purchase of the assets of Home Protection Concepts, Inc., in
July 1991.

In 1995, the Company developed the trademark Cool-It!(R) decontamination
spray. This trademark was disposed of when the Company sold its Law
Enforcement division. The Company also developed internally the trademarks:
Window Jammer(TM), Sonic Alert(TM), Safety Flasher(TM), Sport Strobe(TM),
Child Safe Alarm(TM), Window Alert(TM), Motion Alert(TM), Emergency
Whistle(TM), and Auto Alert(TM). The Company markets products manufactured by
other companies under the foregoing trademarks.

The Company also acquired the trademarks Screecher(R), Peppergard(R),
Slam(R), and Mace (Mexico)(R). The Company developed the Viper(R) trademark
in 1993.

In August 1993, the Company acquired an exclusive worldwide license to the
patent for the safety top device used on the Viper(R) brand defense spray.
The Company is currently producing a Viper(R) spray line for sales to its
foreign franchisees.

In June 1994, as part of a license for a defense spray disarming device, the
Company acquired a co-exclusive license to manufacture and sell products
under U.S. Patent No. 5,310,086 until the expiration of the last patent
covering the invention. The Company does not intend to market products using
this patent.

As part of the August 1994 acquisition of the assets of KinderGard
Corporation, the Company acquired the trademark KinderGard(R) which is
registered in the United States and Japan.

As part of a January 1995 license agreement for a child-to-parent strap,
which is part of the KinderGard(R) line, the Company acquired the following
trademarks: Zip-a-Babe(R), Hand n-Hand(R) and Safe-T-Zip(R).

The Company received trademark registration for Muzzle(R) in Canada on June
17, 1997.

The Company has been issued letters patent on the locking mechanism for the
Mark VI defense spray unit.

The Company is in the process of applying for the registration of the Mace(R)
trademark in the European Community and South Africa.

In July 1998, in connection with its sale of its Law Enforcement division,
the Company transferred its Mace (R) brand trademark and all related
trademarks and a patent (No. 5,348,193) to its wholly-owned subsidiary, Mace
Trademark Corp. The purchaser of its Law Enforcement division received a 99
year license to use the Mace (R) brand, certain other such trademarks and the
patent in the Law Enforcement Market only.

Except as described above, the Company holds no material patents or patent
licenses, although it endeavors to maintain the confidentiality, as trade
secrets, of certain formulations and processes.

An essential part of the Company's business strategy has been to capitalize
on, promote aggressively, and enhance the public's awareness and confidence
in the Mace(R) trademark. The Company relies on the trademark laws to protect
its proprietary rights to the Mace(R) trademark. The Company uses a newspaper
clipping service to identify significant unauthorized uses of the Mace(R)
trademark and provides notice to such users of the Company's willingness to
take legal action for continued unauthorized use. Mace Security notifies all
persons that Mace Security knows are using the Mace(R) trademark improperly
or without authority of Mace Security's willingness to take legal action for
continued unauthorized use. The Company also engages in trademark advertising
in several literary publications and on the internet. All of the Company's
distributors are authorized to use the Mace(R) trademark for advertising. The
Company is not aware of any competitors repeatedly misusing the Mace(R)
trademark in any material manner. There can be no assurance, however, that
the efforts taken by the Company to protect its proprietary rights are or
will be adequate to prevent misappropriation or that the frequent use of the
Mace(R) trademark by the public as an encompassing description of defense
sprays will not jeopardize its proprietary status.
<PAGE>

The Company hopes that the license to the purchaser of its Law Enforcement
division to use the Mace(R) trademark and other related trademarks on
products sold to the Law Enforcement Market will continue the high profile
and market recognition, and enhance the value, of the Mace(R) brand name.

REGULATORY MATTERS

The distribution, sale, ownership and use of Consumer defense sprays are
legal in all 50 states and the District of Columbia. However, in most state
sales to minors are prohibited and in several states (MA, MI, NE, NY, WI)
sales of defense sprays are highly regulated.

On January 1, 1996, California eased restrictions on defense sprays. On
November 1, 1996, New York lifted an overall ban on defense sprays allowing
for the sale of oleoresin capsicum (OC) pepper sprays in licensed pharmacies
and licensed gun stores only. Massachusetts requires both users and sellers
to be licensed. Wisconsin allows the sale of oleoresin capsicum (OC) pepper
sprays only and they must be sold from behind a counter or under glass.
Michigan does not permit sales of chloroacetophenone (CN) sprays. Nevada
permits sales of orthochlorobenzalmalononitrile (CS) sprays only. The Company
has been successful notwithstanding these state regulations. There can be no
assurance, however, that broader, more severe restrictions will not be
enacted that would have an adverse impact on the Company's financial
condition.

The Company generated hazardous waste as a by-product of manufacturing
certain products of its Law Enforcement division. The Company believes that
it is in compliance with all state and local statutes governing the disposal
of such hazardous material through its contract with a licensed hazardous
material disposal company. By October of 1998, the Company had disposed of
substantially all the hazardous waste which was created while it owned and
operated the Law Enforcement division. The cost of the disposal of the
hazardous waste was booked as a charge against the shutdown reserve created
when the Company sold its Law Enforcement division in July of 1998. The
Company believes it is in compliance with all federal, state, and local
environmental laws.

RESEARCH AND DEVELOPMENT

Research and development expenses were approximately $58,000 in 1998 and
$81,000 in 1997. The Company has an on-site laboratory. Research and
development is used by the Company to maintain its reputation in the defense
spray industry. The Company is continually reviewing ideas and potential
licensing arrangements to expand its product lines. Particularly, the Company
spent a significant portion of its research and development budget in the
creation of MaceCash(TM) and other MACB products.

EMPLOYEES

As of April 2, 1999, the Company employed 50 individuals of whom 6 were part
time. The Company's employees are not subject to a collective bargaining
agreement. After completion of its obligations under the Department of
Defense contract, the Company anticipates reducing its number of employees
appropriately.

ITEM 2. PROPERTIES

The Company leases its headquarters in Bennington, Vermont. Substantially all
of the Company's operations, including administration and sales, and all of
its production facilities are located at the Bennington facility. The
facility consists of approximately 220,000 square feet; 60,000 square feet is
referred to as the South Wing of the Holden-Leonard Mill (the "South Wing")
and is leased from one landlord while the remaining 160,000 square feet is
leased from another owner (made up of the "Center Wing" and "North Wing").
The Company acquired from G&G Realty, Inc. , a company that was formerly
co-owned by Jon E. Goodrich, the President and CEO of the Company, a purchase
option with respect to the South Wing and has entered into a real estate
purchase agreement with the Vermont Economic Development Authority for the
Center and North Wings. The term of the South Wing lease expires on January
31, 2000, and requires monthly payments of $6,161, plus the Company's
<PAGE>

proportionate share of taxes, insurance, utilities and an annual cost of
living increase. The purchase option may be exercised for $600,000 at the end
of the lease term. The purchase agreement with respect to the Center and
North Wings contemplates that the Company will purchase the property for
$1,000,000 after certain contingencies are satisfied, including specific
environmental contingencies to be met by the seller. If these contingencies
are not satisfactorily met or waived, the Company has a right to lease the
Center and North Wings. The lease requires monthly payments of $4,000 together
with all utilities, assessments, taxes and maintenance. (See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" and Note 10 to "Notes to Financial
Statements").

The Company subleases a portion of the South, Center and North Wings of the
Holden-Leonard Mill. One of the sublease agreements is with a tenant owned
partially by Jon Goodrich, the Company's President and CEO. Total sublease
rental income was $110,406 and $93,231 in 1998 and 1997, respectively. The
Company does not have any current plan to invest in other real estate,
however, the Company may invest in various parcels of real estate from time
to time without stockholder approval. The Company believes that all of its
properties are adequately covered by insurance and believes its properties
are suitable and adequate for its current and near term needs.

ITEM 3. LEGAL PROCEEDINGS

The following discloses all pending litigation against the Company, other
than routine litigation, involving claims for damages in excess of $724,000,
which constitutes approximately ten (10%) percent of the Company's current
assets at December 31, 1998, and also discloses the disposition of claims
previously disclosed.

As disclosed in the Company's 1994 Form 10-KSB, on January 25, 1994 a suit
was filed by Carmeta Gentles on her own behalf and as personal representative
of the estate of Robert Gentles in Ontario Court (General Division), Ontario,
Canada, claiming intentional or negligent manufacture and distribution of the
Mark V Mace(R) brand defense spray unit and that its contents contributed to
the suffering and death of Robert Gentles while in the Kingston Penitentiary
in October 1993. The Company was added as a party defendant on February 8,
1995. The plaintiff seeks five million dollars in damages. The Company
forwarded this suit to its insurance carrier for defense. The Company does
not anticipate that this claim will result in the payment of damages in
excess of the Company's insurance coverage.

As disclosed in the Company's Form 10-QSB for the quarter ended June 30,
1995, on April 19, 1995 a suit was filed by Elaine Thomlinson, et al., in
Ontario Court (General Division), Ontario, Canada, claiming unspecified
damages to multiple school children for personal injuries, pain and
suffering, emotional trauma and financial loss and expense in consequence of
their exposure to noxious and hazardous substances while participating in a
simulated emergency exercise conducted at a local school by municipal
authorities. This case has been dismissed without the payment of any damages
on the part of the Company or its insurance company.

On July 27, 1998, the Company was added as a defendant in a suit filed in the
state of West Virginia by Susan H. Jackman, et. al. The litigation concerns an
attack on Mrs. Jackman by two dogs and the alleged failure of a "Muzzle(R)"
product distributed by the Company to repel the dogs. The suit claims product
liability and negligence and seeks one million dollars in damages. The
Company forwarded this suit to its insurance carrier for defense. The Company
does not anticipate that this claim will result in the payment of damages in
excess of the Company's insurance coverage.

Although the Company is not aware of any substantiated claim of permanent
personal injury from its products, the Company is aware of reports of
incidents in which, among other things, defense sprays have been
mischievously or improperly used, in some cases by minors, have not been
instantly effective or have been ineffective against enraged or intoxicated
individuals. Incidents of this type, or others, could give rise to product
liability or other claims, or to claims that past or future advertising,
packaging or other practices should be, or should have been, modified, or
that regulation of products of this nature should be extended or changed.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
<PAGE>

There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's Common Stock is traded on the NASDAQ Stock Market under the
symbol MACE. The following table sets forth for the calendar periods
indicating the high and low sales price for the Common Stock for each quarter
within the last two fiscal years.

QUARTER ENDED HIGH LOW
March 31, 1997 1 3/4 1 1/8
June 30, 1997 1 3/8 7/8
September 30, 1997 1 5/16 25/32
December 31, 1997 1 1/4 7/8
March 31, 1998 1 9/16 7/8
June 30, 1998 1 11/16 1 1/4
September 30, 1998 1 1/2 1 1/8
December 31, 1998 1 13/16 1 3/16
March 31, 1999 6 1 9/16

The past performance of the Company's securities is not necessarily
indicative of future performance. As of April 2, 1999, there were
approximately 224 holders of record of the Company's Common Stock. The
Company has not paid cash dividends on its Common Stock since its initial
public offering. The Company's current bank financing imposes certain
restrictions on the Company's ability to pay dividends. Payment of dividends,
if any, will be at the discretion of the Company's Board of Directors and
will depend on, among other factors, earnings, bank restrictions, capital
requirements and the results of operations and financial condition of the
Company. The Company does not intend to pay dividends in the foreseeable
future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following can be interpreted as including forward looking statements
under the Private Securities Litigation Reform Act of 1995. Such statements
are typically identified by the words "intends", "plans", "anticipates",
"believes", "expects", or words of similar import. Various important factors
that could cause actual results to differ materially from those expressed in
the forward looking statements are identified below and may vary
significantly based on a number of factors including, but not limited to,
marketing success, product development, production, manufacturing costs,
competitive conditions, the change in economic conditions of the various
markets the Company serves as well as changes in potential transactions that
have not been fully negotiated and evidenced by executed agreements. Actual
future results may differ materially from those suggested in the following
statements.

RESULTS OF OPERATIONS

Year Ended December 31, 1998 compared to Year Ended December 31, 1997.

The following discussion should be read in conjunction with the accompanying
Financial Statements and Notes thereto.
<PAGE>

Net Consumer sales decreased by $253,133 or 9.5% in 1998 compared to 1997.
The major component contributing to this decrease is a $395,603 decline in
Consumer defense spray sales offset in part by increased sales of $89,961 of
MACB products and $55,000 in franchise fees. Substantially all categories of
the consumer defense spray market realized a sales decrease in 1998 as
compared to 1997, which coincides with the continuing trend exhibited by the
declining defense spray market. Gross profit as a percent of sales increased
to 48.8% as compared to 38.1% in 1997. The margins realized in 1997 were
adversely affected by book to physical adjustments and additions to inventory
reserves for slow moving and obsolete items. Had these adjustments not been
made, the margins in 1997 would have been 48.1%, indicating a slight increase
in margins for 1998 over 1997 on a comparative basis.

General, administrative and selling expenses overall increased 15.3% in 1998
compared to 1997. As a percentage of net sales, these expenses increased to
71.5 % in 1998 from 56.1% in 1997.

General and administrative expenses increased by $348,277 or 41.3 % in 1998
compared to 1997. As a percent of net sales, these expenses increased to
49.6% in 1998 from 31.7% in 1997. The increase was primarily attributable to
Mace Security Centers, Inc., the franchise subsidiary of the Company, which
incurred $209,615 of general and administrative expenses in 1998. Mace
Security Centers, Inc. was not operating in 1997. In addition, the Consumer
division is absorbing all the general and administrative expenses of the
Company which previously were allocated in part to other divisions which have
now been discontinued. Selling expenses decreased by $119,687 or 18.5% in
1998 compared to 1997. As a percentage of net sales, these expenses decreased
to 21.9% in 1998 from 24.3% in 1997.

Operating loss as a percentage of net sales increased to 22.7% in 1998 from
18% in 1997. Other income/expense(net) was income of $263,147 in 1998
compared to income of $8,448 in 1997. These net amounts are comprised of
interest income and rents from sublets on the Company's leased facility and
interest expense on the Company's term loan with First National Bank of New
England. (See "Liquidity and Capital Resources").

For discussion of discontinued operations see "Liquidity and Capital
Resources - Sale of Law Enforcement division" and "Liquidity and Capital
Resources - Sale of Subsidiaries" below.

Following the sale of the Law Enforcement division, and in light of the
continuing decline in sales of Consumer products, the Company is considering
all opportunities to maximize shareholder value, including but not limited
to, potential acquisitions or dispositions, strategic alliances, stock
issuances and/or restructuring management. Such "acquisitions" may include
companies or assets not consistent with the Company's historical business
and/or may include a reverse merger pursuant to which the Company's current
Board of Directors and current management may be replaced. In the event of a
change of control of the Company, there can be no assurance that the
Company's business of selling personal protection products will continue.
(See "Executive Compensation - Change in Control" and "Subsequent Events -
Proposed Change in Control, Private Placement and Merger with American Wash
Services, Inc.")

LIQUIDITY AND CAPITAL RESOURCES

In September 1997, the Company refinanced its long-term debt through the
First National Bank of New England ("FNB"). Two term loans totaling
$1,800,000 bearing interest at prime plus 1.50% (10.0% at December 31, 1997)
payable in monthly installments of $23,791, including interest, due October
1, 2007, were obtained. Of the proceeds, $593,750 was used to pay off the
Company's long-term debt through Key Bank of New York. Additionally, a
$250,000 line of credit bearing interest at prime plus 1% (9.5% at December
31, 1997) due May 31, 1998 was obtained. The Company paid off the loan to FNB
simultaneously with the closing of the sale of its Law Enforcement division
in July of 1998.

Prior to consummating the loan with FNB, promissory notes to TransTechnology
Corporation relating to the acquisition of the assets of Federal Laboratories
(the key assets of the Company's Law Enforcement division), were paid in full
with cash from operations.
<PAGE>

At December 31, 1998, the Company's open orders totalled $41,197 compared to
$1,099,455 for the prior year-end. Open orders are orders that have not yet
been manufactured but are scheduled for production and delivery. Inventory
decreased $163,995 in 1998. For the year ended December 31, 1998, capital
expenditures were $122,568 compared to $238,726 in 1997.

Additionally, the Company is a party to a real estate purchase agreement with
the Vermont Economic Development Authority (VEDA) for the purchase of the
Center and North Wings of its headquarters, after the satisfaction or waiver
of certain contingencies by VEDA. The purchase price is $1,000,000, payable by
delivery of $150,000 in cash and a promissory note to VEDA for $850,000 at 4%
interest per annum, based on a 20 year amortization schedule with a balloon
payment of $100,000 due at the end of ten years. (See "Properties"). The
Company previously deposited $75,000 of the total cash portion into an escrow
account as required by the agreement. The Company has elected not to purchase
the building at this time and is leasing the premises for $4000 per month,
together with taxes, insurance and utilities.

At December 31, 1998 the Company had $4,183,222 in cash and cash equivalents.
These funds are expected to be used by the Company for operations and for the
purposes deemed to be appropriate by the Company's Board of Directors. (See
"Executive Compensation - Change in Control" and "Subsequent Events - Proposed
Change in Control, Private Placement and Merger with American Wash Services,
Inc.")

Sale of Law Enforcement division.

On July 14, 1998, the Company sold substantially all of the assets of its Law
Enforcement division. The purchase price was $4,985,651, paid in cash. In
conjunction with the sale of assets, the Company licensed to the purchaser the
use of Mace(R) and related trademarks and a patent for use by the purchaser
in the Law Enforcement Market only and received a one-time license fee of
$650,000. The Company retained the cash and accounts receivables from the Law
Enforcement division at closing.

The Company applied $1,725,202 of the purchase price received to pay off the
amount due to FNB under its term loans.

A portion of the purchase price ($600,000) was retained by the purchaser in
escrow to secure, among other things, the Company's obligations under the
representations and warranties in the purchase agreement. On January 20,
1999, $480,000 of the escrow was returned to the Company. The remainder will
be released on or about July 14, 1999 so long as no claim is brought against
the Company for which the purchaser is entitled to set off against the escrow
funds.

Sale of Subsidiaries

In the three months ended September 30, 1998, the Company disposed of two
wholly-owned subsidiaries, MSP, Inc. (a Colorado distributor) and MSP Retail,
Inc. (Colorado retail stores). The contracts between the Company and the
former owners of the distributorship and retail stores allowed the Company to
put back the shares of MSP, Inc. and MSP Retail, Inc. to the former owners if
certain pre-tax earnings targets were not met within one year following the
Company's acquisition. In both cases, the aforementioned subsidiaries failed
to make their pre-tax earnings targets.

The Company put back the shares of MSP, Inc. to the former owner in exchange
for 80,000 shares of the Company that were tendered as consideration in the
acquisition of MSP, Inc.

In a modified version of the put with respect to MSP Retail, Inc., the
Company transferred the net assets of MSP Retail, Inc. to a corporation owned
by the former owner in exchange for 176,666 shares of the Company that were
tendered as consideration in the acquisition of MSP Retail, Inc.

Further, both contracts called for repayment of working capital loaned by the
Company to MSP, Inc. and MSP Retail, Inc. The repayment amount as defined by
the contracts is the money loaned by the Company reduced by operating losses
incurred by the respective subsidiary during the twelve-month period each was
owned by the Company. The reduction of amounts owed was necessary to fulfill
another contract provision which required the Company to be responsible for
losses incurred by the subsidiaries during Company ownership. As a result of
the disposition of these subsidiaries, the Company incurred a loss of $67,013
with respect to MSP, Inc. and $47,317 with respect to MSP Retail, Inc.
<PAGE>

Proposed Sale of the Assets of MACB

The Company has entered into a letter of intent for the sale of substantially
all the assets of its MACB division for approximately $1,100,000. Only
certain liabilities of the division will be assumed by the purchaser. The
Company will retain the cash and accounts receivable from this division.
There are no definitive agreements executed and the terms of the letter of
intent are not binding with respect to this proposed transaction.
Additionally, the purchaser's obligation to acquire the MACB division is
conditioned on its obtaining financing sufficient to effect this transaction.

The proposal calls for a downpayment with the remainder of the purchase
price paid pursuant to a nonnegotiable promissory note, payable annually over
three years, with interest at a floating rate per annum equal to the prime
rate quoted by the Wall Street Journal and payable on the first and second
anniversaries of the closing.

The Company also expects to enter into agreements to receive a 1% royalty on
products sold using the brand names Mace Cash(TM), Mace Anti Crime(TM) and
Mace Anti Crime Bureau(R) and contingent consideration in the form of a 5%
royalty on certain sales made by the purchaser within three years following
the closing date.

ITEM 7. FINANCIAL STATEMENTS

Financial Statements filed as a part of this report:

Report of Independent Accountants F-2
Consolidated Balance Sheets at December 31, 1998 and 1997 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1998 and 1997 F-5
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On August 13, 1997, at the direction of its Board of Directors, the Company
advised Coopers & Lybrand, LLP ("Coopers") that due to cost containment
efforts, its engagement of Coopers as its independent public accountants was
terminated, subject to ratification by the Company's shareholders. The
Company's Board of Directors engaged Urbach Kahn & Werlin PC as its new
independent public accountants. The Company's decision to dismiss Coopers was
based solely on cost considerations. There were no disagreements with Coopers
on any matter of accounting principles or practices, financial statement
disclosure or otherwise. None of the Company's financial statements contained
an adverse opinion or disclaimer of opinion.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following persons are directors and officers of the Company as of April
2, 1999.

Name Age Title

Marvin P. Brown .............. 69 Chairman of the Board
<PAGE>

Jon E. Goodrich............... 53 CEO, President and Director
Neil J. Campolungo............ 56 Director
Mark A. Capone................ 50 CFO, Treasurer, Vice President
Lewis Cohen................... 51 of Finance Director
Eric Crawford................. 28 Vice President of Operations
Howard S. Edelman............. 62 Director, Vice President of Franchising
R. David Garwood.............. 56 Director
Eduardo Nieves, Jr............ 25 Corporate Secretary
Linda Sandquist............... 48 Assistant Corporate Secretary,
Assistant Treasurer

Marvin P. Brown was elected President, Chief Executive Officer, and director
of the Company in January 1997. On March 14, 1997, Mr. Brown resigned as
President and CEO and assumed the position of Chairman of the Board. Since
1993 he has been associated with Wolff Investment Company, Inc., a brokerage
firm and member of the National Association of Securities Dealers, Inc., as
Director of Corporate Finance and Senior Vice President. From 1988 through
1992 he had been a senior vice president of Tucker Anthony, a member of the
New York Stock Exchange. Prior to that period, he had held senior officer
positions with various members of the New York Stock Exchange. He also has
served as president of Zenith Laboratories, Inc., formerly a leading
independent manufacturer of generic pharmaceuticals, from 1968 to 1969. Wolff
Investment Group, Inc. has served as a financial consultant to the Company on
several occasions from 1993 to 1996. (See "Certain Relationships and Related
Transactions").

Jon E. Goodrich served as Chairman of the Board of Directors of the Company
from its inception in 1987 until June 1995. He served as President of the
Company from its inception until January 15, 1996 when he tendered his
resignation as President and CEO and was renamed Chairman of the Board. On
March 14, 1997, he was reappointed as President and CEO and resigned as
Chairman of the Board. He was also a vice president of Gould & Goodrich
Leather, Inc., a manufacturer of holsters, belts and related products and
president of G&G Realty, Inc., a real estate management corporation until
January of 1997 when he resigned from his positions and terminated his
interest in both companies. (See and "Employment/Consulting Contracts and
Termination of Employment and Change-in-Control Arrangements").

Mark A. Capone, a CPA, was employed by the Company on September 2, 1997 as
the Company's Chief Financial Officer, and holds the titles of Vice President
of Finance and Treasurer of the Company. Prior to joining the Company, Mr.
Capone operated his own accounting firm providing business consulting and tax
preparation services. He has over 25 years experience in the accounting
profession which includes holding a Senior Financial position with
International Paper Company. Mr. Capone is responsible for all of the
Company's accounting and treasury functions, as well as corporate
development. (See "Certain Relationships and Related Transactions").

Lewis C. Cohen has been a director of the Company since August 7, 1997. Mr.
Cohen is the President and sole shareholder of Apahouser Access Systems, Inc.
since 1976. Apahouser Access Systems, Inc. supplies and services security
hardware and electronic systems to industry, institutions and governmental
entities throughout New England and in the Middle East. Mr. Cohen also serves
as treasurer and is on the boards of trustees of Sterling College in Vermont,
the Corporation at Babson College, Wellesley, Massachusetts and the Institute
for Community and Religion at Brandeis University.

Neil Campolungo has been a Director of the Company since May 10, 1997. Since
1991, Mr. Campolungo has been the CEO and sole shareholder of NJC Associates,
a consulting/marketing firm for public and private sector companies. Prior to
that, he was Division President of Prentice Hall Legal and Financial
Services, a division of Paramount Communications, a Fortune 100 company. Mr.
Campolungo serves on numerous boards of directors.

Eric Crawford became Vice President of Operations on August 7, 1998. He has
been employed by the Company since 1994 and has, during that time, held a
variety of positions including Assistant Plant Manager and Director of Law
Enforcement Sales. Prior to joining the Company, Mr. Crawford obtained a
Bachelor of Science degree from Castleton State College.
<PAGE>

Howard S. Edelman became a director on September 26, 1997. Mr. Edelman, a
CPA, has been employed by the Company since July 1, 1997 in connection with
the acquisition by the Company of MSP, Inc. (formerly known as Global
International Security Products), an importer and distributor of unique
pepper sprays and related personal protection products primarily to civilian
overseas markets, entrepreneurs, small retail stores and mail order catalog
firms. Since September 26, 1997, Mr. Edelman has been serving as Vice
President of Franchising, and in that capacity is responsible to develop and
manage the Company's franchise program. Mr. Edelman was the president, a
director and major stockholder of Global International Security Products from
1990 until its acquisition by the Company (See "Certain Relationships and
Related Transactions").

R. David Garwood was appointed as a director of the Company on February 27,
1998 to fill a vacancy created when the Board of Directors increased the size
of the Board. Mr. Garwood is, and has been since 1974, the president and
founder of R. D. Garwood, Inc., a management firm based in Atlanta, Georgia
that assists manufacturing and marketing firms. Mr. Garwood's clients include
Coca-Cola, Eastman Kodak, Allied Signal, Georgia Pacific, M&M, Monsanto and
others.

Eduardo Nieves, Jr. was appointed to the position of corporate secretary on
August 7, 1998. He has been employed by the Company since March 1997 and has
been responsible for corporate communications and investor relations since
such time. Prior to that time, he was a student at Southern Vermont College
where he obtained a degree in communications.

Linda Sandquist became the Assistant Secretary and Assistant Treasurer of the
Company on September 18, 1998. Her employment began in November of 1997 as
the manager of cost accounting. Prior to that time she worked for 11 years at
Flomatic Corporation in various accounting positions.

BOARD OF DIRECTORS

The number of directors on the Board is currently fixed at six. Each director
serves for a term of one year or until a successor is elected and qualified.
Officers are appointed by, and serve at the discretion of, the Board of
Directors. Virginia de Ganahl Russell, who was a director until the 1998
Annual Shareholder meeting, missed two of the five Board meetings held in
1998. No other directors missed any Board Meetings held during 1998. The
Chairman receives a fee of $750 and each director, who is not also an
employee of the Company, receives $500 per meeting plus out of pocket travel,
meals and lodging expenses for attendance at each board meeting. All
directors, other than Messrs, Brown, Goodrich and Edelman have been granted
options to purchase 20,000 shares of Common Stock in connection with their
roles as directors. Mr. Brown and Mr. Edelman have each been granted options
to purchase 10,000 shares of Common Stock in connection with his role as
director.

The Board of Directors has the following standing Committees, among others:
the Audit Committee, the Compensation Committee, the Planning Committee and
the Nominating Committee. The Audit Committee consists of Messrs. Campolungo,
Garwood, and Cohen. The Audit Committee recommends matters involving the
engagement and discharge of independent auditors, reviews the plans for and
results of the Company's procedures for internal auditing, and reviews the
continuing status of the Company's system of internal accounting controls.
The Compensation Committee consists of Messrs. Cohen, Brown and Campolungo
and makes recommendations regarding management compensation and administers
the Company's Non-qualified Stock Option Plan. The Planning Committee
consists of Messrs. Garwood, Goodrich, Cohen and Brown and is responsible for
recommending long-term strategies to the Board. The Nominating Committee
recommends persons to serve as directors of the Company and consists of
Messrs. Brown and Goodrich.

Mr. Brown and the Company have a verbal agreement pursuant to which Mr. Brown
provides executive services to the Company on an as needed basis and receives
a salary of $500 per day and reimbursement of business expenses.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
<PAGE>

Based solely on a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its fiscal year ended December 31, 1998, no person (other
than Messrs. Garwood, Mr. Nieves and Crawford) known to be a director,
officer or the beneficial owner of more than 10% of the Company's outstanding
Common Stock, failed to file on a timely basis, reports required to be filed
by Section 16(a) of the Exchange Act during the most recent fiscal year. All
reports not timely filed by Messrs. Crawford, Garwood and Nieves have since
been filed.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the aggregate compensation, cash and non-cash,
awarded to, earned by or paid by the Company to all persons who served as its
Chief Executive Officer at any time during the most recent fiscal year. No
other executive officers received annual compensation (consisting solely of
base salary and bonus, if any) in excess of $100,000 for the year ended
December 31, 1998:

Summary Compensation Table

Name and Year Ended Annual Other
Principal Position December 31 Salary Bonus Compensation

Jon E. Goodrich(1) 1998 $123,714 -- --
President and Chief 1997 $125,214 -- --
Executive Officer 1996 $124,023 $25,000 --

Mr. Goodrich served as President and CEO until January 15, 1996, and, for the
remainder of 1996, served as an advisor to the Board of Directors. He was
reappointed as President and CEO on March 14, 1997.

Options/Warrants

In September 1993, the Board of Directors of the Company adopted the Mace
Security International, Inc. Non-qualified Stock Option Plan (the "Plan"),
which was approved by the stockholders of the Company. The Plan provides for
the issuance of up to 630,000 shares of Common Stock upon exercise of the
options. The options are considered non-qualified stock options and are not
transferable by the recipient. The Plan is administered by the Compensation
Committee of the Board of Directors, which may grant options to employees,
former employees, directors and distributors for, and consultants to, the
Company. The term of each option may not exceed fifteen years from the date
of grant. Immediately exercisable options to purchase approximately 501,000
shares of Common Stock were outstanding to employees, former employees,
consultants, and former directors as of December 31, 1998 under the Plan and
options to purchase 428,000 shares are outstanding as of April 2, 1999. As of
April 2,1999, options to purchase 78,000 shares have been exercised.

Jon E. Goodrich, The Company's President and CEO, is the only officer who
receives compensation in excesss of $100,000 annually. Mr. Goodrich has never
been granted options by the Company. Consequently, tables disclosing
information with respect to options granted to in 1998 to the named current
and former executive officers of the Company and information with respect to
the year-end value of options held by the named current and former executive
officers of the Company have been excluded.

In connection with the acquisition of the trademarks and assets of KinderGard
Corporation, the Company granted to the stockholders of KinderGard
Corporation warrants to purchase 60,000 shares of the Company's Common Stock
at a per share exercise price equal to $4.25 exercisable until August 2004.

Employment/Consulting Contracts and Termination of Employment and
Change-in-Control Arrangements
<PAGE>

Jon E. Goodrich is employed by the Company under an employment agreement that
expires September 1, 1999. Mr. Goodrich is entitled to an annual salary of
$125,000. The agreement prohibits Mr. Goodrich from accepting employment with
any other entity and further prohibits him from competing with the Company
for a two year period following his voluntary termination of employment with
the Company or termination of his employment by the Company for cause, as
defined in the agreement. Should Mr. Goodrich's employment be terminated
without cause, he would be entitled to all payments for the term of the
agreement.

