<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>2
<FILENAME>g65816ex1-1.txt
<DESCRIPTION>ASSET PURCHASE AGREEMENT DATED NOVEMBER 16, 2000
<TEXT>

<PAGE>   1
                                  EXHIBIT 1.1


<PAGE>   2


                               Table of Contents


<TABLE>
<CAPTION>
                                                                                                               Page
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<S>                                                                                                            <C>
ARTICLE 1.        SALE AND PURCHASE OF ASSETS.....................................................................1

   1.1   Sale and Purchase of Assets..............................................................................1
   1.2   Excluded Assets..........................................................................................3
   1.3   Closing..................................................................................................4
   1.4   Purchase Price...........................................................................................4
   1.5   Assumption of Liabilities................................................................................4
   1.6   Closing Date Deliveries..................................................................................6
   1.7   Closing Date Balance Sheet...............................................................................7
   1.8   Earnout Amount...........................................................................................8
   1.9   Further Assurances.......................................................................................9
   1.10  Allocation of Purchase Price............................................................................10
   1.11  Purchaser Board Seat....................................................................................10
   1.12  Failure to Obtain Consents..............................................................................10
   1.13  Intercompany Balances...................................................................................11

ARTICLE 2.        REPRESENTATIONS AND WARRANTIES.................................................................11
   2.1   Representations and Warranties as to Seller.............................................................11
      2.1.1      Corporate Status................................................................................11
      2.1.2      Conflicts, Consents.............................................................................11
      2.1.3      Financial Information, Material Adverse Change, Undisclosed Liabilities.........................12
      2.1.4      Personal Property...............................................................................12
      2.1.5      Real Property...................................................................................13
      2.1.6      Accounts Receivable.............................................................................14
      2.1.7      Inventories.....................................................................................14
      2.1.8      Intellectual Property...........................................................................14
      2.1.9      Material Agreements.............................................................................15
      2.1.10     Absence of Certain Changes......................................................................16
      2.1.11     Insurance.......................................................................................18
      2.1.12     Litigation......................................................................................18
      2.1.13     No Judgments or Orders..........................................................................18
      2.1.14     Compliance with Laws, Permits...................................................................18
      2.1.15     Tax Matters.....................................................................................19
      2.1.16     Compliance with ERISA...........................................................................19
      2.1.17     Labor Matters...................................................................................21
      2.1.18     Questionable Payments...........................................................................21
      2.1.19     Environmental...................................................................................21
      2.1.20     Brokers, Finders................................................................................23
   2.2   Representations and Warranties of Purchaser.............................................................23
      2.2.1      Corporate Status................................................................................24
      2.2.2      Authorization...................................................................................24
      2.2.3      Conflicts, Consents.............................................................................24
      2.2.4      Litigation......................................................................................24
</TABLE>


                                       i
<PAGE>   3


                               Table of Contents
                               -----------------
                                  (continued)


<TABLE>
<CAPTION>
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<S>                                                                                                            <C>
      2.2.5      Brokers, Finders................................................................................25
      2.2.6      Senior Debt.....................................................................................25

ARTICLE 3.        CERTAIN COVENANTS..............................................................................25
   3.1   Efforts to Consummate Transaction.......................................................................25
   3.2   Discharge of Excluded Liabilities.......................................................................25
   3.3   Employee Matters........................................................................................25
   3.4   Customer Lists..........................................................................................27
   3.5   Financing...............................................................................................27
   3.6   Tax Matters.............................................................................................27
   3.7   Transactional Tax Undertakings..........................................................................28
   3.8   Property Taxes..........................................................................................28
   3.9   Satisfaction of Certain Indebtedness....................................................................28
   3.10  Accounts Receivable.....................................................................................28
   3.11  Technical Support.......................................................................................29

ARTICLE 4.        CONDITIONS PRECEDENT...........................................................................29
   4.1   Conditions to Obligations of Purchaser..................................................................29
      4.1.1      Certain Approvals, etc..........................................................................29
      4.1.2      No Litigation or Injunction.....................................................................30
      4.1.3      Title Insurance.................................................................................30
      4.1.4      Transfer Documents..............................................................................30
      4.1.5      Opinion of Counsel..............................................................................30
      4.1.6      Corporate Action................................................................................30
      4.1.7      Conditions to Obligations of Seller.............................................................31
      4.1.8      Transfer Documents..............................................................................31
      4.1.9      Certain Approvals, etc..........................................................................31
      4.1.10     No Litigation or Injunction.....................................................................31
      4.1.11     Purchase Price..................................................................................31
      4.1.12     Opinion of Counsel..............................................................................31
      4.1.13     Fairness Opinion................................................................................31
      4.1.14     Corporate Action................................................................................31

ARTICLE 5.        INDEMNIFICATION................................................................................32
   5.1   Indemnification by Seller...............................................................................32
   5.2   Indemnification by Purchaser............................................................................34
   5.3   Notice of Claims........................................................................................34
   5.4   Third Party Claims......................................................................................35

ARTICLE 6.        MISCELLANEOUS..................................................................................36
   6.1   Survival................................................................................................36
   6.2   Expenses................................................................................................36
   6.3   Assignment; Successors; Parties in Interest.............................................................36
</TABLE>


                                      ii
<PAGE>   4


                               Table of Contents
                               -----------------
                                  (continued)


<TABLE>
<CAPTION>
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                                                                                                               ----

<S>                                                                                                            <C>
   6.4   Amendment and Modification..............................................................................36
   6.5   Access After Closing....................................................................................36
   6.6   Bulk Sales Law..........................................................................................37
   6.7   Notices.................................................................................................37
   6.8   Public Announcement.....................................................................................38
   6.9   Captions................................................................................................38
   6.10  Entire Agreement........................................................................................38
   6.11  Counterparts............................................................................................38
   6.12  Severability............................................................................................38
   6.13  Arbitration.............................................................................................38
   6.14  Confidential Nature of Information......................................................................39
   6.15  Schedules and Exhibits..................................................................................39
   6.16  Definitions.............................................................................................39
   6.17  Governing Law...........................................................................................46
</TABLE>


                                      iii
<PAGE>   5


                            ASSET PURCHASE AGREEMENT

                                     among

                             JPS INDUSTRIES, INC.,

                       JPS CONVERTER AND INDUSTRIAL CORP.

                                      and

                             JPSA ACQUISITION CORP.


                         Dated as of November 16, 2000


<PAGE>   6


                            ASSET PURCHASE AGREEMENT

         THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is entered into as of
November 16, 2000, between JPSA ACQUISITION CORP., a North Carolina corporation
("Purchaser"), JPS CONVERTER AND INDUSTRIAL CORP., a Delaware corporation
("Seller") and JPS INDUSTRIES, INC., a Delaware corporation ("Parent").

                                  WITNESSETH

         WHEREAS, Seller is engaged in, among other things, the business of the
manufacture and sale of greige fabric from spun and filament yarn through the
operation of manufacturing facilities (the "Facilities") located in Greenville,
South Carolina (comprised of two locations, the "Office Property" and the
"Monaghan Plant"), South Boston, Virginia (the "South Boston Plant"), and
Laurens, South Carolina (the "Watts Plant") (collectively, together with the
operations referenced as the JPS Apparel Division in Seller's company reports,
the "JPSA Division"); and

         WHEREAS, Parent desires to cause Seller to enter into this Agreement,
Seller desires to sell, assign and transfer to Purchaser, and Purchaser desires
to purchase and acquire from Seller, substantially all of the assets and
properties of the JPSA Division and certain other assets of Seller described
herein, upon the terms and subject to the conditions set forth herein.

         NOW, THEREFORE, in consideration of the mutual promises made herein
and of the mutual benefits to be derived herefrom, the parties hereto agree as
follows (certain capitalized terms used in this Agreement are defined in
SECTION 6.16 hereof):

                                  ARTICLE 1.
                          SALE AND PURCHASE OF ASSETS

         1.1      Sale and Purchase of Assets. Subject to all of the terms and
conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Closing provided for in SECTION 1.3, Seller
shall sell, transfer, assign, convey and deliver to Purchaser, free and clear
of all Liens (other than Permitted Liens), and Purchaser shall purchase from
Seller, all right, title and interest of Seller in and to: (i) all of the
assets and properties of every nature, kind and description, tangible and
intangible, whether real, personal or mixed, whether contingent or otherwise,
whether now existing or hereinafter acquired, wheresoever located, and whether
or not reflected on Seller's books, owned by Seller relating to the JPSA
Division, excluding the Excluded Assets, as the same may exist as of the
Closing Date; and (ii) certain other assets specifically identified herein or
in the schedules hereto, relating to the JPSA Division (collectively, the
"Assets"); subsections (i) and (ii) to include, without limitation, all right,
title and interest of Seller in, to and under:

         (a)      The real property identified on SCHEDULE 2.1.5 and owned by
Seller, and all of the buildings, structures (surface and subsurface), fixtures
and improvements located thereon, together with all water and other utility
lines, rights of way, uses, licenses, permits, approvals, easements,
hereditaments, tenements, and appurtenances belonging or appertaining thereto
and any and all assignable warranties of third parties with respect thereto
(the "Owned Real Property") and, by assignment of leases, all of Seller's
right, title, and interest in the real estate


<PAGE>   7


leases identified on SCHEDULE 2.1.5 (the "Real Property Leases") (including,
without limitation, any assignment of a real estate lease or sublease) to
buildings, fixtures and improvements, including construction in progress, and
appurtenances thereto, located on the real property subject to such real estate
leases, and any and all assignable warranties of third parties with respect
thereto (the "Leased Real Property");

         (b)      All tangible assets (the "Personal Property Assets") (i)
relating exclusively to the JPSA Division located at the Facilities, including
machinery and equipment, tooling, molds, tools, business machines, computers,
terminals, computer equipment, telephones, telephone systems, furniture, office
equipment, furnishings, vehicles, trucks, forklifts, rolling stock, trailers
and storage units and any and all assignable warranties of third parties with
respect thereto, and (ii) without duplication, that personal property listed on
SCHEDULE 2.1.4;

         (c)      The ratti twisters and thirty-four (34) 85 inch Sulzer looms,
and related shipping cradles associated with the scrim manufacturing, located
at the Monaghan Plant listed on SCHEDULE 2.1.4, but not on the books of the
JPSA Division;

         (d)      All inventories of raw materials, supplies, work-in-process,
finished products, goods, spare parts, replacement and component parts, office
and other supplies and packaging materials and similar items, wherever located,
owned by Seller and relating exclusively to the JPSA Division;

         (e)      (i) As they relate exclusively to the JPSA Division and only
to the extent assignable by Seller: all of Seller's right, title and interest
in and to all Intellectual Property and all goodwill associated therewith owned
by Seller, to the extent set forth on SCHEDULE 2.1.8, including: (x) all logos,
trade styles, trade names, trademarks, service marks (and applications
therefor), (y) all patents and patent applications; and (z) all copyrights (and
applications therefor), whether registered or not, owned by or assigned to
Seller or in which Seller has an interest by license, agreement, shop right,
common law, or otherwise, together with all processes, designs, drawings,
formulas, inventions, trade secrets, know-how, ideas and concepts, and together
with all goodwill associated therewith; (ii) all royalties (or claims relating
thereto) due and owing to Seller with regard to the foregoing; and (iii) the
Customer Lists;

         (f)      All contracts, arrangements, licenses, leases and other
agreements owned by Seller and relating exclusively to the JPSA Division,
including, without limitation, any right to receive payment pursuant to such
contracts, arrangements, licenses, leases and other agreements;

         (g)      All of Seller's right, title and interest in and to the
personal property leases listed in SCHEDULE 2.1.9;

         (h)      To the extent transfer is permitted by applicable law or
regulation, all licenses, permits or orders issued by any Governmental
Authority with respect to the conduct of the JPSA Division, including, without
limitation, those listed in SCHEDULE 2.1.14;

         (i)      All credits, prepaid rentals and other prepaid expenses,
deferred charges, advance payments, security deposits and prepaid items owned
by Seller and relating exclusively to the operations of the JPSA Division;


                                       2
<PAGE>   8


         (j)      All contracts of insurance owned by Seller and relating
exclusively to the JPSA Division and all of the Seller's rights, claims and
interest in any insurance, insurance claims, escrows, reserves or rights to
indemnity with respect to any of the Assets and all liabilities or claims
assumed by Purchaser pursuant to the terms of this Agreement;

         (k)      All real or personal property tax refunds or credits related
exclusively to the Assets;

         (l)      All accounts receivable attributable exclusively to the
business and operations of the JPSA Division;

         (m)      All revenues resulting from customer orders of the JPSA
Division received after the Closing Date, and all revenues attributable to the
rental or other use of any Customer Lists after the Closing Date;

         (n)      To the extent owned by Seller, all choses in action, claims
and demands of any nature against third parties, whether by way of counterclaim
or otherwise, with respect to the JPSA Division, the ownership, use, function
or value of any of the Assets or the Assumed Liabilities relating to actions,
facts or circumstances occurring or arising after the Closing Date; and

         (o)      All books, records, files, invoices, data bases, computer
programs, manuals and other materials (in any form or medium) related
exclusively to the operation of the JPSA Division, including, without
limitation, product specifications, drawings, distribution lists, sales and
promotional materials, personnel records of Hired Employees, research and
development records, accounting records, sales order files, and supplier lists.