Change In Control

The Company has entered into an agreement with Louis D. Paolino, Jr. to
become its Chairman and Chief Executive Officer. He will bring with him an
entirely new management team. Mr. Paolino, a graduate of Drexel University
with a B.S. in Civil Engineering, was formerly the Chairman, President and
CEO of Eastern Environmental Services, Inc., a solid waste management
services company from June 1996 through December 1999. When Mr. Paolino
joined Eastern in June 1996, Eastern's sales for that fiscal year totaled
$7.6 million with a market value of less than $10 million and with a stock
price of $1.50. Eastern was recently acquired by Waste Management, Inc.
wherein Eastern shareholders received $32 of value per share of Eastern.
Before that time, Mr. Paolino was President of Soil Remediation of
Philadelphia, Inc., a company engaged in the business of treating
contaminated soil and which was sold to USA Waste Services, Inc., a waste
management corporation, in September 1993. From September 1993 to June 1996,
Mr. Paolino served as Vice President of USA Waste Services, Inc. From
November 1995 to January 1996, Mr. Paolino served on the Board of Directors
of Metal Management, Inc., formerly known as General Parametrics Corp., a
publicly traded company. THE SUCCESS OF EASTERN ENVIRONMENTAL HAS NO BEARING
ON, AND SHOULD NOT BE CONSIDERED AN INDICATION OF, THE POTENTIAL FUTURE
RESULTS OF OPERATIONS FOR THE COMPANY.

As a condition to his agreement to serve as CEO, the Company's current Board
of Directors, other than Mr. Goodrich, will resign and be replaced by a new
Board selected by Mr. Paolino.

The sales of the above-referenced 5,585,000 shares will result in a total
capital investment by Mr. Paolino, members of Mr. Paolino's management team
and others of approximately $8.83 million.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of April 2, 1999, certain information with
respect to beneficial ownership of the Common Stock of the Company (the only
outstanding security) by each director, each executive officer and all
directors and executive officers as a group and by each person known by the
Company to be the beneficial owner of more than five percent of the Company's
Common Stock. The address for all executive officers and directors is 160
Benmont Avenue, Bennington, Vermont. The information regarding shareholders
that are the beneficial owners of 5% or more of the currently outstanding
stock is based on information from the Company's transfer agent and filings
<PAGE>

made by the beneficial owners with the Securities and Exchange Commission.
The Company bears no responsibility for the accuracy of the information
contained in, or the timeliness of, such filings.

Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent(1)

Jon E. Goodrich(2) (3) 2,239,246 31.1%
Marvin P. Brown(4)(6) 380,388 5.21
Neil J. Campolungo(5)(6) 30,000 *
Lewis C. Cohen(5)(6)(7) 63,500 *
Howard Edelman(6) 67,700
R. David Garwood(5)(6)(8) 57,500 *

All executive officers
and directors as a group
(10 persons) 2,891,834(6) 39%

Ronald I. Heller(10) 681,375 9.46%
M. H. Meyerson & Co., Inc.
525 Washington Blvd.,
34th Floor
Jersey City, NJ 07310

David S. Nagleberg(11) 681,375 9.46%
M.H. Meyerson & Co., Inc.
525 Washington Blvd.,
34th Floor Jersey City,
NJ 07310

*Indicates beneficial ownership of less than 1%

(1) Calculation based on 7,203,000 outstanding shares plus shares issuable to
the named person under options/warrantsexercisable within 60 days.
(2) Excludes shares held by the named persons' spouses. The named directors do
not have shared voting or dispositive power with respect to such shares.
(3) Includes 350,000 shares that are the subject of options granted by Mr.
Goodrich to several individuals in private transactions.
(4) Includes immediately exercisable options to purchase 300,000 shares of
Common Stock, 100,000 of which were granted by the Company in consideration
of his agreement to join the Company, and 200,000 of which were granted by
individuals in private transactions.
(5) Includes immediately exercisable options to purchase 10,000 shares of
Common Stock granted in recognition for serving as a director.
(6) Includes options to purchase 10,000 shares of Common Stock exercisable in
the event of a change in a majority of the Board as constituted on
May 1, 1998.
(7) Includes 37,500 shares owned by a 501(c)(2) organization, of which Mr.
Cohen is Trustee, from which he will derive no personal benefit.
(8) Includes immediately exercisable options to purchase 12,500 shares of
Common Stock which were granted by an individual in a private transaction.
(9) The total number of shares deemed outstanding for the purpose of this
calculation is 7,405,500, which includes shares issuable to any of the
persons listed above under options exercisable within 60 days,
exclusive of shares underlying options granted by individuals on shares
already outstanding (to avoid duplication).
(10) Includes 445,375 shares of Common Stock in the Ronald I. Heller Individual
Retirement Account and 236,000 shares of Common Stock directly owned
by his wife.
(11) Includes 681,375 shares held by a trust for which the named person and
his spouse are the trustees.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
<PAGE>

Mr. Brown, who serves as Chairman of the Board, and the Company have a verbal
agreement pursuant to which Mr. Brown provides executive services to the
Company on an as needed basis and receives a salary of $500 per day and
reimbursement of business expenses.

The Company has entered into an employment agreement with Mark A. Capone
pursuant to which Mr. Capone serves as the chief financial officer of the
Company and receives an annual salary of $80,000 plus benefits paid to all
employees generally.

The employment agreement between the Company and Mr. Edelman, a Vice
President of the Company and a director since September 26, 1997, has expired
pursuant to its terms. Mr. Edelman remains an employee of the Company on an
"at-will" basis at an annual salary of $40,000. Mr. Edelman is responsible to
develop and manage the Company's franchise program.

In January 1997, the Company retained the law firm of Donovan & O'Connor,
LLP, a firm at which Mr. Goodrich's brother is a principal, to render legal
services in litigation matters and general corporate matters. The Company
paid $31,017 and $54,354 to such firm in the fiscal years ended December 31,
1998 and 1997, respectively. The Company believes that all transactions with
related individuals and entities were on terms at least as favorable to the
Company as those that would have been reached with unrelated third parties.

SUBSEQUENT EVENTS

Proposed Sale of Assets of MACB

The proposal calls for a downpayment with the remainder of the purchase price
paid pursuant to a nonnegotiable promissory note, payable annually over three
years, with interest at a floating rate per annum equal to the prime rate
quoted by the Wall Street Journal and payable on the first and second
anniversaries of the closing.

Proposed Change in Control, Private Placement and Merger with American Wash
Services, Inc.

As a condition to his agreement to serve as CEO, the Company's current Board
of Directors, other than Mr. Goodrich, will resign and be replaced by a new
Board selected by Mr. Paolino.

The sales of the above-referenced 5,585,000 shares will result in a total
capital investment by Mr. Paolino, members of Mr. Paolino's management
team and others of approximately $8.83 million.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Reports on Form 8-K -No reports on Form 8-K were filed during the last
quarter of 1998.

(b) Exhibits

3(i) Articles of Incorporation - Vermont(1)
3(i)2 Articles of Incorporation - Delaware(1)
3(i)3 Merger Agreement(1)
3(i)4 Certificate of Amendment for Name Change(1)
3(ii) By-Laws(1)
3(ii)2 Amendment No. 1 to By-Laws, effective 11/12/93(1)
3(ii)3 Amendment No. 2 to By-Laws, effective 2/24/96(5)
<PAGE>

9.1 Shareholders Voting Agreement between 321 Investments, Inc., Rajan
Shamdasani, Jon E. Goodrich, Robert P. Gould and Robert D. Norman dated
March 22, 1996(5)
10.1 Employment Agreement between the Company and Jon E. Goodrich dated as of
September 1, 1993(1) 10.2 Consulting Agreement between the
Company and Robert P. Gould dated as of September 1, 1993(1)
10.3 1993 Non-Qualified Stock Option Plan(1)
10.4 Form of Underwriter Warrants(1)
10.5 Form of Selected Dealers Agreement(1)
10.6 Sales Agreement dated May 1, 1992 between the Company and Mosler Inc.(1)
10.7 Purchase and Sales Agreement dated July 19, 1991 between the Company and
Home Protection Concepts, Inc.(1)
10.8 Purchase and Sales Agreement dated April 1, 1993 between the Company and
Personal Protection Consultants, Inc.(1)
10.9 Purchase Agreement between the Company and Defense Technology Corp. of
America dated October 24, 1992(1)
10.10 Amendment to Purchase Agreement of October 24, 1992 between Defense
Technology Corporation of America and the Company dated as of August 15,
1993(1)
10.11 Purchase and Sales Agreement between the Company and Personal Security,
Inc., dated as of July 1, 1993(1)
10.12 Purchase and Sale Agreement between the Company and Messrs. Diamond and
Helmrich, dated August 16, 1993(1)
10.13 Lease Agreement between the Company and G&G Realty, Inc.
10.14 Form of Lock-up Agreement(1)
10.15 Term Loan with Vermont National Bank(1)
10.16 Working Capital Line of Credit with Vermont National Bank for $500,000(1)
10.17 Loan with Vermont National Bank for $400,000(1)
10.18 Guarantees of Messrs. Gould and Goodrich under the loans with Vermont
National Bank(1)
10.19 Waiver/amendment of capital expenditure limitation contained in the term
loan agreement with Vermont National Bank(1)
10.20 Amended and Restated Employment Agreement between the Company and Jon E.
Goodrich(1)
10.21 Aircraft Lease dated as of June 1, 1993 between the Company and G&G
Realty, Inc.(1)
10.22 Trademarks(1)
10.23 Amendment No. 1 to Amended and Restated Employment Agreement(1)
10.24 Asset Purchase Agreement between the Company and TransTechnology
Corporation dated March 1, 1994(2)
10.25 Agreement for Sale between KinderGard Corporation and Mace Security
International, Inc.(3)
10.26 Consulting Agreement between Sheldon Hibbard and Mace Security
International, Inc.(3)
10.27 Consulting agreement between P.D.M. Corporation and Mace Security
International, Inc.(3)
10.28 Warrants in connection with the acquisition of the assets of the
KinderGard Corporation(3)
10.29 Purchase and Sale Agreement between Robert Mainhardt and Mace Security
International, Inc.(3)
10.30 Consulting and Sales Representative Agreement between Robert Mainhardt
and Mace Security International, Inc.(3)
10.31 License Agreement between Robert Mainhardt and Mace Security
International, Inc.(3)
10.32 Assignment and Assumption Agreement between G&G Realty, Inc. and Mace
Security International, Inc.(3)
10.33 Lease Agreement and Option to Purchase between G&G Realty, Inc. and
James Comi and Rhoda Comi(3)
10.34 Real Estate Purchase Agreement between Vermont Economic Development
Authority and Mace Security International, Inc.(3)
10.35 Consulting Agreement effective April 1, 1994 between Robert R. Rosberg
and Mace Security International, Inc.(4)
10.36 Supplemental Agreement effective January 1, 1995 between Robert R.
Rosberg and Mace Security International, Inc.(4)
10.37 Aircraft Lease effective June 1, 1994 between G&G Realty, Inc. and Mace
Security International, Inc.(4)
10.38 Aircraft Lease Termination Agreement effective March 31, 1995 between
G&G Realty, Inc. and Mace Security International, Inc.(4)

<PAGE>

10.39 Line of Credit Note for $1,500,000 with Vermont National Bank(5)
10.40 Term Note for $1,500,000 with Vermont National Bank(5)
10.41 Security Agreement with Vermont National Bank(5)
10.42 Advisory Employment Agreement between Mace Security International, Inc.
and Jon E. Goodrich, dated as of January 17, 1996(6)
10.43 Employment Agreement between Mace Security International, Inc. and
Robert D. Norman, dated as of January 16, 1996(6)
10.44 Letter of Intent between Mace Security International, Inc. and Gould &
Goodrich Leather, Inc., dated March 22, 1996(6)
10.45 Letter of Intent between Mace Security International, Inc. and 321
Investments, Inc., dated March 22, 1996(6)
10.46 Letter of Intent between Mace Security International, Inc. and Rajan
Shamdasani, dated March 22, 1996(6)
10.47 Employment Agreement between the Company and Richard A. Galt dated as of
August 22, 1996(7).
10.48 Amendment 1 to Employment Agreement between the Company and Richard A.
Galt dated as of August 22, 1996(7).
10.49 Employment Agreement between the Company and Richard A. Galt dated as of
January 22, 1997.(8)
10.50 Amendment 1 to Employment Agreement between the Company and Richard A.
Galt dated as of January 22, 1997.(8)
10.51 Employment Agreement between the Company and Jon E. Goodrich dated as of
March 14, 1997.(8)
10.52 Loan Agreement between the Company and KeyBank National Association
dated March 31, 1997.(8)
10.53 Waiver and Modification of Loan Agreement between the Company and KeyBank
National Association dated April 11, 1997.(8)
10.54 Line of Credit Agreement between the Company and Marvin Brown dated
April 14, 1997.(8)
10.55 Line of Credit Agreement between the Company and Jon E. Goodrich dated
April 14, 1997.(8)
10.56 Waiver and Second Modification of Loan Agreement between the Company
and Key Bank National Association dated June 30, 1997(9)
10.57 Stock Purchase Agreement between the Company and Howard S. Edelman dated
July 1, 1997(9)
10.58 First National Bank of New England Loan closing documents dated September
25, 1997 - the $800,000 note.(10)
10.59 First National Bank of New England Loan closing documents dated September
25, 1997 - the $1,000,000 note.(10)
10.60 First National Bank of New England Loan closing documents dated September
25, 1997 - the $250,000 line of credit.(10)
10.61 Asset Purchase Agreement between the Company and MSP Retail, Inc. dated
September 10, 1997.(10)
10.62 First National Bank of New England loan closing documents dated February
5, 1998 relating to the $800,000 loan guaranteed by the U.S. Department
of Agriculture.(11)
10.63 Purchase Agreement between the Company and Armor Holdings, Inc. and its
subsidiary dated April 2, 1998.(11)
10.64 Fairness Opinion relating to the sale of substantially all the assets of
the Law Enforcement division to Armor Holdings, Inc.(11)
10.65 Term Note with MSP, Inc. as payee to the Company dated as of July 1, 1998
(12)
10.66 Employment Agreement between the Company and Jon E. Goodrich effective as
of September 1, 1998 (12)
10.67 Employment Agreement between the Company and Mark A. Capone effective as
of September 17, 1998 (12)
10.68 Settlement Agreement between the Company and MSP Retail, Inc. dated
December 2, 1998 (12)
10.69 Merger Agreement between Louis D. Paolino, Red Mountain Holding, Ltd. and
Mace Security International, Inc. dated as of March 26, 1999 (12)
10.70 Stock purchase Agreement, between Louis Paolino, Jr. and Mace Security
International, Inc. dated as of March 26, 1999 (12)
10.71 Employment Contract between Mace Security International, Inc. and
Robert M. Kramer dated March 26, 1999 (12)
10.72 Employment Contract between Mace Security International, Inc. and
Gregory M. Krzemien dated March 26, 1999 (12)
10.73 Amendment No. 1 to Merger Agreement between Louis D. Paolino, Red
Mountain Holding, Ltd. and Mace Security International, Inc. dated April
13, 1999 (12)
10.74 Amendment No. 1 to Stock purchase Agreement, between Louis Paolino, Jr.
and Mace Security International, Inc. dated April 13, 1999
(12)

(1) Incorporated by reference to the exhibit of the same number filed with
the Company's registration statement on Form SB-2 (33-69270) that was
declared effective on November 12, 1993.
(2) Incorporated by reference to the Company's report on Form 8-K filed March
14, 1994.
<PAGE>

(3) Incorporated by reference to the Company's Form 10-QSB report for the
quarter ended 9/30/94 filed on November 14, 1994. It should be noted
that Exhibits 10.25 through 10.34 were previously numbered 10.1 through
10.10 in that report.
(4) Incorporated by reference to the Company's Form 10-KSB for the year ended
12/31/94.
(5) Incorporated by reference to the Company's Form 10-KSB for the year ended
December 31, 1995.
(6) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended March 31, 1996.
(7) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended September 30, 1996.
(8) Incorporated by reference to the Company's Form 10-KSB for the year ended
December 31, 1996.
(9) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended June 30, 1997.
(10) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended September 30, 1997.
(11) Incorporated by reference to the Company's Form 10-KSB for the year ended
December 31, 1997
(12) Filed herewith.
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereto
duly authorized.

MACE SECURITY INTERNATIONAL, INC.
By: /s/ Jon E. Goodrich
------------------- Date: April , 1998
Jon E. Goodrich, President
and CEO

In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on
the date indicated.

Signature Title Date

/s/ Jon E. Goodrich President, CEO April , 1998
- ------------------- and Director
Jon E. Goodrich

/s/ Marvin P. Brown Chairman of the April , 1998
- ------------------- Board
Marvin P. Brown

/s/ Howard S. Edelman Director April , 1998
- ---------------------
Howard S. Edelman

/s/ Neil J. Campolungo Director April , 1998
- ----------------------
Neil J. Campolungo

/s/ Lewis C. Cohen Director April , 1998
- ------------------
Lewis C. Cohen

/s/ R. David Garwood Director April , 1998
- --------------------
R. David Garwood

/s/ Mark A. Capone
- ------------------ Treasurer/Chief April , 1998
Mark A. Capone Financial Officer
<PAGE>

MACE SECURITY INTERNATIONAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
No.

Report of Independent Accountants F-2

Consolidated Balance Sheets at December 31, 1998 and 1997 F-3

Consolidated Statements of Operations
for the Years Ended December 31, 1998 and 1997 F-4

Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1998 and 1997 F-5

Consolidated Statements of Cash Flows for the Years
Ended December 31, 1998 and 1997 F-6

Notes to Consolidated Financial Statements F-7

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Mace Security International,
Inc.

We have audited the accompanying consolidated balance sheets of Mace
Security International, Inc. and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. 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 financial position of Mace
Security International, Inc. and subsidiaries as of December 31, 1998 and
1997, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.

/s/URBACH KAHN & WERLIN PC

Albany, New York
April 2, 1999

F-2
<PAGE>

MACE SECURITY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997

1998 1997

ASSETS
Current assets:

Cash and cash equivalents............. $ 3,572,422 $1,146,212
Cash escrow........................... 610,800 -
Accounts receivable, net.............. 1,271,031 1,880,565
Inventories:
Finished goods...................... 438,168 539,894
Work in process..................... 126,696 175,699
Raw material and supplies........... 937,308 622,586
Prepaid expenses and other............ 285,208 314,438

Total current assets................ 7,241,633 4,679,394
Net assets of discontinued operations... 326,835 5,103,851
Property and equipment, net............. 1,079,196 1,157,126
Intangibles, net........................ 912,131 1,791,933
Other assets............................ 217,474 136,362

Total Assets $ 9,777,269 $12,868,666

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable......................... $ - $ 30,728
Current maturities of long-term debt.. - 113,210
Accounts payable...................... 297,553 333,735
Accrued expenses...................... 232,942 556,624

...................................... 530,495 1,034,297
Long-term debt, net of current
maturities............................ - 1,660,205

Total liabilities................... 530,495 2,694,502

Commitments and contingencies

Stockholders' equity:
Preferred stock, par value $.01 per
share; authorized 2,000,000 shares;
no shares issued.................... - -
Common stock, par value $.01 per
share; authorized 18,000,000
shares; issued 6,825,000 shares
in 1998, issued and outstanding
7,081,666 in 1997................... 68,250 70,817
Additional paid-in capital............ 13,333,191 13,333,191
Treasury stock, 256,666 shares........ (52,388) -
Accumulated deficit................... (4,102,279) (3,229,844)

Total Stockholders' equity.......... 9,246,774 10,174,164

Total Liabilities and
Stockholders' equity.............. $ 9,777,269 $12,868,666

The accompanying notes are an integral part
of the financial statements.

F-3
<PAGE>

MACE SECURITY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998 and 1997

1998 1997

Net sales............................... $2,404,221 $ 2,657,354
Cost of sales........................... 1,230,375 1,645,077

Gross profit........................ 1,173,846 1,012,277

Operating expenses:
General and administrative............ 1,191,611 843,334
Selling............................... 527,556 647,243

Operating loss...................... (545,321) (478,300)

Other income (expense):
Interest income....................... 137,486 32,130
Interest expense...................... (94,920) (121,877)
Other income.......................... 220,581 98,195

263,147 8,448

Loss from continuing operations
before income tax expense............. (282,174) (469,852)
Income tax expense...................... 4,358 7,800

Loss from continuing operations......... (286,532) (477,652)
Loss from discontinued operations,
including $271,452 gain on sale
of Law Enforcement division in 1998... (585,903) (1,209,291)

Net loss............................ $ (872,435) $(1,686,943)

Net loss per common share:
From continuing operations ........... $ (0.04) $ (0.07)
From discontinued operations.......... (0.08) (0.17)

Total net loss per common share..... (0.12) (0.24)

Weighted average number of
common shares outstanding............. 6,987,127 6,920,023

The accompanying notes are an integral part
of the financial statements.

F-4
<PAGE>

MACE SECURITY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1998 and 1997

<TABLE>
<CAPTION>
Common Stock Additional Treasury
Shares Par Value Paid-in Capital Stock Deficit
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 6,825,000 $68,250 $13,080,133 - $(1,542,901)

Shares issued for MSP Retail, Inc.
acquisition 176,666 1,767 163,858 - -

Shares issued for MSP, Inc.
acquisition 80,000 800 89,200 - -

Net loss - - - - (1,686,943)

Balance at December 31, 1997 7,081,666 70,817 13,333,191 - (3,229,844)

Shares reacquired from MSP Retail, Inc.
and MSP, Inc. (256,666) (2,567) - (52,388) -

Net loss - - - - (872,435)

Balance at December 31, 1998 6,825,000 $68,250 $13,333,191 $(52,388) $(4,102,279)
</TABLE>

The accompanying notes are an integral part
of the financial statements.

F-5
<PAGE>

MACE SECURITY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997

1998 1997

Operating activities:
Net loss $ (872,435) $(1,686,943)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation 341,061 454,247
Amortization 175,653 268,994
Allowance for bad debts 21,140 (47,905)
Gain on sale of assets - (1,996)
Gain on sale of Law Enforcement
division (271,452) -
Changes in:
Accounts receivable 588,394 735,260
Inventories (163,993) 1,334,307
Prepaid expenses 29,230 (115,087)
Discontinued operations 2,492,252 -
Accounts payable (36,182) (679,042)
Accrued expenses (323,682) 145,391
Other assets (81,112) (12,459)

Net cash provided by
operating activities 1,898,874 394,767

Investing activities:
Purchases of property and equipment (122,568) (238,726)
Proceeds attributable to noncurrent
portion of Law Enforcement assets 3,117,235 -

Proceeds from sales of property
and equipment - 13,744
Acquisition of subsidiaries - (51,372)
Increase in cash escrow account (610,800) -

Net cash provided by (used in)
investing activities 2,383,867 (276,354)

Financing activities:
Payment of principal on long-term debt (1,773,415) (525,933)
Proceeds from long-term debt 1,206,250
Payment of notes payable (30,728) (3,272)
Proceeds from notes payable - 34,000
Debt issue costs - (28,800)
Treasury stock (52,388) -

Net cash provided by (used in)
financing activities (1,856,531) 682,245

Net increase in cash and cash equivalents 2,426,210 800,658

Cash and cash equivalents:
Beginning of year 1,146,212 345,554

End of year $ 3,572,422 $ 1,146,212

The accompanying notes are an integral part
of the financial statements.

F-6
<PAGE>

MACE SECURITY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED STATEMENTS

1. DESCRIPTION OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of organization:

Mace Security International, Inc. (Mace) is incorporated under the laws
of the state of Delaware. Mace and its subsidiary's revenues are generated
primarily through the manufacture, distribution and sale of defense sprays
and personal safety products for the consumer market.

Summary of significant accounting policies:

Principles of consolidation:

The consolidated financial statements include the accounts of Mace and
its wholly-owned subsidiary Mace Security Centers, Inc. (collectively
referred to as the Company). All intercompany accounts and transactions have
been eliminated.

Revenue recognition:

Substantially all revenue from domestic sales is recognized when
shipments are made and export sales are recognized when title has passed.

Cash and cash equivalents:

Cash and cash equivalents consist of cash and highly liquid short-term
investments with original maturities of three months or less.

Accounts receivable:

Accounts receivable are presented net of an allowance for doubtful
accounts approximating $32,000 at December 31, 1998 ($54,000 at December 31,
1997).

Inventories:

Inventories are stated at the lower of cost (first-in, first-out method)
or market.

Cost of sales for the year ended December 31, 1998 includes
approximately $30,000 attributable to lower of cost or market write downs.

Property and equipment:

Property and equipment are stated at cost.

Depreciation is recorded using the straight-line method over the
estimated useful lives of the assets.

Significant additions or improvements extending assets' useful lives are
capitalized; normal maintenance and repair costs are expensed as incurred.

The cost of fully depreciated assets remaining in use are included in
the respective asset and accumulated depreciation accounts. When items are
sold or retired, related gains or losses are included in operations.

F-7
<PAGE>

Intangibles:

Trademarks are stated at cost and are amortized on a straight-line basis
over 15 years.

The excess purchase price over fair values assigned to assets acquired
is amortized on a straight-line basis over 15 years.

Research expense:

Research and development expense, which is charged to operations as
incurred, was approximately $58,000 in 1998 and $81,000 in 1997.

Income taxes:

The Company accounts for income taxes using the asset and liability
method. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable for future years to differences
between financial statement and tax bases of existing assets and liabilities.
The effect of tax rate changes on deferred taxes is recognized in the income
tax provision in the period that includes the enactment date.

The provision for taxes is reduced by investment and other tax credits
in the years such credits become available.

Advertising:

The Company expenses the production costs of advertising the first time
the advertising takes place. Advertising expense was approximately $133,000
and $249,000 in 1998 and 1997, respectively.

Net loss per common share:

Loss per common share amounts have been computed using the weighted
average number of common shares outstanding for the respective periods.
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 Earnings Per Share (SFAS No. 128). This standard
requires the presentation of basic and diluted earnings, when applicable, per
share. All outstanding options and warrants are anti-dilutive at December 31,
1998 and 1997.

Use of Estimates:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.

Disclosures about Fair Value of Financial Instruments:

All financial instruments are held for purposes other than trading. The
following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:

Cash and Cash Equivalents

The carrying amount approximates fair value because of the short term
maturity of those instruments.

F-8
<PAGE>

Long Term Debt

The carrying value approximates fair value for variable rate debt.

Impairment of long-lived assets

In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Company
evaluates the recoverability of its long-lived assets which include
trademarks, other intangibles, and other assets whenever changes in
circumstances indicate that the carrying amount may not be recoverable. If
indications are that the carrying amount of the asset is not recoverable, the
Company will estimate the future cash flows expected to result from use of
the asset and its eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the asset, the Company
recognizes an impairment loss. The impairment loss recognized is measured as
the amount by which the carrying amount of the asset exceeds its fair value.

During 1998, the Company's sale of its Law Enforcement division resulted
in an impairment loss attributable to a trademark. This loss, approximating
$550,000, is included with the gain on the sale of the Law Enforcement
division in 1998, classified as discontinued operations (Note 2).

2. DISCONTINUED OPERATIONS

As more fully explained below, during 1998, the Company sold
substantially all the assets of its Law Enforcement division. Accordingly,
the operating results of its Law Enforcement division have been segregated
from continuing operations and reported, on a comparative basis, as a
separate line item on the statement of operations entitled "Loss from
discontinued operations" and entitled "Net assets of discontinued operations"
on the Balance Sheets.

On April 2, 1998, the Company entered into an agreement (the "Purchase
Agreement") with Armor Holdings, Inc. and its wholly-owned subsidiary ("AHI")
for the sale of substantially all of the assets of the Company's Law
Enforcement division to AHI (the "Transaction"). The terms of the Purchase
Agreement required that, in conjunction with the sale of assets, the Company
license to AHI the use of Mace(R) and related trademarks and a patent for use
by AHI in the Law Enforcement Market only. The Transaction closed on July 14,
1998.

Pursuant to the terms of the Purchase Agreement, the Company sold to AHI
all of the fixed assets, intangibles and inventory of the Law Enforcement
division. AHI received a 99-year paid-up license to exploit the Mace(R) brand
and other related trademarks in the Law Enforcement Market only, which is
made up of law enforcement, military, correctional and certain governmental
agencies. The assets of the Law Enforcement division constituted
approximately 40% of the Company's assets at December 31, 1997.

The purchase price for the fixed assets and intangibles, including the
license fee for the 99-year paid-up license was $3,117,235, representing the
book value as of December 31, 1997. The purchase price for inventory was
$1,868,416, representing the book value at July 14, 1998. The Company
retained its cash and accounts receivable from the Law Enforcement division.

In September 1998, the Company disposed of two-wholly owned
subsidiaries, MSP, Inc. (a Colorado distributor) and MSP Retail, Inc.
(Colorado retail stores). The contracts between the Company and the former
owners of the distributorship and retail stores allowed the Company to put
back the shares of MSP, Inc. and MSP Retail, Inc. to the former owners if
certain pre-tax earnings targets were not achieved within one year following
the Company's acquisition. In both cases, the aforementioned subsidiaries
failed to achieve their pre-tax earnings targets.

F-9
<PAGE>

The Company put back the shares of MSP, Inc. to the former owner in
exchange for 80,000 shares of the Company that were tendered as consideration
in the acquisition of MSP, Inc.

In a modified version of the put, the Company transferred the net assets
of MSP Retail, Inc. to a corporation owned by the former owner in exchange
for 176,666 shares of the Company that were tendered as consideration in the
acquisition of MSP Retail, Inc.

Further, both contracts called for repayment of working capital loaned
by the Company to MSP, Inc. and MSP Retail, Inc. The repayment amount as
defined by the contracts is the money loaned by the Company reduced by
operating losses incurred by the respective subsidiaries during the
twelve-month period each was owned by the Company. The reduction of amounts
owed was necessary to fulfill another contract provision which required the
Company to be responsible for losses incurred by the subsidiaries during
Company ownership. As a result of the disposition of these subsidiaries, the
Company incurred a loss of $67,013 with respect to MSP, Inc. and $47,317 with
respect to MSP Retail, Inc.

3. SUPPLEMENTARY CASH FLOW INFORMATION

In September 1997, the Company obtained long-term debt from the First
National Bank of New England (See Note 8). As part of this refinancing, the
Key Bank long-term debt of $593,750 was paid. This non-cash transaction has
been excluded from proceeds from long-term debt, as well as payment of
principal on long-term debt.

On January 20, 1999, pursuant to the purchase agreement between the
Company and the purchaser of the Law Enforcement division, the Company
collected $480,000 or 80% of the $600,000 of purchase price that was retained
by the purchaser in escrow to secure among other things, the Company's
obligation under the representations and warranties in the purchase
agreement. The remainder will be released on or about July 14, 1999 so long
as no claim is brought against the Company for which the purchaser is
entitled to set off against escrowed funds.

F-10
<PAGE>

4. PROPERTY AND EQUIPMENT

The components of property and equipment are summarized below:

1998 1997

Office furniture ................. $ 132,621 $ 128,959
Computer equipment................. 475,194 428,769
Vehicles ........... 46,501 46,501
Leasehold improvements............. 734,421 674,513
Machinery and equipment............ 813,589 784,344

Total property and equipment..... 2,202,326 2,063,086
Less: Accumulated depreciation..... (1,123,130) (905,960)

Property and equipment, net...... $ 1,079,196 $1,157,126

Depreciation expense was $341,061 in 1998 and $454,247 in 1997.
Expenditures for maintenance and repairs are charged to income as incurred
and amounted to $82,428 in 1998 and $113,429 in 1997.

5. INTANGIBLES

The components of intangibles are summarized below:

1998 1997

Trademarks......................... $ 1,712,853 $2,483,846
Trademark protection costs......... 154,088 154,088
Excess purchase price over fair
value assigned to assets
acquired....................... - -

Total intangibles .............. 1,866,941 2,637,934
Less: Accumulated amortization..... 954,810 846,001

Intangibles, net.............. $ 912,131 $1,791,933

Amortization expense was $175,653 in 1998 and $268,994 in 1997.

6. NOTES PAYABLE

Notes payable at December 31, 1997 consisted of an obligation to a
financing company, payable in monthly installments with interest at 10.2%.
This note was fully paid in 1998.

In September 1997, the Company obtained a $250,000 working capital line
of credit from First National Bank of New England bearing interest at prime
plus 1% (9.5% at December 31, 1997) due May 31, 1998. No amounts were ever
drawn on this line of credit which expired on May 31, 1998.