         1.2      Excluded Assets. Notwithstanding the foregoing or any other
provision of this Agreement to the contrary, Seller will retain and not
transfer, and Purchaser will not purchase or acquire, the following
(collectively, the "Excluded Assets"):

         (a)      The Material Agreements designated by Purchaser in Schedules
2.1.4, 2.1.5, 2.1.8 or 2.1.9 as Excluded Liabilities;

         (b)      Any of Seller's claims for any federal, state or local tax
refunds or credits other than real or personal property tax refunds or credits
related exclusively to the Assets;

         (c)      The Benefit Plans and the assets related thereto and any
records relating thereto;

         (d)      Except as provided in SECTION 1.1(M), all cash and cash
equivalents attributable to the operations of the JPSA Division prior to the
Closing Date;

         (e)      Seller's rights and interests under this Agreement;

         (f)      The minute book, stock records, and corporate seal of Seller
and of its subsidiaries;

         (g)      The Benease(R) Computer program;


                                       3
<PAGE>   9


         (h)      That certain promissory note issued by Chiquola Fabrics to
Seller;

         (i)      Any rights to payments from the South Carolina Second Injury
Fund arising prior to the Closing Date, whether or not paid prior to the
Closing Date; and

         (j)      The items listed on SCHEDULE 1.2.

         1.3      Closing. Subject to the satisfaction or waiver of all
respective conditions to each party's obligations to close, the purchase and
sale of the Assets and the assumption of the liabilities contemplated hereby
(the "Closing") shall be consummated at the offices of Jones, Day, Reavis &
Pogue in Atlanta, Georgia at 9:00 a.m., on November 16, 2000, or at such other
place, time or date as the parties hereto may agree in writing (the "Closing
Date"). The parties understand and agree that, subject to the provisions of
SECTION 1.7, for purposes of Closing, all financial statement, payroll, and
related cut-off periods shall be the close of business on SATURDAY, OCTOBER 28,
2000.

         1.4      Purchase Price. The purchase price (the "Purchase Price") to
be paid to Seller for the sale, transfer, and conveyance of the Assets, subject
to the Adjustment Amount, shall be:

         (i)      Twenty-Seven Million Ninety-Two Thousand One Hundred
         Thirty-Four and No/100 Dollars ($27,092,134.00), subject to the
         Adjustment Amount (the "Cash Purchase Price");

         (ii)     the assumption of the Assumed Liabilities; and

         (iii)    the Earnout Amount provided in SECTION 1.8.

         1.5      Assumption of Liabilities.

         (a)      On the Closing Date, Purchaser shall deliver to Seller the
Bill of Sale, in the form of EXHIBIT A, and the Assignment and Assumption
Agreement, in the form of EXHIBIT B, pursuant to which Purchaser shall assume
and agree to discharge all of the following obligations exclusively related to
the JPSA Division in accordance with their respective terms, but only to the
extent that such obligations do not constitute Excluded Liabilities:

         (i)      any and all liabilities, obligations and commitments arising
         out of the (x) Real Property Leases identified in SCHEDULE 2.1.5 and
         (y) Material Agreements, excluding, however, (A) any obligation or
         liability for breach thereof occurring prior to the Closing Date and
         (B) any Material Agreements designated by Purchaser in SCHEDULES
         2.1.4, 2.1.5, 2.1.8 or 2.1.9 as Excluded Liabilities;

         (ii)     all trade accounts payable, accrued payroll and accrued
         employee benefits (including, without limitation, all obligations of
         Seller and Parent under any employment contracts, severance policies,
         vacation policies, and similar employee benefit programs to the extent
         accrued and disclosed on the Closing Date Balance Sheet, but excluding
         those liabilities related to the Excluded Assets as provided in
         SECTION 1.2(C)); and


                                       4
<PAGE>   10


         (iii)    all obligations and liabilities accruing, arising out of, or
         relating to acts or omissions of Purchaser, including the operation
         and use of the Assets from and after the Closing Date.

All of the foregoing to be assumed by Purchaser hereunder (excepting any
Excluded Liabilities) are referred to herein as the "Assumed Liabilities."

         (b)      Notwithstanding any provision of this Agreement to the
contrary, Purchaser shall not assume any liabilities, obligations or
commitments of Seller relating to or arising out of the operations of the JPSA
Division or the ownership of the Assets other than the Assumed Liabilities (the
"Excluded Liabilities"). Without limiting the generality of the foregoing, none
of the following shall be "Assumed Liabilities" for purposes of this Agreement:

         (i)      Any and all Taxes (whether pursuant to existing laws and
         regulations or laws and regulations subsequently enacted by any
         Governmental Authority) which arise from: (A) the business and
         operations of the JPSA Division prior to and including the Closing
         Date; (B) the ownership of the Assets prior to and including the
         Closing Date; or (C) any Taxes owed by Seller arising from the
         consummation of the transaction contemplated herein; provided,
         however, that as set forth in SECTION 5.1, Purchaser shall be required
         to expend reserves for the Excluded Liabilities described in this
         SECTION 1.5(B)(I) before asserting any claim for a Loss relating to
         such Excluded Liabilities;

         (ii)     Any and all costs, expenses, liabilities or obligations
         incurred by Seller incident to the negotiation and preparation of this
         Agreement and its performance and compliance with the agreements and
         conditions contained herein;

         (iii)    Any and all divisional intergroup or intercompany payables
         and other liabilities of the JPSA Division to Seller or any of its
         affiliates;

         (iv)     Any and all liabilities and obligations under any recalls
         mandated by any Governmental Authority on or after the Closing Date
         with respect to products manufactured or sold by Seller prior to the
         Closing Date;

         (v)      Any and all liabilities and obligations arising from or in
         connection with warranty claims and product liability claims relating
         to products manufactured and sold by Seller prior to the Closing Date;
         provided, however, that as set forth in SECTION 5.1, Purchaser shall
         be required to expend reserves for the Excluded Liabilities described
         in this SECTION 1.5(B)(V) before asserting any claim for a Loss
         relating to such Excluded Liabilities;

         (vi)     Any liabilities or obligations relating to any Environmental
         Damages whether or not disclosed in any schedule to this Agreement or
         otherwise known to Purchaser;

         (vii)    Any liability of Seller for the unpaid Taxes of any person
         under Reg. 1.1502-6 of the Code (or any other similar provision of
         state, local or foreign law) as a transferee or successor, by
         contract, or otherwise;

         (viii)   Any liabilities or obligations of Seller for borrowed money
         or evidenced by bonds, debentures, notes, drafts or similar
         instruments;


                                       5
<PAGE>   11


         (ix)     Any liabilities or obligations of Seller existing on the
         Closing Date relating to individuals who are employees of the JPSA
         Division while employed by Seller, except to the extent provided in
         SECTIONS 1.5(A)(II) AND 3.3;

         (x)      Any WARN Act obligations with respect to employees of Seller,
         solely to the extent the basis for which arises prior to the Closing
         Date;

         (xi)     Any liabilities or obligations relating to the Excluded
         Assets;

         (xii)    All liabilities or obligations of Seller relating to any
         claims by employees of the JPSA Division, whether pending as of
         Closing or arising after Closing, due to acts, alleged acts or
         omissions of Seller occurring prior to Closing under any federal labor
         or employment laws or state laws relating to or arising out of the
         employment relationship or the termination thereof, including, without
         limitation, any claims under the National Labor Relations Act, Fair
         Labor Standards Act, Family and Medical Leave Act, Title VII of the
         Civil Rights Act of 1964, Americans with Disabilities Act, Age
         Discrimination in Employment Act, and the Civil Rights Act of 1866 and
         1970 or relating to any of the Plans, except to the extent provided in
         SECTIONS 1.5(A)(II) AND 3.3; and

         (xiii)   Any liabilities or obligations in respect of any actions,
         suits or proceedings, or possible claims, whether such actions, suits,
         proceedings or possible claims are currently pending, threatened,
         contingent or otherwise, in any way relating to the conduct of the
         business and operations of the JPSA Division prior to the Closing
         Date, including any such matters disclosed on SCHEDULE 2.1.12 and
         without regard to whether any such actions, suits, or proceedings are
         described on SCHEDULE 2.1.12.

         (xiv)    Any liabilities, costs or expenses relating to termination of
         any Material Agreement by Seller in connection with the consummation
         by Seller of the transactions contemplated hereby;

         (xv)     Any and all liabilities, obligations, and commitments to
         customers relating to Charge-Backs and Returns; provided, however,
         that as set forth in SECTION 5.1, Purchaser shall be required to
         expend reserves for the Excluded Liabilities described in this SECTION
         1.5(B)(XV) before asserting any claim for a Loss relating to such
         Excluded Liabilities; and

         (xvi)    Any liabilities or obligations of Seller for accrued
         post-retirement or post-employment benefits.

         1.6      Closing Date Deliveries.

         (a)      On the Closing Date, Seller and Parent shall deliver or cause
to be delivered to Purchaser (i) the Bill of Sale and the Assignment and
Assumption Agreement collectively covering all of the Assets and the Assumed
Liabilities and (ii) all of the documents, instruments and opinions required to
be delivered by Seller pursuant to SECTION 4.1.

         (b)      On the Closing Date, Purchaser shall deliver or cause to be
delivered to Seller (i) the Cash Purchase Price by wire transfer of immediately
available funds to an account or accounts designated by Seller, provided,
however, that the Cash Purchase Price to be delivered


                                       6
<PAGE>   12


on the Closing Date shall be adjusted on the Closing Date as provided below,
(ii) the Bill of Sale and the Assignment and Assumption Agreement and (iii) all
of the documents, instruments and opinions required to be delivered by
Purchaser pursuant to SECTION 4.1.7.

The Cash Purchase Price delivered by Purchaser at Closing shall be decreased by
the amount designated as the "Cash Purchase Price Adjustment" on SCHEDULE
1.6(B).

         1.7      Closing Date Balance Sheet.

         (a)      As promptly as practicable (but not later than forty-five
(45) days after the Closing Date), Purchaser shall deliver to Seller a balance
sheet of the JPSA Division as of the Closing Date (the "Closing Date Balance
Sheet"), indicating the Closing Date Working Capital, prepared by Purchaser's
independent public accountants in accordance with generally accepted accounting
principles ("GAAP") consistently applied and in accordance with past practices
of Seller, together with such independent public accountants' standard audit
opinion. Seller shall have thirty (30) days from the date on which the Closing
Date Balance Sheet is delivered to it to review such document (the "Review
Period"). Seller and its accountants shall be provided with full access to the
work papers of Purchaser and its accountants in connection with such review. If
Seller asserts that any item or amount shown or reflected in the Closing Date
Balance Sheet is not materially correct or that the calculation of Closing Date
Working Capital was arrived at other than in accordance with GAAP applied on a
consistent basis, in accordance with Seller's past practices, or does not
fairly present the financial condition of the JPSA Division as of the Closing
Date in accordance with the provisions of this SECTION 1.7(A), then Seller may,
on or prior to the last day of the Review Period, deliver a notice to Purchaser
setting forth, in reasonable detail, the basis for the disagreement therewith,
together with supporting calculations (the "Dispute Notice"). If no Dispute
Notice is delivered by Seller on or prior to the last day of the Review Period,
the Closing Date Balance Sheet shall be deemed accepted by both parties and
shall provide the basis for determining the Closing Date Working Capital and
any adjustments required pursuant to SECTION 1.7(C).