F-11
<PAGE>

7. ACCRUED EXPENSES

The components of accrued expenses are summarized below:

1998 1997

Commissions $ 664 $ 130,833
Customer prepayments............... 56,473 107,643
Payroll and related expenses....... 46,172 109,552
Compensated absences............... - 8,524
Professional fees.................. 33,349 65,000
Advertising........................ 22,248 64,571
Other.............................. 74,036 70,501

$232,942 $ 556,624

8. LONG-TERM DEBT

Long-term debt at December 31 consists of the following:

1998 1997

Notes payable--First National Bank of New
England, bearing interest at prime plus 1.50%
(10.0% at December 31, 1997) payable in monthly
installments of $23,791, including interest,
due October 1, 2007, collateralized by
all assets of the Company ........................ - $1,773,415
Less: Current maturities - 113,210

Total long-term debt - $1,660,205

Interest paid was $94,920 in 1998 and $129,770 in 1997.

In September 1997, the Company refinanced its long-term debt with the
First National Bank of New England (`FNB"). Two term loans totaling
$1,800,000 bearing interest at prime plus 1.50% (10.0% at December 31, 1997)
payable in monthly installments of $23,791, including interest, due October
1, 2007, were obtained. Of the proceeds, $593,750 was used to pay off the
existing long-term debt. Additionally, a $250,000 line of credit bearing
interest at prime plus 1% (9.5% at December 31, 1997) due May 31, 1998 was
obtained. No amounts have been drawn on this line of credit. The Company paid
off the loan to FNB simultaneously with the closing of the sale of its Law
Enforcement division on July 14, 1998 (Note 2).

9. INCOME TAXES

The components of income tax expense are:

1998 1997

Current (principally state taxes) $4,358 $7,800
Deferred - -

Total income tax expense $4,358 $7,800

F-12
<PAGE>

The significant components of deferred income tax expense attributed to
loss from continuing operations for the years ended December 31, 1998 and
1997 are as follows:

1998 1997

Current deferred tax expense $ 58,008 $ 37,336
Loss carry forward (203,600) (615,707)
Valuation allowance for deferred tax assets 145,592 578,371

$ - $ -

A comparison of the federal statutory rate to the Company's effective
rate is as follows:

1998 1997

U.S. statutory rate (34%) (34%)
State taxes, net of federal benefit 1% 1%
Valuation allowance for deferred tax assets 34% 34%

Effective tax rate 1% 1%

The significant components of deferred tax assets and liabilities are as
follows:

1998 1997

Current assets (liabilities):
Allowance for doubtful accounts $ 12,878 $ 21,587
Inventories 45,147 65,869
Accrued expenses (32,548) 9,128
Other 1,357 12,163

Current deferred assets 26,834 108,747
Valuation allowance (26,834) (108,747)

Net current deferred tax assets $ - $ -

Noncurrent assets (liabilities):
Intangibles - (4,758)
Plant, equipment and depreciation (215,225) (234,372)
Net operating loss carry forwards 1,355,600 1,152,000

Net noncurrent deferred assets 1,140,375 912,870
Valuation allowance (1,140,375) (912,870)

Net noncurrent deferred tax assets $ - $ -

A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The deferred tax assets
recorded reflects management's estimate of the amount which will be realized
based upon current operating results and contingencies.

At December 31, 1998, the Company has net operating loss carry forwards
for federal income tax purposes of approximately $3,389,000. The federal net
operating loss carry forwards, if unused, will begin to expire during the
year ended December 31, 2009.

F-13
<PAGE>

10. RELATED PARTY TRANSACTIONS

The Company paid legal and management/consulting fees to officers and
directors approximating $31,000 and $57,350 in 1998 and 1997, respectively.

11. COMMITMENTS AND CONTINGENCIES

The Company is a party to various legal proceedings related to its
normal business activities. In the opinion of the Company's management, none
of these proceedings are material in relation to the Company's results of
operations, liquidity, cash flows or financial condition.

Operating lease expense for equipment, vehicles and real estate amounted
to $181,716 and $170,231 for 1998 and 1997, respectively. Certain of these
leases contain purchase options, renewal provisions, and contingent rentals
for proportionate share of taxes, utilities, insurance and annual cost of
living increases. Future minimum rental payments required under operating
leases that have initial or remaining noncancelable lease terms in excess of
one year as of December 31, 1998 are:

1999 104,205
2000 28,857

$133,062

The Company has entered into month to month and long-term sublease
agreements with tenants of their operating facility in Bennington, Vermont,
including a related party. Total sublease rental income was $110,406 and
$93,231 in 1998 and 1997, respectively.

Future minimum rental receipts required under operating subleases that
have initial or remaining noncancelable lease terms in excess of one year as
of December 31, 1998 are:

1999 76,848
2000 44,828

$121,676

During 1994, the Company paid $75,000 to a related entity to acquire all
of the rights and obligations under a lease agreement, including an option to
purchase the South Wing of its principal operating facility. Amortization of
this deferred cost was $13,440 in 1998 and 1997. The term of the lease
expires on January 31, 2000, and requires monthly payments of $6,161, plus
the Company's proportionate share of taxes, insurance, utilities and an
annual cost of living increase. The option may be exercised for $600,000 at
the end of the lease term.

The Company is a party to a real estate purchase agreement with the
Vermont Economic Development Authority (VEDA) for the purchase of the Center
and North Wings of its headquarters, after the satisfaction or waiver of
certain contingencies by VEDA. The purchase price is $1,000,000, payable by
delivery of $150,000 in cash and a promissory note to VEDA for $850,000 at 4%
interest per annum, based on a 20 year amortization schedule with a balloon
payment of $100,000 due at the end of ten years. The Company previously
deposited $75,000 of the total cash portion into an escrow account as
required by the agreement. The Company has elected not to purchase the
building at this time and is leasing the premises for $4,000 per month,
together with taxes, insurance and utilities.

F-14
<PAGE>

12. STOCK OPTIONS AND WARRANTS

During September 1993, the Company adopted the 1993 Stock Option Plan
(the Plan). The Plan provides for the issuance of up to 630,000 shares of
common stock upon exercise of the options. The Company has reserved 630,000
shares of common stock to satisfy the requirements of the Plan. The options
are non-qualified stock options and are not transferable by the recipient.
The Plan is administered by the Compensation Committee of the Board of
Directors, which may grant options to employees, directors and consultants to
the Company. The term of each option may not exceed fifteen years from the
date of grant. Options are exercisable over either a 10 or 15 year period and
exercise prices are not less than the market value of the shares on the date
of grant.

The Company applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, in accounting for the stock option
plans. Accordingly, no employee compensation cost has been recognized in 1998
and 1997. Had compensation cost and fair value been determined pursuant to
Statement of Financial Accounting Standards No. 123 (SFAS No. 123),
Accounting for Stock-Based Compensation, net loss would increase from
$872,435 to $996,694 in 1998 and from $1,686,943 to $1,886,293 in 1997. Net
loss per share would increase from $.12 to $.14 in 1998 and from $.24 to $.27
in 1997. The weighted average fair value of options granted during 1998 and
1997, for the purpose of SFAS No. 123, is $1.33 and $1.23 per share,
respectively.

In accordance with SFAS No. 123, the fair value of each option granted
is estimated on the grant date using the Black-Scholes Single Option model,
assuming no dividend yield and an expected volatility of 89.5% and 92.2% in
1998 and 1997, respectively. The weighted-average remaining contractual life
of outstanding options under the plan at December 31, 1998 is 13 years. The
risk-free interest rate ranges from 5.53% to 5.88% in 1998 and from 6.06% to
6.86% in 1997.

Activity with respect to these plans is as follows:

1998 1997

Weighted Weighted
Average Average
Exercise Exercise
Number Price Number Price

Shares under option, January 1 437,800 $1.48 276,400 $1.54
Options granted 98,500 1.10 162,500 1.40
Options repurchased (4,800) 5.50 - -
Options canceled (30,500) 1.38 (1,100) 5.50

Shares under option, December 31 501,000 1.37 437,800 1.48

Options exercisable, December 31 501,000 $1.37 437,800 $1.48

Shares available for granting
of options, December 31 129,000 192,200

F-15
<PAGE>

The following is a summary of the status of options outstanding at December
31, 1998:

Outstanding Options Exercisable Options

Weighted
Average Weighted Weighted
Exercise Remaining Average Average
Price Contractual Exercise Exercise
Range Number Life Price Number Price

$1.63 6,000 14.33 $1.63 6,000 $1.63
1.50 337,500 12.41 1.50 337,500 1.50
1.25 52,500 13.58 1.25 52,500 1.25
1.21 65,000 14.60 1.21 65,000 1.21
1.19 40,000 12.64 1.19 40,000 1.19

In connection with the initial public offering of the Company's
securities in November 1993, the Company issued a total of 75,000 common
stock purchase warrants to the underwriters of the securities. These warrants
expired in November 1998.

In August 1994, the Company issued warrants to purchase 60,000 shares of
Mace Security International, Inc. common stock at $4.25 per share in
connection with the purchase of certain assets of a business. The warrants
are exercisable over a ten year period, expiring on August 24, 2004. On July
14, 1998, in connection with the sale of the Law Enforcement division ( Note
2), the Company issued to the purchaser 300,000 warrants to purchase Common
Stock of the Company at $1.25 per share. These warrants were fully exercised
in March 1999.

During the exercise periods, the Company will reserve a sufficient
number of shares of its common stock to provide for the exercise of the
rights represented by option and warrant holders.

13. CONCENTRATION OF CREDIT RISK

The Company maintains its cash accounts in high quality financial
institutions. At times, these balances may exceed insured amounts.

The Company limits the concentration of credit risk in receivables from
retailers by closely monitoring credit and collection policies. Risk of
losses from international sales are minimized by requiring the majority of
customers to provide irrevocable confirmed letters of credit and/or cash
advances. Management believes that the allowance for doubtful accounts is
adequate to absorb estimated losses.

14. EMPLOYEE BENEFIT PLAN

The Company maintains a voluntary 401(k) plan covering substantially all
of its employees. Employees may contribute from 1% to 20% of their regular
wages, up to the limit permitted by the Department of Labor. The Company
matches 25% of each dollar contributed by employees up to 4% of their wages.
The cost of the plan amounted to $20,521 and $28,354 in 1998 and 1997,
respectively.

15. ACQUISITIONS AND SUBSIDIARIES

In July 1997, the Company acquired all of the issued and outstanding
common stock of MSP, Inc. (MSP), an Aurora, Colorado marketer of a
diversified line of consumer safety and security products. This transaction
was recorded as a purchase, and the operations of MSP have been included with
the Company's from the acquisition date. In the event MSP achieves certain
financial goals, an additional 15,000 shares of the Company's common stock is
issuable. The purchase cost of $90,000 was represented by 80,000 shares of
the Company's stock valued at $1.125 per share.

F-16
<PAGE>

In September 1997, the Company acquired all of the issued and
outstanding common stock of MSP Retail, Inc. (MSPR), an operator of two
retail stores in the Denver, Colorado area, specializing in the sale of
security products for personal and home protection. This transaction was
recorded as a purchase, and the operations of MSPR have been included with
the Company's from the acquisition date. The purchase price of $212,000 was
represented by 176,666 shares of the Company's common stock valued at $.9375
per share and cash of $46,300.

The operations of MSP, Inc. and MSP, Retail, Inc. were discontinued in
1998 (Note 2).

In September 1997, the Company established Mace Security Centers, Inc.,
a subsidiary corporation formed for the purpose of offering franchises for
the operation of retail stores which will sell personal protection and
security products. The subsidiary became active during 1998 selling its first
two franchises.

16. SEGMENT INFORMATION

Since the sale of its Law Enforcement division, the Company principally
engages in the manufacture, distribution and sale of Mace(R) brand defense
sprays and personal safety products to the civilian consumer market,
"Consumer". Mace Anti Crime Bureau's operations are not significant enough to
report as a separate business segment and are included in with Consumer.
Although the Company sell its products on a worldwide basis, more than 95% of
its sales in 1998 from continuing operations were within the United States.

17. SUBSEQUENT EVENTS

Proposed Sale of Mace Anti Crime Bureau

The Company has entered into a letter of intent for the sale of
substantially all the assets of its MACB division for approximately
$1,100,000. Only certain liabilities of the division will be assumed by the
purchaser. The Company will retain the cash and accounts receivable from this
division. There are no definitive agreements executed and the terms of the
letter of intent are not binding with respect to this proposed transaction.
Additionally, the purchaser's obligation to acquire the MACB division is
conditioned on its obtaining financing sufficient to effect this transaction.

The proposal calls for a downpayment with the remainder of the purchase
price paid pursuant to a nonnegotiable promissory note, payable annually over
three years, with interest at a floating rate per annum equal to the prime
rate quoted by the Wall Street Journal and is payable on the first and second
anniversaries of the closing.

The Company also expects to enter into agreements to receive a 1%
royalty on products sold using the brand names Mace Cash(TM), Mace Anti
Crime(TM) and Mace Anti Crime Bureau(R) and contingent consideration in the
form of a 5% royalty on certain sales made by the purchaser within three
years following the closing date.

Proposed Change of Control, Private Placement and Merger with American Wash
Services, Inc.

The Company has entered into an agreement with Louis D. Paolino, Jr. to
become its Chairman and Chief Executive Officer.

As a condition to his agreement to serve as CEO, the Company's current
Board of Directors, other than Mr. Goodrich, will resign and be replaced by a
new Board selected by Mr. Paolino.

Also, Mr. Paolino has agreed to purchase 3,735,000 shares of the
Company's Common Stock. A portion of such shares are expected to be purchased
by members of Mr. Paolino's management team, by assignment of Mr. Paolino's
right to purchase such shares.

F-17
<PAGE>

As a condition to Mr. Paolino's agreement to purchase the shares, the
Company has entered into employment agreements with certain members of the
new management team selected by Mr. Paolino. Pursuant to the employment
agreements, each new member of the management was granted options to purchase
shares of the Company's Common Stock. The employment agreements specify that
the new management will be entitled to only nominal compensation until the
sale of the 3,735,000 shares is consummated. In the event the sale of the
Paolino Shares does not occur, the employment agreements terminate and the
options will automatically be cancelled.

As an additional condition to Mr. Paolino's agreement to purchase the
shares, substantially simultaneously with such sale, the Company will sell in
a private placement 1,850,000 shares of the Company's Common Stock. The
shares will not be registered under the Securities Act of 1933, and thus,
will not be freely tradable for a period of at least one year from the
closing of the sale of the shares.

The sales of the above-referenced 5,585,000 shares will result in a
total capital investment by Mr. Paolino, members of Mr. Paolino's management
team and others of approximately $8.83 million.

As a condition to the referenced stock purchases, MSI will substantially
simultaneously with the stock sales acquire by merger American Wash Services,
Inc., a company headed by Mr. Paolino. The purchase price for American Wash
will be cash of $4,687,500, 628,362 shares of the Company's Common Stock and
the issuance to Mr. Paolino and his designee of assignable warrants to
purchase a total of 1,825,000 shares of the Company's Common Stock. The
total consideration to be paid to the Company upon the exercise of all such
warrants is approximately $2,791,000. The warrants will not be exercisable
until the expiration of 120 days following the closing and will have terms of
64 months. The shares issued in the merger and issuable under the warrants
will not be registered under the Securities Act of 1933, and thus, will not
be freely tradable for a period of at least one year from the closing of the
sale of the shares.

MSI's obligation to complete the transactions is conditioned on, among
other things, approval by MSI's Board of Directors and shareholders,
continued listing on the NASDAQ National Market System, a due diligence
investigation and receipt of a fairness opinion covering the merger and the
sale of shares.

It is anticipated that the transactions will be approved by the
Company's shareholders by written consent. The transactions are expected to
close twenty days following the distribution of an Information Statement
regarding the transactions and related matters.

F-18

TERM NOTE

Principal Amount $20,562.00 As of July 1, 1998

FOR VALUE RECEIVED, MSP, INC., a Colorado Corporation ("Payor"),
promises to pay to the order of MACE SECURITY INTERNATIONAL, INC. (the
"Holder"), or at such address as Holder shall notify Payor in writing, the
principal sum of TWENTY THOUSAND FIVE HUNDRED SIXTY TWO AND 00/100 DOLLARS
($20,562.00) together with interest thereon on the unpaid principal balance,
payable as provided below.

1. Interest. This Note shall bear interest at an adjusting rate of Prime
plus one percent per annum, with Prime meaning the prime rates as quoted in
the Wall Street Journal (New York edition). Interest shall be calculated
based on 30 day months and a 360 day year. The rate shall be adjusted
quarterly, on the last day of each fiscal quarter and shall be applicable for
the quarter commencing the following day. The Prime rate in effect as of July
1, 1998 is nine percent (9%) per annum.

2. Principal. Principal payments shall be made in equal monthly
installments of five hundred seventy one and 17/100 dollars.

3. Application of Payments. All payments under the Note when paid shall
be applied first in reduction of costs and expenses, if any, next to the
reduction of accrued and unpaid interest and the balance in reduction of
principal.

4. Prepayments. This Note may be prepaid in whole, or in part, at the
option of Payor, at any time without penalty.

5. Payments. Monthly payments of principal equal to five hundred seventy
one and 17/100 dollars plus interest accrued on the unpaid principal amount
since the last payment shall be paid to Holder at its principal executive
offices on the first day of each month commencing January 1, 1999 and
continuing on the like day of each month thereafter for a term of thirty six
months through and including December 1, 2001, when all outstanding principal
and all accrued and unpaid interest shall be due and payable. Interest on the
unpaid principal balance from July 1, 1998 through December 31, 1998 of
$1028.10 is due and payable on December 15, 1998.

6. Late Charges. In the event that any payment required by this Note on
account of the terms hereof, by acceleration, maturity, or otherwise, shall
become overdue for a period in excess of ten(10) days a "late charge" of five
cents($.05) for each dollar overdue may be charged by the holder for the
purpose of defraying the expenses incident to handling such delinquent
payment.

<PAGE>

7. Events of Default. The following shall constitute Events of Default
under this Note:

(i) Failure by Payor to make any payment required hereunder within ten
(10) days of the date when due;

(ii) The sale of all or substantially all of the assets of the Payor;

(iii) a change in control of the management of Payor, or the transfer or
issuance of any shares of Payor;

(iv) The liquidation and/or dissolution of the Payor;

(v) If (A) the Payor shall have applied for or consented to the
appointments of a custodian, receiver, trustee, or liquidator of all or a
substantial part of its assets (any such entity hereafter being referred to
as a "Receiver"); (B) a Receiver shall have been appointed with or without
consent of the Payor; (C) the Payor shall have made or filed any of (1)
general assignment for the benefit of creditors, or (2) a voluntary petition
in bankruptcy, or (3) a petition or answer seek reorganization, or (4) any
arrangement with creditors to take advantage of any insolvency law, or (5) an
answer admitting the material allegations of a petition in bankruptcy, or
other reorganization or insolvency proceeding, or (6) taken an action for the
purpose of effecting any of the foregoing; (D) a petition in bankruptcy is
filed against the Payor; or (E) an order for relief has been entered under
the bankruptcy code, or an order, judgment or decree shall have been entered
by any court of competent jurisdiction approving a petition seeking
reorganization of the Payor or appointing a Receiver.

8. Acceleration Upon Default. Upon the occurrence of an Event of
Default, the entire unpaid principal balance of this Note, together with
accrued interest and costs and expenses shall, at the option of Holder,
immediately become due and payable immediately upon written demand of Holder.

9. Cumulative Remedies; Waivers by Payor. No remedy referred to herein
is intended to be exclusive, but each shall be cumulative and in addition to
any other remedy above or otherwise available to the Holder under any
security agreement executed in connection herewith or at law or in equity.
Payor hereby waives presentment, demand for payment, protest and notice of
dishonor of this Note and all other notices and demands.

10. Non-Waiver. Failure to insist on the strict performance of any or
all of the terms, provisions, and covenants contained in this Note shall not
be construed as a waiver or relinquishment for the future of any term,
provision or covenant herein.

11. Collection Fees. If suit is brought to collect this Note or any part
hereof while an Event of Default is continuing, Payor expressly agrees to pay
all of Holder's costs and expenses of collection, including reasonable
attorney's fees.

<PAGE>

12. Governing Law. This Note shall be governed by, and interpreted in
accordance with the laws of the State of Vermont without regard to its
principles of conflicts of laws. The parties hereto consent to the
jurisdiction of the State of Vermont, and agree that any action arising out
of or relating to this Note shall be litigated in the State of Vermont.

13. Miscellaneous. This Note shall inure to the benefit of transferees
and assigns of the Holder. The obligations of Payor under this Note may not
be transferees, assigned or delegated.

IN WITNESS WHEREOF, Payor has caused this Note to be duly executed and
delivered by its proper officers the day and year first above written.

MSP, Inc.

By: /s/ Howard Edelman
------------------
Name: Howard Edelman
Title: CEO

The undersigned, Howard Edelman, guarantees all principal and interest and
other obligations under this Note.

/s/ Howard Edelman Howard Edelman
<PAGE>

EMPLOYMENT AGREEMENT

This Agreement made, effective as of September 1, 1998, by and between
MACE SECURITY INTERNATIONAL, INC., a Delaware corporation with a principal
place of business at 160 Benmont Avenue, Town of Bennington, County of
Bennington and State of Vermont ("Employer" or "Company"), and JON E.
GOODRICH, of the Town of Bennington, County of Bennington and State of
Vermont ("Employee").

In consideration of the mutual covenants and promises of the parties to
this Agreement, and in consideration of the services rendered by the Employee
prior to the effective date of this Agreement, Employer and Employee agree as
follows:

SECTION ONE
EMPLOYMENT

Employer employs Employee in an executive capacity as President
and Chief Executive Officer, and Employee accepts such employment
with Employer subject to the terms and conditions of this
Agreement.

SECTION TWO
TERM OF EMPLOYMENT

This Agreement and the employment under this Agreement shall commence on
the effective date stated above, and continue until August 31, 1999,
provided, however, that this Agreement and Employee's employment with
Employer, shall terminate immediately upon the purchase, lease or license by
Employee of any operating division of Employer, but specifically excluding
any assignment of the lease or the option to purchase the South Wing at the
Company's headquarters in Bennington, Vermont and any assignment of the lease
or the right to purchase the Center and North Wings of the Company's
headquarters in Bennington, Vermont.

SECTION THREE
DUTIES OF EMPLOYEE

Employee shall serve Employer faithfully, to
the best of his ability, under the direction of the Board of
Directors of Employer. Employee will devote all of his time,
energy, and skill during regular business hours doing such
employment. Employee shall perform such services and act in such
executive as the Board of Directors of Employers shall direct.
Employee shall not engage in employment for any other company.

SECTION FOUR
NON-COMPETE/SHAREHOLDER VOTES

Should employee voluntarily leave the employment of Employer or should
his employment be terminated as a result of disability, by action of the
Board of Directors for cause or as a result of the acquisition by Employer of
any Operating Asset, then he shall be prohibited for a period of two (2)
years from the termination date from competing with Employer, either directly
or indirectly, in the business of Employer, as such business is conducted on
the date of termination or at any time during the two (2) year period
following termination; provided that, if Employer's employment is terminated
as a result of Employee's acquisition of any Operating Division, employee may
compete with Employer to the extent, and only to the extent, of operating the
acquired Operating Division. The determination of whether acts or omissions
constitute cause shall be made by the Board of Directors, in good faith.

Nothing herein shall be deemed to restrict Employee's ability to vote
and sell or transfer his shares of the Company's common stock in opposition
to recommendations of the Board.

Nothing herein will limit or restrict Employee's ability to vote in any
manner as a Board member, so long as he remains a Board member.

Employee will not, at any time (including during and after termination
of his employment for any reason), other than for the benefit of Employer,
exploit, publish or disclose any non-public, confidential or proprietary
information or trade secrets relating to the business or Employer except in
pursuit of his duties hereunder, as required by law, or to Employer's Board
of Directors. All documents and copies thereof containing any of the same in
the possession of Employee shall be and remain the property of employer, and
shall be surrendered to Employer upon termination of Employee's employment.

During the term of this Agreement and for two (2) years form the
termination date of Employee's employment for any reason: (i) the Employee
will not solicit any of Employer's clients for the purpose of interfering
with Employer's past, present or future business relationship with such
clients; (ii) the Employee will not solicit or attempt to solicit any of
Employer's officers or managers (which shall include all persons who were
officers or managers at any time within sixty (60) days prior to the date of
Employee's termination).

<PAGE>

SECTION FIVE
COMPENSATION

Employee's annual compensation shall consist of (a) a salary of
$125,000; and (b) participation in all benefit plans available to the
Company's employees generally. Employee shall be reimbursed for such
reasonable and necessary business expenses as are approved by the Board of
Directors.

SECTION SIX
EMPLOYER'S OBLIGATIONS UPON TERMINATION

If during the term of this Agreement, Employer terminates this Agreement
without cause (as determined by the Board of Directors in good faith),
Employer shall nevertheless continue the salary payments provided in Section
5 (a) of this Agreement for the remaining term of this agreement.

SECTION SEVEN
EMPLOYER'S OBLIGATION ON TERMINATION OF
EMPLOYMENT BY EMPLOYEE, OR FOR CAUSE OR
AS A RESULT OF ACQUISITION OF OPERATING ASSETS

If, during the term of this Agreement, Employee should resign, die,
become disabled or be terminated by the Board of Directors for cause (as
determined by the Board in good faith) or his employment shall be terminated
as a result of Employee's acquisition of any Operating Division, then
Employer's obligation to make the payments provided for in this Agreement
shall cease as of the date of termination; provided that all payments for
periods prior to termination must be paid by Employer.

SECTION EIGHT
RELEASE

Employee hereby releases Employer and its affiliates from any liability
or obligation under any prior employment agreements. Nothing herein will be
deemed to be a release by Employer of any of Employee's obligations to
Employer under prior employment agreements, including but not limited to the
non- compete provisions.

SECTION NINE
ARBITRATION

Any differences, claims, or matters in dispute arising between Employer
and Employee out of or connected with this Agreement shall be submitted to
arbitration consistent with the rules of the American Arbitration
Association.

SECTION TEN
ATTORNEY'S FEES

In the event that any action is filed in relation to this Agreement, the
unsuccessful party in the action shall pay to the successful party, in
addition to al of the sums that either party may be called on to pay, a
reasonable sum for the successful party's attorney's fees.

SECTION ELEVEN
GOVERNING LAW

It is understood that this Agreement shall be governed by, construed,
and enforced in accordance with the laws of the State of Vermont.

SECTION TWELVE
ENTIRE AGREEMENT

This Agreement shall constitute the entire Agreement between the parties
and any prior understandings or representation of any kind preceding the date
of this Agreement shall not be binding.

SECTION THIRTEEN
MODIFICATION OF THIS AGREEMENT

Any modification of this Agreement or additional obligation assumed by
either party in connection with this Agreement shall be binding only if
evidenced in writing signed by each party or an authorized representative of
each party.

SECTION FOURTEEN
NOTICES

Any notice provided for or concerning this Agreement shall be in writing
and be deemed sufficiently given when sent by certified or registered mail if
sent to the respective addresses of each party as set forth at the beginning
of this Agreement, or at such other address as may hereafter be furnished by
either party to the other.

<PAGE>

SECTION FIFTEEN
PARAGRAPH HEADINGS

The titles to the paragraphs of this Agreement are solely for the
convenience of the parties and shall not be used to explain, modify,
simplify, or aid in the interpretation of the provisions of this Agreement.

SECTION SIXTEEN
WAIVER

No waiver by either party of any failure or refusal by the other party
to comply with its or his obligations hereunder, shall be deemed a waiver of
any other or subsequent failure or refusal of a similar or different kind.

IN WITNESS WHEREOF, each party to this Agreement has caused it to be executed
on this 18th day of September, 1998.

MACE SECURITY INTERNATIONAL, INC.

By: /s/ Marvin P. Brown

By: /s/ Jon E. Goodrich
Jon E. Goodrich

<PAGE>

EMPLOYMENT AGREEMENT

This Agreement made, effective as of September 17, 1998, by and
between Mace Security International, Inc., a Delaware corporation with a
principal place of business at 160 Benmont Avenue, Town of Bennington, County
of Bennington and State of Vermont ("Employer" or "Company"), and MARK A.
CAPONE, of the Town of Bennington, County of Bennington and State of Vermont
("Employee").

In consideration of the mutual covenants and promises of the parties
to this Agreement, and in consideration of the services rendered by the
Employee prior to the effective date of this Agreement, Employer and Employee
agree as follows:

SECTION ONE

EMPLOYMENT

Employer employs Employee in an executive capacity as Vice President
Finance, Chief Financial Officer and Treasurer, and Employee accepts such
employment with Employer subject to the terms and conditions of this
Agreement.

SECTION TWO

TERM OF EMPLOYMENT

This Agreement and the employment under this Agreement shall
commence on the effective date stated above, and continue until August 31,
1999.

SECTION THREE

DUTIES OF EMPLOYEE

Employee shall serve Employer faithfully, to the best of his
ability, under the direction of the Board of Directors of Employer. Employee
will devote all of his time, energy, and skill during regular business hours
doing such employment. Employee shall perform such services and act in such
executive capacity as the Board of Directors of Employer shall direct.
Employee shall not engage in employment for any other company.

SECTION FOUR

NON-COMPETE/SHAREHOLDER VOTES

Should employee voluntarily leave the employment of Employer or
should his employment be terminated as a result of disability or by action of
the Board of Directors for cause, then he shall be prohibited for a period of
two (2) years from the termination date from competing with Employer, either
directly or indirectly, in the business of Employer, as such business is
conducted on the date of termination or at any time during the two (2) year
period following termination. The determination of whether acts or omissions
constitute cause shall be made by the Board of Directors, in good faith.

Nothing herein shall be deemed to restrict Employee's ability to
vote and sell or transfer his shares of the Company's common stock in
opposition to recommendations of the Board.

Employee will not, at any time, other than for the benefit of
Employer, exploit, publish or disclose any non-public, confidential or
proprietary information or trade secrets relating to the business of Employer
except in pursuit of his duties hereunder, as required by law, or to
Employer's Board of Directors. All documents and copies thereof containing
any of the same in the possession of Employee shall be and remain the
property of Employer, and shall be surrendered to Employer upon termination
of Employee's employment.

During the term of this Agreement and for two (2) years from the
termination date of Employee's employment: (i) the Employee will not solicit
any of Employer's clients for the purpose of interfering with Employer's
past, present or future business relationship with such clients; (ii) the
Employee will not solicit or attempt to solicit any of Employer's officers or
managers (which shall include all persons who were officers or managers at
any time within sixty (60) days prior to the date of Employee's termination).

SECTION FIVE

COMPENSATION

Employee's annual compensation shall consist of (a) a salary of
$80,000; and (b) participation in all benefit plans available to the
Company's employees generally. Employee shall be reimbursed for such
reasonable and necessary business expenses as are approved by the Board of
Directors or Chief Executive Officer.

<PAGE>

SECTION SIX

EMPLOYER'S OBLIGATIONS UPON TERMINATION

If during the term of this Agreement, Employer terminates this
Agreement without cause, as determined by the Board of Directors in good
faith, Employer shall continue the salary payments provided in Section 5(a)
of this Agreement for the remaining term of this agreement.

SECTION SEVEN

EMPLOYER'S OBLIGATION ON TERMINATION OF
EMPLOYMENT BY EMPLOYEE

If, during the term of this Agreement, Employee should resign, die,
become disabled or be terminated by the Board of Directors for cause (as
determined by the Board in good faith), then Employer's obligation to make
the payments provided for in this Agreement shall cease as of the date of
termination; provided that all payments for periods prior to termination must
be paid by Employer.

SECTION EIGHT

RELEASE

Employee hereby releases Employer and its affiliates from any
liability or obligation under any prior employment agreements. Nothing herein
will be deemed to be a release by Employer of any of Employee's obligations
to Employer under prior employment agreements, including but not limited to
the non-compete provisions.

SECTION NINE

ARBITRATION

Any differences, claims, or matters in dispute arising between
Employer and Employee out of or connected with this Agreement shall be
submitted to arbitration consistent with the rules of the American
Arbitration Association.

SECTION TEN

ATTORNEY'S FEES

In the event that any action is filed in relation to this Agreement,
the unsuccessful party in the action shall pay to the successful party, in
addition to all of the sums that either party may be called on to pay, a
reasonable sum for the successful party's attorney's fees.

SECTION ELEVEN

GOVERNING LAW

It is understood that this Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of Vermont.

SECTION TWELVE

ENTIRE AGREEMENT

This Agreement shall constitute the entire Agreement between the
parties and any prior understandings or representation of any kind preceding
the date of this Agreement shall not be binding.

SECTION THIRTEEN

MODIFICATION OF THIS AGREEMENT

Any modification of this Agreement or additional obligation assumed
by either party in connection with this Agreement shall be binding only if
evidenced in writing signed by each party or an authorized representative of
each party.

SECTION FOURTEEN

NOTICES

Any notice provided for or concerning this Agreement shall be in
writing and be deemed sufficiently given when sent by certified or registered
mail if sent to the respective addresses of each party as set forth at the
beginning of this Agreement, or at such other address as may hereafter be
furnished by either party to the other.

<PAGE>

SECTION FIFTEEN

PARAGRAPH HEADINGS

SECTION SIXTEEN

WAIVER

No waiver by either party of any failure or refusal by the other
party to comply with its or his obligations hereunder, shall be deemed a
waiver of any other or subsequent failure or refusal of a similar or
different kind.

IN WITNESS WHEREOF, each party to this Agreement has caused it to be
executed on this 17 day of September, 1998.

MACE SECURITY INTERNATIONAL, INC.

By: /s/ Marvin P. Brown

By: /s/ Mark A. Capone

Mark A. Capone
<PAGE>

SETTLEMENT AGREEMENT

THIS AGREEMENT (the "Agreement") is made this 2nd day of December, 1998
("Closing Date"), between Mace Security International, Inc, a Delaware
corporation (the "Lender"), and MSP Retail, Inc., a Colorado corporation (the
"Borrower").

RECITALS

A. The Borrower owns certain personal property (as more specifically
described at paragraph 1 of this Agreement and hereafter called the
"Assets").

B. To evidence and secure payment of the following demand notes:

Date Rate Amount

--------- ----- ----------
10/20/97 9.75% $25,000.00
--------- ----- ----------
11/14/97 9.75% $37,000.00
--------- ----- ----------
01/27/98 10.0% $10,000.00
--------- ----- ----------
06/26/98 10.0% $ 8,000.00
--------- ----- ----------
09/23/98 10.0% $ 9,000.00
--------- ----- ----------
$89,000.00

(collectively "Demand Notes"), as well as other promissory notes, the
Borrower executed a Security Agreement in favor of Lender ("Security
Agreement"). The Demand Notes and Security Agreement hereafter called
the "Loan Documents."

C. The Borrower defaulted in performing the Borrower's obligations under
the Demand Notes by failing to pay the principal and interest required
by the Demand Notes.

D. The Borrower has determined that the fair market value of the Assets
is less than the amount of the Demand Notes.

E. The Borrower has requested that the Lender resolve the default by the
Borrower under the Loan Documents by agreeing to accept a conveyance of
the Assets to the Lender in return for satisfaction of the Demand Notes
in accordance with the terms and conditions set forth in this Agreement.

IN CONSIDERATION of the mutual agreements herein contained, the benefits
to be derived by the parties therefrom and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
<PAGE>

1. Conveyances to the Lender. The Borrower agrees to convey the Assets
to the Lender absolutely and free from any right of redemption or other
right or interest of the Borrower or any party claiming by or through
the Borrower, which conveyance will specifically include the following
personal property comprising the Assets: all furniture, fixtures,
appliances, equipment, inventory, supplies and other personal property
as set forth on the Schedule of Assets that is attached hereto as
Exhibit A and made a part hereof by reference.

2. Consideration. Subject to the satisfaction by the Borrower of the
Lender Conditions (as hereafter defined), the Lender agrees to accept
the conveyance of the Assets to the Lender in full, final and complete
settlement, accord and satisfaction of the Demand Notes. The Borrower
agrees to convey the Assets to the Lender in consideration of such
accord and satisfaction.

3.1 Closing.

3.1 Borrower's Deliveries. On the Closing Date, the Borrower will
deliver or cause to be delivered to the Lender a Bill of Sale
for the Assets in the form attached hereto as Exhibit B and
made a part hereof by reference.

3.2 Lender's Deliveries. On the Closing Date, the Lender will
deliver to the Borrower copies of the Demand Notes and Security
Agreement bearing the following legend on the face thereof:
"This instrument is subject to the terms of a certain Settlement
Agreement dated December 2, 1998 between Mace Security
International, Inc. and MSP Retail, Inc."

3.3 Possession. Possession of the Assets will be delivered by the
Borrower to the Lender on the Closing Date.

4. Lender Conditions. The Lender's obligation to perform this Agreement
will, in addition to any other conditions set forth herein, be
conditioned and contingent on the satisfaction by the Borrower or
waiver by the Lender of all of the following conditions (the "Lender
Conditions") on the Closing Date:

4.1 Borrower Deliveries. The Borrower shall have delivered to the
Lender all of the documents, the Assets and other items
required by paragraphs 3.1 and 3.3 of this Agreement.

4.2 Borrower Agreements. The Borrower shall have performed each
and all of the Borrower's agreements set forth at paragraph 5
of this Agreement.

5. Borrower Agreements. The Borrower agrees to perform or cause to be
performed the following agreements:

5.1 Cooperation. After the Closing Date, the Borrower will
assist the Lender in an orderly transfer of the Assets.
<PAGE>

5.2 Voluntary Agreement. The Borrower is fully aware of the terms
contained in this Agreement and has voluntarily and without
coercion or duress of any kind entered into this Agreement and
the documents executed in connection with this Agreement.

5.3 Third Party Obligations. The Borrower agrees that the
acceptance by the Lender of ownership of the Assets pursuant to
the terms of this Agreement will not create any obligations on
the part of the Lender to third parties which might have claims
of any kind whatsoever against the Borrower or the Assets and
that the Lender does not assume or agree to discharge any
liabilities pertaining to the Assets which originated prior to
the Closing Date. No person not a party to this Agreement will
be a third party beneficiary of any term contained in this
Agreement or acquire any rights hereunder.

5.4 Absolute Transfer. The Borrower agrees that: (a) the
transfer of the Assets to the Lender pursuant to the terms of
this Agreement is an absolute transfer of all the Borrower's
right, title and interest in and to the Assets in fact as well
as in form subject only to the Loan Documents; (b) the Bill of
Sale and other transfer documents are not intended to be a
security instrument of any kind; (c) the consideration for the
transfer is exactly as recited in this Agreement; and (d) after
the Closing Date, the Borrower will have no further interest
(including rights of redemption or other rights under Article
9 of the Uniform Commercial Code) or claims in, to or against
the Assets or to the proceeds or profits that might be
derived therefrom.

5.5 Indemnification. The Borrower agrees to indemnify and hold
the Lender harmless from and against any and all liabilities,
claims, demands, losses, damages, costs and expenses (including,
without implied limitation, reasonably attorneys' fees and
litigation expenses), actions or causes of action, arising out
of or relating to any breach of any covenant or agreement or the
incorrectness or inaccuracy of any representation and warranty
of the Borrower contained in this Agreement or contained in any
other document delivered to the Lender by the Borrower, or any
party acting by or on behalf of the Borrower.

6. Conditions Subsequent. The Release to be delivered by the Lender in
accordance with paragraph 8 of this Agreement will be void ab initio
and will be of no force or effect if any one or more of the events
described at paragraphs 6.1 through 6.3 of this Agreement occurs. On
the occurrence of such event, the Lender will have the right to
unilaterally reinstate the obligations of the Borrower under the Loan
Documents and abrogate the Release by service of written notice to the
Borrower. On the exercise of such right by the Lender, the Lender will
be entitled to exercise all of the Lender's rights and remedies under
the Loan Documents, at law or in equity. The conditions subsequent are
as follows:
<PAGE>

6.1 Litigation. The Borrower or any person claiming by or
through the Borrower ever commence, join in, assist, cooperate
in or participate as an adverse party or as an adverse witness
(subject to compulsory legal process which requires testimony)
in any suit or other proceeding against the Lender or any
person named by the Lender in the Release (a "Released Lender
Party") relating to the Demand Notes the Loan Documents, this
Agreement, the Assets or the conveyance of the Assets by the
Borrower to the Lender; or

6.2 Avoidance. The Bill of Sale or any other document evidencing
a transfer of any part of the Assets to the Lender is ever
rendered void or rescinded by operation of law, or by order of
any state or federal court of competent jurisdiction by reason
of an order arising out of any claim or proceeding initiated
or commenced in favor of, against, on behalf of, or in concert
with, directly or indirectly, the Borrower or any person
claiming by or through the Borrower; or

6.3 No Release. The release of any Released Lender Party is
ever rendered void, rescinded or adjudicated unenforceable by
operation of law or by order of any state or federal court of
competent jurisdiction, by reason of an order arising out of
any claim or proceeding initiated or commenced in favor of,
against, on behalf of, or in connection with, directly or
indirectly, the Borrower or any person claiming by or through
the Borrower.

7. No Merger. The parties acknowledge and agree that notwithstanding the
Release contemplated by this Agreement, all of the Loan Documents will
remain in full force and effect after the transactions contemplated by
this Agreement have been consummated.

8. Mutual Releases.

8.1 Release of Lender Parties. Effective on the Closing Date and
only if the transactions contemplated by the Settlement
Agreement are consummated, the Borrower hereby releases,
acquits and forever discharges the Lender and the Lender's
subsidiaries, affiliates, officers, directors, agents,
employees, shareholders, servants, attorneys and
representatives, as well as the respective heirs, personal
representatives, successors and assigns of any and all of them
(hereafter collectively called the "Released Lender Parties')
from any and all loss, damages, claims, demands, debts, actions,
causes of action, suits, contracts, agreements, obligations,
accounts, defenses, offsets against the Indebtedness and
liabilities of any kind or character whatsoever, known or
unknown, suspected or unsuspected, in contract or in tort, at
law or in equity, which the Borrower ever had, now has, or
might hereafter have against the Released Lender Parties,
jointly or severally, for or by reason of any matter, cause or
thing whatsoever occurring prior to the Closing Date, which
relates to, in whole or in part, directly or indirectly to the
Demand Notes and Security Agreement; EXCEPTING ONLY the

<PAGE>

obligations of the Lender to perform the terms of the Settlement
Agreement and the documents delivered pursuant to the Settlement
Agreement. In addition, the Borrower agrees not to commence,
join in, prosecute or participate in any suit or other
proceeding in a position which is adverse to any of the Released
Lender Parties arising directly or indirectly from any of the
foregoing matters.

8.2 Release of Borrower Parties. Effective on the Closing Date
and only if the transactions contemplated by the Settlement
Agreement are consummated, the Lender does hereby release,
acquit and forever discharge the Borrower and the Borrower's
officers, directors, agents, employees, servants, shareholders,
attorneys and representatives, as well as the respective heirs,
personal representatives, successors and assigns of any and all
of them (hereafter collectively called the "Released Borrower
Parties") from any and all loss, damages, claims, demands,
debts, actions, causes of action, suits, contracts, agreements,
obligations, accounts, defenses and liabilities of any kind or
character whatsoever, known or unknown, suspected or
unsuspected, in contract or in tort, at law or in equity, which
the Lender ever had, now has, or might hereafter have against
the Released Borrower Parties, jointly or severally, for or by
reason of any matter, cause or thing whatsoever occurring
prior to the Closing Date which relates to, in whole or in part,
directly or indirectly the Demand Notes and Security Agreement;
EXCEPTING ONLY the obligations of the Borrower to perform the
terms of the Settlement Agreement.

9. Miscellaneous. It is further agreed as follows:

9.1 Entire Agreement. This Agreement constitutes the entire and
final agreement between the parties and there are no agreements,
understandings, warranties or representations between the
parties except as set forth herein. This Agreement supersedes,
in all respects, all other prior written or oral agreements
between the parties relating to the subject matter of this
Agreement and there are no agreements, understandings,
warranties or representations between the Lender and the
Borrower except as set forth in this Agreement or the documents
to be delivered by the parties on the Closing Date.

9.2 Binding Effect. This Agreement will inure to the benefit of
and bind the respective successors and permitted assigns of
the parties.

9.3 Severability. If any clause or provision of this Agreement is
determined to be illegal, invalid or unenforceable under any
present or future law by the final judgment of a court of
competent jurisdiction, the remainder of this Agreement will
not be affected thereby. It is the intention of the parties
that if any such provision is held to be illegal, invalid or
unenforceable, there will be added in lieu thereof a provision
as similar in terms to such provision as is possible and be
legal, valid and enforceable.
<PAGE>

9.4 Counterpart Execution. This Agreement may be executed in
counterparts, each of which will be deemed an original
document, but all of which will constitute a single document.
This document will not be binding on or constitute evidence of
a contract between the parties until such time as a counterpart
of this document has been executed by each party and a copy
thereof delivered to the other party to this Agreement.
Facsimile signatures shall be treated as original signatures.

9.5 Governing Law. This Agreement will be interpreted and
construed under the internal laws of the State of Vermont. All
claims, disputes and other matters in question arising out of
or relating to this Agreement or the breach thereof, will be
decided by proceedings instituted and litigated in the court of
competent jurisdiction sitting in the state of Vermont.

9.6 Survival. All representations, warranties and covenants of
the Borrower and the Lender contained in this Agreement and in
the documents to be delivered by the Borrower on the Closing
Date will survive the Closing Date, the closing of the transfer
of the Assets and the other transactions contemplated by this
Agreement.

9.7 Amendment. Neither this Agreement nor any of the provisions
hereof can be changed, waived, discharged or terminated, except
by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination
is sought.

EXECUTED as of the date first above written.

MACE SECURITY INTERNATIONAL, INC.

By: /s/ Mark A. Capone
------------------------------
Title: CFO
---------------------------

MSP RETAIL, INC.

By: /s/ Howard Edelman
------------------------------
Title: CEO
---------------------------

<PAGE>

MERGER AGREEMENT

BETWEEN

MACE SECURITY INTERNATIONAL, INC.

And

The Shareholders of

AMERICAN WASH SERVICES, INC.
<PAGE>

TABLE OF CONTENTS

PAGE

RECITALS................................................ 1

ARTICLE I ACQUISITION; CLOSING.......................... 1

ARTICLE II TITLE INSURANCE.............................. 4

ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE SELLERS....................................... 5

ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER .................................... 18

ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS ............. 18

ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER .......... 22

ARTICLE VII CONDITIONS OF PURCHASER .................... 23

ARTICLE VIII CONDITIONS OF SELLERS...................... 24

ARTICLE IX INDEMNIFICATION ............................. 25

ARTICLE X OTHER PROVISIONS.............................. 28
<PAGE>

SECTION OF DISCLOSURE SCHEDULE

ATTACHED TO THIS AGREEMENT

1.3(c) Plan of Merger
1.6(c) Purchaser Opinion Letter
1.6(d) Registration Rights Agreement
1.7(f) Release
1.7(h) Sellers Opinion Letter

ATTACHED AS PART OF DISCLOSURE BINDER

1.3(b) Stock Allocation
2.2 Permitted Exceptions
3.6 Real Property Interests
3.6(a) Exceptions to governmental compliance
3.6(b) Exceptions to lawful use of the Property
3.6(c) Exceptions to conduct in compliance with Applicable laws
3.6(e) Litigation or administrative proceedings for environmental violations
3.6(f) Definition of "Hazardous Materials" and Environmental Conditions
3.6(h) Mechanic's liens
3.6(j) Exceptions to proceedings which would affect use of the Property
3.7(a) List of Company's Leased Personalty and Permitted Encumbrances
3.10 Fiscal Condition of Company
3.11 Tax Deficiencies
3.12 Insurance Policies, etc.
3.13(a) Employment Agreements
3.13(b) Employee Information
3.13(c) Employee Benefit Plans, Funds or Programs
3.14(a) Exceptions to Company's operation in compliance with laws, etc.
3.14(b) Exceptions relating to environmental issues and liability
3.14(c) Notices of Violation
3.16 Exceptions to right of Sellers and Company to enter this Agreement
3.17 Transaction Intermediaries 3.19 Investments in Competing Companies
3.22 List of Litigation and Summaries
<PAGE>

MERGER AGREEMENT

This Merger Agreement ("Agreement") is made as of March 26, 1999, by and
between Louis D. Paolino, Jr. and Red Mountain Holding, Ltd. ("Shareholders")
on the one hand, and Mace Security International, Inc. ("Purchaser") on the
other hand.Shareholders may sometimes be referred to as "Sellers" in this
Agreement.

RECITALS

The Shareholders are the owners of all of the outstanding shares of
stock ("Company Shares") of American Wash Services, Inc. (the "Company"),
which is in the business of operating a car wash company (the "Business")
throughout the United States. The Company, through a wholly-owned subsidiary,
owns and/or operates certain car wash locations ("Business") and has entered
into two contracts to purchase additional multi-location car wash businesses
("Acquisition Contracts"). Purchaser owns all of the outstanding stock of
Mace Anti Crime Bureau, Inc. ("Subsidiary"). In accordance with the
provisions of this Agreement, the parties desire to merge Company into
Subsidiary in exchange for common stock of Purchaser, all on the terms
contained herein. The parties intend that the transactions contemplated
hereby qualify as a reorganization, within the meaning of Section
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended.

Throughout this Agreement various Schedules are referenced as being
attached to this Agreement. Notwithstanding the fact that all Schedules are
referred to as being attached to this Agreement, some of the Schedules are
not attached but instead appear in a Disclosure Binder prepared by the
Sellers. The Disclosure Binder is organized under subheadings which
correspond to the various Schedules described in this Agreement. For purposes
of identification, the Disclosure Binder has been identified by the parties
by a written statement executed by the parties and appearing as the first
page of the Disclosure Binder. For purposes of this Agreement, a disclosure
by Sellers of any fact on a Schedule shall be deemed a disclosure on every
Schedule of Sellers to the extent such disclosure properly could have been
made thereon but was not made, provided a cross-reference thereon sets forth
the Schedule where disclosure is made.

ARTICLE I
Acquisition; Closing

Section 1.1 Incorporation of Recitals. The recitals set forth above are
incorporated herein by reference and are a part of this Agreement.

Section 1.2 Time and Place for Closing. Closing under this Agreement
shall take place within fifteen days of the conditions set forth in Article
VII and Article VIII being satisfied or waived, time being of the essence, at
the offices of Company, 1000 Crawford Place, Suite 400, Mount Laurel, New
Jersey, or such other place as the parties hereto may agree upon. The date
that Closing occurs is referred to hereinafter as the "Closing Date" and the
act of closing as "Closing." The exact Closing Date shall be established by a
written notice sent by Purchaser to Sellers.

Section 1.3 Merger; Consideration.

(a) At the Closing, pursuant to the provisions of the General
Corporation Law of Delaware, effective on the Closing Date, Company shall be
merged with Subsidiary, with the survivor of the merger being Subsidiary. At
the Closing, (i) the outstanding common stock of Company shall be
automatically converted into the common stock of Subsidiary and delivered to
Purchaser, (ii) all of the Company Shares previously outstanding shall be
delivered to Purchaser, and (iii) Purchaser shall deliver to Sellers (1)
immediately available funds in the amount of Four Million Six Hundred Eighty
Seven Thousand Five Hundred and 00/100 Dollars ($4,687,500.00), plus (2) Six
Hundred Twenty Eight Thousand Three Hundred Sixty Two (628,362) shares of
unregistered shares of Purchaser's common stock, par value $.01 per share
(the " Mace Stock").

(b) The Mace Stock shall be allocated in the same proportions that the
Sellers own shares in the Company, as set forth on Schedule 1.3(b).
<PAGE>

(c) At Closing, Subsidiary and Company shall execute the certificate of
merger attached hereto as Schedule 1.3(c) ("Certificate of Merger"), and the
parties shall file the Certificate of Merger with the Secretary of State of
Delaware.

Section 1.4 Closing. Following execution of this Agreement, Purchaser
and Sellers shall be obligated to conclude the transaction strictly in
accordance with its terms within fifteen (15) days after the conditions of
Closing set forth in Article VII and Article VIII have been satisfied or
waived, time being of the essence. If the failure to conclude this
transaction is due to the refusal and failure of Sellers to perform their
obligations under this Agreement, Purchaser may seek to enforce this
Agreement with an action of specific performance, in addition to, and not in
limitation of, any other rights and remedies available to the Purchaser under
this Agreement, or at law or in equity, including, without limitation an
action to recover their actual damages resulting from the default of Sellers.
If the failure to conclude this transaction is due to the refusal and failure
of Purchaser to perform its obligations under this Agreement, Sellers may, in
addition to and not in limitation of any other rights and remedies available
to the Sellers under this Agreement, or at law or in equity, bring legal
action to recover their actual damages resulting from the default of
Purchaser.

Section 1.5 Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date:

(a) by mutual written agreement of Purchaser and the Sellers;

(b) by the Sellers, or by Purchaser, in the event Purchaser or the
Sellers, as applicable, makes a material misrepresentation under this
Agreement or breaches a material covenant or agreement under this Agreement,
and fails to cure such misrepresentation or breach within ten (10) business
days from the date of written notice of the existence of such
misrepresentation or breach; or

(c) by the Sellers or Purchaser, if the Closing shall not have occurred
by July 31, 1999, or such other date as may be agreed to by the parties
hereto in writing, due to the non-fulfillment of a condition precedent to
such party's obligation to close as set forth at Article VII or VIII hereof,
as applicable (through no fault or breach by the terminating party).

All terminations shall be exercised by sending the other parties a
written notice of the termination. In the event this Agreement is terminated
as provided herein, this Agreement shall become void and be of no further
force and effect and no party hereto shall have any further liability to any
other party hereto, except that this Section 1.5, Article IX, Section 10.1,
Section 10.2 and Section 10.17 shall survive and continue in full force and
effect, notwithstanding termination. The termination of this Agreement shall
not limit, waive or prejudice the remedies available to the parties, at law
or in equity, for a breach of this Agreement.

Section 1.6 Deliveries by Purchaser. At the Closing, Purchaser shall
deliver, all duly and properly executed (where applicable):

(a) The Mace Stock due on the Closing Date, as provided in Section 1.3
above to be delivered to the Sellers;

(b) Immediately available funds in the amount of Four Million Six
Hundred Eighty Seven Thousand Five Hundred and 00/100 Dollars ($4,687,500.00)
as provided in Section 1.3 above to be delivered to Sellers;

(c) A copy of the resolutions of the Board of Directors of Purchaser
authorizing the execution and delivery of this Agreement and each other
agreement to be executed in connection herewith (collectively, the
"Collateral Documents") and the consummation of the transactions contemplated
herein, certified by the secretary of Purchaser;
<PAGE>

(d) A favorable opinion from counsel for Purchaser, dated the day of the
Closing, in form and substance as attached hereto as Schedule 1.6(c);

(e) Two assignable warrants to purchase an aggregate of 1,575,000 shares
of Purchaser's common stock, par value $.01 per share ("Common Stock") with a
term of 64 months, exercisable 120 days following the Closing hereunder, with
an exercise price of $1.375 (the "1,575,000 Warrants"), shall be issued for
1,500,000 shares to Louis Paolino and 75,000 shares to Robert Kramer;

(f) An assignable warrant to purchase 250,000 shares of Common Stock
with a term of 64 months, exercisable 120 days following the Closing
hereunder, with an exercise price of $2.50 (the "250,000 Warrant"), shall be
issued to Louis Paolino;

(g) Evidence that a certificate of name change of Subsidiary has been
filed with the Secretary of State of the State of Delaware, which name shall
be reasonably acceptable to Sellers.

Section 1.7 Deliveries by Sellers. At the Closing, each of the Sellers,
as applicable, shall deliver to Purchaser, all duly executed, the following:

(a) Duly executed certificates in valid form evidencing all of the
Company Shares owned by each Seller, duly endorsed in blank or accompanied by
duly executed stock powers attached or otherwise executed in the presence of
authorized representatives of Purchaser;

(b) The written resignations of all officers and directors of the
Company as of the time of Closing, if required by Purchaser;

(c) A certified copy of resolutions of the directors of the Company and
the Shareholders authorizing the execution and delivery of this Agreement and
each of the Collateral Documents;

(d) The Certificate described at Section 7.1;

(e) A release from each Seller, in a form and substance attached as
Schedule 1.7(e);

(f) A favorable opinion from counsel for Purchaser, dated the day of the
Closing, in form and substance as attached hereto as Schedule 1.7(g);

(g) The books and records of the Company, including, without limitation,
all original financial and operating records, the corporate minute book and
seal, the corporate stock ledger, and all title documents; and

(h) Other documents and instruments required by this Agreement, if any.

ARTICLE II
Title Insurance

Section 2.1 Owners Title Policy. The Company is foreclosing upon the
assets and real property utilized in operating car washes at Flourtown and
Norristown, Pennsylvania ("Foreclosure Real Property"). The Company owns the
real property utilized in operating a car wash in Berlin, New Jersey ("Owned
Real Property"). The Company leases the real property utilized in operating
car washes at Bryn Mawr and West Chester, Pennsylvania, and Cherry Hill, New
Jersey ("Leased Real Property"). If the Company has completed foreclosure on
the Foreclosure Real Property by Closing, the Company shall own, with respect
to the Foreclosure Real Property, an extended coverage owners policy of title
<PAGE>

insurance from a title company selected by Sellers (the "Title Company"),
dated as of the Closing Date, in the amount equal to the fair market value of
the Foreclosure Real Property. At Closing, the Company shall own, with
respect to the Owned Real Property, an extended coverage owners policy of
title insurance from the Title Company for the Owned Real Property. At
Closing, the Company shall own, with respect to the Leased Real Property, an
extended coverage tenant's policy. The title policies shall include access
and contiguity endorsements, and shall insure title to the Foreclosure Real
Property to be in fee simple in Company (or with respect to the Leased Real
Property, an unencumbered leasehold interest) subject only to the Permitted
Exceptions permitted by Section 2.2 hereof (the "Owners Policy"). Sellers
shall bear the cost of the Owners Policy.

Section 2.2 Permitted Exceptions. The Owners Policy shall insure
Company's interest in the Owned Real Property and, if applicable, the
Foreclosure Real Property to be free and clear of all encumbrances and
exceptions whatsoever except those listed on Schedule 2.2 attached hereto
("Permitted Exceptions"). Schedule 2.2 sets forth all encumbrances and
exceptions by separate parcel of real estate.

ARTICLE III
Representations and Warranties of the Sellers

With knowledge that Purchaser is relying upon the representations,
warranties and covenants herein contained, Sellers represent and warrant to
Purchaser and make the following covenants for Purchaser's benefit. When the
phrase "to Sellers' knowledge" or any equivalent phrase is used in this
Agreement, the phrase shall mean the actual knowledge of any Seller.

Section 3.1 Organization and Standing. The Company is duly organized,
legally existing and in good standing under the laws of the state of
Delaware, with full power and authority to own its properties and conduct its
business as now being conducted. The Company does not own any stock or
interest in any other corporation, partnership, or other business
organization, except as listed on Schedule 3.1.

Section 3.2 Company Stock. All of the authorized, issued, and
outstanding shares of capital stock and other securities of the Company are
owned by the Shareholders, including without limitation equity securities,
debt securities and options. At Closing, the Shareholders will be the only
owners of the securities of the Company. The Company Shares each Seller owns
are legally and validly authorized and issued, fully paid and nonassessable
and free and clear of all liens, claims and encumbrances of every kind and
nature and are not subject to any agreement or instrument relating to the
transfer, disposition or voting of such securities. At Closing, all of the
Company Shares will be conveyed and assigned to Purchaser free and clear of
all liens, claims and encumbrances of every kind. There are no outstanding
rights of any kind to acquire additional shares of any class from the Company
nor has any person claimed any such rights. All of the outstanding shares of
the Company's capital stock have been duly authorized, issued, and are fully
and validly paid and non-assessable.

Section 3.3 Contracts, Permits and Material Documents. The items listed
and included in Schedule 3.3, attached hereto, are all of the following with
respect to the Company ("Material Documents"): (i) leases and purchase
agreements for real property, and leases and purchase agreements for personal
property and businesses, including the Acquisition Contracts, (ii) licenses,
(iii) franchises, (iv) promissory notes, guarantees, bonds, letters of
credit, mortgages, liens, pledges, and security agreements under which the
Company is, or any of its assets are, bound or under which the Company is a
beneficiary, (v) collective bargaining agreements, (vi) patents, trademarks,
trade names, copyrights, trade secrets, proprietary rights, symbols, service
marks, and logos, (vii) all permits, licenses, consents and other approvals
from governments, governmental agencies (federal, state and local) and/or
third parties relating to, used in or required for the operation of the
Company's businesses, and (viii) other contracts, agreements and instruments
not listed on another Schedule attached to this Agreement which are binding
on the Company or any of its property or pursuant to which the Company
derives any material benefit or has imposed upon it any material detriment.
<PAGE>

For purposes of this Section 3.3 a material benefit or material detriment
shall be anything which provides a benefit or imposes a detriment having a
value of $10,000 or more. The Material Documents listed and included in
Schedule 3.3 are organized under subheadings for each of the different type
of documents provided. Neither the Company nor, to Sellers' knowledge, any
person or party to the any of the Material Documents or bound thereby is in
material or knowing default under any of the Material Documents, and no act
or event has occurred which with notice or lapse of time, or both, would
constitute such a default. The Company is not a party to, and the Company's
property is not bound by any agreement or instrument which is material to the
continued conduct of its business operations as now being conducted or with
respect to which a default might materially and adversely affect its
properties, business operations, or financial condition of the Company,
except as listed in Schedule 3.3. To Sellers' knowledge, the documents listed
on Schedule 3.3 confer on the Company all rights necessary to enable the
Company to conduct its operations as now being conducted.

Section 3.4 Personal Property. All of the following items of personal
property used in the business operations of the Company are owned by the
Company by good and marketable title free of all liens, and are now and at
closing will be in operable condition, normal wear and tear excepted.

(a) All equipment, computers, printers, card readers, vending machines,
appliances, machinery and parts, vehicles, tools, hoses, brushes, heating,
ventilation, air conditioning, plumbing, electrical, drainage, fire alarm,
communications, sprinkler, security and exhaust equipment and their component
parts; auto wash equipment, auto wash conveyor, auto drying equipment and
similar items in Sellers' possession or control, used in connection with,
located in or on, or otherwise pertaining to the Business (collectively, the
"Equipment");

(b) All of the inventory of retail items, operating supplies, parts and
accessories owned by the Company and used or usable in connection with the
Business;

(c) All office or other equipment, furnishings, supplies, brochures,
sales and promotional materials, catalogues and advertising literature,
business files, customer lists, customer records and information, and all
pictures and photographs, computer programs and software (with applicable
documentation and source codes), construction and "as-built" drawings, plans
and specifications, finish plans and other personal property of every nature
and description in Sellers' possession or control;

(d) All intellectual property used in connection with the Business or
any other asset, including, without limitation, know-how, trade secrets,
trademarks, trade names, and the exclusive right to use the names under which
any of the Business' locations are currently operated (collectively, the
"Intellectual Property");

(e) All of the accounts receivable, prepaid deposits, cash, goodwill and
all other tangible and intangible assets of the Company; and

(f) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (e) above.

Sellers represent and warrant that, in the aggregate, the personal property
of the Company is sufficient for the Company to carry on its business as
previously conducted and as presently conducted, and that the personal
property is all in operable condition. .

Section 3.5 [This section intentionally omitted.]

Section 3.6 Real Property. Each parcel of Foreclosure Real Property,
Owned Real Property and Leased Real Property is listed on Schedule 3.6
attached hereto and incorporated herein by reference. Those parcels of
Foreclosure Real Property which have been foreclosed upon by Closing,
together with each parcel of Owned Real Property and Leased Real Property are
<PAGE>

referred to in this Section 3.6 as the "Real Property." The Company has or
will have at Closing good, marketable and insurable title to all of the Owned
Real Property and any of the Foreclosed Property with respect to which the
foreclosure actions have been completed, free and clear of any mortgages,
pledges, liens, encumbrances, charge, claim, security agreement or title
retention or other security arrangement except for the Permitted Exceptions.
The Company has or will have at Closing good, marketable and insurable
leasehold interest pursuant to the terms of the leases covering the Leased
Real Property free and clear of any mortgages, pledges, liens, encumbrances,
charge claims, and all leases covering the Leased Real Property are valid and
enforceable. The Company has no interest in any real property other than the
properties listed on Schedule 3.6. The Company nor any of its predecessors
has ever had an ownership interest in any other real property, except as
disclosed in schedule 3.6.