         (b)      Disputes. Within thirty (30) days after delivery of the
Dispute Notice, if Purchaser and Seller shall be unable despite their
reasonable efforts to resolve the dispute set forth in the Dispute Notice,
Purchaser and Seller shall jointly retain a nationally recognized firm of
independent public accountants mutually acceptable to them. Such independent
firm shall review the Closing Date Balance Sheet (and, if necessary or
appropriate in their judgment, any related work papers of Seller) and the
Dispute Notice, and shall, as promptly as practicable and in no event later
than forty-five (45) days following the date of their engagement, deliver to
Purchaser and Seller a report (the "Adjustment Report") setting forth, in
reasonable detail, their determination with respect to all of the disputed
items or amounts specified in the Dispute Notice, and the revisions, if any, to
be made to the Closing Date Balance Sheet and the calculation of Closing Date
Working Capital to reflect such determination, together with supporting
calculations. The Adjustment Report shall be final and binding upon Purchaser
and Seller. The fees of the independent firm shall be the obligation of the
party as to which the Adjustment Report is adverse.

         (c)      Adjustment and Payment. Upon final determination of the
Closing Date Working Capital pursuant to Sections 1.7(a) and (b), the Purchase
Price shall be adjusted as follows:


                                       7
<PAGE>   13


In the event that the Closing Date Working Capital is greater than or less than
$24,160,000, as calculated in the attached SCHEDULE 1.7(C), then the Purchase
Price shall be increased or decreased, respectively, by the amount of the
difference (such difference, if any, herein referred to as the "Adjustment
Amount"). The Adjustment Amount, if any, shall be paid by Seller to Purchaser,
if a reduction in the Purchase Price, or by Purchaser to Seller, if an increase
in the Purchase Price, by wire transfer of immediately available funds within
ten (10) business days after the final determination of the Closing Date
Working Capital; provided, however, that in the event that Purchaser and Seller
agree that an Adjustment Amount is due to either Purchaser or Seller, as the
case may be (the "Receiving Party"), but a bona fide dispute exists between
Purchaser and Seller as to the amount due to the Receiving Party, the party
from whom such payment is due (the "Paying Party") shall pay to the Receiving
Party within ten (10) business days after delivery of the Dispute Notice the
amount that both parties reasonably believe is due and shall only be entitled
to withhold the amount equal to the difference between the amount that the
Receiving Party reasonably believes is due and the amount that the Paying Party
reasonably believes is due (the "Disputed Amount"). In addition, upon final
determination of Closing Date Working Capital, if it is determined that the
Paying Party owes all or any portion of the Disputed Amount to the Receiving
Party, the Paying Party shall pay to the Receiving Party, in addition to the
Disputed Amount, or any portion thereof, interest at the rate of 10% per annum
on the Disputed Amount, or portion thereof, calculated from the date of
delivery of the Dispute Notice.

         1.8      Earnout Amount.

         (a)      Within seventy-five (75) days after the date that is
twenty-four (24) months after the first day of Purchaser's first full fiscal
month immediately following the Closing Date (the "Earnout Payment Date"),
Purchaser shall pay to Seller the Earnout Amount. In the event that Purchaser
and Seller agree than an Earnout Amount is due, but a bona fide dispute exists
between Purchaser and Seller regarding the amount due, Purchaser shall pay to
Seller the amount that Purchaser reasonably believes is due and shall only be
entitled to withhold the amount equal to the difference between the amount that
Seller reasonably believes is due and the amount that Purchaser reasonably
believes is due. If Purchaser and Seller shall be unable despite their
reasonable efforts to resolve a bona fide dispute regarding the Earnout Amount
within thirty (30) days after the Earnout Payment Date, Purchaser and Seller
shall jointly retain a nationally recognized firm of independent public
accountants mutually acceptable to them, the cost of which shall be borne
equally by Purchaser and Seller. Such independent firm shall review Purchaser's
calculation of the Earnout Amount (and, if necessary or appropriate in their
judgment, any related work papers of Seller), and shall, as promptly as
practicable and in no event later than forty-five (45) days following the date
of their engagement, deliver to Purchaser and Seller a report (the "Earnout
Report") setting forth, in reasonable detail, their determination with respect
to all of the disputed items or amounts and the calculation of the Earnout
Amount to reflect such determination, together with supporting calculations.
The Earnout Report shall be final and binding upon Purchaser and Seller. In
addition, if the Earnout Report shall be adverse to Purchaser, Purchaser shall
pay to Seller within ten (10) business days after the final determination of
the Earnout Amount, interest at the rate of 10% per annum on any portion of the
Earnout Amount that is outstanding, calculated from the Earnout Payment Date.

         (b)      The Earnout Amount shall be equal to fifty percent (50%) of
the amount by which Cumulative Adjusted EBITDA, for the period beginning on the
first day of Purchaser's first full


                                       8
<PAGE>   14


fiscal month immediately following the Closing Date and ending on the date that
is twenty-four (24) full fiscal months thereafter, exceeds Eleven Million and
No/100 Dollars ($11,000,000.00). The Earnout Amount, if any, shall be paid by
Purchaser to Seller by wire transfer of immediately available funds within ten
(10) business days after final determination of the Earnout Amount. Payment of
the Earnout Amount shall be subject to offset pursuant to SECTION 5.1.

         (c)      Cumulative Adjusted EBITDA shall be calculated in accordance
with GAAP consistently applied as used in the preparation of Seller's balance
sheet of April 1, 2000. Notwithstanding the foregoing, nothing contained herein
shall be construed to limit Purchaser's authority to change the fiscal year of
the JPSA Division, to allocate overhead, to consolidate the JPSA Division with
another division or subsidiary of Purchaser solely for accounting purposes
(provided that no such change, allocation, or consolidation shall render it
impossible to calculate Cumulative Adjusted EBITDA hereunder) or to change
accounting methods or principles for purposes other than the calculation of the
Earnout Amount; provided, however, that in the event that Purchaser
consolidates the operations of the JPSA Division with those of another division
or subsidiary of Purchaser, changes the fiscal year of the JPSA Division,
allocates overhead or changes the accounting methods or principles of the JPSA
Division, Purchaser shall maintain (at no additional expense for purposes of
calculating Cumulative Adjusted EBITDA) a separate set of books and records for
the business of the JPSA Division from which Cumulative Adjusted EBITDA
hereunder can be calculated; and provided further that Purchaser shall notify
Seller or its designee promptly following any such change.

         (d)      Unless a bona fide dispute exists with respect to the Earnout
Amount, the determination of Cumulative Adjusted EBITDA hereunder shall be made
by Purchaser's independent public accountants.

         (e)      Seller acknowledges and agrees that its right to receive the
Earnout Amount shall be subordinated and junior in right of payment to any and
all senior obligations of Purchaser for borrowed money, including that certain
Loan and Security Agreement of even date herewith between Purchaser and
Foothill Capital Corporation, as amended, restated, refinanced, or replaced
from time to time, (but not including any mezzanine or senior subordinated
obligations) (the "Senior Debt"). In the event the lender(s) to Purchaser of
the Senior Debt (the "Senior Lender") does not permit the payment of all or any
portion of the Earnout Amount (if any) when due, such amount shall be evidenced
by a promissory note and shall be payable on such terms as Purchaser, Seller
and the Senior Lender shall agree, subordinated only to the Senior Debt.

         (f)      In the event that Purchaser sells substantially all of its
operating assets or disposes of a majority of its capital stock to an
unaffiliated third party purchaser by sale, merger or otherwise, Purchaser
acknowledges and agrees that it will take all necessary actions to have such
third party purchaser assume all of the obligations of Purchaser set forth in
this SECTION 1.8.

         1.9      Further Assurances. On the Closing Date, Seller shall (i)
deliver to Purchaser such other bills of sale, deeds, endorsements, assignments
and other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to Purchaser and its counsel, as Purchaser may
reasonably request or as may be otherwise reasonably necessary to vest in
Purchaser all the right, title and interest of Seller in, to or under all of
the Assets, and (ii) take all steps as may be reasonably necessary to put
Purchaser in actual possession and control of


                                       9
<PAGE>   15


all the Assets. From time to time following the Closing, the parties shall
execute and deliver, or cause to be executed and delivered, to each other such
other instruments and documents as may be reasonably requested or as may be
otherwise reasonably necessary to consummate the transactions contemplated
hereunder. Notwithstanding anything in this SECTION 1.9 to the contrary, this
Agreement shall not constitute an agreement to assign any license, certificate,
approval, authorization, agreement, contract, lease, easement or other
commitment included in the Assets if an attempted assignment thereof without
the consent of a third party thereto or Governmental Authority would constitute
a breach thereof or a violation of applicable law. If any such consent shall
not be obtained or if any attempted assignment would be ineffective, Seller
shall cooperate with the Purchaser to the extent permitted by law and by the
terms of any material third party agreements to which Seller is a party in any
other reasonable arrangement designed to provide to Purchaser the benefits of
any such license, certificate, approval, authorization, agreement, contract,
lease, easement or other commitment.

         1.10     Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in the manner set forth in SCHEDULE 1.10. The
parties to this Agreement agree that such allocation is a fair and reasonable
allocation of the Purchase Price, and the parties to this Agreement shall file
all applicable tax returns and reports (including IRS Form 8594 issued pursuant
to Section 1060 of the Code) in accordance with and based upon such allocation,
and shall not take any position in any tax return or report, or any tax
proceeding or audit that is inconsistent with such allocation.

         1.11     Purchaser Board Seat. Purchaser covenants that it will take
all necessary actions to elect to its Board of Directors an individual
designated by Parent, Seller or any of their affiliates (the "Parent
Designee"), effective as of the Closing Date, to serve for the period beginning
on the date of this Agreement and ending two (2) years from such date or for
such longer period during which any Earnout Amount is due but has not been paid
to Seller or any dispute with regard to Purchaser's obligation to pay an
Earnout Amount exists. Without limiting the foregoing, such Parent Designee
shall be entitled to receive, no later than any Director of the Purchaser, all
information provided to any Director for purposes of committee meetings or
otherwise. In the event Purchaser shall consolidate the JPSA Division with any
other division, subsidiary or other entity, Purchaser shall take all necessary
action to ensure that the Parent Designee shall serve on the Board of Directors
of any such resulting entity for the period contemplated hereby.

         1.12     Failure to Obtain Consents. Notwithstanding any contrary
provision in this Agreement, neither Seller nor Parent shall have any liability
whatsoever to Purchaser, including without limitation, any indemnification
obligations under ARTICLE 5 hereof, in the event of a failure by Purchaser to
obtain any consent, release, waiver or approval related to the transactions
contemplated by this Agreement set forth on SCHEDULE 1.12, the cost of which
shall be borne exclusively by Purchaser. Notwithstanding the foregoing, the
parties agree that Seller and Purchaser shall each bear 50% of any Losses
incurred in obtaining consents to the assignments from Seller to Purchaser of
the New York Lease, the Bank of America Lease, and the IBM Credit Corporation
Lease (the "Leases") and 50% of any Losses relating to any damages resulting to
Purchaser from any failure to obtain the foregoing consents, including, but not
limited to, relocation costs relating to moving into leasehold space comparable
to the space leased by Seller pursuant to the New York Lease, which relocation
costs shall not exceed


                                      10
<PAGE>   16


$100,000, and Losses relating to increases in lease rates; provided, however,
that prepaid items shall not be deemed to be Losses under this SECTION 1.12.
Seller and Purchaser agree to cooperate in good faith to obtain consents to the
assignments of the Leases. In addition, each party agrees to obtain the consent
of the other party before entering into any new agreements comparable to the
Leases, which consent shall not be unreasonably withheld.

         1.13     Intercompany Balances. Purchaser hereby acknowledges and
agrees that the divisional intergroup and intercompany accounts receivables set
forth on SCHEDULE 2.1.6 shall be paid in the ordinary course of business
consistent with the past practices of Seller on terms no longer than sixty (60)
days.

                                  ARTICLE 2.
                         REPRESENTATIONS AND WARRANTIES

         2.1      Representations and Warranties as to Seller. Parent and
Seller jointly and severally represent and warrant to Purchaser as of the date
hereof as follows:

         2.1.1    Corporate Status.

         (a)      Corporate Existence. Each of Parent and Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. Seller is duly qualified and in good standing as a
foreign corporation duly authorized to do business in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect.

         (b)      Authorization. Each of Parent and Seller has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of each of Parent and Seller. This Agreement and
the other agreements and instruments to be executed by Parent and Seller in
connection with this Agreement have been duly executed and delivered by Parent
and Seller and constitute the legal, valid and binding obligation of Parent and
Seller.

         2.1.2    Conflicts, Consents.

         (a)      Conflicts. Except as set forth on SCHEDULE 2.1.2, the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby in the manner contemplated hereby, will not
(x) result in the creation of any Lien upon any of the Assets; or (y) conflict
with or result in any violation of or default under (or any event that, with
notice or lapse of time or both, would constitute a default under), require any
consent, notice or other action under, or result in the acceleration or
required prepayment of any indebtedness pursuant to the terms of, any provision
of (i) the Articles of Incorporation or Bylaws of Parent or Seller, (ii) any
mortgage, indenture, loan agreement, note, bond, deed of trust, other
agreement, commitment or obligation for the borrowing of money or the obtaining
of credit, material lease or other material agreement, contract, license,
franchise, permit or instrument to which Seller is a party or by


                                      11
<PAGE>   17


which Seller or its properties may be bound, or (iii) any judgment, order,
decree, law, statute, rule or regulation applicable to Seller.