(a) To Sellers' knowledge, in all material respects, and except as set
forth in Schedule 3.6(a) attached hereto and incorporated herein, the Real
Property is, and at all times during operation of the Company's business
thereon has been, licensed, permitted and authorized for the operation of
such business under all applicable federal, state and local statutes, laws,
rules, regulations, orders, permits (including, without limitation, zoning
restrictions and land use requirements) and licenses and all administrative
and judicial judgments, rulings, decisions and orders affecting or otherwise
applicable to the protection of the environment, the Real Property and the
conduct of such business thereon (collectively, the "Applicable Laws").

(b) To Sellers' knowledge, except as set forth in Schedule 3.6(b)
attached hereto and incorporated herein by reference, the Real Property is
legally usable for its current uses, and the Real Property can be used by the
Purchaser after the Closing to operate such business as is currently
operated, without violating any Applicable Law or private restriction, and
such uses are legal, conforming uses.

(c) To Sellers' knowledge, except as set forth in Schedule 3.6(c)
attached hereto and incorporated herein by reference, all activities and
operations conducted on the Real Property, whether by Sellers or by third
parties, are now being conducted and have always been conducted in compliance
with all Applicable Laws.

(d) The Sellers and Company shall make available on Purchaser's
reasonable request all engineering, geologic, environmental and other similar
reports, documentation and maps relating to the Real Property in the
possession of the Shareholders.

(e) To Sellers' knowledge, except as set forth in Schedule 3.6(e)
attached hereto and incorporated herein by reference, neither Sellers nor the
Company nor the Real Property now is or ever has been involved in any
litigation or administrative proceeding seeking to impose fines, penalties or
other liabilities or seeking injunctive relief for violation of any
Applicable Laws relating to the environment.

(f) To Sellers' knowledge, there have been no spills, leaks, deposits or
other releases into the environment or onto or under the Real Property of any
Hazardous Materials as defined for purposes of this Agreement as any material
or substance which, by reason of its composition or characteristics, is (i)
toxic or hazardous waste ("Hazardous Waste") as defined in either (A) the
Solid Waste disposal Act, 42 U.S.C. ss.ss. 6901 et seq., or Section 6(c) of
the Toxic Substance Control Act, 15 U.S.C. ss.2605(c), or the Resource
Conservation and Recovery Act, 42 USCA Section 6901 et seq., or any laws of
similar purpose or effect, and any rules, regulations or policies promulgated
thereunder, or (B) any Environmental Law as hereinafter defined, or (ii)
special nuclear or by-products materials within the meaning of the Atomic
Energy Act of 1954, or other material environmental conditions in quantities
that require remediation, other than as disclosed on Schedule 3.6(f).

(g) To Sellers' knowledge, no party, other than the Company, has a
present or future right to possession of all or any part of the Real
Property, except for any right defined in, under or by any of the Permitted
Exceptions.
<PAGE>

(h) To Sellers' knowledge, there are no mechanic's liens affecting the
Real Property and no work has been performed on the Real Property within
twelve (12) months of the date hereof for which a mechanic's lien could be
filed, except as set forth in Schedule 3.6(h) attached hereto and
incorporated herein by reference.

(i) To Sellers' knowledge, there are no levied or pending special
assessments affecting all or any part of the Real Property owed to any
governmental entity and none is threatened.

(j) To Sellers' knowledge, there are no proceedings or amendments
pending and brought by or threatened by, any third party which would result
in a change in the allowable uses of the Real Property or which would modify
the right of the Company or the Purchaser to use the Real Property for its
present uses after the Closing Date, except as set forth in Schedule 3.6(j)
attached hereto and incorporated herein by reference.

(k) To Sellers' knowledge, no portion of the Real Property contains any
areas that could be characterized as disturbed, undisturbed or man-made
wetlands or as "waters of the United States" pursuant to any Applicable Laws
or the procedural manuals of the Environmental Protection Agency, U.S. Army
Corps of Engineers or any applicable state agency whether such
characterization reflects current conditions or historic conditions which
have been altered without the necessary permits or approvals, except as
listed on Schedule 3.6(k) attached hereto and incorporated herein by
reference.

Section 3.7 Title. To Sellers' knowledge, the Company has good and
marketable title to all of its personal property, tangible and intangible,
including, without limitation, all of the assets reflected on the "Most
Recent Balance Sheet" (hereinafter defined), all personal property currently
located on its premises, all cash and accounts receivable, all items of
personal property set forth on the schedules attached hereto, and all
trademarks and other intellectual property used in the Company's business,
except in each case, that personal property which the Company leases. All
leases of personal property having a fair market value of $10,000 or more are
listed on Schedule 3.7 attached hereto and incorporated herein by reference.
All of such assets are owned by the Company free and clear of any mortgage,
pledge, lien, encumbrance, charge, claim, security agreement, agreement
regarding or restricting transfer or title retention or other security
arrangement, except the items set forth in subparagraphs (a) through (c)
below, and the items listed on Schedule 3.7 ("Permitted Company Assets
Encumbrances"). Schedule 3.7 identifies all liens by amount and by the
document, instrument or law under which it arises.

(a) Liens imposed by law and incurred in the ordinary course of business
for indebtedness not yet due to carriers, warehousemen, laborers or
materialmen and the like;

(b) Liens in respect of pledges or deposits under worker's compensation
laws or similar legislation; and

Section 3.8 Financial Statements. Prior to Closing, Sellers will deliver
to Purchaser true and correct copies of the following financial statements of
the Company (the "Financial Statements"):

(a) Balance Sheets for the Company as of December 31, 1998, and
statements of income, cash flow and retained earnings for the same period,
all prepared on an accrual basis and reviewed by the the Company's regular
accountants (the "1998 Financial Statements").

(b) A balance sheet for the Company as of March 31, 1999 ("Most Recent
Balance Sheet"), and a statements of income, cash flow and retained earnings
for the period ended March 31, 1999 ("Most Recent Income Statement"), all
prepared on an accrual basis by the Company. The Most Recent Balance Sheet
<PAGE>

and Most Recent Income Statement are hereafter referred to as the "Most
Recent Financial Statements."

The Financial Statements have been prepared by the regular accountants
of the Company, in accordance with generally accepted accounting principles
("GAAP"). All notes and contingent liabilities required to be stated and
reflected under GAAP are stated and reflected on the Financial Statements.
Each of the Financial Statements (including all footnotes thereto) is true,
complete and correct in all material respects. The balance sheets present
fairly and accurately the financial condition of the Company as of the dates
indicated thereon and the statements of income present fairly and accurately
on an accrual basis the results of the operations of the Company for the
periods indicated thereon. The Company has not (i) made any material change
in its accounting policies or (ii) effected any prior period adjustment to,
or other restatement of, its financial statements for any period. The
Financial Statements are consistent with the books and records of the Company
(which books and records are correct and complete).

Section 3.9 Liabilities; Accounts Receivable

(a) To Sellers' knowledge, the Company does not have any liabilities,
fixed or contingent, other than:

(i) liabilities fully reflected in the Most Recent Balance Sheet; and

(ii) accounts payable arising since the date of the Most Recent
Balance Sheet in the normal course of business consistent with
past custom and practice.

(b) To Sellers' knowledge, all accounts receivable of the Company, less
a bad accounts reserve as set forth on the Most Recent Balance Sheet , are
valid accounts receivable, have been generated in the ordinary course of the
Company's business and all services required to be rendered for the accounts
receivable to be due have been rendered. To Sellers' knowledge, there are no
defenses or set-offs to any of the accounts receivable..

Section 3.10 Fiscal Condition of Company. Since the date of the 1998
Financial Statements, except as set forth on Schedule 3.10, there has not
(except as otherwise specifically permitted by this Agreement) been:

(a) Any material change in the financial condition, liabilities,
business organization or personnel of the Company or in the relationships of
the Company with suppliers, customers or others, other than changes occurring
in the ordinary course of business;

(b) Any disposition by the Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by the Company of any of its capital stock or any
declaration or payment of any dividend or other distribution of its capital
stock;

(c) Any sale or other disposition of any asset owned by the Company at
the close of business on the date of the Most Recent Balance Sheet, or
acquired by it since that date, other than in the ordinary course of business
or which individually do not exceed $10,000 or in the aggregate, do not
exceed $20,000;

(d) Any expenditure or commitment by the Company for the acquisition of
any single asset having an acquisition price of $50,000 or more;

(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company, except damage,
destruction or loss which does not exceed $100,000 in the aggregate, and
which is not covered by insurance;
<PAGE>

(f) Any bonuses or increases in the compensation payable or to become
payable by the Company to any officer or key employee;

(g) Any loans or advances to the Company other than renewals or
extensions of existing indebtedness; or

(h) Any change in accounting method or practice.

Section 3.11 Tax Returns. The Company has filed all Federal and other
tax returns for all periods on or before the due date of such return (as may
have been extended by any valid extension of time) and has paid all taxes due
for the periods covered by the said returns. The Company has no liability for
taxes incurred by its operations prior to Closing, except for taxes for the
current fiscal year plus any tax reserve reflected on the Most Recent Balance
Sheet. The Company is a Subchapter C corporation under the Internal Revenue
Service Code. The Company has filed, and will file in a timely manner, all
requisite federal, state, local and other tax returns due for all fiscal
periods ended on or before the date hereof and as of the Closing shall have
filed in a timely manner all such returns due for all periods ended on or
before the Closing Date. The Company has duly withheld and collected all
taxes which the Company is required to withhold or collect by law, has paid
over to the proper authorities all such amounts required to be paid, and has
in reserve all amounts so withheld or collected which have not yet been
required to be paid. No taxing authority has asserted any deficiency for any
prior tax period of the Company, and the Sellers are not aware of any facts
which would constitute the basis for the assertion of such a deficiency,
except as listed on Schedule 3.11 attached hereto..

Section 3.12 Policies of Insurance. All insurance policies, performance
bonds, and letters of credit insuring the Company or which the Company has
had issued and which has not expired are listed on Schedule 3.12 attached
hereto. Schedule 3.12 includes, the names and addresses of the beneficiaries,
insurers and sureties, policy and bond numbers, types of coverage or bond,
time periods or projects covered and the names and addresses of all known
agents or agencies, issuing banks, and beneficiaries, with respect to each
listed insurance policy, performance bond and letter of credit. The Company's
current insurance policies, performance bonds and letters of credits are
still in force and effect and the premiums thereon are not delinquent. The
Company has not received notification from any insurance carrier denying or
disputing any claim made by the Company or denying or disputing any coverage
for any such claim or denying or disputing the amount of any claim. The
Company does not have any claim against any of its insurance carriers under
any policies insuring it pending or anticipated and there has been no
occurrence of any kind which would give rise to any such claim.

Section 3.13 Employees, Pensions and, ERISA.

(a) The Company does not have any contract of employment with an officer
or other employee that is not terminable without penalty on notice of two
weeks or less, except as listed on Schedule 3.13(a).

(b) No employee of the Company is represented by any union. The name,
social security number and current rate of compensation of each of the
Company's employees and department in which each person is employed is listed
on Schedule 3.13(b) attached. There is no pending or threatened dispute
between the Company and any of its employees which might materially and
adversely affect the continuance of any Company's business operations.

(c) Attached hereto, made a part hereof and marked Schedule 3.13(c)
lists all employee benefit plans, funds or programs (within the meaning of
the Internal Revenue Code of the United States ("Code") or the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) which are
currently maintained and/or were established or sponsored by the Company
(whether or not they are now terminated) or to which the Company currently
<PAGE>

contributes, or has an obligation to contribute in the future, including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions ("Plans"), whether or not the Plans are or are
intended to be (i) covered or qualified under the Code, ERISA or any other
applicable law, (ii) written or oral, (iii) funded or unfunded, or (iv)
generally available to all employees of the Company.

(d) The Company has delivered to the Purchaser (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii)
accurate and complete detailed summaries of all oral Plans, (iii) true and
complete copies of the most recent financial statements with respect to the
Plans, (iv) true and complete copies of all annual reports for any Plan
prepared within the past 5 years, and (v) all filings submitted to and any
correspondence received from any government agency relating to any Plan
within the past 5 years.

(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the
IRS to be so qualified and such determination remains in effect and has not
been revoked. Nothing has occurred since the date of any such determination
which may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code
or ERISA except as set forth on Schedule 3.13 (e), attached hereto made a
part hereof. No Plan is funded through a trust intended to be exempt from tax
under Section 501(c) of the Code.

(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been
fully waived, or accumulated funding deficiency whether or not waived (as
defined in Section 302 of ERISA), or liability to the Pension Benefit
Guaranty Corporation ("PBGC") under Section 4062 of ERISA, nor any prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the Code),
has occurred or exists with respect to any Plan. All Plans are in substantial
compliance with all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other law applicable to such Plans, and, in
all material respects, have been administered, operated and managed in
substantial accordance with the governing documents of the Plan and the
requirements of ERISA. The Company has no unfunded obligations or liabilities
with respect to any Plan and the present value of the benefit liabilities of
each Plan which is a Pension Plan is less than the fair market value of the
assets of such Plan.

(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Sellers, after due inquiry of the Company, threatened
relating to any Plan, fiduciary of any Plan or assets of any Plan, before any
court, tribunal or government agency.

(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan
as at the date thereof and the results of operations of the Plan for the plan
year reflected therein and, subject to changes in amounts attributable to
investment performance and normal employee turnover, there has been no
material adverse change in the condition of the Plan since the date of the
most recent Form 5500, audited annual financial statement or actuarial
valuation report.

(i) The transaction contemplated herein will not accelerate any
liability under the Plans because of an acceleration of any rights or
benefits to which any employee may be entitled thereunder.

(j)The Company has no obligations with respect to, and makes no
contributions to, any Multi-Employer Pension Plan.

(k) To Sellers knowledge, there are no ERISA, pension plan, profit
sharing plan or compensation claims against the Company by employees.
<PAGE>

Section 3.14 Legality of Operation. In regard to the Company, and to
Sellers' knowledge:

(a) Except as disclosed in Schedule 3.14(a) to this Agreement, and
except as to Environmental Laws, as hereinafter defined, the Company is in
material compliance with all Federal, state and local laws, rules and
regulations including, without limitation, the following laws: land use laws;
payroll, employment, labor, or safety laws; or federal, state or local
"anti-trust" or "unfair competition" or "racketeering" laws such as but not
limited to the Sherman Act, Clayton Act, Robinson Patman Act, Federal Trade
Commission Act, or Racketeer Influenced and Corrupt Organization Act ("Law").
Except as disclosed in Schedule 3.14(a), the Company is in material
compliance with all permits, franchises, licenses, and orders that have been
issued with respect to the Laws and are or may be applicable to the Company's
property and operations, including, without limitation, any order, decree or
directive of any court or federal, state, municipal, or other governmental
department, commission, board, bureau, agency or instrumentality wherever
located, federal, state and local permits, orders, franchises and consents.
Except as disclosed in Schedule 3.14(a), the Company has received no
notification of any past or present failure by the Company to materially
comply with any Law applicable to it or its assets.

(b) Except as disclosed in Schedule 3.14(b) to this Agreement, the
Company is in material compliance with all Federal, state and local laws,
rules and regulations relating to environmental issues of any kind
("Environmental Law").

(c) Attached hereto as Schedule 3.14(c) is a list of all Notice of
Violations relating to Environmental Laws issued to the Company in the past
two years by any federal, state or local regulatory agency. There are no
outstanding or unremedied notices of violation either from a federal, state
or local authority.

(d) To Sellers' knowledge, no employee, contractor or agent of the
Company has, in the course and scope of employment with the Company, been
harmed by exposure to hazardous materials, as defined under the flaws.

(e) To Sellers' knowledge, except as set forth in Schedule 3.14(f), all
licenses, sewer hookups approvals, permits and certificates ("Government
Approvals") needed or required for the operation of the Company's business
are set forth on Schedule 3.3. All such Government Approvals are in full
force and effect, the Company.

Section 3.15 Corrupt Practices. To Sellers' knowledge, the Company has
not made, offered or agreed to offer anything of value to any employees of
any customers of the Company for the purpose of attracting business to the
Company or any foreign or domestic governmental official, political party or
candidate for government office or any of their respective employees or
representatives, nor has the Company otherwise taken any action which would
cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended.

Section 3.16 Legal Authority and Compliance. Except as listed in
Schedule 3.16 attached hereto and incorporated herein, each Seller and the
Company have the right, power, legal capacity and authority to enter into,
and perform their respective obligations under this Agreement, and no
approvals or consents of any other persons (including the consent of any
mortgagee holding a mortgage on the Owned Real Property or the Leased Real
Property and any landlord of the Leased Real Property) are necessary in
Connection with the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement have been duly
authorized by all necessary action of the directors and shareholders of
the Company. The execution, delivery and performance of this Agreement will
not result in a breach of or constitute a default or result in the loss
of any material right or benefit under:

(a) Any charter, by-law, agreement or other document to which any Seller
or the Company is a party or by which the Company or any of its property is
bound; or

(b) Any decree, order or rule of any court or governmental authority
which is binding on the Sellers, the Company, or the property of the Company.
<PAGE>

Section 3.17 Transaction Intermediaries. Sellers have not employed or
retained the services of any financial advisor, broker, or finder with
respect to which the Sellers will incur any broker's, finder's, investment
banking or similar fees, commissions or expenses, in connection with the
transactions contemplated by this Agreement.

Section 3.18 Intellectual Property. To Sellers' knowledge, the Company
has not infringed and is not now infringing, on any trade name, trademark,
service mark, copyright, trade secret or patent belonging to any person, firm
or corporation ("Intellectual Property") and no one has or is infringing any
Intellectual Property right of the Company.

Section 3.19 Competition. No salaried officer, shareholder or employee
of the Company, nor any spouse, child or other relative of any of them, has
any direct or indirect interest in any competitor of the Company within the
geographical area in which the Company currently conducts business, or an
interest in any supplier or customer of the Company or in any person from
whom or to whom the Company leases any real or personal property, or in any
other person with whom the Company is doing business which interest adversely
or materially affects the business of the Company, excepting only those
investments of not more than five percent of the capital stock of a business,
the stock of which is traded on a national securities exchange or
over-the-counter, where such investments are set forth on Schedule 3.19
attached hereto and incorporated herein by reference.

Section 3.20 Disclosure. Neither the representations and warranties of
the Sellers contained in this Agreement nor any information contained in any
Exhibit or Schedule or other document delivered by the Sellers or the Company
to Purchaser contains any untrue statement of a material fact, omits to state
any statement of a material fact necessary to make the statements contained
therein or herein not misleading. No investigation conducted by the Purchaser
shall be deemed to limit or vitiate in any way the effect of the
representations and warranties made herein; however, Purchaser shall disclose
to Sellers prior to Closing any representation or warranty that Purchaser
shall have found to be untrue or correct and provide Sellers the opportunity
to cure such misrepresentation.

Section 3.21 Continuation of Legal Status. No written agreement between
the Company and any third party shall be impaired or in any way limited by
the transactions contemplated by this Agreement.

Section 3.22 Litigation. All pending or, to Sellers' knowledge,
threatened litigation, administrative or judicial proceedings or
investigations by any governmental agency or officials involving the Company
or any of its property (including personal or owned, foreclosed or leased
real property) or assets, liabilities or the Company Shares, together with a
description of each such proceedings, is set forth on Schedule 3.22 attached.
There is no pending or, to Sellers' knowledge, threatened litigation,
administrative or judicial proceedings or investigation involving the Company
or its owned, leased or foreclosed real property, assets, liabilities or the
Company Shares, except as listed on Schedule 3.22.

ARTICLE IV
Representations and Warranties of Purchaser

Purchaser represents and warrants to the Sellers that the
representations and warranties contained in this Article IV are true on the
date hereof and shall be true on the Closing Date.

Section 4.1 Structure. Purchaser is a corporation duly organized and
legally existing in good standing under the laws of Delaware.

Section 4.2 Authorization to Proceed with this Agreement. Purchaser has,
by proper corporate proceedings, duly authorized the execution, delivery and
performance of this Agreement and the Collateral Documents.
<PAGE>

Section 4.3 Absence of Intermediaries. Purchaser has not employed or
retained the services of any financial advisor, broker, or finder with
respect to which the Purchaser will incur any broker's, finder's, investment
banking or similar fees, commissions or expenses, in connection with the
transactions contemplated by this Agreement.

Section 4.4 Commission Filings. All Forms 8-K, 10-K, 10-Q and Proxy
Statements required to be filed by Purchaser have been timely filed with the
Securities and Exchange Commission ("SEC") for fiscal year ending December
31, 1998 (the "Public Reports") under the Electronic Data Gathering, Analysis
and Retrieval system and are available to Sellers. The Public Reports
accurately and completely describe, in all material respects, Purchaser's
financial condition and results of operations as of the date of such filings
and as of the date hereof, and do not omit any material fact(s) necessary to
make the information contained in the filings not misleading, in light of the
circumstances under which they were made.

Section 4.5 Issued Common Stock. The Mace Stock to be issued pursuant to
this Agreement has been duly authorized and, when issued, will be validly
issued, fully paid and nonassessable.

Section 4.6 NASDAQ Listing. Purchaser shall not have received any notice
from NASDAQ that threatens its continued listing on the NASDAQ National
Market System, and Purchaser, shall continue to be so listed.

ARTICLE V
Additional Agreements of Sellers

The Sellers covenant and agree with Purchaser as follows:

Section 5.1 Restrictions on Transfer of Unregistered Stock. The Sellers
understand and agree that the following restrictions and limitations are
applicable to the Sellers' purchase and resale or other transfer of the Mace
Stock, pursuant to the Securities Act of 1933 (the "Act") or otherwise:

(a) Sellers agree that the Mace Stock shall not be sold or otherwise
transferred, unless the Mace Stock is registered under the Act and state
securities laws or such sale or transfer is exempt therefrom.

(b) A legend in substantially the following form will be placed on the
certificates evidencing the Mace Stock to be issued to the Sellers:

"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state securities
act. These shares have been acquired for investment and may not be
sold, transferred, pledged or hypothecated unless (i) they shall
have been registered under the Securities Act of 1933 and any
applicable states securities act or (ii) Mace Security
International, Inc., shall have been furnished with an opinion of
counsel, reasonably satisfactory to counsel for Mace Security
International, Inc., that registration is not required under any
such acts."

(c) Stop transfer instructions will be delivered to the Purchaser's
transfer agent with respect to the Mace Stock issued to Sellers pursuant to
this Agreement so as to restrict resale or other transfer thereof except in
accordance with the foregoing provisions of this Agreement.

Section 5.2 Representations as to Private Offering. The Mace Stock is
being delivered to the Sellers in a private placement under Section 4.2 of
<PAGE>

the Act and under Regulation D promulgated under the Act. To induce Purchaser
to issue the Mace Stock, each Seller represents and warrants as follows:

(a) Each Seller represents and warrants that he or she is a resident of
New Jersey and is an accredited investor, as that term is defined in
Regulation D under the Act.

(b) Each Seller acknowledges that they have received a copy of the
Public Reports.

(c) The Sellers represent and warrant that the Mace Stock is being
acquired for their own account for investment purposes only without a view to
public distribution or resale and that the Sellers have no contract,
undertaking, agreement or arrangement to sell or otherwise transfer or
dispose of Mace Stock, or any portion thereof, to any other person.

(d) The Sellers represent and warrant that, in determining to acquire
the Mace Stock, they have relied solely upon their independent investigation,
including the advice of their legal counsel and accountants or other
financial advisers or purchaser representatives, and have, during the course
of discussions concerning their acquisition of the Mace Stock, been offered
the opportunity to ask such questions and inspect such documents concerning
Purchaser and its business and affairs as they have requested so as to more
fully understand the nature of the investment and to verify the accuracy of
the information supplied.

(e) THE SELLERS ACKNOWLEDGE THAT THE ACQUISITION OF THE MACE STOCK
INVOLVES A HIGH DEGREE OF RISK, and represents and warrants that they can
bear the economic risk of the acquisition of the Mace Stock, including the
total loss of their investment.

(f) The Sellers represent and warrant that (i) they have adequate means
of providing for their current needs and financial contingencies, (ii) they
have no need for liquidity in this investment, (iii) they have no debts or
other obligations, and cannot reasonably foresee any other circumstances,
that are likely in the future to require them to dispose of the Mace Stock,
and (iv) all their investments in and commitments to non-liquid investments
are, and after their acquisition of the Mace Stock will be, reasonable in
relation to their net worth and current needs.

(g) The Sellers understand that no federal or state agency has approved
or disapproved the Mace Stock or the issuance or sale thereof or made any
finding or determination as to the fairness of the Mace Stock for investment.

(h) The Sellers understand that the Mace Stock is being offered and sold
in reliance on specific exemptions from the registration requirements of
federal and state securities laws and that Purchaser is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings set forth herein in order to determine the
applicability of such exemption and the suitability of Sellers to acquire the
Mace Stock.

Section 5.3 Access to Records. The Sellers will cause the Company to
give to Purchaser and its representatives, experts and advisors, from and
after the date of execution of this Agreement and up until Closing, full
access to all of the properties, assets, books, contracts, documents,
records, contracts and customer lists of the Company, and to make available
to Purchaser and its representatives, experts and advisors all additional
financial statements of and all information with respect to the business and
affairs of the Company that Purchaser may reasonably request. Purchaser and
its representatives shall have the right to copy any information or
documentation the Purchaser is entitled to inspect under this Section 5.34.

Section 5.4 Continuation of Business. The Sellers will operate the
Company until the time of Closing, using prudent business judgment so as to
preserve its business organization intact, to assure, to the extent possible,
the availability to Purchaser of the present key employees of the Company,
and to preserve for Purchaser the relationships of the Company with suppliers
<PAGE>

and others, all to the end that every bona fide effort be made that the
ongoing business of the Company will not be impaired at the time of Closing.

Section 5.5 Continuation of Insurance. The Sellers will cause the
Company to keep in existence all policies of insurance insuring the Company
against liability and property damage, fire and other casualty through the
time of Closing.

Section 5.6 Standstill Agreement. Unless and until this Agreement is
terminated without the Closing having taken place, the Shareholders will not
directly or indirectly solicit offers for the Real Property, the Company
Shares or the assets of the Company or for a merger or consolidation
involving the Company, or respond to inquiries from, share information with,
negotiate with or in any way facilitate inquiries or offers from, third
parties who express or who have heretofore expressed an interest in acquiring
the Company by merger, consolidation or other combination or acquiring any of
Company's assets; nor will the Shareholders permit the Company to do any of
the foregoing.

Section 5.7 FIRPTA Certificate. Purchaser and Sellers acknowledge that
the financial provisions of this Agreement are subject to the requirements of
the Foreign Investment in Real Property Tax Act ("FIRPTA"), and that the
Internal Revenue Code ("Code") Sections 1445 and 6039C require Purchaser in
certain circumstances to withhold ten percent (10%) of the amount realized by
the Sellers. Among other circumstances, Purchaser is not required to withhold
said amount if Sellers furnish Purchaser with a certificate stating the
Sellers' U.S. Taxpayer Identification Numbers and that no Seller is a foreign
person within the meaning of the Code. Sellers agree to provide to Purchaser
at Closing such certificate as is reasonably necessary to insure that such
withholding is not required under FIRPTA.

Section 5.8 Consents. Sellers and Purchaser shall cooperate with each
other and use their best efforts to obtain all approvals, authorizations and
consents required to be obtained to consummate the transaction set forth in
this Agreement, including, without limitation, (i) the approval of the
Federal Trade Commission pursuant to the provisions of the Hart-Scott-Rodino
Antitrust Improvement Acts of 1986, and (ii) the approval of every regulatory
agency of federal, state, or local government that may be required in the
opinion of either Purchaser or Sellers.

Section 5.9 Audited Financial Statements. Before and after Closing,
Sellers agree to cooperate with Purchaser to have the Company prepare audited
balance sheets for the Company as of December 31, 1998, and statements of
income, cash flow and retained earnings for the Company for the twelve-month
period ended December 31, 1998 ("Historical Financial Statements"), as
rapidly as possible, but in no event later than one week prior to the date
the Form 8-K covering the transactions contemplated hereby must be filed with
the SEC. Sellers' cooperation shall include, without limitation, the
execution of standard representation letters requested by Purchaser's
auditors. Sellers shall prepare a compiled stub balance sheet and statements
of income, cash flow and retained earnings for the period commencing January
1, 1999, and ending on the last day of the last calendar quarter ending prior
to Closing ("Interim Financial Statements"). The Historical Financial
Statements and the Interim Financial Statements shall be prepared at
Purchaser's cost. Sellers shall cause the Company's usual accountants to
cooperate with Purchaser's accountants. Purchaser shall pay for the
reasonable costs of the Company's usual accountants in the preparation of the
Historical Financial Statements and the Interim Financial Statements.
Notwithstanding the foregoing, Sellers agree to cause the preparation of
audited financial statements for the period ended December 31, 1998 prior to
the Closing, and as rapidly as possible, in the event the SEC requires audited
financial statements to be included in the information statement to be
delivered to shareholders.

ARTICLE VI
Additional Agreements of Purchaser

Section 6.1 Payment of Expenses. Purchaser will pay all expenses
(including legal fees) incurred by it in connection with the negotiation,
execution and performance of this Agreement. The Sellers and Company will pay
<PAGE>

all expenses incurred by the Sellers and Company (including legal fees) in
connection with the negotiation, execution and performance of this Agreement.

Section 6.2 Books and Records. From the Closing Date to six years after
the Closing Date, the Purchaser shall allow the Sellers and their
professional advisers access to all business records and files of the Company
pertaining to the operation of the Company prior to the Closing Date which
were delivered to the Purchaser in accordance with this Agreement ("Records")
where the Shareholders or Sellers require access to the Records for the
purpose of preparing their tax returns, responding to any audit or
informational request regarding their tax returns or if required by them for
use in a judicial proceeding in which they are a party. Access to the records
shall be during normal working hours at the location where such Records are
stored. The Sellers shall have the right, at their own expense, to make
copies of any Records provided, however, that any such access or copying
shall be had or done in such a manner so as not to interfere unreasonably
with the normal conduct of the Purchaser's business. For a period of six
years after the Closing Date, the Purchaser shall not dispose of or destroy
any material Records without first providing written notice to the Sellers at
least 30 days prior to the proposed date of such disposition or destruction.

Section 6.3 Warrants. As additional consideration for the Company Shares
to be acquired pursuant hereto, Purchaser agrees to issue on the Closing
Date (a) to Louis Paolino an assignable warrant to purchase 1,500,000 shares
of Common Stock at an exercise price of $1.375, (b) to Robert Kramer an
assignable warrant to purchase 75,000 shares of Common Stock at an exercise
price of $1.375, and (c) to Louis Paolino an assignable warrant to purchase
250,000 shares of Common Stock at an exercise price of $2.50 per share (the
"250,000 Warrant"). Each warrant shall have a term of 64 months and shall be
exercisable 120 days following the Closing hereunder.

ARTICLE VII
Conditions of Purchaser

The obligations of Purchaser to effect the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following items which are conditions to the Closing:

Section 7.1 Compliance by Sellers and the Company. The Sellers and the
Company shall have performed and complied with all of the obligations and
conditions required by this Agreement to be performed or complied with by the
Sellers and Company at or prior to the Closing Date. All representations and
warranties of Sellers contained in this Agreement shall be true and correct
at and as of the date made and the Date of Closing, with the same force and
effect as though made at and as of the Date of Closing, except for changes
expressly permitted by this Agreement, and Purchaser shall have received a
Certificate duly executed by each of the Sellers representing and warranting
the foregoing.

Section 7.2 Litigation Affecting This Transaction. There shall be no
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or
which might affect the right of Purchaser to own, operate in its entirety or
control any of the its assets or the Business or which, as a result of the
transaction contemplated by this Agreement, might affect such right as to
Purchaser or any affiliate thereof subsequent to the Date of Closing and
which, in the judgment of the Board of Directors of Purchaser, made in good
faith and based upon advice of its counsel, makes it inadvisable to proceed
with the transaction contemplated by this Agreement.

Section 7.3 Fiscal Condition of Business. There shall have been no
material adverse change in the results of operations, financial condition or
business of the Company, and the Company shall have not suffered any material
loss or damage or any of its properties or assets, whether or not covered by
insurance, since the date of the Most Recent Balance Sheet.

Section 7.4 Consents. All approvals, authorizations and consents
required to be obtained shall have been obtained, including, without
<PAGE>

limitation, (i) the consent of the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act; and (iii) the approval of every
regulatory agency of federal, state, or local government that may be required
in the reasonable opinion of either Purchaser or Sellers. Purchaser shall
have been furnished with appropriate evidence, reasonably satisfactory to
Purchaser and its counsel, of the granting of such approvals, authorizations
and consents.

Section 7.5 Opinion of Counsel. Sellers shall have delivered to the
Purchaser the opinion of counsel, dated the Closing Date, in the form and
substance of Schedule 1.7(i).

Section 7.6 Title Insurance. Purchaser shall receive comfort, acceptable
to it, that there has been issued an Owner's Policy on all Owned Real
Property, and that such Owner's Policies are in full force and effect and
shall remain in full force and effect following the Closing and shall inure
to the benefit of Purchaser.

Section 7.7 Stock Purchase Agreement. Closing shall have taken place
under a stock purchase agreement dated the date hereof executed between
Purchaser and Louis D. Paolino, Jr. and such persons as are designated by
Mr. Paolino, if any, pursuant to which the Purchaser shall sell to such
individual(s) 3,675,000 shares of its Common Stock at a price of $1.375
(the "Stock Purchase Agreement").

Section 7.8 Due Diligence. As a condition of Closing, the Purchaser
shall be satisfied in its sole discretion with the results of the due
diligence investigation it has made concerning the Company and the
transactions, as set forth in this Agreement. Sellers acknowledge that the
due diligence investigation will not be complete until the later to occur of
April 15 or twenty business (20) days following receipt of both the 1998
Financial Statements and the Most Recent Financial Statements; provided that
the due diligence period shall not expire until twenty (20) business days
following the date that Purchaser has received all of the information
requested on the due diligence request list provided to Seller's attorney,
unless sooner terminated by Purchaser, at its sole discretion.

Section 7.9 Fairness Opinion. Purchaser shall have received a favorable
opinion from a reputable investment banking firm selected by Purchaser to the
effect that the transaction is fair to the shareholders of Purchaser, from a
financial point of view.

Section 7.10 Shareholder and Board Approval. The shareholders owning at
least a majority of the outstanding shares of the Purchaser and the Board of
Directors of Purchaser shall have approved the transactions contemplated
hereby.

ARTICLE VIII
Conditions of Sellers

The obligations of the Sellers to effect the transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the time
of Closing of each of the following conditions:

Section 8.1 Compliance by Purchaser. The Purchaser shall have performed
and complied with all of the obligations and conditions required by this
Agreement to be performed or complied with by it at or prior to or at the
Closing Date. All representations and warranties of Purchaser contained in
this Agreement shall be true and correct at and as of the Date of Closing,
with the same force and effect as though made at and as of the Date of
Closing, except for changes expressly permitted by this Agreement.

Section 8.2 Litigation Affecting This Transaction. There shall be no
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or
<PAGE>

which might affect the right of Purchaser to own, operate in its entirety or
control any of the Assets of the Business or which, as a result of the
transaction contemplated by this Agreement, might affect such right as to
Purchaser or any affiliate thereof subsequent to the Date of Closing and
which, in the judgment of the Sellers, made in good faith and based upon
advice of their counsel, makes it inadvisable to proceed with the transaction
contemplated by this Agreement.

Section 8.3 Consents. All approvals, authorizations and consents
required to be obtained shall have been obtained, including, without
limitation, (i) the consent of the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act; and (iii) the approval of every
regulatory agency of federal, state, or local government that may be required
in the reasonable opinion of either Purchaser or Sellers. Sellers shall have
been furnished with appropriate evidence, reasonably satisfactory to Sellers
and their counsel, of the granting of such approvals, authorizations and
consents.

Section 8.4 Opinion of Counsel. Purchaser shall have delivered to the
Sellers the opinion of counsel, dated the Closing Date, in the form and
substance of Schedule 1.6(c).

Section 8.5 Stock Purchase Agreement. Closing shall have taken place
under the Stock Purchase Agreement.

Section 8.6 Private Placement. The Purchaser shall have sold,
substantially simultaneously with the Closing, 1,850,000 shares of its Common
Stock in a private placement at a purchase price of $2.00 per share to
individuals or entities designated by Louis Paolino.

ARTICLE IX
Indemnification

Section 9.1 Indemnification by Sellers. Each Seller agrees that it will
indemnify, defend, protect and hold harmless Purchaser and its officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parent, agents, employees, legal representatives, successors and assigns from
and against all claims, adverse consequences, losses, damages, actions,
suits, proceedings, demands, assessments, adjustments, penalties, costs and
expenses whatsoever (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) whether equitable
or legal, matured or contingent, known or unknown to such Seller, foreseen or
unforeseen, ordinary or extraordinary, patent or latent, whether arising out
of occurrences prior to, at, or after the date of this Agreement, from: (a)
any breach of, misrepresentation in, untruth in or inaccuracy in the
representations and warranties by the Sellers, set forth in this Agreement or
in the Schedules attached to this Agreement or in the Collateral Documents;
(b) nonfulfillment or nonperformance of any agreement, covenant or condition
on the part of a Seller made in this Agreement and to be performed by a
Seller before or after the Closing Date; and (c) any claim by a third party
that, if true, would mean that a condition for indemnification set forth in
subsections (a) or (b) of this Section 9.1 of this Agreement has occurred.

Section 9.2 Indemnification by Purchaser. Purchaser agrees that it will
indemnify, defend, protect and hold harmless Sellers and their agents,
employees, heirs, legal representatives, successors and assigns, as
applicable, from and against all claims, adverse consequences, losses,
damages, actions, suits, proceedings, demands, assessments, adjustments,
penalties, costs and expenses whatsoever (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation)
incurred by it, as a result of or incident to: (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties of Purchaser set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment
or nonperformance of any agreement, covenant or condition on the part of
Purchaser made in this Agreement and to be performed by Purchaser before or
after the Closing Date; (c) any claim by a third party that, if true, would
mean that a condition for indemnification set forth in subsections (a), (b),
or (c) of this Section 9.2 has occurred.
<PAGE>

Section 9.3 Procedure for Indemnification with Respect to Third Party
Claims.

(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that
may give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article IX, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the extent)
the Indemnifying Party is thereby prejudiced. Such notice shall state the
amount of the claim and the relevant details thereof.

(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory
to the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within ten days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party pursuant to the provisions of Article IX, as
applicable, from and against the entirety of any adverse consequences (which
will include, without limitation, all losses, claims, liens, and attorneys'
fees and related expenses) the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party
Claim and fulfill its indemnification obligations hereunder, (iii) the Third
Party Claim involves only monetary damages and does not seek an injunction or
equitable relief, (iv) settlement of, or adverse judgment with respect to the
Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.

(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in (but not control) the defense of the Third Party Claim,
(ii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (which will not be
unreasonably withheld), and (iii) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified Party
(which will not be unreasonably withheld). In the case of (c)(ii) or (c)(iii)
above, any such consent to judgment or settlement shall include, as an
unconditional term thereof, the release of the Indemnifying Party from all
liability in connection therewith.

(d) If any condition set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the cost of defending against
the Third Party Claim (including reasonable attorneys' fees and expenses),
and (iii) the Indemnifying Party will remain responsible for any adverse
consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Article IX.

Section 9.4 Procedure for Non-Third Party Claims. If Purchaser or any
Seller wishes to make a claim for indemnity under Section 9.1 or Section 9.2,
as applicable, and the claim does not arise out of a third party notification
which makes the provisions of Section 9.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the party from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses which the Indemnified
<PAGE>

Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section 9.1
or Section 9.2, as applicable; and (b) the nature of the event or occurrence
which entitles the Indemnified Party to receive payment under Section 9.1 or
Section 9.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to
the Indemnified Party stating the objections and the grounds for the
objections ("Indemnification Objection"). If no Indemnification Objection is
sent within thirty (30) days after the Indemnification Demand is sent, the
Indemnifying Party shall be deemed to have acknowledged the correctness of
the claim or claims specified in the Indemnification Demand and shall pay the
full amount claimed in the Indemnification Demand within forty-five (45) days
of the day the Indemnification Demand is dated. If for any reason the
Indemnifying Party does not pay the amounts claimed in the Indemnification
Demand, within thirty days of the Indemnification Demand's date, the
Indemnified Party may institute legal proceedings to enforce payment of the
indemnification claim contained in the Indemnification Demand and any other
claim for indemnification that the Indemnified Party may have.

Section 9.5 Survival of Claim. All of the respective representations,
warranties and obligations of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement as follows:
(i) all representations and warranties pertaining to federal, state and local
taxes, including, without limitation, the representations and warranties set
forth in Section 3.11 shall survive until the expiration of the applicable
statute of limitations on any claim which can be brought against the Company
by tax authorities or governmental agencies or governmental units and (ii)
all representations and warranties other than set forth in (i) above shall
survive until one year from the Closing Date. Notwithstanding the prior
sentence which provides that the representations and warranties expire after
certain stated periods of time, if within the stated period of time, a notice
of a claim for indemnification or Indemnification Demand is given, or a suit
or action based upon representation or warranty is commenced, the Indemnified
Party shall not be precluded from pursuing such claim or action, or from
recovering from the Indemnifying Party (whether through the courts or
otherwise) on the claim or action, by reason of the expiration of the
representation or warranty.

Section 9.6 Prompt Payment. In the event that any party is required to
make any payment under this Article IX, such party shall promptly pay the
Indemnifying Party the amount so determined. If there should be a dispute as
to the amount or manner of determination of any indemnity obligation owed
under this Article IX, the Indemnifying Party shall, nevertheless, pay when
due such portion, if any, of the obligation as shall not be subject to
dispute. The portion in dispute shall be paid upon a final and non-appealable
resolution of such dispute. Upon the payment in full of any claim, the
Indemnifying Party shall be subrogated to the rights of the Indemnified Party
against any person with respect to the subject matter of such claim.

Section 9.7 Limitation of Liability. Notwithstanding anything else to
the contrary contained herein, the obligations of Sellers and Purchaser
pursuant to the indemnifications contained in Section 9.1 and 9. 2,
respectively, shall be limited to Five Million Six Hundred Thousand Dollars
($5,600,000).

ARTICLE X
Other Provisions

Section 10.1 Nondisclosure by Sellers. Sellers recognize and acknowledge
that they have in the past, currently have, and in the future will have
certain confidential information of Purchaser such as lists of customers,
operational policies, and pricing and cost policies that are valuable,
special and unique assets of Purchaser. Sellers agree that for a period of
twelve (12) months from the Closing Date or for a period of
eighteen (18) months from the date hereof, if the Closing does not take place
they will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of Purchaser, unless (i)
such information becomes known to the public generally through no fault of
any Seller, or (ii) a Seller is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding. In the event of a
<PAGE>

breach or threatened breach by any Seller of the provisions of this Section,
Purchaser shall be entitled to an injunction restraining such Seller from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Purchaser from pursuing any other
available remedy for such breach or threatened breach, including, without
limitation, the recovery of damages.

Section 10.2 Nondisclosure by Purchaser. Purchaser recognize and
acknowledges that it has in the past, currently has, and prior to the Closing
Date, will have access to certain confidential information of the Company,
such as lists of customers, operational policies, and pricing and cost
policies that are valuable, special and unique assets of the Company.
Purchaser agree that it will not utilize such information in the business or
operation of Purchaser or any of its affiliates or disclose such confidential
information to any person, firm, corporation, association, or other entity
for any purpose or reason whatsoever, unless (i) such information becomes
known to the public generally through no fault of Purchaser or any of its
affiliates, (ii) Purchaser is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding, or (iii) Closing takes
place. In the event of a breach or threatened breach by Purchaser of the
provisions of this Section, Sellers shall be entitled to an injunction
restraining Purchaser from utilizing or disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting Sellers from pursuing any other available remedy for such breach
or threatened breach, including, without limitation, the recovery of damages.

Section 10.3 Assignment; Binding Effect; Amendment. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation
of law) and shall be binding upon and shall inure to the benefit of the
parties hereto, and their respective successors, personal representatives and
assigns. This Agreement, upon execution and delivery, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance with its
terms and may be modified or amended only by a written instrument executed by
all parties hereto.

Section 10.4 Entire Agreement. This Agreement, is the final, complete
and exclusive statement and expression of the agreement among the parties
hereto with relation to the subject matter of this Agreement, it being
understood that there are no oral representations, understandings or
agreements covering the same subject matter as the Agreement. The Agreement
supersedes, and cannot be varied, contradicted or supplemented by evidence of
any prior to contemporaneous discussions, correspondence, or oral or written
agreements of any kind. The parties to this Agreement have relied on their
own advisors for all legal, accounting, tax or other advice whatsoever with
respect to the Agreement and the transactions contemplated hereby.

Section 10.5 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original and
all of which together shall constitute but one and the same instrument.

Section 10.6 Notices. All notices or other communications required or
permitted hereunder shall be in writing and may be given by depositing the
same in United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested, by
reputable, nationally recognized overnight courier or by delivering the same
in person to such party.

(a) If to Sellers, addressed to them at:

American Wash Services, Inc.
1000 Crawford Place, Suite 400
Mount Laurel, New Jersey 08054

with a copy to:

Robert M. Kramer & Associates, P.C.
<PAGE>

1150 First Avenue, Suite 900
King of Prussia, Pennsylvania 19406

(b) If to Purchaser, addressed to it at:

160 Benmont Avenue
Bennington, Vermont 05201
Attn: Jon E Goodrich

With a copy to:

Germaine Curtin
Curtin & Galt, LLP
19 Hollywood Ave.
Albany, NY 12208

Notice shall be deemed given and effective the day personally delivered, the
day after being sent by overnight courier and three business days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received, if
earlier. Any party may change the address for notice by notifying the other
parties of such change in accordance with this Section 10.6.

Section 10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware,
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.

Section 10.8 No Waiver. No delay of or omission in the exercise of any
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in
any such breach or default, or of or in any similar breach or default
occurring later; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach of default occurring before or after that
waiver.

Section 10.9 Time of the Essence. Time is of the essence of this
Agreement as well as all dates referred to herein and extensions thereof.

Section 10.10 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.

Section 10.11 Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible,
be modified in such manner as to be valid, legal and enforceable but so as
most nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement, unless
severing such provision would result in an agreement that does not reflect
the overall intent of either of the parties. In either case the validity,
legality and enforceability of the remaining provisions of this Agreement
shall not in any way be affected or impaired thereby.

Section 10.12 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
<PAGE>

construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute shall be deemed to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" means included, without limitation.

Section 10.13 Extension or Waiver of Performance. Either the Sellers or
Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Sellers and the
Purchaser.

Section 10.14 Liabilities of Third Parties. Nothing in this Agreement,
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to
it and their respective successors, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.

Section 10.15 Agreement Not Binding Until Fully Executed. This Agreement
shall not be binding on any party hereto until the Agreement has been fully
executed.

Section 10.16 Publicity. Prior to Closing, except as may be required by
law, no party to this Agreement shall issue any press release or otherwise
make any statement with respect to the transactions contemplated by this
Agreement without the prior consent of the other party, which shall not be
unreasonably withheld.

Section 10.17 Arbitration.

(a) Each and every controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in Philadelphia, Pennsylvania
in accordance with the commercial rules (the "Rules") of the American
Arbitration Association then obtaining, and judgment upon the award rendered
in such arbitration shall be final and binding upon the parties and may be
confirmed in any court having jurisdiction thereof. Notwithstanding the
foregoing, this Agreement to arbitrate shall not bar any party from seeking
temporary or provisional remedies in any Court having jurisdiction. Notice of
the demand for arbitration shall be filed in writing with the other party to
this Agreement, and shall set forth in the same degree of particularity as
required for complaints under the Federal Rules of Civil Procedure the claims
to be submitted to arbitration. Additionally, the demand for arbitration
shall be stated with reasonable particularity with respect to such demand
with documents attached as appropriate. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.

(b) The arbitrators shall have the authority and jurisdiction to
determine their own jurisdiction and enter any preliminary awards that would
aid and assist the conduct of the arbitration or preserve the parties' rights
with respect to the arbitration as the arbitrators shall deem appropriate in
their discretion. The award of the arbitrators shall be in writing and it
shall specify in detail the issues submitted to arbitration and the award of
the arbitrators with respect to each of the issues so submitted.

(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators
its contemplated discovery plan outlining the desired documents to be
produced, the depositions to be taken, if ordered by the arbitrators in
accordance with the Rules, and any other discovery action sought in the
arbitration proceeding. After a preliminary hearing, the arbitrators shall
fix the scope and content of each party's discovery plan as the arbitrators
deem appropriate. The arbitrators shall have the authority to modify, amend
or change the discovery plans of the parties upon application by either
party, if good cause appears for doing so.
<PAGE>

(d) The award pursuant to such arbitration will be final, binding and
conclusive.

(e) Counsel to Sellers and Purchaser in connection with the negotiation
of and consummation of the transactions under this Agreement shall be
entitled to represent their respective party in any and all proceedings under
this Section or in any other proceeding (collectively, "Proceedings").
Sellers and Purchaser, respectively, waive the right and agree they shall not
seek to disqualify any such counsel in any such Proceedings for any reason,
including but not limited to the fact that such counsel or any member thereof
may be a witness in any such Proceedings or possess or have learned of
information of a confidential or financial nature of the party whose
interests are adverse to the party represented by such counsel in any such
Proceedings.

* * * *
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement on
this 26 day of March, 1999.

SHAREHOLDERS PURCHASER

By: /s/ Louis D. Paolino, Jr. MACE SECURITY INTERNATIONAL, INC.
Louis D. Paolino, Jr.

By: /s/ Jon E. Goodrich
Red Mountain Holding, Ltd. Jon E. Goodrich
Chief Executive Officer

By: /s/ David Ehrlich
David Ehrlich, director

<PAGE>

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT, dated as of March 26, 1999, between Louis
Paolino, Jr., an individual and the persons designated by Louis Paolino,
("Paolino"), if any (collectively referred to as the "Purchasers" or each,
singularly as a "Purchaser") and Mace Security International, Inc., a
Delaware corporation with offices at 160 Benmont Avenue, Bennington, Vermont
05201 (the "Seller").

W I T N E S E T H :

WHEREAS, Purchasers desire to acquire, and the Seller desires to sell,
3,675,000 shares of Seller's common stock, par value $.01 per share, upon the
terms and subject to the conditions hereinafter set forth.

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

ARTICLE I

Definitions

In addition to terms defined elsewhere in this Agreement, the following
terms when used in this Agreement shall have the meanings indicated below:

"Affiliate" shall mean, with respect to any Person, any Person that
directly or indirectly controls, is controlled by or is under common control
with the Person in question, and, in the case of an individual, all minor
children of such individual and all other members of such individual's
immediate family living in such individual's residence.

"Agreement" shall mean this Stock Purchase Agreement, together with all
exhibits and schedules referred to herein.

"Commission" shall mean the Securities and Exchange Commission.

"Common Stock" shall mean the Company's common stock, par value $.01 per
share.

"CS-1" shall mean a compound consisting of CS
(O-chlorobenzalmalononitrile) and a flow agent.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

"Financial Statements" shall mean the audited balance sheets of the
Seller as at December 31, 1998, and the related statements of income, cash
flows and retained earnings for the fiscal years then ended, including any
related notes, each prepared in accordance with United States generally
<PAGE>

accepted accounting principles ("GAAP") consistently applied with prior
periods and the interim unaudited balance sheets, statements of income, cash
flows and retained earnings for each of the fiscal quarters since
December 31, 1998, each of which have been filed with the Commission.

"Knowledge" or Known" shall mean, with respect to the Seller, the actual
knowledge of the chief executive officer and the chief operating officer of
the Seller, and with respect to any the Purchaser, the actual knowledge of
such Purchaser.

"Person" shall mean any natural person, corporation, unincorporated
organization, limited liability company, partnership, limited liability
partnership, association, joint stock company, joint venture, trust or
government, or any agency or political subdivision of any government, or any
other entity.

"Securities Act" shall mean the Securities Act of 1933, as amended.

ARTICLE II

Purchase of Stock; Consideration

ss.2.1 Terms of the Purchase.

On the basis of the representations, warranties, covenants, and
agreements contained in this Agreement and subject to the terms and
conditions of this Agreement:

(a) The Seller shall sell to the Purchasers at the Closing, as
hereinafter defined, 3,675,000 shares of Common Stock (the "Purchased
Stock").

(b) The Purchasers shall pay to the Seller the sum of $1.375 per share,
or Five Million Fifty Three Thousand One Hundred Twenty Five and 00/100
Dollars ($5,053,125.00) (the "Purchase Price"), payable at the Closing in
immediately available funds.

ss.2.2 The Closing

The closing of the transactions contemplated by this Agreement shall
take place at the offices of the Seller at 160 Benmont Ave, Bennington,
Vermont at 10:00 A.M., Eastern time on or about May 28, 1999, or such other
date, time or place as the parties may agree (the "Closing Date"). In the
alternative, the Closing may take place by the parties forwarding executed
copies of all documents required to be delivered pursuant to Section 2.3 to
be held in escrow by Germaine Curtin, Esq., with the Purchase Price wired to
the Seller. The Purchased Stock, issued in the name(s) designated by the
Purchasers, will be forwarded to the Purchasers by overnight delivery
promptly following receipt of the Purchase Price. The closing of the
transactions contemplated by this Agreement is herein called the "Closing."

ss.2.3 Transactions at the Closing

The following transactions shall take place at the Closing:

(a) Purchasers shall deliver the Purchase Price in immediately available
funds, by certified check or wire transfer.
<PAGE>

(b) Seller shall deliver to the Purchasers one or more stock
certificates evidencing an aggregate of 3,675,000 shares of Common Stock,
bearing the following legend "These securities have not been registered under
the Securities Act of 1933 and may be reoffered and sold only if so
registered or if an exemption from registration is available."

(c) Seller and Purchasers shall each deliver such evidences of consent,
and other instruments or documents as are required pursuant to Article VI.

(d) Seller shall have obtained resignation letters from each of its
current Directors, other than Jon E. Goodrich. The resignation of the
Directors shall be effective as of the Closing. Jon E. Goodrich shall remain
on the Board.

(e) Jon E. Goodrich, as the remaining director, shall appoint Paolino,
and the persons listed on Exhibit C attached hereto and incorporated herein
by this reference to fill the Board vacancies created by the resigning
Directors.

(f) Paolino (regardless of whether he assigns his rights as a Purchaser
under this Agreement) shall have accepted the position of President and CEO
of the Seller, effective as of the Closing and Seller and Paolino shall have
executed and delivered the employment agreement, the form of which is
attached hereto as Exhibit A.

(g) Seller shall deliver the certificates for the Purchased Stock
described in Section 2.1(a) and all conditions to Closing shall have been
satisfied or waived.

(h) Purchasers shall deliver the purchase price described in Section
2.1(b) and all conditions to Closing shall have been satisfied or waived.

ARTICLE III

Representations and Warranties of the Seller

In order to induce the Purchasers to enter into this Agreement and the
other agreement contemplated herein the Seller makes the representations,
warranties and covenants set forth below to the Purchasers, which are true
and correct as of the date of the Agreement and which will be true and
correct in all material respects as though they had been made at the date of
the Closing.

ss.3.1 Organization

The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Seller is duly
qualified to transact business in all jurisdictions where the ownership or
leasing of it assets or the conduct of its business requires such
qualification, except where the failure to so qualify will not have a
material adverse effect on Seller. The Seller has the requisite corporate
power and authority to own or lease and operate its properties and conduct
its business as presently conducted.
<PAGE>

ss.3.2 Capitalization.

The authorized capital stock of Seller consists of 18,000,000 shares of
common stock, $.01 par value, of which 6,825,000 shares are issued and
outstanding and 2,000,000 shares of preferred stock, $.01 par value, none of
which are issued and outstanding. All of such issued and outstanding shares
are validly issued, fully paid and non-assessable and are free of preemptive
rights.

ss.3.3 Rights, Warrants, Options

Except as set forth in Schedule 33 hereto, there are no outstanding (a)
securities or instruments convertible into or exercisable for any of the
capital stock or other equity interests of the Seller; (b) options, warrants,
subscriptions or other rights to acquire capital stock or other equity
interests of the Seller; or (c) commitments, agreements or understandings of
any kind, including employee benefit arrangements, relating to the issuance
or repurchase by the Seller of any capital stock or other equity interests of
the Seller.

ss.3.4 Authorization; Enforceability

The Seller has the corporate power and authority to execute, deliver and
perform this Agreement. This Agreement and all other documents to be executed
and delivered by the Seller pursuant to this Agreement has been or will be
duly authorized, executed and delivered and, when executed and delivered,
will constitute the legal, valid and binding obligations of the Seller
enforceable in accordance with their respective terms, except to the extent
that their enforcement is limited by bankruptcy, insolvency, reorganization
or other laws relating to or affecting the enforcement of creditors' rights
generally and by general principles of equity.

ss.3.5 No Violation or Conflict

The execution, delivery and performance of this Agreement and the other
documents contemplated herein to be executed by the Seller, and the
consummation by the Seller of the transactions contemplated hereby and
thereby: (a) do not violate or conflict with any provision of law or
regulation (whether federal, state or local), or any writ, order or decree of
any court or governmental or regulatory authority, or any provision of the
Seller's Certificate of Incorporation or Bylaws; and (b) do not, with or
without the passage of time or the giving of notice, or both, result in the
breach of, or constitute a default, cause the acceleration of performance or
require any consent under, or result in the creation of any lien, charge or
encumbrance upon the Purchased Stock pursuant to, any instrument or agreement
to which the Seller is a party or by which the Seller or its properties may
be bound or affected, other than instruments or agreements as to which
consent shall have been obtained or waived at or prior to the Closing.
<PAGE>

ss.3.6 Consents of Governmental Authorities and Others

Except for shareholder and director approval and the requirement that
the Seller file with the Commission and distribute to its shareholders a
proxy or information statement as may be required by the NASDAQ Stock Market
and the Commission, no material consent, approval or authorization of, or
registration, qualification or filing with, any federal, state or local
governmental or regulatory authority, or any other Person, is required in
connection with the execution, delivery or performance of this Agreement by
the Seller or the consummation by the Seller of the transactions contemplated
hereby.

ss.3.7 Contingent Liabilities

Except for the expense of disposing of the stockpile of CS-1 held in the
Seller's inventory, which is a hazardous material, Seller has no knowledge of
any contingent liability that could reasonably be expected to have a material
adverse effect on the Seller's financial condition.

ss.3.8 Litigation

Except as disclosed in the Financial Statements and other documents
filed with the Commission, and in Schedule 3.8 hereto, there are no actions,
suits, investigations, claims or proceedings ("Litigation") pending or, to
the knowledge of the Seller, threatened before any court or by or before any
governmental or regulatory authority or arbitrator which could reasonably be
expected to have a material adverse effect on the financial condition of
Seller.

ss.3.9 Financial Statements

The Financial Statements: (a) have been prepared in accordance with the
books of account and records of the Seller; and (b) fairly present, and are
true and accurate statements in all material respects of the Seller's
financial condition and the results of its operations at the dates and for
the periods specified therein; and (c) with respect to the audited portion of
the Financial Statements only, have been prepared in accordance with GAAP
consistently applied with prior periods.

ss.3.10 Board Approval

As of the Closing Date, the Board of Directors of the Seller will have
approved this Agreement and the transactions contemplated hereby in
accordance with applicable law.

ss.3.11 Tax Matters

All material tax returns and tax reports required to be filed by Seller
have been timely filed (or appropriate extensions have been obtained or the
issue has been remedied in accordance with applicable law) with the
appropriate governmental agencies in all jurisdictions in which such returns
and reports are required to be filed, all of the foregoing as filed are true,
correct and complete and, in all material respects, reflect accurately all
liability for taxes of the Seller for the periods to which such returns
relate, and all amounts shown as owing thereon have been paid. All income,
profits, franchise, sales, use, value added, occupancy, property, excise,
payroll, FICA, FUTA and other taxes (including interest and penalties), if
any, collectible or payable by the Seller or relating to or chargeable
against any of its assets, revenues or income through December 31, 1998, and
through the Closing Date, were fully collected and paid by such date or
<PAGE>

provided for by adequate reserves in the December 31, 1998Financial
Statements and all similar items due through the Closing Date will have been
fully paid by that date or provided for by adequate reserves.

ss.3.12 Disclosure

The Seller has filed within required time periods, in compliance with
applicable law, all reports, registration statements and filings, including
any necessary amendments thereto ("Filings"), required to be filed by it with
the Commission pursuant to the Exchange Act and the Securities Act. No
representation or warranty of the Seller contained in this Agreement, and no
Filing or certificate furnished by or on behalf of the Seller pursuant hereto
or in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact (in light of the circumstances under
which they were made) or omits to state a material fact (in light of the
circumstances under which they were made) necessary to make the statements
contained therein not misleading.

ss.3.13 Fully Paid, Non-Assessable

Upon payment in full of the Purchase Price therefor, the Purchased Stock
will be duly authorized, validly issued and non-assessable.

ss.3.14 Brokers

Other than Meyerson & Co., which shall receive, warrants to purchase
300,000 shares of Common Stock (at an exercise price of $1.375, a term of
three years, and exercisable 120 days following the Closing hereunder) at the
Closing of this transaction as a finder's fee, Seller has not employed or
retained the services of any financial advisor, broker, or finder with
respect to which the Seller will incur any broker's, finder's, investment
banking or similar fees, commissions or expenses, in connection with the
transactions contemplated by this Agreement.

ss.3.15 Contracts, Permits and Material Documents.

Schedule 3.15 attached hereto lists all of the following material
agreements: (i) leases and purchase agreements for real property and personal
property, in each case, with a purchase price of $100,000 or more or
requiring monthly lease payments of $5,000 or more, (ii) material licenses
and franchises, the failure to possess which could reasonably be expected to
have a material adverse effect on Seller, (iv) promissory notes, guarantees,
bonds, letters of credit, mortgages, liens, pledges, and security agreements
under which the Seller is bound or under which the Seller is a beneficiary
that have initial principal amounts of, or secure obligations of, $100,000 or
more, (v) all material patents, trademarks, trade names, copyrights, trade
secrets, proprietary rights, symbols, service marks, and logos used or usable
by Seller (all of which are owned by Mace Trademark Corp., a wholly-owned
subsidiary of Seller), (vi) all material permits, licenses, consents and
other approvals from governments, governmental agencies (federal, state and
local) and/or third parties relating to, used in or required for the
operation of the Seller's businesses and which the failure to possess could
reasonably be expected to have a material adverse effect on Seller, and (vii)
other contracts, agreements and instruments not listed on another Schedule
attached to this Agreement which are binding on the Seller or any of its
property or pursuant to which the Seller derives any material benefit or has
imposed upon it any material detriment. Neither the Seller nor, to Sellers'
knowledge, any person or party to the any of the documents disclosed on
Schedule 3.15 ("Material Documents") or bound thereby is in material default
under any of the Material Documents, and, to Seller's knowledge, no act or
event has occurred which, with notice or lapse of time, or both, would
<PAGE>

constitute such a default. The Seller is not a party to, and the Seller's
property is not bound by, any agreement or instrument which is material to
the continued conduct of its business operations as now being conducted and
with respect to which a default might materially and adversely affect its
financial condition, except as listed in Schedule 3.15.

ss.3.16 Title.

(a) The Assets.

Except as disclosed on Schedule 3.16(a), Seller has good and marketable
title to all of its material assets, including, without limitation, all of
the assets reflected on the Financial Statements (other than intellectual
property). All of such assets are owned by the Seller free and clear of any
mortgage, pledge, lien, encumbrance, charge, claim, security agreement,
agreement regarding or restricting transfer or title retention or other
security arrangement, except for liens and encumbrances listed below in
subparagraphs (i) through (iii) ("Permitted Company Assets Encumbrances").