         (b)      Consents. Except as set forth in SCHEDULE 2.1.2, no consent,
approval, authorization, permit, order, filing, registration or qualification
of or with any court, governmental authority or third person is required to be
obtained by Parent or Seller (whether under applicable law, pursuant to
agreements to which Parent or Seller is a party, or otherwise) in connection
with the execution and delivery of this Agreement or the consummation by Parent
and Seller of the transactions contemplated hereby in the manner contemplated
hereby, except for those consents and approvals the absence of which will not
have a Material Adverse Effect.

         2.1.3    Financial Information, Material Adverse Change, Undisclosed
Liabilities.

         (a)      Financial Statements. Seller has delivered to the Purchaser
an unaudited balance sheet, income statement and statement of cash flow of the
JPSA Division for the fiscal year ended October 30, 1999, prepared from and in
accordance with the books and records of Seller as of, and for the period ended
on such date, representing only bona fide transactions and including the
related statements of income for the period then ended (the "Annual
Financials"). Seller also has delivered to the Purchaser an unaudited balance
sheet and statement of operations of the JPSA Division for the nine (9) month
period ended July 29, 2000 (the "Interim Financials"), prepared from and in
accordance with the books and records of Seller as of, and for the period ended
on, such date and representing only bona fide transactions. The Annual
Financials and Interim Financials are set forth in SCHEDULE 2.1.3. SCHEDULE
2.1.3 contains a detail of all credits, prepaid rentals and other prepaid
expenses, deferred charges, advance payments, security deposits and prepaid
items owned by Seller and relating exclusively to the operations of the JPSA
Division. The Annual Financials and the Interim Financials have been prepared
in accordance with GAAP and accounting practices consistently applied
throughout the periods indicated (and in accordance with Seller's past
practices) and present fairly the results of operations and (in the case of the
Annual Financials) cash flows of the JPSA Division for the respective periods
indicated, except that the Interim Financials may be subject to year-end audit
adjustments in accordance with GAAP, and set forth accruals for all liability
of Seller with regard to wages, vacation and other benefits owing to employees
of Seller, but not yet paid as of the date thereof.

         (b)      Material Adverse Change. Except as disclosed on SCHEDULE
2.1.3, since July 29, 2000, there has been no change in the business, financial
condition, properties, liabilities or operations of the JPSA Division that has
had a Material Adverse Effect.

         (c)      Undisclosed Liabilities. Seller has no liabilities or
obligations arising out of or relating to the business and operations of the
JPSA Division, secured or unsecured (whether absolute, accrued, known or
unknown, contingent or otherwise, and whether due or to become due) except (x)
as disclosed in the Interim Financials, (y) as disclosed in SCHEDULE 2.1.3, and
(z) nonmaterial current liabilities incurred since July 29, 2000 in the
ordinary course of business consistent with past practice.

         2.1.4    Personal Property. SCHEDULE 2.1.4 sets forth all machinery,
equipment, furniture and other material items of tangible personal property
(other than inventory and Excluded


                                      12
<PAGE>   18


Assets) with an initial book value in excess of $2,000 utilized by Seller in
connection with the JPSA Division as presently conducted, all leases and
agreements associated therewith and certain other assets of Seller located at
the Monaghan Plant. Seller has good and marketable title to, and owns free and
clear of any Liens, except for Permitted Liens, all of the Personal Property
Assets including, without limitation, all personal property reflected in
SCHEDULE 2.1.4. The Personal Property Assets comprise all assets, other than
the Excluded Assets and Real Property, required for the continued conduct of
the JPSA Division by Purchaser as presently conducted. Except as disclosed in
SCHEDULE 2.1.4, the Personal Property Assets are in all material respects
adequate for the purposes for which such Personal Property Assets are currently
used or are held for use, are in reasonably good repair and operating condition
(subject to normal wear and tear) and, to the Knowledge of Seller, there are no
facts or conditions affecting the Personal Property Assets which could,
individually or in the aggregate, interfere in any material respect with the
continued use thereof in the usual and normal conduct of the business and
operations of the JPSA Division consistent with past practice.

         2.1.5    Real Property.

         (a)      Seller has marketable title in fee simple to the Owned Real
Property free and clear of any Liens, except for Permitted Liens. Upon delivery
to Purchaser on the Closing Date of the instruments of transfer contemplated by
SECTION 1.6(A), Seller will thereby transfer to Purchaser marketable title to
the Owned Real Property free and clear of any Liens, except for Permitted
Liens. Seller has in all material respects performed all obligations required
to be performed by Seller to the date hereof under the Real Property Leases
described in SCHEDULE 2.1.5 and to the knowledge of Seller, no dispute exists
with regard to Seller's right to enjoy the premises under such leases. Except
to the extent a violation would not individually or in the aggregate cause a
Material Adverse Effect, the Real Property, including the buildings and
operations of Seller conducted thereon, are in compliance with all applicable
ordinances, regulations and zoning laws, do not encroach on the property of
others, are not subject to any Liens of any nature whatsoever, encroachments,
building or use restrictions, exceptions, reservations or limitations that
interfere or impair the present and continued use thereof in the usual and
normal conduct of the business and operations of Seller. Seller has not
received written notice of any violation of any applicable zoning regulation,
ordinance, or other law, order, regulation, or requirement relating to the Real
Property and Seller has no Knowledge of any such violation. Seller has not
received written notice of any pending or threatened condemnation proceedings
related to the Real Property and Seller has no Knowledge of any such pending or
threatened proceedings.

         (b)      Except as set forth in SCHEDULE 2.1.5;

         (i)      The plants, structures, material tangible properties, and
         equipment owned, operated, or leased by Seller at the locations of the
         Real Property are in conformity in all material respects with all
         applicable laws, ordinances, orders, regulations, and other
         requirements presently in effect or, to Seller's Knowledge, scheduled
         to take effect;

         (ii)     Seller has delivered to Purchaser true and correct copies of
         all title insurance policies and all surveys and deeds to the Owned
         Real Property that are in Seller's possession;


                                      13
<PAGE>   19


         (iii)    Seller is not in violation of, or default under, any material
         legal requirement pertaining to any of the Leased Real Property, and
         no written notice of violation of any legal requirement, or of any
         covenant, condition, restriction or easement affecting any of the
         Leased Real Property or with respect to the use or occupancy thereof,
         has been given to Seller;

         (iv)     No condemnation proceeding is pending or, to the Knowledge of
         Seller, threatened which would impair the occupancy, use or value of
         any of the Real Property; and

         (v)      There are no (A) subleases, licenses, concessions or other
         agreements, written or oral, granting to any other person the right to
         acquire, use or occupy any portion of, any of the Leased Real
         Property, or (B) persons (other than Seller) in possession of any of
         the Leased Real Property.

         2.1.6    Accounts Receivable. SCHEDULE 2.1.6 contains a list that is
true and complete in all material respects of all receivables arising out of or
relating to the Customer Lists or the business and operations of the JPSA
Division in excess of $500 (the "Accounts Receivable") and an aging of all such
Accounts Receivable as of October 28, 2000 (the "AR Ledger"). Except for
Accounts Receivable with respect to which applicable reserves are set forth on
the Closing Date Balance Sheet, the Accounts Receivable reflected on the AR
Ledger and those that have arisen since July 29, 2000 have arisen from bona
fide sales transactions in the ordinary course of business and are valid claims
enforceable against the account debtor.

         2.1.7    Inventories. The inventories of the JPSA Division are fit and
sufficient in all material respects for the purposes for which they were
purchased or manufactured, except as set forth on SCHEDULE 2.1.7 which sets
forth all obsolete items and below-standard quality items which have been
written off or written down to net realizable value on the books of the JPSA
Division in accordance with GAAP applied on a consistent basis. The values
shown for inventories on the books of the JPSA Division reflect the normal
inventory policy of Seller (including the writing down or reserving of the
value of slow-moving or obsolete inventory of below-standard quality to
estimated net realizable market value in accordance with GAAP) at the lower of
cost or market and are not in excess of the value of such inventories computed
in accordance with GAAP applied on a consistent basis. Seller owns the
inventories of the JPSA Division free and clear of any Liens.

         2.1.8    Intellectual Property.

         (a)      SCHEDULE 2.1.8 contains a list of all (x) logos, trade
styles, trade names, trademarks, service marks (and applications therefor), (y)
patents and patent applications; and (z) copyrights (and applications
therefor), whether registered or not, owned by or assigned to Seller or in
which Seller has an interest by license, agreement, shop right, common law, or
otherwise, used in and relating to the JPSA Division (collectively, the "Listed
Intellectual Property"). Except as set forth on SCHEDULE 2.1.8, to the
Knowledge of Seller, no third party is engaged in any activity not duly
authorized by Seller which would constitute an infringement of any Listed
Intellectual Property or (i) any processes, designs, formulas, inventions,
trade secrets, know-how, ideas or concepts which are presently used in the
operation of the JPSA Division, or (ii) the


                                      14
<PAGE>   20


Customer Lists (collectively, together with the Listed Intellectual Property,
the "Intellectual Property"). Except as set forth on SCHEDULE 2.1.8, there are
no claims or proceedings pending or, to the Knowledge of Seller, threatened
against Seller asserting that Seller has, is or was infringing any patent,
trademark, trade name or other intellectual property rights of any third party
relating to the JPSA Division. Except as set forth on SCHEDULE 2.1.8, Seller
owns or by license or otherwise has the right to use all Intellectual Property.
No intellectual property other than the Intellectual Property is necessary for
the conduct of the JPSA Division as currently conducted.

         (b)      The Customer Lists delivered to Purchaser pursuant to SECTION
3.4 contain a true, correct, and complete copy of the list of the customers who
have purchased fabric from the JPSA Division during the past two (2) years in
aggregate amounts of more than $250,000 per year.

         2.1.9    Material Agreements. Except for the contracts, franchises,
agreements, plans, leases and licenses described in SCHEDULE 2.1.9, Seller is
not a party to or subject to:

         (a)      any written employment contract or any other written or oral
agreement or arrangement relating to compensation or severance payments with
any officer, consultant, director or employee of the JPSA Division;

         (b)      any plan or contract or arrangement providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit sharing
or other benefits for individuals who are employees of the JPSA Division;

         (c)      any contract or agreement with any labor union relating to
the JPSA Division;

         (d)      any lease (other than leases of real property described in
SCHEDULE 2.1.5) relating to the JPSA Division that involves payment of annual
rentals in excess of $50,000;

         (e)      any contract or agreement for the purchase of any materials,
services, or supplies relating to the JPSA Division that involves annual
payments in excess of $50,000 (other than purchase orders in the ordinary
course or business and contracts or agreements not terminable on less than 90
days' notice);

         (f)      any contract or agreement for the purchase of equipment or
any construction or other contract or agreement relating to the JPSA Division,
not otherwise covered by this SECTION 2.1.9, that involves annual payments in
excess of $50,000;

         (g)      any contract or agreement for the sale of products of the
JPSA Division other than purchase orders in the ordinary course of business;

         (h)      any contract or agreement with an agent, sales
representative, dealer or other distributor of products of the JPSA Division
not terminable on less than 90 days' notice;

         (i)      any instrument evidencing or related to indebtedness for
money loaned or borrowed by Seller or indebtedness guaranteed by Seller, with
respect to the JPSA Division;


                                      15
<PAGE>   21


         (j)      any contract or agreement relating to the JPSA Division, not
otherwise covered by this SECTION 2.1.9, containing covenants materially
limiting the freedom of the JPSA Division (or, to the Knowledge of Seller, any
key employee of the JPSA Division) to compete in any line of business or with
any person;

         (k)      any license or franchise agreement relating to the JPSA
Division in which Seller is the licensor or franchisor;

         (l)      any license or franchise agreement relating to the JPSA
Division in which Seller is the licensee or franchisee;

         (m)      any contract, agreement, commitment or understanding relating
to the Customer Lists other than purchase orders in the ordinary course of
business;

         (n)      any contract for the purchase, licensing or development of
software relating to the JPSA Division;

         (o)      any agreement which provides for incurrence of debt for
borrowed money with respect to the JPSA Division; (p) any guarantee of the
obligations of customers, distributors, suppliers, officers, directors,
employees, affiliates or others with respect to the JPSA Division;

         (q)      any contract relating to the JPSA Division not made in the
ordinary course of business consistent with past practice; or

         (r)      any contract or agreement relating to the JPSA Division, not
of the type covered by any of the other items of this SECTION 2.1.9, which
involves the payment or receipt by Seller of $50,000 or more in any one year
and which by its terms is either (i) not to be performed by Seller prior to one
year from the date hereof, or (ii) does not terminate, or is not terminable, by
and without penalty to Seller prior to one year from the date hereof.