(i) Liens imposed by law and incurred in the ordinary course of
business for indebtedness not yet due to carriers, warehousemen,
laborers or materialmen and the like;

(ii) Liens in respect of pledges or deposits under worker's
compensation laws or similar legislation; and

(iii) Liens for property taxes, assessments, or governmental charges
not yet subject to penalties for nonpayment.

(b) Real Property. The Seller does not own any real property.

ss 3.17 Employees, Pensions and, ERISA.

(a) The Seller does not have any contract of employment with an officer
or other employee that is not terminable without penalty on notice of two
weeks or less, except as listed on Schedule 3.17(a). Jon E. Goodrich and Mark
A. Capone are the only employees that have employment agreements with the
Seller. No such agreement has a "golden parachute".

(b) No employee of the Seller is represented by any union. There is no
pending or threatened dispute between the Seller and any of its employees
which might materially and adversely affect the continuance of any Company's
business operations.

(c) The only employee benefit plan, fund or program (within the meaning
of the Internal Revenue Code of the United States ("Code") or the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) which is
currently maintained and/or established or sponsored by the Company or to
which the Company currently contributes, or has an obligation to contribute
in the future is the Seller's 401(k) Plan ("401(k) Plan").

(d) The Seller has delivered to the Purchasers (i) a true and complete copy
<PAGE>

of its 401(k) Plan, and (ii) a true and complete copy of all annual reports
for such 401(k) Plan prepared within the past 5 years, and (iii) all filings
submitted to and any correspondence received from any government agency
relating to such 401(k) Plan within the past 5 years.

(e) Such 401(k) Plan is administered by Merrill Lynch and, to Seller's
knowledge, such 401(k) Plan is qualified under Section 401(a) and exempt from
tax under Section 501(a) of the Code. Such 401(k) Plan is not funded through
a trust intended to be exempt from tax under Section 501(c) of the Code.

(f) The 401(k) Plan is administered by Merrill Lynch. To Seller's
knowledge, no reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been
fully waived, or accumulated funding deficiency whether or not waived (as
defined in Section 302 of ERISA), or liability to the Pension Benefit
Guaranty Corporation ("PBGC") under Section 4062 of ERISA, nor any prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the Code),
has occurred or exists with respect to the 401(k) Plan. To Seller's
knowledge, such Plan is in substantial compliance with all applicable
provisions of ERISA and the regulations issued thereunder, as well as with
all other law applicable to such Plan, and, to Seller's knowledge, in all
material respects, has been administered, operated and managed in substantial
accordance with the governing documents of the Plan and the requirements of
ERISA. To Seller's knowledge, the Seller has no unfunded obligations or
liabilities with respect to any Plan.

(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Seller, threatened relating to such 401(k) Plan, fiduciary
of such 401(k) Plan or assets of such 401(k) Plan, before any court, tribunal
or government agency.

(h) To Seller's knowledge, the transaction contemplated herein will not
accelerate any liability under such 401(k) Plan because of an acceleration of
any rights or benefits to which any employee may be entitled thereunder.

(i) The Seller has no obligations with respect to, and makes no
contributions to, any Multi-Employer Pension Plan.

ss 3.18 Legality of Operation.

In regard to the Seller:

(a) Except as disclosed in Schedule 3.18(a) to this Agreement, and
except as to Environmental Laws, as hereinafter defined, the Seller is in
material compliance with all Federal, state and local laws, rules and
regulations including, without limitation, the following laws: land use laws;
payroll, employment, labor, or safety laws; or federal, state or local
"anti-trust" or "unfair competition" or "racketeering" laws such as but not
limited to the Sherman Act, Clayton Act, Robinson Patman Act, Federal Trade
Commission Act, or Racketeer Influenced and Corrupt Organization Act ("Law")
except to the extent the failure to comply could not reasonably be expected
to have a material adverse effect on the Seller's financial condition. Except
as disclosed in Schedule 3.18(a), the Seller is in material compliance with
all permits, franchises, licenses, and orders that have been issued with
respect to the Laws and are or may be applicable to the Seller's property and
operations, except to the extent the failure to so comply could not
reasonably be expected to have a material adverse effect on Seller's
financial condition. Except as set forth on Schedule 3.18(a), with respect to
any Law, there are no claims, actions, suits or proceedings pending, or, to
the knowledge of the Sellers threatened against or affecting the Seller, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, wherever located, which could reasonably be expected to have
<PAGE>

a material adverse effect on the Seller's financial condition or which would
invalidate this Agreement. Except as disclosed in Schedule 3.18(a), the
Seller has received no notification of any past or present failure by the
Seller to comply with any Law applicable to it or its assets that could
reasonably be expected to have a material adverse effect on the Seller's
financial condition.

(b) Except as disclosed in Schedule 3.18(b) to this Agreement, the
Seller is in material compliance with all Federal, state and local laws,
rules and regulations relating to environmental issues of any kind and/or the
receipt, transport or disposal of any hazardous or non-hazardous waste
materials from any source ("Environmental Law")except for noncompliance that
could not reasonably be expected to have a material adverse effect on the
Seller. Except as disclosed in Schedule 3.18(b), with respect to any
Environmental Law the Seller is in material compliance with all permits,
licenses, and orders related thereto or issued thereunder with respect to
Environmental Laws, as are or may be applicable to the Seller's property and
operations, except for such noncompliance that could not reasonably be
expected to have a material adverse effect on Seller. Except as set forth on
Schedule 3.18(b), there are no Environmental Law related claims, actions,
suits or proceedings pending, or, to the knowledge of the Sellers, threatened
against or affecting the Seller, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, wherever located, which could
reasonably be expected to have a material adverse effect on the Seller or
which would invalidate this Agreement. Except as set forth on Schedule
3.18(b), the Seller has not transported, stored, treated or disposed, nor has
the Seller allowed any third persons, on its behalf, to transport, store,
treat or dispose waste to or at (i) any location other than a site lawfully
permitted to receive such waste for such purpose or, (ii) any location
currently designated for remedial action pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or any
similar federal or state statute; nor has the Seller performed, arranged for
or allowed by any method or procedure such transportation or disposal in
contravention of state or federal laws and regulations or in any other manner
which could reasonably be expected to have a material adverse effect on the
Seller; and the Seller has not disposed, nor has the Seller knowingly allowed
third parties to dispose of waste upon property owned or leased by the Seller
other than as permitted by, and in conformity with, applicable Environmental
Law except for such disposal that could not reasonably be expected to have a
material adverse effect on the Seller. Except as disclosed in Schedule
3.18(b), the Seller has not received notification of any past or present
failure by the Seller to comply with any Environmental Law applicable to it
or its operations or its assets, except for such notification relating to
matters that have been remedied or could not reasonably be expected to have a
material adverse effect on Seller. The Seller has not received hazardous
waste as defined in the Resource Conservation and Recovery Act, 42 USCA
Section 6901 et seq., or in any similar federal or state statute.

(c) Except as disclosed in Schedule 3.18 (e), to Seller's knowledge, no
employee, contractor or agent of the Seller has, in the course and scope of
employment with the Seller, been harmed by exposure to hazardous materials,
as defined under the Laws. No liens with respect to environmental liability
have been imposed against the Seller under CERCLA, any comparable Vermont
statute or other applicable Law, and, to Seller's knowledge, no facts or
circumstances exist which would give rise to the same.

(d) Attached hereto as Schedule 3.18(d) is a list of all Notice of
Violations issued to the Company in the past ten years by any federal, state
or local regulatory agency. There are no outstanding or unremedied notices of
violation either from a federal, state or local authority.

(e) To Seller's knowledge, it is not under investigation by any District
Attorney or similar state or local official or agency or the Justice
Department of the United States of America for the violation of any Laws,
including, without limitation, racketeering, unfair competition, or
anti-trust. To Seller's knowledge, no facts or circumstances exist which
would cause the Seller to be liable for the violation of any Laws including,
without limitation, racketeering, unfair competition, or anti-trust.
<PAGE>

(f) Except as set forth in Schedule 3.18(f), all material licenses,
approvals, permits and certificates ("Government Authorizations") needed or
required for the operation of the Seller's business are set forth on Schedule
3.15. To Seller's knowledge, all such Government Approvals are in full force
and effect, the Seller is in compliance with all such Government Approvals,
and all such Government Approvals have been validly and legally obtained by
the Company.

ss 3.19 Corrupt Practices.

To the Sellers' knowledge, the Seller has not made, offered or agreed to
offer anything of value to any employees of any customers of the Seller for
the purpose of attracting business to the Seller or any foreign or domestic
governmental official, political party or candidate for government office or
any of their respective employees or representatives, nor has the Seller
otherwise taken any action which would cause it to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended.

For purposes of this Article III, a material benefit or material
detriment shall be a direct reduction in assets or an increase of a liability
of $500,000 or more.

ARTICLE IV

Representations, Warranties and Covenants of the Purchasers

In order to induce the Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, each Purchaser, with respect
to himself only, makes the representations, warranties and covenants set
forth below to the Seller, which shall be true and accurate as of Closing in
all material respects.

ss.4.1 Organization; Standing and Power

The Purchaser is an individual. The Purchaser has all requisite power
and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby.

ss.4.2 Authorization; Enforceability

This Agreement and any and all other documents to be executed and
delivered by the Purchaser pursuant to this Agreement have been duly executed
and delivered by the Purchaser, and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with their terms,
except to the extent that their enforcement is limited by bankruptcy,
insolvency, reorganization or other laws relating to or affecting the
enforcement of creditors' rights generally and by general principles of
equity.

ss.4.3 No Violation or Conflict

The execution, delivery and performance by the Purchaser of this
<PAGE>

Agreement and the other agreements contemplated hereby: (a) do not violate
or conflict with any provision of law or regulation (whether federal, state
or local), or any writ, order or decree of any court or governmental or
regulatory authority; and (b) do not, with or without the passage of time or
the giving of notice, or both, result in the breach of, or constitute a
default, cause the acceleration of performance or require any consent under,
any instrument or agreement to which the Purchaser or any of its Affiliates
is a party or by which the Purchaser or any of its Affiliates or any of their
respective properties may be bound or affected, other than instruments or
agreements as to which consent shall have been obtained or waived at or prior
to the Closing.

ss.4.4 ERISA.

The execution and delivery of this Agreement and the purchase of the
Purchased Stock by the Purchaser will not involve any prohibited transaction
within the meaning of Section 406 of Employee Retirement Income and Security
Act or Section 4975 of the Internal Revenue Code for which an exemption is
not available by statute or regulation.

ss.4.5 Purchase for Investment

The Purchased Stock to be acquired hereunder is being acquired for
Purchaser's own account and with no intention of distributing or reselling
such Purchased Stock or any part thereof in any transaction which would be in
violation of the securities laws of the United States of America or any
State, without prejudice, however, to Purchaser's right at all times to sell
or otherwise dispose of all or any part of such Purchased Stock under a
registration under the Securities Act or under an exemption from such
registration available under the Securities Act, and subject, nevertheless,
to the disposition of Purchaser's property being at all times within its
control. If Purchaser should in the future decide to dispose of any of the
Purchased Stock, such Purchaser understands and agrees that it may do so only
in compliance with the Securities Act, as then in effect.

ss.4.6 Restrictive Legend

Purchaser understands and agrees that, so long as appropriate, the
certificates evidencing the Purchased Stock shall bear the following legend:
"These securities have not been registered under the Securities Act of 1933
and may be reoffered and sold only if so registered or if an exemption from
registration is available."

ss.4.7 Accredited Investor

Purchaser is familiar with the Securities Act and the definition of
"accredited investor" and represents that he is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.

ss.4.8 Brokers

Other than Meyerson & Co., which shall receive warrants to purchase
300,000 shares of Common Stock (at an exercise price of $1.375, a term of
three years and exercisable 120 days following the Closing hereunder) at the
Closing of this transaction as a finder's fee, Seller has not employed or
retained the services of any financial advisor, broker, or finder with
respect to which the Seller will incur any broker's, finder's, investment
banking or similar fees, commissions or expenses, in connection with the
transactions contemplated by this Agreement.
<PAGE>

ARTICLE V

Additional Agreements

ss.5.1 Survival

All of the respective representations, warranties and obligations of the
parties to this Agreement shall survive consummation of the transactions
contemplated by this Agreement as follows: (i) all representations and
warranties pertaining to federal, state and local taxes shall survive until
the expiration of the applicable statute of limitations on any claim which
can be brought against the Seller by tax authorities or governmental agencies
or governmental units and (ii) all representations and warranties other than
set forth in (i) above shall expire twelve months following the Closing Date.
Notwithstanding the prior sentence which provides that the representations
and warranties expire after certain stated periods of time, if within the
stated period of time, a notice of a claim for indemnification or
Indemnification Demand is given, or a suit or action based upon
representation or warranty is commenced, the Indemnified Party shall not be
precluded from pursuing such claim or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the claim or
action, by reason of the expiration of the representation or warranty.

ss.5.2 Investigation

Notwithstanding anything to the contrary contained herein, neither party
shall have a claim hereunder for breach of a representation , warranty or
covenant to the extent such breach was known prior to the Closing Date by the
party seeking to bring the claim.

ss.5.3 Employment

Seller agrees to appoint Paolino as a director, to name him as Chairman
of the Board and to appoint him as Seller's chief executive officer on
substantially the same terms and conditions as are set forth in the form of
employment agreement attached hereto as Exhibit A, effective upon Closing of
the transactions contemplated by this Agreement.

Seller agrees to employ each of Robert Kramer, Greg Krzemien, John
Poling, David Ehrlich, Stephen Bulboff, Joseph Paolino, Mathew Paolino and
Lisa Paolino and on substantially the terms and conditions set forth in
Exhibit B attached hereto, with such employment to be effective as of the
date hereof.

ss.5.4 Board of Directors

All current directors, other than Jon Goodrich, will resign and Paolino
and the persons named in Exhibit C attached hereto will be appointed by the
remaining Board member.
<PAGE>

ss.5.5 Private Placement

Seller agrees to use its best efforts to sell, in a private placement
1,850,000 shares of its common stock at a purchase price of $2.00 per share
to five individuals or entities to be designated by Paolino.

ARTICLE VI

Conditions Precedent; Termination

ss.6.1 Conditions Precedent to the Obligations of the Purchasers

Each and every obligation of the Purchasers to consummate the
transactions described in this Agreement and any and all liability of the
Purchasers to the Seller shall be subject to the fulfillment or waiver by
Purchasers on, before or simultaneous with the Closing of the following
conditions precedent:

(a) Representations and Warranties True. Each of the representations and
warranties of the Seller contained herein or in any certificate or other
document delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects as of the Closing Date with the same force and effect as though made
on and as of such date (except for changes specifically permitted by this
Agreement).

(b) Performance. The Seller shall have performed and complied in all
material respects with all of the agreements, covenants and obligations under
this Agreement to be performed or complied with by each of them on or prior
to the Closing Date.

(c) No Adverse Change. Except as expressly permitted or contemplated by
this Agreement, no event or condition shall have occurred which has
materially adversely affected or may materially adversely affect in any
respect the financial condition since the date hereof.

(d) Certificates. The Seller shall have delivered to the Purchasers a
certificate dated the Closing Date, certifying that the conditions specified
in Section 6.1(a), (b) and (c) above have been fulfilled and as to such other
matters as the Purchasers may reasonably request. The Secretary or Assistant
Secretary of the Seller shall have delivered to the Purchasers a certificate,
dated the Closing Date, certifying the names and signatures of the officers
thereof authorized to sign this Agreement and the Exhibits hereto to which it
is a party.

(e) No Litigation. No litigation, arbitration or other legal or
administrative proceeding shall have been commenced or be pending by or
before any court, arbitration panel or governmental authority or official,
and no statute, rule or regulation of any foreign or domestic, national or
local government or agency thereof shall have been enacted after the date of
this Agreement, and no judicial or administrative decision shall have been
rendered, which in each case enjoins or prohibits, or seeks to enjoin or
prohibit, the consummation of all or any of the transactions contemplated by
this Agreement.

(f) Consents. The Seller shall have obtained all authorizations,
<PAGE>

consents, waivers and approvals and given all notices as may be required to
consummate the transactions contemplated by this Agreement including, but not
limited to, approval of the Seller's stockholders, delivery of the
Information Statement or notice to the stockholders, as applicable.

(g) Opinion of Counsel. An opinion letter from counsel to the Seller
addressed to the Purchasers, in form and substance satisfactory to the
Purchasers, to the effect that the Purchased Stock is duly authorized,
validly issued and non-assessable, shall have been delivered to Purchasers at
the Closing.

(h) Board/Shareholder Approval. The Board of Directors of Seller shall
have approved this Agreement and the transactions contemplated hereby and the
holders of a majority of outstanding shares of Seller shall have approved the
transactions contemplated hereby.

(i) Employment Agreements. Employment Agreements containing
substantially the terms and conditions set forth in Exhibit B attached hereto
shall have been executed by and between Seller and each of Robert Kramer,
Greg Krzemien, John Poling, David Ehrlich, Stephen Bulboff, Joseph Paolino,
Mathew Paolino and Lisa Paolino as of the date of this Agreement, effective
as of the date of this Agreement.
<PAGE>

(j) Board/President and CEO. Paolino shall have been appointed to serve
as Seller's President and CEO on substantially the same terms as are set
forth in the employment agreement attached hereto as Exhibit A hereto and
appointed to the Board, effective as of the Closing, and all current
directors, other than Jon Goodrich (the "Resigning Board") shall have
submitted letters of resignation, effective as of the Closing. The remaining
director, Mr. Goodrich , shall have appointed Paolino and the persons named
on Exhibit C to fill the vacancies created by the Resigning Board.

(k) Other Stock Purchases. Purchaser shall have purchased: (a) 1,100,000
shares of Common Stock from Jon Goodrich at a purchase price of $1.375 per
share or less, and (b) 100,000 shares of Common Stock from each of two
current shareholders at a purchase price of $1.375 per share or less.

(l) NASDAQ. Purchasers shall have received comfort, reasonably
acceptable to it, that, upon consummation of the transactions contemplated
hereby, Seller will not lose its listing on the NASDAQ National Market.

(m) No Material Adverse Change. There shall have been no material
adverse change in the financial condition of Seller and the Seller shall not
have suffered any material loss or damage to its assets since the date of its
December 31, 1998 Financial Statements, except as contemplated by Seller's
projections. A material adverse change, for the purposes of this subsection
(m) shall mean a reduction in equity of $1,000,000 or more.

(n) Private Placement. Substantially simultaneously with the Closing
hereunder, Seller shall have sold, in a private placement, 1,8750,000 shares
of its Common Stock at a purchase price of $2.00 per share to five
individuals or entities designated by Paolino.

ss.6.2 Conditions Precedent to the Obligations of Seller

Each and every obligation of Seller to consummate the transactions
described in this Agreement and any and all liability of Seller to the
Purchasers shall be subject to the fulfillment or waiver by Seller on or
before the Closing Date of the following conditions precedent:

(a) Representations and Warranties True. Each of the representations and
warranties of the Purchasers contained herein or in any certificate or other
document delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be true and correct in all respects as
of the Closing Date with the same force and effect as though made on and as
of such date.

(b) Performance. The Purchasers have performed and complied in all
respects with all of the agreements, covenants and obligations required under
this Agreement to be performed or complied with by them on or prior to the
Closing Date.

(c) Certificate. Each Purchaser shall have delivered to the Seller a
certificate addressed to Seller executed by each Purchaser dated the Closing
Date, certifying that the conditions specified in Sections 6.2(a) and (b)
above have been fulfilled.

(d) Board/Shareholder Approval. The Board of Directors of the Seller
<PAGE>

shall have approved this Agreement and the transactions contemplated hereby
and the holders of a majority of outstanding shares Seller shall have
approved the transactions contemplated hereby.

(e) Fairness Opinion. Seller shall have received an opinion from an
independent investment banking firm that the transactions contemplated hereby
are fair, from a financial point of view, to the shareholders of Seller.

(f) Board/President and CEO. Paolino shall have been appointed to serve
as Seller's President and CEO on substantially the same terms as are set
forth in Exhibit A hereto and appointed to the Board, effective as of the
Closing, and all current directors, other than Jon Goodrich, (the "Resigning
Board") shall have submitted letters of resignation, effective as of the
Closing. The remaining director, Mr. Goodrich, shall have appointed
Paolino and the persons named in Exhibit C to fill the vacancies created by
the Resigning Board.

(g) NASDAQ. Seller shall have received comfort, reasonably acceptable to
it, that, upon consummation of the transactions contemplated hereby, Seller
will not lose its listing on the NASDAQ National Market.

ss.6.3 Best Efforts

Subject to the terms and conditions provided in this Agreement, each of
the parties shall use their respective best efforts in good faith to take or
cause to be taken as promptly as practicable all reasonable actions that are
within its power to cause to be fulfilled those of the conditions precedent
to its obligations or the obligations of the other parties to consummate the
transactions contemplated by this Agreement that are dependent upon its
actions, including obtaining all necessary consents, authorizations, orders,
approvals and waivers. In furtherance of the foregoing, the Seller shall
cooperate fully with Purchasers and the Purchasers shall cooperate fully with
the Seller, in accordance with the terms hereof.

ss.6.4 Termination

This Agreement and the transactions contemplated hereby may be
terminated (i) at any time by the mutual consent of the parties hereto; (ii)
by the Purchaser at any time at or prior to Closing if any of the
representations or warranties of the Seller in this Agreement are not in all
material respects true, accurate and complete or if the Seller breaches in
any material respect any covenant contained in this Agreement, provided that
such misrepresentation or breach is not cured within ten (10) days or thirty
(30) days if such breach can be cured within such period of time after
written notice thereof.; (iii) by the Seller at any time at or prior to
Closing if any of the representations or warranties of the Purchasers in this
Agreement are not in all material respects true, accurate and complete or if
the Purchasers breaches in any material respect any covenant contained in this
Agreement, provided that such misrepresentation or breach is not cured within
ten (10) days or thirty (30) days if such breach can be cured within such
period of time after notice thereof, but in any event prior to the
Termination Date, and (iv) by either Purchasers or Seller if the conditions to
closing are not satisfied or waived on or prior to July 1, 1999 and the
failure to satisfy any condition is not due to the actions or omissions of
the party attempting to terminate this Agreement. If this Agreement is
terminated pursuant to this Section 6.4, written notice thereof shall
promptly be given by the party electing such termination to the other party
and, subject to the expiration of the cure periods provided in clauses (ii)
<PAGE>

and (iii) above, this Agreement shall terminate without further actions by
the parties and no party shall have any further obligations under this
Agreement.

ARTICLE VII

Covenants

ss.7.1 Seller's Interim Operation

During the period from the date of this Agreement to the Closing Date,
except with Purchasers' prior specific written consent or as expressly
contemplated by this Agreement the Seller shall not do any of the following
(unless otherwise expressly contemplated by this Agreement or permitted in
writing by Purchasers):

(a) amend its Certificate of Incorporation or By-Laws;

(b) issue, sell or authorize for issuance or sale (except
pursuant to its non-qualified stock option plan), shares of
any class of its securities (including, but not limited to,
by way of stock split or dividend) or any subscriptions,
options, warrants, rights or convertible securities, or
enter into any agreements or commitments of any character
obligating it to issue or sell any such securities;

(d) grant or make any mortgage or pledge or subject itself or
any of its properties or assets to any lien, charge or
encumbrance of any kind, except liens for taxes not
currently due;

(e) create, incur or assume any liability or indebtedness in
excess of $100,000.00, except for inventory purchases in
the ordinary course of business;

(f) alter the manner of keeping its books, accounts or records,
or change in any manner the accounting practices therein
reflected;

(g) enter into any commitment or transaction other than in the
ordinary course of business including, but not limited to,
the making of any loan to any Person;

(h) do any act, or omit to do any act, or permit to the extent
within the Seller's control, any act or omission to act
which would cause a material violation or breach of any
of the representations, warranties; agree, whether in
writing or otherwise, to do any of the foregoing.
<PAGE>

ss.7.2 Confidentiality (through Closing Date)

Except as otherwise required in the performance of obligations under
this Agreement and except as otherwise required by law, any non-public
information received by a party or its advisors from the other party shall be
kept confidential and shall not be used or disclosed for any purpose other
than in furtherance of the transa ctions contemplated by this Agreement. The
obligation of confidentiali ty shall not extend to information (a) which is
or shall become generally ava ilable to the public other than as a result of
an unauthorized disclosure by a party to this Agreement or a person to whom a
party has provided such information, (b) which was available to a party to
this Agreement on a nonconfidential basis prior to its disclosure by one
party to the other pur suant to this Agreement or (c) which is disclosed by
the Purchasers in any legal proceeding requiring any such disclosure. Upon
termination o f this Agreement, each party shall promptly return any
confidential information received from the other party and, upon request,
shall destroy any copies of such information in its possession. Notwithstandi
ng anything contained herein to the contrary, the covenants of the parties
contained in this Section 7.2 shall survive any termination of this Agreement
until the earlier of (i) three (3) years from the date hereof, or (ii) the
date when such information becomes generally available to the public.

ARTICLE VIII

Indemnification

ss.8.1 Indemnification of Purchasers.

In the event the transaction contemplated hereby is consummated, Seller
agrees to defend, indemnify and hold Purchasers and any person claiming by or
through Purchasers and their respective successors and assigns harmless from
and against, and agrees to reimburse them for, any and all demands, claims,
recoveries, obligations, losses, damages, deficiencies and liabilities and
all related costs, expenses (including reasonable attorneys' and accountants'
fees and disbursements), interest and penalties which any of them shall incur
or suffer which arise from, result from or relate to the breach of any of the
representations, warranties, covenants or agreements made by Seller in this
Agreement.

ss.8.2 Indemnification of Seller.

In the event the transaction contemplated hereby is consummated ,
Purchasers will defend, indemnify and hold Seller and its officers,
directors, employees and any person claiming by or through Seller and their
respective successors and assigns harmless from and against, and agrees to
reimburse them for, any and all demands, claims, recoveries, obligations,
losses, damages, deficiencies and liabilities and all related costs, expenses
(including reasonable attorneys' and accountants' fees and disbursements),
interest and penalties which any of them shall incur or suffer which arise
from, result from or relate to the breach of any of the representations,
warranties, covenants or agreements made by Purchasers in or under this
Agreement.

ss.8.3 Defense and Settlement of Claims.

If any person entitled to indemnification pursuant to any provision of
this Agreement (an "Indemnitee") is threatened in writing with any claim by
any Person who is not a party to this Agreement, or any claim is presented in
writing to, or any action or proceeding by is formally commenced against, an
<PAGE>

Indemnitee by any Person who is not a party to this Agreement and such claim,
action or proceeding may give rise to the right of indemnification hereunder
or reimbursement, the Indemnitee shall give written notice thereof as
promptly as reasonably practicable to any indemnifying party, provided that
any delay by the Indemnitee in so notifying an indemnifying party shall not
relieve any Indemnitor of any liability to the Indemnitee hereunder except to
the extent severely prejudiced by such delay.

ss.8.4 Procedure and Payment.

If after the Closing either Seller or the Purchasers shall become aware
of a loss, damage or claim or shall receive notice of a third party claim or
alleged third party claim asserting the existence of any matter of the nature
as to which the Indemnitee has been indemnified against under this Article
VIII by the other party hereto ( the "Indemnitor"), Indemnitee shall promptly
notify Indemnitor in writing with respect thereto. In the event of any such
third party claim, Indemnitor shall have the right to defend against any such
claim with counsel reasonably satisfactory to Indemnitee, provided (i)
Indemnitor shall, within ten (10) days after the giving of such notice by
Indemnitee, notify Indemnitee that Indemnitor will, at its own cost and
expense, defend the same, and (ii) such defense is instituted and
continuously maintained in good faith by Indemnitor. In such event the
defense may, if necessary, be maintained in the name of Indemnitee.
Indemnitee may, if it so elects and at its expense, designate its own counsel
to participate with the counsel selected by Indemnitor in the conduct of such
defense. Indemnitor shall not permit any lien or execution to attach to any
of the assets of the Indemnitee as a result of such claim, and the Indemnitor
shall provide such bonds or deposits as shall be necessary to prevent the
same. In any event, Indemnitor is obligated to keep Indemnitee fully advised
as to the status of such defense. If Indemnitor shall be given notice of a
claim as aforesaid and shall fail to notify Indemnitee of its election to
defend such claim within the time as prescribed herein, or after having so
elected to defend such claim shall fail to institute and maintain such
defense in accordance with the foregoing, then Indemnitee shall defend such
claim and Indemnitor shall reimburse Indemnitee for the costs of such defense
upon demand therefore, which demand shall include a copy of the legal bills
and other costs. Such reimbursement shall be made within ten (10) days of
demand therefore. If such defense shall be unsuccessful then the Indemnitor
shall fully satisfy and discharge the claim within ten (10) days after notice
from Indemnitee requesting Indemnitor to do so. Indemnitor shall not be
entitled to settle any such claim without the consent of Indemnitee.

ARTICLE IX

Miscellaneous

ss.9.1 Notices

Any notice, demand, claim or other communication under this Agreement
shall be in writing and shall be deemed to have been given upon the delivery,
mailing or transmission thereof, as the case may be, if delivered personally
or sent by certified mail, return receipt requested, postage prepaid, or sent
by facsimile (transmission confirmed) or prepaid overnight courier to the
parties at the addresses set forth herein (or at such other addresses as
shall be specified by the parties by like notice). A copy of any notices
delivered to the Purchasers shall also be sent to Robert M. Kramer, 1150
First Avenue, Suite 900, King of Prussia, PA 19406, telephone 610-992-4712,
fax 610-992-0723. A copy of any notices delivered to the Seller shall also be
sent to Germaine Curtin, Esq., 19 Hollywood Ave., Albany, NY 12208, telephone
and fax 518-437-9276.
<PAGE>

ss.9.2 Entire Agreement

This Agreement contains every obligation and understanding between the
parties relating to the subject matter hereof and merges all prior
discussions, negotiations and agreements, if any, between them, and none of
the parties shall be bound by any conditions, definitions, understandings,
warranties or representations made prior to the date hereof other than as
expressly provided or referred to herein.

ss.9.3 Binding Effect

This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, heirs, personal
representatives, legal representatives, and permitted assigns. It is agreed
that any Purchaser may assign his rights to purchase the Purchased Stock
hereunder to a Person he Controls.

ss.9.4 Waiver and Amendment

Any representation, warranty, covenant, term or condition of this
Agreement which may legally be waived, may be waived, or the time of
performance thereof extended, at any time by the party hereto entitled to the
benefit thereof, and any term, condition or covenant hereof (including,
without limitation, the period during which any condition is to be satisfied
or any obligation performed) may be amended by the parties thereto at any
time. Any such waiver, extension or amendment shall be evidenced by an
instrument in writing executed by Paolino on behalf of Purchasers, or in the
case of Seller, by its President or CFO or other person, who has been
authorized by its Board of Directors to execute waivers, extensions or
amendments on its behalf. No waiver by any party hereto, whether express or
implied, of its rights under any provision of this Agreement shall constitute
a waiver of such party's rights under such provisions at any other time or a
waiver of such party's rights under any other provision of this Agreement

ss.9.5 No Third Party Beneficiary

Nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any Person other than the parties hereto
and their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason
of this Agreement.

ss.9.6 Severability

In the event that any one or more of the provisions contained in this
Agreement shall be declared invalid, void or unenforceable, the remainder of
the provisions of this Agreement shall remain in full force and effect, and
such invalid, void or unenforceable provision shall be interpreted as closely
as possible to the manner in which it was written.
<PAGE>

ss.9.7 Expenses

Each party agrees to pay, without right of reimbursement from the other
party, the costs incurred by it incident to the performance of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, costs incident to the
preparation of this Agreement, and the fees and disbursements of counsel,
accountants and consultants employed by such party in connection herewith.

ss.9.8 Headings

The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
any provisions of this Agreement.

ss.9.9 Counterparts

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

ss.9.10 Governing Law

This Agreement has been entered into and shall be construed and enforced
in accordance with the laws of the State of New York without reference to the
choice of law principles thereof. In any litigation in connection with or
arising out or related to this Agreement, any of the documents referred to
herein or transactions contemplated hereby, the Seller irrevocably consents
to and confer personal jurisdiction on the courts of the State of New York or
the United States located within the City of Albany and expressly waive any
objections as to venue in any such courts.

ss.9.11 Participation of Parties

The parties hereto acknowledge that this Agreement and all matters
contemplated herein, have been negotiated among all parties hereto and their
respective legal counsel and that all such parties have participated in the
drafting and preparation of this Agreement from the commencement of
negotiations at all times through the execution hereof. The rules of
construction with the "presumption against the drafter" are not applicable as
all parties participated in drafting.

ss.9.12 Further Assurances

The parties hereto shall deliver any and all other instruments or
documents required to be delivered pursuant to, or take such other action
required to be taken, or necessary or proper in order to give effect to, all
of the terms and provisions of this Agreement including, without limitation,
all necessary instruments of assignment and transfer and such other documents
as may be necessary or desirable to transfer ownership of the Purchased
Stock.

ss.9.13 Arbitration

Any dispute, controversy or claim arising hereunder between the parties
<PAGE>

shall be settled by arbitration in Albany, New York, in accordance with the
commercial rules of the American Arbitration Association, by an arbitration
panel consisting of three members, and judgment upon any such arbitration
award rendered by the arbitrators may be entered in any court of competent
jurisdiction. Such arbitrators shall have knowledge and expertise in the
subject matter of the arbitration proceeding. Each of the parties and the
arbitrators shall use its best efforts to keep confidential the existence of
any dispute and arbitration proceedings and all information relating thereto
or submitted in connection therewith and, in the event of judicial
proceedings for the enforcement of this paragraph or any award pursuant
thereto, shall cooperate to seal the record of any such arbitration or
judicial proceeding. Each party to any arbitration shall bear its own
expenses in relation thereto, including but not limited to such party's
attorneys' fees, if any; provided however that the expenses and fees of the
arbitration not capable of being attributed to any one party shall be borne
half by the Seller and half by the Purchasers.

* * * * *
<PAGE>

IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the day and year first above written.

PURCHASER:

/s/ Louis Paolino
Louis Paolino

SELLER:

Mace Security International, Inc.

By: /s/ Jon E. Goodrich
Name: Jon E. Goodrich
Title: President and CEO
<PAGE>

EMPLOYMENT CONTRACT

This Employment Contract ("Agreement") is executed and delivered as of
March 26, 1999, by and between Mace Security International, Inc., a Delaware
corporation ("Company"), and Robert M. Kramer, an individual ("Employee").

RECITALS

The Company conducts diversified businesses, including, without
limitation, personal security device marketing and anticipates entering into
car wash services operations ("Business"). The Employee is an executive with
extensive experience in corporate management. The Company desires to hire
Employee as Executive Vice President and General Counsel and the Employee
desires to accept the position offered.

The Company has entered into a Stock Purchase Agreement with Louis D.
Paolino, Jr., and others, pursuant to which Mr. Paolino will become Chairman
and Chief Executive Officer of the Company ("Paolino Agreement").

Employee will be employed by Company in a confidential relationship
wherein Employee, in the course of employment with Company, will become
familiar with and aware of information as to the specific manner of doing
business and the customers of Company and its affiliates and the Company's
future plans. The information Employee has and will have knowledge of are
trade secrets and constitute valuable goodwill of Company. Employee
recognizes that the business of Company is dependent upon a number of trade
secrets and confidential business information, including customer lists and
customer data. The protection of these trade secrets is of critical
importance to Company. Company will sustain great loss and damage if, for
whatever reason, during the term of this Agreement or Employee's employment
with Company and for a period following the termination of this Agreement or
Employee's employment, Employee should violate the provisions of paragraph 4
of this Agreement. Further, Employee acknowledges that any such violation
would cause irreparable harm to Company and that Company would be entitled,
without limitation, to injunctive relief to remedy such violation.

NOW, THEREFORE, in consideration of the mutual promises, terms and
conditions set forth herein and the performance of each, the parties hereby
agree as follows:

1. Services.

(a) Company hereby employs Employee as its Executive Vice President and
General Counsel, effective upon the closing under the Paolino Agreement
("Paolino Closing"), and the material duties of Employee may not be changed
without the Employee's consent. In the event the Paolino Closing does not

<PAGE>

occur on or before August 25, 1999, then (i) this Agreement shall be
terminated without action by any party hereto on that date and shall
thereafter be void and be of no further force and effect, (ii) no party
hereto shall have any further liability or obligation to any other party
hereto, and (iii) any stock options granted pursuant to the terms hereof
shall be cancelled as of that date without vesting.

(b) Employee hereby accepts employment upon the terms and conditions
contained in this Agreement. Employee shall faithfully adhere to, execute and
fulfill all directions and policies established by the Company for its
employees.

(c) Employee shall not, during the term of his employment hereunder,
without the prior written consent of Company, be engaged in any other
competing business activity pursued for gain, profit or other pecuniary
advantage, except for Employee's provision of consulting services to U.S.
Plastic Lumber Corp. on a limited basis throughout the term of this
Agreement, consent to which is hereby given. Company also acknowledges that
Employee is engaged in the private practice of law through Robert M. Kramer &
Associates, P.C., and the Company acknowledges that Employee may remain
employed by Robert M. Kramer & Associates, P.C.. Employee may make personal
investments and conduct his personal business affairs, including, without
limitation, participating in the management of businesses which the Employee
owns directly or through affiliated entities, as long as such investments do
not violate the terms of Paragraph 4.

2. Compensation.

(a) From the date of this Agreement until the Paolino Closing, Employee
shall be paid a fee of Ten Dollars ($10.00) per month. For all services to be
rendered by Employee to Company after the Paolino Closing, Company shall pay
Employee a salary computed and earned ratably over twelve months at the rate
of One Hundred Fifteen Thousand Dollars ($115,000) per year, commencing on
the date hereof, payable in accordance with Company's normal payroll
procedures.

(b) To the extent that Company, from time to time in its sole
discretion, offers or provides any of the following to its employees, then
after the Paolino Closing Employee, on an equal basis with such other
employees, shall be entitled to: (i) participation in all, if any, life,
health, medical, hospital, accident and disability insurance programs of
Company in existence for the benefit of its employees and for which Employee
qualifies; (ii) participation in all, if any, pension, retirement, profit
sharing or stock purchase plans for which Employee qualifies; and (iii)
participation in any other employee benefits which Company accords to its
employees and for which Employee qualifies.

(c) During the term of Employee's employment with Company, Employee
shall be entitled to reimbursement for reasonable business expenses,

<PAGE>

including gasoline, incurred on behalf of Company. Reimbursement for business
expenses will be provided to Employee on the same basis and under the same
guidelines as are applicable to all of Company's employees. Employee shall be
entitled to the Employee Benefits set forth in Schedule A attached.

(d) The Employee shall be granted stock options ("Options") exercisable
for 200,000 shares of the Company's common stock at a per-share exercise
price equal to the lowest bid price of the stock on the NASDAQ National
Market System on the date of this Agreement. The Options shall be granted
under the Company's 1999 stock option plan, and shall be granted as qualified
incentive stock options to the maximum extent possible. The Company agrees to
obtain shareholder approval of the 1999 Stock Option Plan within one year of
the date of grant. The Options shall vest over the four-year term of this
Agreement, one-eighth of the Options vesting on each six-month anniversary
date of this Agreement. Notwithstanding the prior sentence, the Options shall
all vest immediately upon a "Change of Control" which for purposes of this
Agreement shall de deemed to have occurred upon the occurrence of any of the
events set forth in items (i) through and including (iv) below:

(i) the acquisition in one or more transactions by any "Person" (as the
term "Person" is used for purposes of Sections 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) of "Beneficial
Ownership" (as the term beneficial ownership is used for purposes of Rule
13d-3 promulgated under the 1934 Act) of fifty percent (50%) or more of the
combined voting power of the Company's then outstanding voting securities
(the "Voting Securities"). For purposes of this Paragraph 2(d), the Voting
Securities acquired directly from the Company by any Person shall be excluded
from the determination of such Person's Beneficial Ownership of Voting
Securities (but such Voting Securities shall be included in the calculation
of the total number of Voting Securities then outstanding).

(ii) the approval by the shareholders of the Company of: (A) a merger,
reorganization or consolidation involving the Company, if the shareholders of
the Company immediately before such merger, reorganization or consolidation
do not or will not own directly or indirectly immediately following such
merger, reorganization or consolidation, more than fifty percent (50%) of the
combined voting power of the outstanding voting securities of the corporation
resulting from or surviving such merger, reorganization or consolidation in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, reorganization or consolidation, or (B) a
complete liquidation or dissolution of the company, or (C) an agreement for
the sale or other disposition of all or substantially all of the assets of
the Company.
<PAGE>

(iii) the acceptance by shareholders of the Company of shares in a share
exchange, if the shareholders of the Company immediately before such share
exchange do not or will not own directly or indirectly immediately following
such share exchange more than fifty percent (50%) of the combined voting
power of the outstanding voting securities of the corporation resulting from
or surviving such share exchange in substantially the same proportion as the
ownership of the Voting Securities outstanding immediately before such share
exchange.

(iv) Louis D. Paolino, Jr., no longer serving as Chief Executive Officer
or Chairman of the Company's Board of Directors.

3. Term. The period of Employee's employment with the Company shall
commence on the date of this Agreement and shall continue for four years
thereafter, unless sooner terminated in accordance with the provisions of
this Agreement ("Term"). After expiration of the Term, Employee's employment
shall continue thereafter on an at-will month-to-month basis, until
terminated by either party to the Agreement.

4. Noncompetition Covenants.

(a) Employee agrees that the noncompetition covenants contained in this
Paragraph 4 are a material and substantial part of this Agreement.

(b) Employee covenants that during Employee's employment with Company
and for three months following the termination of Employee's employment
(regardless of the reason for the termination) the Employee shall not,
directly or indirectly, without the prior express written consent of Company,
do any of the things set forth in item (i) through (v) below:

(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, agent, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor or sales representative, in the
personal security device industry or in the car wash services industry within
the United States ("the Territory");

(ii) call upon any person who is, at the time of the contact, an
employee of Company or its affiliates, if the purpose and intent of the
contact is to entice such employee away from or out of the employ of Company
or its affiliates;

(iii) call upon any person or entity which is, at the time of the
contact, a customer of the Company or its affiliates for the purpose of
soliciting or selling any of the items or services which are the items or
services offered by the Company or its affiliates;

(iv) disclose the identity of the customers of Company or its
affiliates, whether in existence or proposed, to any person, firm,
partnership, corporation or other entity whatsoever, for any reason or
purpose whatsoever;
<PAGE>

(v) promote, or assist, financially or otherwise, any person, firm,
partnership, corporation or other entity whatsoever to do any of the above;

For the purposes of this Agreement, the term "affiliates" shall mean one
or more of: (A) each subsidiary of Company, and (B) each other entity under
the direct or indirect control of the Company.

(c) The Company will sustain significant losses and damages, if Employee
breaches the covenants in this Paragraph 4. There is no adequate monetary
remedy for the immediate and irreparable damage that would be caused to
Company by Employee's breach of its non-competition covenants. Employee
agrees that, in the event of a breach by him of the foregoing covenants, such
covenants may be enforced by Company by, without limitation, injunctions and
restraining orders.

(d) It is agreed by the parties that the covenants in this Paragraph 4
impose a reasonable restraint on Employee in light of the activities and
business of Company on the date of the execution of this Agreement and the
future plans of Company.

(e) The covenants in this Paragraph 4 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions
of any other covenant. If any court of competent jurisdiction shall determine
that the scope, time or territorial restrictions set forth are unreasonable,
then it is the intention of the parties that such restrictions be enforced to
the fullest extent which the court deems reasonable, and the Agreement shall
thereby be reformed.

(f) The covenants in this Paragraph 4 shall be construed as independent
of any other provision of this Agreement and the existence of any claim or
cause of action of Employee against Company whether predicated on this
Agreement, or otherwise, shall not constitute a defense to the enforcement by
Company of such covenants. It is specifically agreed that the duration of the
noncompetition covenants stated above shall be computed by excluding from
such computation all time during which Employee is in violation of any
provision of this Paragraph 4 and all time during which there is pending in
any court of competent jurisdiction any action (including any appeal from any
judgment) brought by any person, whether or not a party to this Agreement, in
which action Company seeks to enforce the agreements and covenants of
Employee or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement. Provided that, no such exclusion shall include the period of
time within which Employee has ceased violating this paragraph, whether or
not as a result of being in compliance with Court injunction or doing so
voluntarily, and whether or not any action is pending against Employee, and
<PAGE>

provided that no such exclusion shall include the time an action is pending,
if the action is finally determined in Employee's favor.

5. Confidential Information. It is expressly acknowledged by the
Employee that customer lists, orders, current and closed out orders, prospect
lists, documents containing the names or addresses of existing or potential
customers, information regarding the Company's financial condition or
business plans, the methods by which the Company serves its customers or
conducts its operations, as well as other business procedures, are the
property of the Company and constitute confidential information or trade
secrets of the Company ("Confidential Information"). Employee agrees to
maintain the confidentiality of the Confidential Information and further
agrees that Employee will not, directly or indirectly, use or disclose
Confidential Information to any natural or legal person, other than
authorized employees or agents of the Company, during the Term or thereafter.
All Confidential Information and all correspondence, reports, charts,
products, records, designs, patents, plans, manuals, "field guides,"
memoranda, advertising materials, lists and other data or property collected
by or delivered to Employee by or on behalf of Company, its representatives,
customers and government entities (including, without limitation, customers
obtained for Company by Employee), and all other materials compiled by
Employee which pertain to the business of Company shall be and shall remain
the property of Company, shall be subject at all times to its discretion and
control and shall be delivered, together with any and all copies thereof,
promptly to Company upon request at any time and without request upon
completion or other termination of Employee's employment hereunder.

6. Inventions. Employee shall disclose promptly to Company any and all
conceptions and ideas for inventions, improvements, and valuable discoveries,
whether patentable or not, which are conceived or made by Employee solely or
jointly with another during the period of employment or within three months
thereafter and which are related to the business or activities of Company.
Employee hereby assigns and agrees to assign all his interests therein to
Company or its nominee. Whenever requested to do so by Company, Employee
shall execute any and all applications, assignments or other instruments that
Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect Company's
interest therein. These obligations shall continue beyond the termination of
employment with respect to inventions, improvements and valuable discoveries,
whether patentable or not, conceived, made or acquired by Employee during the
period of employment, and shall be binding upon Employee's heirs, assigns,
executors, administrators and other legal representatives.
<PAGE>

7. Termination; Rights of Termination. Employee's employment under this
Agreement may terminated during the term hereof in any one or more of the
following ways:

(a) Automatically upon the death or resignation of Employee, the parties
agreeing that Employee may resign at any time without such resignation
constituting a breach of this Agreement;

(b) By Company upon written notice to Employee upon:

(i) Employee's unsatisfactory performance of his duties or other
obligations under this Agreement, as determined in good faith by the Company
after having given Employee notice of the unsatisfactory performance,
including without limitation, Employee's refusal or inability to competently
perform his obligations under this Agreement, as determined in good faith by
the Company, except where non-performance is caused by disability;

(ii) Employee's inability to perform his duties under this Agreement
because of illness or physical or mental disability or other incapacity which
continues for a period of 90 days, either consecutive or cumulative during
any one-year period;

(iii) any type of harassment, violence or threat thereof, or other
behavior toward other employees of the Company or toward third parties of a
kind that may tend to result in liability being incurred by the Company
toward such employee or third party;

(iv) alcohol abuse, use of controlled substances during employment
hours, or a positive test for use of controlled substances; or

(v) gross negligence or willful misconduct with respect to the Company
or any of its affiliates or subsidiaries, including without limitation fraud,
embezzlement, theft or proven dishonesty in the course of employment, or a
conviction of a felony or a misdemeanor involving moral turpitude, or a
finding of adjudication withheld, with imposition of a sentence, to either a
felony or a misdemeanor involving moral turpitude, or the entering of a plea
of guilty or nolo contendere to a felony.

The written notice provided for herein shall state the reason for
Employee's termination.

(c) Upon termination of Employee's employment under this Paragraph 7 for
any reason, Employee shall be entitled to receive Employee's salary accrued
through the date of termination, plus any employee benefits which by their
terms and provisions continue after such termination and plus one month's
salary.

(d) In the event of termination of Employee's employment under this
Agreement for any reason provided in this paragraph 7, or if Employee resigns
prior to the expiration of the term of this Agreement, all rights and
obligations of Company and Employee under this Agreement shall cease
<PAGE>

immediately, except that Employee's obligations under this subparagraph and
paragraphs 4, 5, and 6, and the Company's obligations under Paragraph 7(c)
herein shall survive such termination. After such termination Employee shall
have no right to receive any compensation hereunder, except as set forth in
paragraph 7(c).

8. Complete Agreement. This Agreement is the final, complete and
exclusive statement and expression of the agreement between Company and
employee, it being understood that there are no oral representations,
understandings or agreements covering the same subject matter as this
Agreement. This Agreement supersedes, and cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous discussions,
correspondence, or oral or written agreements of any kind. This Agreement may
be modified, altered or otherwise amended only by a written instrument
executed by both Company and Employee.

9. No Waiver; Remedies Cumulative. No waiver by the parties hereto of
any default or breach of any term, condition or covenant of this Agreement
shall be deemed to be a waiver of any subsequent default or breach of the
same or any other term, condition or covenant contained herein. No right,
remedy or election given by any term of this Agreement shall be deemed
exclusive but each shall be cumulative with all other rights, remedies and
elections available at law or in equity.

10. Assignment; Binding Effect. Employee understands that Employee has
been selected by Company on the basis of Employee's personal qualifications,
experience and skills. Employee agrees, therefore, that he cannot assign all
or any portion of this Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and Company's successors and
assigns. It is further understood and agreed that Company may be merged or
consolidated with another entity and that any such entity shall automatically
succeed to the rights, powers and duties of Company hereunder.

11. Notice. All notices or other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight
courier or by delivering the same in person to such party.

To Company: Chief Executive Officer
1000 Crawford Place
Mount Laurel, New Jersey 08054

To Employee: Robert M. Kramer
1150 First Avenue, Suite 900
<PAGE>

King of Prussia, Pennsylvania 19406

Notice shall be deemed given and effective the day personally delivered, the
day after being sent by overnight courier and three days after the deposit in
the U. S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier.
Either party may change the address for notice by notifying the other party
of such change in accordance with this paragraph 11.

12. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall
be given to the intent manifested by the portion held invalid or inoperative.
The paragraph headings herein are for reference purposes only and are not
intended in nay way to describe, interpret, define or limit the extent or
intent of this Agreement or of any part hereof.

13. Gender. The use of the masculine pronoun in this Agreement has been
used for convenience and shall apply to the Employee even where the Employee
is a female.

14. Governing Law. This Agreement shall in all respects be construed in
accordance with the laws of the State of New Jersey.

15. Insurance and Indemnification.

(a) Subject to applicable law, for a period of six (6) years following
completion of the Term, the Company will: (i) indemnify Employee and his
heirs and representatives to the extent provided in the Company's Certificate
of Incorporation in effect on the date of this Agreement and will not amend,
reduce or limit rights of indemnity afforded to them or the ability of the
Company to indemnify them, not hinder, delay or make more difficult the
exercise of such rights of indemnity and (ii) maintain director and officer
liability insurance coverage providing Employee with coverage (1) at least as
favorable as the policies in effect immediately prior to the date hereof
covering the Company's directors and officers or (2) as favorable as is
available at a cost to the Company of up to 125% of the premiums currently
being paid by the Company.

(b) If any claim is (or claims are) made against Employee and his heirs
and representatives, including legal counsel, arising from Employee's
services as a director, officer and employee of the Company, within six (6)
years from the expiration of the Term, the provisions of this Paragraph 15
respecting the Company's Certificate of Incorporation shall continue in
effect until the final disposition of all such claims.

(c) The Company agrees to provide written notice to Employee immediately
upon learning of any claim or threatened claim against Employee by any third
party relating to or arising out of the business of the Company or Employee's
<PAGE>

prior service as a director, officer, employee or controlling shareholder of
the Company. The Company further agrees to provide to Employee any complaints
and other relevant documentation related to such claims immediately upon
receipt of such documentation.

(d) Employee agrees that he will cooperate with and assist the Company,
as is reasonably requested by the Company, in its defense of any action or
proceeding against the Company, its directors, officers, employees or
affiliates arising out of or in any way related to any transactions, events
or other matters which occurred during the period of his employment with the
Company, to the extent that such cooperation and assistance will not impair
Employee's legal rights or remedies or increase the likelihood that Employee
will incur any liabilities as a result thereof. This Agreement shall not
preclude Employee from testifying in such action or proceeding. In the event
that Employee does cooperate with and assist the Company in its defenses of
such an action or proceeding, the Company agrees to reimburse Employee for
all reasonable expenses incurred by Employee in providing such assistance.

16. Arbitration.

(a) Each and every controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in Philadelphia, Pennsylvania,
in accordance with the commercial rules (the "Rules") of the American
Arbitration Association then obtaining, and judgment upon the award rendered
in such arbitration shall be final and binding upon the parties and may be
confirmed in any court having jurisdiction thereof. Notwithstanding the
foregoing, this Agreement to arbitrate shall not bar any party from seeking
temporary or provisional remedies in any Court having jurisdiction. Notice of
the demand for arbitration shall be filed in writing with the other party to
this Agreement, which such demand shall set forth in the same degree of
particularity as required for complaints under the Federal Rules of Civil
Procedure the claims to be submitted to arbitration. Additionally, the demand
for arbitration shall be stated with reasonable particularity with respect to
such demand with documents attached as appropriate. In no event shall the
demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in
question would be barred by the applicable statutes of limitations.

(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators
its contemplated discovery plan outlining the desired documents to be
produced, the depositions to be take, if ordered by the arbitrators in
accordance with the Rules, and any other discovery action sought in the
arbitration proceeding. After a preliminary hearing, the arbitrators shall
fix the scope and content of each party's discovery plan as the arbitrators
deem appropriate. The arbitrators shall have the authority to modify, amend
or change the discovery plans of the parties upon application by either
party, if good cause appears for doing so.

(d) The award pursuant to such arbitration will be final, binding and
conclusive.

(e) Counsel to Company and Employee in connection with the negotiation
of and consummation of this Agreement shall be entitled to represent their
respective party in any and all proceedings under this Paragraph or in any
other proceeding (collectively, "Proceedings"). Company and Employee,
respectively, waive the right and agree they shall not seek to disqualify any
such counsel in any such Proceedings for any reason, including but not
limited to the fact that such counsel or any member thereof may be a witness
in any such Proceedings or possess or have learned of information of a
confidential or financial nature of the party whose interests are adverse to
the party represented by such counsel in any such Proceedings.

IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
on the year and day above written.

MACE SECURITY INTERNATIONAL, INC.

By: /s/ Marvin P. Brown
Its: Chairman of the Board

/s/ Robert M. Kramer
Robert M. Kramer
<PAGE>

EMPLOYMENT CONTRACT

RECITALS

The Company conducts diversified businesses, including, without
limitation, personal security device marketing and anticipates entering into
car wash services operations ("Business"). The Employee is an executive with
extensive experience in corporate management. The Company desires to hire
Employee as Chief Financial Officer and the Employee desires to accept the
position offered.

NOW, THEREFORE, in consideration of the mutual promises, terms and
conditions set forth herein and the performance of each, the parties hereby
agree as follows:

1. Services.

(a) Company hereby employs Employee as its Chief Financial Officer,
effective upon the closing under the Paolino Agreement ("Paolino Closing"),
and the material duties of Employee may not be changed without the Employee's
consent. In the event the Paolino Closing does not occur on or before August
<PAGE>

25, 1999, then (i) this Agreement shall be terminated without action by any
party hereto on that date and shall thereafter be void and be of no further
force and effect, (ii) no party hereto shall have any further liability or
obligation to any other party hereto, and (iii) any stock options granted
pursuant to the terms hereof shall be cancelled as of that date without
vesting.

(c) Until the Paolino Closing, Employee shall provide consulting
services to the Company as and when requested on a reasonable basis. After
the Paolino Closing, Employee's employment shall be for a full-time position,
except for Employee's provision of consulting services to U.S. Plastic Lumber
Corp. on a limited basis throughout the term of this Agreement, consent to
which is hereby given. Employee shall not, during the remaining term of his
employment hereunder after the Paolino Closing, without the prior written
consent of Company, be engaged in any other business activity pursued for
gain, profit or other pecuniary advantage, if such activity interferes with
Employee's duties and responsibilities under this Agreement. Employee may
make personal investments in such form or manner as will neither require
Employee's services in the operation or affairs of the companies or
enterprises in which such investments are made nor violate the terms of
Paragraph 4.

2. Compensation.

(a) From the date of this Agreement until the Paolino Closing, Employee
shall be paid a fee of Ten Dollars ($10.00) per month. For all services to be
rendered by Employee to Company after the Paolino Closing, Company shall pay
Employee a salary computed and earned ratably over twelve months at the rate
of One Hundred Thousand Dollars ($100,000) per year, commencing on the date
hereof, payable in accordance with Company's normal payroll procedures.

(c) During the term of Employee's employment with Company, Employee
shall be entitled to reimbursement for reasonable business expenses,
<PAGE>

(d) The Employee shall be granted stock options ("Options") exercisable
for 115,000 shares of the Company's common stock at a per-share exercise
price equal to the lowest bid price of the stock on the NASDAQ National
Market System on the date of this Agreement. The Options shall be granted
under the Company's 1999 stock option plan, and shall be granted as qualified
incentive stock options to the maximum extent possible. The Company agrees to
obtain shareholder approval of the 1999 Stock Option Plan within one year of
the date of grant. The Options shall vest over the four-year term of this
Agreement, one-eighth of the Options vesting on each six-month anniversary
date of this Agreement. Notwithstanding the prior sentence, the Options shall
all vest immediately upon a "Change of Control" which for purposes of this
Agreement shall de deemed to have occurred upon the occurrence of any of the
events set forth in items (i) through and including (iv) below:

(iv) Louis D. Paolino, Jr., no longer serving as Chief Executive Officer
or Chairman of the Company's Board of Directors.

4. Noncompetition Covenants.

(a) Employee agrees that the noncompetition covenants contained in this
Paragraph 4 are a material and substantial part of this Agreement.

(v) promote, or assist, financially or otherwise, any person, firm,
partnership, corporation or other entity whatsoever to do any of the above;

For the purposes of this Agreement, the term "affiliates" shall mean one
or more of: (A) each subsidiary of Company, and (B) each other entity under
the direct or indirect control of the Company.

provided that no such exclusion shall include the time an action is pending,
if the action is finally determined in Employee's favor.

7. Termination; Rights of Termination. Employee's employment under this
Agreement may terminated during the term hereof in any one or more of the
following ways:

(a) Automatically upon the death or resignation of Employee, the parties
agreeing that Employee may resign at any time without such resignation
constituting a breach of this Agreement;

(b) By Company upon written notice to Employee upon:

(iv) alcohol abuse, use of controlled substances during employment
hours, or a positive test for use of controlled substances; or

The written notice provided for herein shall state the reason for
Employee's termination.

To Company: Chief Executive Officer
1000 Crawford Place
Mount Laurel, New Jersey 08054

To Employee: Gregory M. Krzemien
1743 Central Park
<PAGE>

Orefield, Pennsylvania 18069

13. Gender. The use of the masculine pronoun in this Agreement has been
used for convenience and shall apply to the Employee even where the Employee
is a female.

14. Governing Law. This Agreement shall in all respects be construed in
accordance with the laws of the State of New Jersey.

15. Insurance and Indemnification.

16. Arbitration.

(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators
its contemplated discovery plan outlining the desired documents to be
produced, the depositions to be take, if ordered by the arbitrators in
accordance with the Rules, and any other discovery action sought in the
arbitration proceeding. After a preliminary hearing, the arbitrators shall
fix the scope and content of each party's discovery plan as the arbitrators
deem appropriate. The arbitrators shall have the authority to modify, amend
or change the discovery plans of the parties upon application by either
party, if good cause appears for doing so.

(d) The award pursuant to such arbitration will be final, binding and
conclusive.

IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
on the year and day above written.

MACE SECURITY INTERNATIONAL, INC.

By: /s/ Marvin P. Brown
Its: Chairman of the Board

/s/ Gregory M. Krzemien
Gregory M. Krzemien
<PAGE>

AMENDMENT NO. 1
TO
MERGER AGREEMENT

This AMENDMENT NO. 1 dated April 13, 1999 amends that certain MERGER
AGREEMENT (the "Merger Agreement") made as of March 26, 1999, by and between
Louis D. Paolino, Jr. and Red Mountain Holding, Ltd. ("Shareholders") on the
one hand, and Mace Security International, Inc. ("Purchaser") on the other
hand. All capitalized terms set forth herein and not defined herein shall
have the meanings ascribed thereto in the Merger Agreement.

For good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:

1. The Merger Agreement must be amended to reflect the increase to the
number of shares of Seller's Common Stock to be sold pursuant to the Stock
Purchase Agreement from 3,675,000 shares to 3,735,000 shares.

In that regard, Section 7.7 of the Merger Agreement is hereby amended by
replacing all references to "3,675,000 shares" with "3,735,000 shares"

and all other provisions, if any, of the Merger Agreement that reference
"3,675,000 shares" shall also be so amended.

2. All other terms of the Merger Agreement shall remain in full force
and effect.

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

4. This Amendment has been entered into and shall be construed and
enforced in accordance with the laws of the State of New York without
reference to the choice of law principles thereof. In any litigation in
connection with or arising out or related to this Agreement, any of the
documents referred to herein or transactions contemplated hereby, the Seller
irrevocably consents to and confer personal jurisdiction on the courts of the
State of New York or the United States located within the City of Albany and
expressly waive any objections as to venue in any such courts.

IN WITNESS WHEREOF, the parties hereto have each executed and delivered this
Amendment No. 1 to Merger Agreement as of the day and year first above
written.

IN WITNESS WHEREOF, the parties have executed this Agreement on this 13
day of April, 1999.

SHAREHOLDERS PURCHASER

By: /s/ Louis D. Paolino, Jr. MACE SECURITY INTERNATIONAL, INC.
Louis D. Paolino, Jr.

By: /s/ Jon E. Goodrich

Red Mountain Holding, Ltd. Jon E. Goodrich
Chief Executive Officer
By: /s/ David Ehrlich
David Ehrlich, director

<PAGE>

AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT

This AMENDMENT NO. 1 dated April 13, 1999 amends that certain STOCK
PURCHASE AGREEMENT, dated as of March 26, 1999 (the "Stock Purchase
Agreement"), between Louis Paolino, Jr. an individual and the persons
designated by Louis Paolino, if any (collectively referred to as the
"Purchasers" or each , singularly as a "Purchaser") and Mace Security
International, Inc., a Delaware corporation with offices at 160 Benmont
Avenue, Bennington, Vermont 05201 (the "Seller").

For good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:

1. The Stock Purchase Agreement shall be amended to increase the number
of shares of Seller's Common Stock to be purchased thereunder from 3,675,000
to 3,735,000.

In that regard, the Stock Purchase Agreement is hereby amended by
replacing all references to "3,675,000 shares" with "3,735,000 shares".

2. The Stock Purchase Agreement is hereby further amended to amend the
Purchase Price as stated in Section2.1(b)from Five Million Fifty Three
Thousand One Hundred Twenty Five and 00/100 Dollars ($5,053,125.00) to Five
Million One Hundred Thirty Five Thousand Six Hundred Twenty Five and 00/100
($5,135,625).

3. All other terms of the Stock Purchase Agreement shall remain in full
force and effect.

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

5. This Amendment has been entered into and shall be construed and
enforced in accordance with the laws of the State of New York without
reference to the choice of law principles thereof. In any litigation in
connection with or arising out or related to this Agreement, any of the
documents referred to herein or transactions contemplated hereby, the Seller
irrevocably consents to and confer personal jurisdiction on the courts of the
State of New York or the United States located within the City of Albany and
expressly waive any objections as to venue in any such courts.

IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Amendment No. 1to Stock Purchase Agreement as of the day and year first
above written.

PURCHASER:

/s/ Louis Paolino
Louis Paolino

SELLER:

Mace Security International, Inc.

By: /s/ Jon E. Goodrich
Name: Jon E. Goodrich
Title: President and CEO