Except as set forth in SCHEDULE 2.1.9, Seller has delivered to Purchaser
correct and complete copies of all Material Agreements, and all such Material
Agreements are valid and in full force and effect and neither Seller, nor, to
the Knowledge of Seller, any other party to such Material Agreements has
breached any material provision of or is in default in any material respect
under the terms of any such Material Agreement. SCHEDULES 2.1.4, 2.1.5, 2.1.8
AND 2.1.9 correctly identify each Material Agreement which is or might be
terminable by any other party upon the sale of substantially all the Assets or
occurrence of any of the other transactions contemplated by this Agreement.

         2.1.10   Absence of Certain Changes. Except as set forth in SCHEDULE
2.1.10, since July 29, 2000, Seller has not, with respect to the JPSA Division:

         (a)      mortgaged, pledged or subjected to any Lien, lease, or other
charge or encumbrance any of the Assets, except for Permitted Liens;


                                      16
<PAGE>   22


         (b)      acquired or disposed of any material assets or properties, or
entered into any agreement or other arrangements for any such acquisition or
disposition, or entered into or amended or terminated any Material Agreement,
except inventory in the ordinary course of business consistent with past
practice;

         (c)      (i) increased the wages, salaries, compensation, pension or
other benefits payable to any employee other than in accordance with the normal
compensation and benefit policies of Seller consistent with past practice, (ii)
granted any severance or termination pay other than in accordance with the
normal compensation and benefit policies of Seller consistent with past
practice, (iii) entered into any employment, severance or consulting agreement
or arrangement with any officer or salaried employee that is not terminable by
the employer without cause and without penalty, (iv) changed any benefit plan
or labor agreement relating to the employees of the JPSA Division except to
comply with applicable law, or (v) granted, made or accrued, contingent or
otherwise, any bonus, incentive compensation, service award or other like
benefit, to or to the credit of any personnel of Seller;

         (d)      forgiven or canceled any material debts or claims or waived
any material claims or rights other than in the ordinary course of business
consistent with past practice or canceled or terminated any contract, agreement
or other instrument material to Seller;

         (e)      suffered any damage, destruction or loss (whether or not
covered by insurance) affecting the properties or assets of the JPSA Division
that could reasonably be expected to have a Material Adverse Effect;

         (f)      suffered any strike or other labor trouble materially
affecting the JPSA Division or its operations;

         (g)      incurred any indebtedness for borrowed money other than trade
indebtedness incurred in the ordinary course of business and normal use of
Seller's bank lines of credit, all consistent with past practice;

         (h)      paid, repaid, redeemed, retired, repurchased or otherwise
acquired, directly or indirectly, the principal of any indebtedness for
borrowed money (or any installment thereof), prior to the regularly scheduled
maturity date thereof (as in effect on the date such indebtedness was
originally incurred) other than normal use of Seller's bank lines of credit
consistent with past practice;

         (i)      changed any pricing practices (other than in the ordinary
course consistent with past practices) or any method of accounting or
accounting practice or policy of Seller;

         (j)      conducted its business other than in the ordinary course
consistent with past practice, except as required by this Agreement;

         (k)      settled or compromised any claim, suit or cause of action
involving more than $25,000;


                                      17
<PAGE>   23


         (l)      materially altered its collection practices with respect to
accounts receivable, including any practice which has had the effect of
accelerating the recording and billing of accounts receivable;

         (m)      materially altered its payment practices with respect to
accounts payable, including any practice which has had the effect of delaying
the payment of expenses and other reserves in connection with the business and
accounts of Seller;

         (n)      made any capital expenditures or commitments therefore
outside the ordinary course of business in excess of $25,000; or

         (o)      agreed to do any of the foregoing.

         2.1.11   Insurance. The Assets are insured under the various policies
of general liability and other forms of insurance, as set forth on SCHEDULE
2.1.11. No written notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policies has been received by Seller.

         2.1.12   Litigation. Except as set forth in SCHEDULE 2.1.12, there is
no action, suit, proceeding, claim, arbitration, grievance, or investigation
pending or, to the Knowledge of Seller, threatened against or affecting the
business and operations of the JPSA Division or the Assets, or which would
prevent the consummation of the transactions contemplated hereby, nor is Seller
aware of any basis for any such action, suit, proceeding, claim, arbitration,
grievance or investigation which would have a Material Adverse Effect or which
would prevent the consummation of the transactions contemplated hereby.

         2.1.13   No Judgments or Orders. With respect to the business and
operations of the JPSA Division, Seller is not a party to or subject to any
judgment, order or decree entered in any action or proceeding brought by any
Governmental Authority or any other party either enjoining it in respect of any
business practice or the conduct of business in any area or the acquisition of
any property or which otherwise has or could have a Material Adverse Effect.

         2.1.14   Compliance with Laws, Permits.

         (a)      Compliance with Laws. Except as set forth on SCHEDULE 2.1.14,
Seller is not in violation of any applicable laws or regulations or any
applicable orders, rules, writs, judgments, injunctions, decrees or ordinances
applicable to the business or operations of the JPSA Division, the violation of
which would have a Material Adverse Effect. Except as set forth on SCHEDULE
2.1.14, Seller has not received any written notice to the effect that Seller is
not in compliance with any such laws, regulations, orders, rules, writs,
judgments, injunctions, decrees or ordinances, and to Seller's Knowledge, there
are no presently existing circumstances that are likely to result in violations
of any such regulations, which could, in any one case or in the aggregate, be
reasonably expected to have a Material Adverse Effect.

         (b)      Permits. All material permits, governmental licenses, orders,
registrations, and other approvals of all federal, state, local and foreign
governmental and regulatory bodies with respect to the conduct of the JPSA
Division have been obtained by Seller, are set forth on SCHEDULE 2.1.14, and
are in full force and effect, and there has been neither any violation,


                                      18
<PAGE>   24


suspension or cancellation thereof nor, to Seller's Knowledge, any basis for
any such claim. Except as disclosed on SCHEDULE 2.1.14, the consummation of the
transactions contemplated by this Agreement will not result in the revocation,
suspension or limitation of any such governmental license or permit, nor will
there be required (i) any consent of any issuing authority, or (ii) any fees,
expenses or Taxes relating to the transfer or assignment of such permits or
licenses, as a result of the consummation of the transactions contemplated
hereby.

         2.1.15   Tax Matters. With respect to the JPSA Division, Seller has
correctly prepared and timely filed all federal, foreign, state and local tax
returns and other tax reports required to be filed by Seller and has paid, or,
with respect to current taxes not yet due and payable, set up an adequate
reserve on the books of Seller for the payment of, all federal, foreign, state
and local income taxes and all other taxes (including, without limitation, all
franchise, gross receipts, license, property, sales, use, excise, intangible,
severance, stamp, occupation, environmental, social security, withholding,
employment, unemployment or payroll taxes, and interest or penalties thereon,
and all such other taxes along with all federal, foreign, state and local
income taxes (being defined collectively as "Taxes") required to be paid in
respect of the periods covered by such returns, and has set up an adequate
reserve on the books of Seller for the payment of all Taxes payable by Seller
in respect of the period subsequent to the last of such periods. All such
returns are true, complete and correct. Seller is not delinquent in the payment
of any Taxes with respect to the JPSA Division, has not waived any statute of
limitations in respect of any such Taxes or has not requested or agreed to any
extension of time within which to file any tax return or report or with respect
to a tax assessment or deficiency relating to the JPSA Division. No
deficiencies for Taxes with respect to the JPSA Division have been assessed or
asserted, and, except as set forth on SCHEDULE 2.1.15, Seller knows of no
unresolved questions or claims concerning the tax liability of Seller with
respect to the JPSA Division. Except as set forth on SCHEDULE 2.1.15, there is
no pending or, to the Knowledge of Seller, threatened examination or audit by
the Internal Revenue Service or any state taxing authorities of any tax returns
relating to the JPSA Division. Except as disclosed on SCHEDULE 2.1.15, no claim
has ever been made by any Governmental Authority in any jurisdiction where
Seller does not file tax returns that Seller is or may be subject to that
jurisdiction. All proper amounts have been collected or withheld and paid by
Seller to the relevant taxing authority for all Taxes payable or anticipated to
be payable with respect to the JPSA Division. Except as set forth on SCHEDULE
2.1.15, since January 1998, (i) the business and operations of the JPSA
Division have not been audited by any taxing authority, (ii) Seller is not and
has not been a party to a tax allocation or sharing agreement and has not
otherwise assumed any liability for Taxes of any third party, including as a
transferee or successor, and (iii) Seller has not been (nor does it have any
liability for unpaid taxes, whether under Section 1.1502-6 of the Treasury
regulations or otherwise, because it was) a member of an affiliated group
within the meaning of Section 1504(a) of the Code or any unitary, affiliated or
similar group for state, local or foreign tax purposes.

         2.1.16   Compliance with ERISA.

         (a)      The term "Benefit Plan" shall include each bonus, deferred
compensation, incentive compensation, severance or termination pay,
hospitalization or other medical, life or other insurance pension or
retirement, profit sharing, supplemental unemployment, layoff, consulting,
fringe benefit including, but not limited to, vacation, paid holidays, personal
leave, or any similar plan, program, agreement, arrangement, policy or
understanding (other than


                                      19
<PAGE>   25


arrangements involving the payment of wages) sponsored, maintained or
contributed to by Seller or by any trade or business, whether or not
incorporated, that together with Seller would be deemed a "single employer"
within the meaning of Section 4001(a)(14) of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder ("ERISA") (an "ERISA Affiliate"), whether or not subject to the laws
of a country or jurisdiction other than the United States, for the benefit of
any current or former employee, partner, or independent contractor of Seller,
whether foreign or domestic and whether formal or informal and whether legally
binding or not with respect to which Seller or any ERISA Affiliate has or may
in the future have any liability or obligation to contribute or make payments
of any kind.

         (b)      SCHEDULE 2.1.16 contains a true and complete list of each
Benefit Plan.

         (c)      Neither Seller nor any ERISA Affiliate has any formal plan or
commitment, whether legally binding or not, to create any additional Benefit
Plan or modify or change any existing Benefit Plan that would affect any
current or former employee, partner or independent contractor of Seller, other
than (i) as contemplated or required by this Agreement, and (ii) to increase
the employee's share of the cost of benefits.

         (d)      With respect to each of the Benefit Plans listed on SCHEDULE
3.3(B), Seller has heretofore delivered to the Purchaser (or will deliver to
the Purchaser no later than 30 days prior to the Closing) true, correct and
complete copies of each of the following documents: (i) the Benefit Plans
(including all amendments thereto), (ii) if the Benefit Plan is funded through
a trust, a copy of the trust (including all amendments thereto), (iii) the most
recent determination letter received from the Internal Revenue Service with
respect to each such Benefit Plan that is intended to be qualified under
Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code") as
well as any pending application for a determination letter, and (iv) the most
recent summary plan descriptions, together with each summary of material
modifications, required under ERISA with respect to such Benefit Plan or as
otherwise provided to Benefit Plan participants or beneficiaries.

         (e)      Except as set forth on SCHEDULE 2.1.16, there are no pending
or, to the knowledge of Seller, threatened claims of any Employees against or
otherwise involving any of the Benefit Plans (other than routine claims for
benefits).

         (f)      Except as set forth on SCHEDULE 2.1.16, each Benefit Plan
that is an employee pension benefit plan, as defined in ERISA Section 3(2) (a
"Qualified Benefit Plan"), has received a favorable determination letter from
the Internal Revenue Service as to its qualification under Section 401(a) of
the Code and nothing has occurred, whether by action or failure to act, which
would cause the loss of such qualification, to the knowledge of Seller.

         (g)      The property and assets of Seller are not, and as of the
Closing Date will not be, subject to a lien imposed under ERISA or the Code,
with respect to any Benefit Plan. No assets of Seller have been provided as
security to any Benefit Plan pursuant to Code section 401(a)(29).

         (h)      On or after the date hereof and through the period ending 90
days after Closing, each Qualified Benefit Plan has not been, and will not be,
(i) terminated by Seller, (ii) amended


                                      20
<PAGE>   26


in any manner which would directly or indirectly increase the benefits accrued,
or which may be accrued, by any participant thereunder, or (iii) amended in any
manner which would materially increase the cost to Purchaser of maintaining
such Qualified Benefit Plan.

         (i)      No event has occurred and no condition exists that would
subject Purchaser to any tax under Code sections 4971, 4972, 4977 or 4979 or to
a fine or penalty under ERISA Section 502(c) or under any other applicable
sections of the Code or ERISA.

         (j)      Except as set forth on SCHEDULE 2.1.16 or in SECTION 3.3, the
events contemplated by this Agreement (either alone or together with any other
event) will not (i) entitle any Employees to severance pay, unemployment
compensation, or other similar payments under any Benefit Plan, law or
agreement, (ii) accelerate the time of payment or vesting or increase the
amount of benefits due under any Benefit Plan or agreement or compensation to
any Employees, (iii) result in any payments (including parachute payments)
under any Benefit Plan, law or agreement becoming due to any Employees, or (iv)
terminate or modify or give a third party a right to terminate or modify the
provisions or terms of any Benefit Plan or any employment agreement.

         (k)      The PBGC has not instituted proceedings to terminate any of
the Benefit Plans.

         2.1.17   Labor Matters. SCHEDULE 2.1.17 sets forth a complete and
correct list of (i) all present employees and sales representatives employed or
engaged by Seller in the JPSA Division and (ii) a list of each such employee
who earns $75,000 or more in base salary, setting forth each such employee's
base salary, any bonus received by him or her in the past twelve (12) months
ended December 31, 1999, his or her current remuneration, the amount of any
increase in salary, perquisite, fringe benefit or other compensation since
December 31, 1999, and a description of all perquisite and fringe benefits he
or she receives or is eligible to receive. Except as set forth on SCHEDULE
2.1.17, there has been no material work stoppage or slowdown or other material
labor difficulties relating to the business and operations of the JPSA
Division. Except as set forth on SCHEDULE 2.1.17, Seller is not a party to any
collective bargaining agreement with any labor union or similar organization
relating to the JPSA Division, nor does Seller know of any such organization
which represents or claims to represent any of employees of the JPSA Division
or is currently seeking to represent or organize the employees of the JPSA
Division.

         2.1.18   Questionable Payments. Neither Seller nor, to Seller's
Knowledge, any of its directors, officers, agents, employees or other persons
associated with or acting on behalf of Seller has with respect to the JPSA
Division (a) used any corporate funds for illegal contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (b)
made any direct or indirect illegal payments to government officials or
employees, or foreign government officials or employees, from corporate funds,
(c) established or maintained any illegal or unrecorded fund of corporate
moneys or other assets, (d) made or received any bribe, rebate, payoff,
influence payment, kickback or other illegal payment, or (e) made any other
material payment, favor or gift related to the assets or operations of the JPSA
Division that is prohibited by law.

         2.1.19   Environmental. Except as disclosed on SCHEDULE 2.1.19,


                                      21
<PAGE>   27


         (a)      Seller is in compliance, and Seller at all times has
complied, in all material respects, with all Environmental, Health or Safety
Requirements of Law applicable to the JPSA Division, the Owned Real Property
and Leased Real Property (collectively, the "Real Property"), including,
without limitation, the use, maintenance and operation of the Real Property,
and all activities and conduct of business related thereto, including, without
limitation, the treatment, remediation, removal, transport, storage and/or
disposal of any Contaminant;

         (b)      Seller has obtained, as required by Environmental, Health or
Safety Requirements of Law, to obtain all material environmental, health and
safety permits, consents, licenses and other authorizations (collectively, "EHS
Permits") necessary for the operation of the JPSA Division and the ownership
and operation of the Real Property, all such EHS Permits are in good standing,
and Seller is currently in compliance in all material respects with all terms
and conditions of such EHS Permits. No material change in the facts or
circumstances reported or assumed in the applications for or the granting of
such EHS Permits exists. To the Knowledge of Seller, there are no proceedings
threatened which would jeopardize the validity of any such EHS Permits;

         (c)      Seller is not subject to any judicial or administrative
proceeding, notice, order, judgment, decree or settlement, or to the Knowledge
of Seller, any investigation, alleging or addressing in connection with the
JPSA Division or the Real Property: (i) any violation of any Environmental,
Health or Safety Requirements of Law, (ii) any Remedial Action, or (iii) any
claims or liabilities and costs arising from the Release or threatened Release
of any Contaminant;

         (d)      No Environmental Lien has attached to any Real Property;

         (e)      Seller has not received any written notice, claim or other
communication concerning and has no Knowledge that would reasonably lead Seller
to believe that any of the following exist: (i) any alleged violation of any
Environmental, Health or Safety Requirements of Law at the Real Property,
whether or not corrected to the satisfaction of the appropriate authority, (ii)
alleged liability of Seller for Environmental Damages arising out of or related
to the JPSA Division or any of the Real Property, or (iii) any alleged
liability of Seller arising out of or related to the JPSA Division or the Real
Property for the Release or threatened Release of a Contaminant at any
location, and there exists no writ, injunction, decree, order or judgment
outstanding, nor any lawsuit, claim, proceeding, citation, directive, or
summons relating to the condition, use, maintenance or operation of any of the
Real Property, or the suspected presence of Contaminants thereon or therefrom,
nor to the Knowledge of Seller is there any basis for such lawsuit, claim,
proceeding, citation, directive, summons or investigation being instituted or
filed;

         (f)      There has been no Release of any Contaminants in reportable
quantities, nor, to the Knowledge of Seller, is there any threatened release of
any Contaminants, at, to or from any of the Real Property;

         (g)      None of the Real Property is listed or proposed for listing
on the National Priorities List ("NPL") pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended ("CERCLA"),
or listed on the Comprehensive Environmental Response Compensation Liability
Information System List ("CERCLIS") or any similar state list of sites, and to
the Knowledge of Seller there is no condition at any of such Real Property
which,


                                      22
<PAGE>   28


if known to a Governmental Authority, would qualify such Real Property for
inclusion on any such list;

         (h)      Seller has not disposed (as such term is defined in the
Federal Resource Conservation and Recovery Act ("RCRA")) of any hazardous waste
(as such term is defined in RCRA) at any of the Real Property which is not in
material compliance with the applicable Environmental, Health and Safety
Requirements of Law;

         (i)      Seller has not transported or arranged for the transport of
any Contaminant to any site in connection with the JPSA Division which is not
in material compliance with the applicable Environmental, Health and Safety
Requirements of Law;

         (j)      Seller has not transported or arranged for the transport of
any Contaminant in connection with the JPSA Division to any facility or site
for the purpose of treatment or disposal which (i) is included on the NPL or
CERCLIS, (ii) is or was, at the time of disposal, subject to a Remedial Action
requirement (other than routine, anticipated, closure-related corrective action
obligations affecting closed solid waste management units at such facility)
issued under RCRA or any state or local solid or hazardous waste regulatory
law, or (iii) at the time of the disposal had received a notice of violation
with respect to alleged violations of any Environmental, Health or Safety
Requirements of Law;

         (k)      There is not constructed, placed, deposited, stored, disposed
nor located on any of the Real Property any asbestos in any form except in
compliance with applicable Environmental, Health or Safety Requirements of Law;

         (l)      No underground improvements, including, but not limited to,
treatment or storage tanks, sumps, or water, gas or oil wells, or associated
piping, but excluding utility-owned underground improvements, are or have ever
been located on any of the Real Property;

         (m)      There is not constructed, placed, deposited, released,
stored, disposed, leaching nor located on any of the Real Property any
polychlorinated biphenyls ("PCBs") or transformers, capacitors, ballasts, or
other equipment which contain dielectric fluid containing PCBs; and

         (n)      Seller has not received any written notice, claim or other
communication alleging liability on the part of Seller for the material
violation of any Environmental, Health or Safety Requirements of Law, for
Environmental Damages, or for the Release or threatened Release of any
Contaminant in connection with the JPSA Division or properties previously owned
or operated by Seller in connection with the JPSA Division and Seller has no
Knowledge that would reasonably lead Seller to believe that any such liability
exists.

         2.1.20   Brokers, Finders. Other than First Union Securities, Inc.
("FUSI"), whose fees will be paid by Seller, Seller has not retained any broker
or finder in connection with the transactions contemplated hereby so as to give
rise to any claim against the Purchaser for any brokerage or finder's
commission, fee or similar compensation.

         2.2      Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller and Parent as of the date hereof as follows:


                                      23
<PAGE>   29
         2.2.1    Corporate Status. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of North
Carolina and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as presently conducted and
as will be conducted following the consummation of the transactions contemplated
by this Agreement. Purchaser is duly qualified and in good standing as a foreign
corporation duly authorized to do business in all jurisdictions in which the
failure to be so qualified would have a material adverse effect on the business
or operations of Purchaser, including such jurisdictions as will be required by
the consummation of the transactions contemplated by this Agreement. All of the
issued and outstanding shares of capital stock of Purchaser have been duly
authorized by all necessary corporate action and are validly issued, fully paid
and nonassessable and are owned as set forth on SCHEDULE 2.2.1.

         2.2.2    Authorization. Purchaser has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Purchaser. This Agreement and the other
agreements and instruments to be executed by Purchaser in connection with this
Agreement have been duly executed and delivered by Purchaser and constitute the
legal, valid and binding obligation of the Purchaser.

         2.2.3    Conflicts, Consents.

         (a)      Conflicts. The execution and delivery of this Agreement by
Purchaser, and the consummation by Purchaser of the transactions contemplated
hereby in the manner contemplated hereby, do not and will not conflict with or
result in any violation of, or default under (or any event that, with notice or
lapse of time or both, would constitute a default under), require any consent,
notice or other action under, or result in the acceleration or required
prepayment of any indebtedness pursuant to the terms of, any provision of (i)
the Articles of Incorporation or Bylaws of Purchaser, (ii) any mortgage,
indenture, loan agreement, note, bond, deed of trust, other agreement,
commitment or obligation for the borrowing of money or the obtaining of credit,
material lease or other material agreement, contract, license, franchise, permit
or instrument to which the Purchaser is a party or by which it may be bound, or
(iii) any judgment, order, decree, law, statute, rule or regulation applicable
to Purchaser.

         (b)      Consents. No consent, approval, authorization, permit, order,
filing, registration or qualification of or with any court, governmental
authority or third person (including any filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended) is required to be obtained by
Purchaser in connection with the execution and delivery by the Purchaser of this
Agreement or the consummation by the Purchaser of the transactions contemplated
hereby in the manner contemplated hereby.

         2.2.4    Litigation. There is no action, suit, proceeding, claim,
arbitration, grievance, or investigation pending, or, to Purchaser's Knowledge,
threatened, against Purchaser which would prevent the consummation of the
transactions contemplated hereby, nor is Purchaser aware of any basis for any
such action, suit, proceeding, claim, arbitration, grievance, or investigation
which would prevent the consummation of the transactions contemplated hereby.


                                       24
<PAGE>   30
         2.2.5    Brokers, Finders. Other than Azalea Capital, L.L.C. whose fees
will be paid by Purchaser, Purchaser has not retained any broker or finder in
connection with the transactions contemplated hereby so as to give rise to any
valid claim against Seller for any brokerage or finder's commission, fee or
similar compensation.

         2.2.6    Senior Debt. So long as no breach has occurred under the
documentation relating to the Senior Debt, there is no covenant in such
documentation that would prohibit payment of the Earnout Amount to Seller.

                                   ARTICLE 3.
                                CERTAIN COVENANTS

         3.1      Efforts to Consummate Transaction. Subject to the terms and
conditions herein provided, each of the parties agrees to use its commercially
reasonable efforts (without obligation to make any payment to any third party
except as expressly provided herein) to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to make effective the transactions contemplated
hereby in accordance with the terms of this Agreement.

         3.2      Discharge of Excluded Liabilities. Subject to the limitations
set forth in ARTICLE 5, Seller covenants and agrees that it will hold Purchaser
harmless from, and indemnify Purchaser against, the Excluded Liabilities,
including each and every liability and obligation of Seller in respect to the
JPSA Division or the Assets arising from events occurring on or prior to the
Closing Date, except only those obligations expressly assumed by Purchaser at
the Closing pursuant to SECTION 1.5, it being understood and agreed that
Purchaser is assuming no liabilities or obligations of Seller other than the
Assumed Liabilities.

         3.3      Employee Matters.

         (a)      Purchaser represents and warrants that as of the Closing Date
it has made offers of employment to all active, full-time employees, and to
those employees on leave, absence, or layoff who are listed in SCHEDULE 3.3(a),
of the JPSA Division at the Facilities (the "Employees") for at least a ninety
(90) day period following the Closing Date on terms comparable in the aggregate
to the compensation and benefit levels provided to such Employees by Seller as
of the date hereof and that it shall hire all such Employees who accept such
offers of employment. Seller shall be liable and responsible for any obligations
under the Worker Adjustment and Restraining Notification Act, as amended (the
"WARN Act"), with respect to employees of Seller, the basis of which arises
prior to the Closing Date and not in relation to the transactions contemplated
hereby, and Purchaser shall be liable and responsible for any obligations under
the WARN Act with respect to the Employees.

         (b)      Effective as of the Closing Date, Purchaser and Seller shall
take all necessary steps, including the adoption of said Benefit Plans, in
accordance with the terms of the Benefit Plans and applicable laws, including
ERISA and the Code, to enable all Employees hired by Purchaser (the "Hired
Employees") to continue participating in the Benefit Plans listed on SCHEDULE
3.3(B), upon payment of any necessary premiums therefor, for a period which will
not extend beyond the 90-day period commencing on the Closing Date (the "Interim
Period"). Said


                                       25
<PAGE>   31
continued participation shall not include retiree medical benefits or retiree
death benefits. Seller and Purchaser shall cooperate to accomplish the efficient
administration of the Benefit Plans during the Interim Period. Seller shall
retain liability for all claims incurred by the Employees (and their enrolled
dependents) under the Benefit Plans prior to the Closing Date. Purchaser shall
be liable for all claims incurred by Hired Employees (and their enrolled
dependents) under the Benefit Plans on or after Closing Date. Purchaser shall
also pay the portion of administrative expenses and the cost of specific and
aggregated stop-loss insurance coverage applicable to the Hired Employees'
participation in said Benefit Plans for the Interim Period. For purposes of this
SECTION 3.3, a claim shall be deemed to have been incurred on the date on which
each medical or other treatment or service was rendered and not the date of the
inception of the related illness or injury or the date of submission of a claim
related thereto. The inception date of workers compensation claims shall be
determined by applicable state laws.

         (c)      After the end of the Interim Period, Purchaser shall cover the
Hired Employees under employee benefit Plans established and maintained by
Purchaser, which shall provide credit for coverage periods under Seller's
Benefit Plans against any exclusion period for pre-existing conditions.

         (d)      Seller shall be responsible for complying with the
continuation health care coverage requirements of section 4980B of the Code
("COBRA") pertaining to any Seller's Benefit Plan, with respect to any
individual who became a "qualified beneficiary" prior to the Closing Date.
Seller will offer Employees who are not Hired Employees the opportunity to elect
continued health coverage under COBRA, to the extent required by law. Purchaser
shall be responsible for complying with all requirements of COBRA with respect
to any Hired Employee (or enrolled dependent) on or after the Closing Date, and
shall reimburse Seller for all claims paid for Hired Employees (or their
"qualified beneficiaries") who elect continued health coverage under COBRA on or
after the Closing Date and are required to receive said coverage under Seller's
Benefit Plans.

         (e)      Seller shall be responsible for payment of all short and
long-term disability claims arising from disabilities of Employees that occurred
prior to Closing to the extent required by Seller's Benefit Plans. Purchaser
shall be responsible for payment of all short and long-term disability claims
arising from disabilities incurred by Hired Employees that occur on or after the
Closing Date to the extent required by Purchaser's Benefit Plans.

         (f)      Seller shall pay any severance costs payable pursuant to any
severance policies or Benefit Plans, if applicable, that are incurred with
respect to any Employees due to the consummation of the transactions
contemplated by this Agreement, including any claim by a Hired Employee that
transfer of employment from the JPSA Division to Purchaser constitutes a
termination of employment which entitles him or her to severance benefits.

         (g)      As to any Hired Employee, Seller agrees to cause the release
of such Hired Employee from any contractual provision with Seller which would
impair the utility of such Hired Employee's services to Purchaser or which would
impose upon such Hired Employee any monetary or other obligation to Seller which
otherwise would be occasioned by the transfer of such Hired Employee's
employment to Purchaser, including, without limitation, any agreements


                                       26
<PAGE>   32
of noncompetition or confidentiality owed to Seller, but only to the extent
required to permit them to work for the JPSA Division after the Closing Date.

         (h)      At the request of Purchaser, Seller shall cause to be
transferred from the Savings, Investment and Profit Sharing Plan of JPS Textile
Group, Inc. ("Seller's 401(k) Plan") to the Purchaser's 401(k) Plan the
liability for the account balances of the Hired Employees employed by Purchaser
as of the end of the Interim Period, together with assets the fair market value
of which is equal to such liability. The transfer shall take place as soon as
reasonably possible after the Interim Period; provided, however, that, unless
waived by Seller, such transfer shall not take place until the furnishing to
Seller by Purchasers of a copy of the plan document and trust agreement
establishing the Purchaser's 401(k) Plan (including amendments thereto) and a
copy of the most recent favorable determination letter from the IRS with respect
to the qualification of the Purchaser's 401(k) Plan under section 401(a) of the
Code; and further provided that, unless waived by Purchasers, such transfer
shall not take place until the furnishing to Purchasers by Seller of a copy of
the favorable determination letter from the IRS with respect to the
qualification of the Seller's 401(k) Plan. In lieu of a favorable determination
letter, either party may provide a written opinion from their counsel that the
plan in question satisfies the qualification requirements of section 401(a) of
the Code. Seller and Purchaser shall cooperate in filing with all government
agencies any documents required in connection with the transfer of assets.

         (i)      Pending the completion of the transfer described in SECTION
3.3(H), Seller shall make arrangements for any required payments to the Hired
Employees from the Seller's 401(k) Plan, in the event of their retirement or
other separation from service within the meaning of section 401(k) of the Code.
Seller and Purchaser shall provide each other with access to information
reasonably necessary in order to carry out the provisions of this SECTION
3.3(H).

         (j)      Seller shall treat all Hired Employees as being 100% vested
under the Pension Plan for Employees of JPS Industries, Inc. and shall pay all
benefits due to the Hired Employees under said Plan in accordance with the terms
of such Plan. If requested by Seller, Purchaser will provide written notice
(prepared at the expense of Seller) to all Hired Employees, including those on
SCHEDULE 3.3(A), concerning transition under Seller's Benefit Plans.

         3.4      Customer Lists. As of the Closing Date, Seller shall deliver
to Purchaser all Customer Lists in its possession in such format as Purchaser
shall reasonably request.

         3.5      Financing. Purchaser has adequate funds to purchase the Assets
and to otherwise fulfill its obligations hereunder.

         3.6      Tax Matters.

         (a)      Purchaser has completed any and all exemption certificates or
similar documents which may be required by any state or local taxing authority
with respect to any Taxes (including, without limitation, any sales or use or
other transfer Taxes) in order (i) to obtain an exemption from the imposition of
any such Taxes to the greatest extent possible under applicable law, (ii) to
relieve Purchaser of any obligation to withhold any portion of the Purchase
Price, and


                                       27
<PAGE>   33

(iii) to hold Seller harmless from any Taxes described in SECTION 3.6(C) in
connection with the transactions contemplated by this Agreement.

         (b)      Seller and Purchaser shall (i) each provide the other with
such assistance as may be reasonably requested by either of them in connection
with the preparation of any tax return, audit or other examination by any taxing
authority or judicial or administrative proceedings relating to liability for
Taxes, (ii) each retain and provide the other with any records or other
information which may be relevant to such tax return, audit or examination,
proceeding or determination, and (iii) each provide the other with any final
determination of any such audit, examination, proceeding or determination that
affects any amount required to be shown on any tax return of the other for any
period. Without limiting the generality of the foregoing, both Purchaser and
Seller shall retain, until the applicable statutes of limitations (including any
extensions) have expired, copies of all tax returns, supporting work schedules
and other records or information which are relevant to such returns for all tax
periods or portions thereof ending on or before the Closing Date.

         (c)      Notwithstanding any provision of state or local law or this
Agreement to the contrary, Seller will pay any sales, use, transfer, stamp,
documentary or similar Taxes and recording and filing fees (and file any tax
returns relating to such Taxes) applicable to the transactions contemplated by
this Agreement, it being agreed that none of such payments shall be borne
directly or indirectly by Purchaser.

         3.7      Transactional Tax Undertakings. The parties hereto shall
cooperate to make any necessary filings with federal, state and local taxing
authorities and to furnish any required supplemental information to any foreign,
federal, state or local governmental or taxing authorities resulting from the
consummation of the transaction contemplated by this Agreement.

         3.8      Property Taxes. Personal property taxes and assessments with
respect to the Assets and real estate ad valorem taxes payable by Seller with
respect to the Real Property, if any, shall be prorated as of the Closing Date
on the basis of the calendar year in which the Closing occurs, regardless of
when such taxes become a lien or are payable. If the rate of any such taxes
shall not be fixed prior to the Closing Date, the proration thereof at the
Closing shall be upon the basis of the rate for the preceding calendar year
applied to the latest assessed valuation, the same shall be appropriately and
promptly adjusted, if necessary, between Seller and Purchaser when the rate is
fixed for the calendar year during which the Closing occurs.

         3.9      Satisfaction of Certain Indebtedness. At the Closing, Seller
shall take such actions (including without limitation paying, or directing
Purchaser to apply any portion of the Purchase Price to pay to, the appropriate
creditors of Seller) as may be required to fully pay, satisfy and discharge all
of the indebtedness of Seller or Parent listed or described on SCHEDULE 3.9 and
to secure the release as of the Closing of all Liens on the Assets relating
thereto.

         3.10     Accounts Receivable.

         (a)      In the event that Seller receives any payment relating to any
Account Receivable outstanding on or after the Closing Date, such payment shall
be the property of, and shall be immediately forwarded and remitted to,
Purchaser. Seller will promptly endorse and deliver to


                                       28
<PAGE>   34
Purchaser any cash, checks or other documents received by Seller on account of
any such Accounts Receivable.

         (b)      After the Closing Date, Purchaser shall use its reasonable
best efforts to, collect all Accounts Receivable included in the Assets and
Purchaser shall not, without Seller's consent, grant any discounts or
concessions with respect thereto.

         (c)      Purchaser shall deliver to Seller a true and correct list of
its Accounts Receivable aging with fifteen (15) business days following the
expiration of the period during which such Accounts Receivable are deemed
"uncollectible" in accordance with this SECTION 3.10. Accounts Receivable shall
be deemed "uncollectible" if remaining unpaid 180 days after the Closing Date.

         (d)      In the event that any Account Receivable or any portion
thereof (less applicable reserves for any such Account Receivable set forth on
the Closing Date Balance Sheet) is not paid by the date as of which it is deemed
uncollectible as herein provided, Purchaser shall be entitled to reimbursement
from Seller in the amount of such unpaid Account Receivable. Upon such
reimbursement, the claim or cause of action against the debtor not making
payment shall be assigned by Purchaser to Seller and Seller may take such
measures to enforce collection of the unpaid items as Seller shall deem
necessary. In connection with the collection of any Accounts Receivable,
remittance by a customer shall be first credited to the Accounts Receivable
bearing the earliest date unless the customer has specified the particular
invoice to which a remittance pertains, in which case the credit shall be made
to the invoice specified.

         3.11     Technical Support.

         (a)      For a period of twelve (12) months following the Closing Date,
upon the request of Parent or Purchaser, as the case may be, Purchaser shall
provide to Parent, and Parent shall provide to Purchaser, any or all of the
technical support and services described on SCHEDULE 3.11(A) or SCHEDULE 3.11(B)
hereof. The support and services described in SCHEDULES 3.11(A) AND 3.11(B)
shall be provided by Parent or Purchaser at no charge or cost to the other
party.

         (b)      For such period of time as Parent and Purchaser shall
participate in any multiple employer plans, if Parent or Purchaser incurs any
out-of-pocket expense in connection with a multiple employer plan as it relates
to employees of the other party, the recipient party shall reimburse the party
incurring such out-of-pocket expense for such expense. The parties acknowledge
and agree that no right of set off shall arise under this SECTION 3.11.

                                   ARTICLE 4.
                              CONDITIONS PRECEDENT

         4.1      Conditions to Obligations of Purchaser. The obligations of
Purchaser under this Agreement are subject to the fulfillment, at or prior to
the Closing, of the following conditions, any one or more of which may be waived
by Purchaser in its sole discretion:

         4.1.1    Certain Approvals, etc. All consents and approvals from
Governmental Authorities and third parties required to be obtained by the Seller
to consummate the transactions contemplated hereby, including all such consents
set forth on SCHEDULE 2.1.2, shall have been obtained, other than any consents
and approvals of third parties in respect of any contract or


                                       29
<PAGE>   35
agreement of the Seller (not involving the borrowing of money) in respect of
which the failure to obtain such consent or approval, either in any case or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

         4.1.2    No Litigation or Injunction. As of the Closing Date, there
shall not be in effect any judgment, order, injunction or decree of any court of
competent jurisdiction, the effect of which is to prohibit or restrain the
consummation of the transactions contemplated by this Agreement, and no claim,
action, suit, investigation or other proceeding shall be threatened or pending
before any court or administrative agency or by any governmental agency or other
person, challenging or otherwise relating to the transactions provided for
herein or which may have a Material Adverse Effect.

         4.1.3    Title Insurance. Seller shall have delivered to Purchaser a
title insurance policy with regard to the Owned Real Property in an amount and
form reasonably satisfactory to Purchaser and its lender. Survey costs and title
insurance premiums shall be borne by Seller.

         4.1.4    Transfer Documents. Seller shall have executed and delivered
to Purchaser the following:

         (a)      a Bill of Sale substantially in the form of EXHIBIT A;

         (b)      an Assignment and Assumption Agreement, substantially in the
form of EXHIBIT B, which together with the Bill of Sale, collectively cover all
of the Assets;

         (c)      Assignment and Assumption of Lease Agreements, each
substantially in the form of EXHIBIT C, assigning to Purchaser Seller's
leasehold interest in the Leased Real Property;

         (d)      Releases, including, without limitation, termination
statements under the Uniform Commercial Code of any financing statements filed
against the Assets, evidencing discharge, removal and termination of all Liens
to which the Assets are subject in connection with the indebtedness described in
SCHEDULE 3.9 which releases shall be effective at the Closing.

         (e)      for each interest in Owned Real Property identified on
SCHEDULE 2.1.5, a recordable special warranty deed or such other appropriate
document or instrument of transfer, as the case may require, each in form and
substance satisfactory to Purchaser and executed by Seller; and

         (f)      such other assignment documents relating to the Material
Agreements as have been identified during due diligence.

         4.1.5    Opinion of Counsel. Purchaser shall have received a favorable
opinion, addressed to Purchaser and dated the Closing Date, of Jones, Day,
Reavis & Pogue, counsel to Seller, in substantially the form attached hereto as
EXHIBIT D.

         4.1.6    Corporate Action. Seller and Parent shall have taken all
corporate action necessary to approve the transactions contemplated by this
Agreement and shall have furnished Purchaser with certified copies of the
resolutions adopted by their respective boards of directors.


                                       30
<PAGE>   36
         4.1.7    Conditions to Obligations of Seller. The obligations of Seller
under this Agreement are subject to the fulfillment, at or prior to the Closing,
of the following conditions, any one or more of which may be waived by Seller in
its sole discretion:

         4.1.8    Transfer Documents. Purchaser shall have executed and
delivered to Seller the following:

         (a)      a Bill of Sale, substantially in the form of EXHIBIT A;

         (b)      an Assignment and Assumption Agreement, substantially in the
form of EXHIBIT B; and

         (c)      Assignment and Assumption of Lease Agreements, each
substantially in the form of EXHIBIT C.

         4.1.9    Certain Approvals, etc. All consents and approvals from
Governmental Authorities and third parties required to be obtained by Purchaser
to consummate the transactions contemplated hereby shall have been obtained,
other than any consents and approvals of third parties in respect of any
contract or agreement of Purchaser (not involving the borrowing of money) in
respect of which the failure to obtain such consent or approval, either in any
case or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on the transactions contemplated hereby.

         4.1.10   No Litigation or Injunction. As of the Closing Date, there
shall not be in effect any judgment, order, injunction or decree of any court of
competent jurisdiction, the effect of which is to prohibit or restrain the
consummation of the transactions contemplated by this Agreement, and no claim,
action, suit, investigation or other proceeding shall be threatened or pending
before any court or administrative agency or by any governmental agency or other
person, challenging or otherwise relating to the transactions provided for
herein or which may have a Material Adverse Effect.

         4.1.11   Purchase Price. Seller shall have received from Purchaser the
Cash Purchase Price as provided in SECTION 1.4.

         4.1.12   Opinion of Counsel. Seller shall have received a favorable
opinion, addressed to the Seller and dated the Closing Date, of Kilpatrick
Stockton LLP, counsel to the Purchaser, in substantially the form attached
hereto as EXHIBIT E.

         4.1.13   Fairness Opinion. Parent and Seller shall have received an
opinion of FUSI dated as of the date hereof to the effect that, as of the date
of such opinion, the Purchase Price to be received by Parent and Seller is fair
to Parent's stockholders from a financial point of view.

         4.1.14   Corporate Action. Purchaser shall have taken all corporation
action necessary to approve the transactions contemplated by this Agreement and
shall have furnished Seller with certified copies of the resolutions adopted by
its board of directors.


                                       31
<PAGE>   37

                                   ARTICLE 5.
                                 INDEMNIFICATION

         5.1      Indemnification by Seller. Seller and Parent, jointly and
severally, agree to indemnify and hold harmless Purchaser and its affiliates and
their respective officers, directors, members, managers, shareholders, agents,
employees, other representatives, successors and assigns from and against any
and all liabilities, losses, claims, costs or damages ("Loss") and reasonable
attorneys' and accountants' fees and expenses, court costs and all other
reasonable out-of-pocket expenses, including expenses of investigation, but
excluding loss of profits or other consequential damages ("Expense") suffered or
incurred by it in connection with or arising from:

         (i)      any breach by Seller or Parent of any warranty or the
         inaccuracy of any representation of Seller or Parent contained in this
         Agreement or in any agreement or instrument contemplated hereby
         (including any Schedule or Exhibit hereto);

         (ii)     any breach by Seller or Parent of any of their obligations or
         covenants contained in this agreement or in any agreement or instrument
         contemplated hereby (including any Schedule or Exhibit hereto);

         (iii)    subject to SECTION 3.6, any Taxes of Seller or Parent for (A)
         any taxable period ended on or before the Closing Date or (B) in the
         case of a taxable period beginning before the Closing Date and ending
         after the Closing Date, the portion of such period ending on the
         Closing Date determined as if such taxable period ended on the Closing
         Date and the taxable income or other basis of taxation for such taxable
         period was determined by means of an actual closing of the books at the
         end of the Closing Date;

         (iv)     any Excluded Liabilities;

         (v)      non-compliance by Seller or Parent with respect to any
         applicable bulk sales laws; and

         (vi)     in addition to the indemnification provided in SECTION 5.1(I),
         any claims by third parties identified in SCHEDULE 2.1.8 and SCHEDULE
         2.1.12 with respect to the use of any Intellectual Property purchased
         by Purchaser;

provided, however, that except as otherwise provided in this SECTION 5.1, Seller
and Parent shall be required to indemnify and hold harmless under SECTION 5.1
with respect to Loss and Expense incurred by Purchaser or its affiliates,
successors and assigns only to the extent that the aggregate amount of such Loss
and Expense exceeds $150,000 (the "Threshold Limitation"), at which time claims
hereunder may be asserted for all claims in excess of the initial $150,000; and
provided further that except as provided below, the aggregate liability of the
Seller and Parent pursuant to this ARTICLE 5 will not exceed Seven Million
($7,000,000) (the "Amount Limitation"). The indemnification provided for in this
SECTION 5.1 shall terminate eighteen (18) months after the Closing Date (and no
claims shall be made by any party indemnified under this SECTION 5.1 thereafter)
(the "Time Limitation").


                                       32

<PAGE>   38
Notwithstanding the foregoing, the Threshold Limitation, the Amount Limitation,
and the Time Limitation described above shall not apply to the obligations and
covenants of Seller and Parent under SECTIONS 1.9, 2.1.12, 2.1.15, 2.1.16,
2.1.19, 3.3, 3.11(B), 6.6 and those representations and warranties of Seller or
Parent in ARTICLE 2 regarding title to and any encumbrances against the Assets,
and the indemnification obligation contained in SECTION 5.1 with respect thereto
shall survive for the applicable statutory periods for such claims (as the case
may be, the "Survival Period"). Such indemnification obligation shall continue
after the Closing Date as to any Loss or Expense of which Purchaser or its
affiliates, successors or assigns has notified Seller in accordance with the
requirements of SECTION 5.3 on or prior to the expiration of the applicable
Survival Period in accordance with this SECTION 5.1, as to which the obligation
of Seller and Parent shall continue until the liability of Seller and Parent
shall have been determined pursuant to this ARTICLE 5, and Seller and Parent
shall have reimbursed Purchaser, its affiliates, successors or assigns for the
full amount of such Loss and Expense in accordance with this ARTICLE 5.

In addition, notwithstanding the foregoing, the Threshold Limitation, the Amount
Limitation, and the Time Limitation described above shall not apply to Seller's
and Parent's obligation to indemnify Purchaser for Losses resulting from those
Excluded Liabilities described in SECTIONS 1.5(B)(II)-(V), (VII-XII), AND
(XIV)-(XVI), Losses resulting from those items set forth on SCHEDULES 2.1.12 AND
2.1.19, and Losses described in SECTION 1.12, which shall constitute the
obligation of Seller and Parent without regard to any of the limitations
described above and which shall survive without termination.

Neither Seller nor Parent shall be required to indemnify Purchaser against any
Loss and Expense which constitutes an Assumed Liability. Purchaser shall not be
deemed to have incurred any Loss or Expense with respect to any item for which
there is a reserve or accrual on the Closing Date Balance Sheet until the total
amount of such liability exceeds such reserve or accrual and then only for the
excess.

Purchaser acknowledges that its officers, directors, employees, and authorized
representatives and agents have been given the opportunity to examine the
agreements, instruments, documents, and other information relating to the JSPA
Division that they have requested to examine. Any inspection, preparation, or
compilation of information or schedules, or audit of inventories, properties,
financial condition, or other matters relating to Seller, Parent, or the JPSA
Division pursuant to this Agreement shall in no way limit, affect, or impair the
ability of Purchaser to rely upon the representations, warranties, covenants,
and agreements of Seller and Parent set forth herein; provided that to the
extent that Seller and Parent prove by competent evidence that Jerry Hunter or
Rod Grandy had actual knowledge before the Closing of facts contrary to the
statements made in any representation or warranty of Seller or Parent set forth
herein, which singly or in the aggregate could reasonably be expected to lead to
a Loss in excess of Two Hundred Thousand Dollars ($200,000), and Purchaser
completes the Closing without requiring correction or amendment of such contrary
statements, Purchaser shall be estopped from asserting reliance on such contrary
representation or warranty in connection with any post-Closing claim for
indemnification pursuant to this ARTICLE 5. The covenants, representations, and
warranties of Seller and Parent shall survive the Closing and the execution and
delivery of all instruments of conveyance for the periods set forth in this
ARTICLE 5.


                                       33
<PAGE>   39

Purchaser shall have the right to withhold and set off against the Earnout
Amount otherwise due the amount of claims of Purchaser pursuant to SECTION 5.1,
whether such claims are resolved or disposed of by agreement, mediation,
arbitration, or otherwise; provided, however, that such right of set off shall
not be the sole recourse of such claims and Purchaser may pursue other remedies,
at law or in equity, that may be available under this Agreement.

         5.2      Indemnification by Purchaser. Purchaser agrees to indemnify
and hold harmless Seller, Parent, and their respective affiliates and their
respective officers, directors, members, managers, shareholders, agents,
employees, other representatives, successors and assigns from and against any
and all Loss and Expense incurred by them in connection with or arising from:

         (i)      any breach by Purchaser of any warranty or the inaccuracy of
         any representation of Purchaser contained in this Agreement or in any
         agreement or instrument contemplated hereby (including any Schedule or
         Exhibit hereto);

         (ii)     any breach by Purchaser of any of its obligations or covenants
         in this Agreement or in any agreement or instrument contemplated hereby
         (including any Schedule or Exhibit hereto);

         (iii)    any Loss or Expense arising from the Purchaser's ownership or
         use of the Assets or operation of the JPSA Division after Closing; and

         (iv)     the Assumed Liabilities;

provided, however, that Purchaser shall be required to indemnify and hold
harmless under this SECTION 5.2 with respect to any Loss and Expense incurred by
Seller or its affiliates, successors and assigns only to the extent that the
aggregate amount of such Loss and Expense exceeds $150,000, at which time claims
hereunder may be asserted for all claims in excess of the initial $150,000; and
provided further that, except for Purchaser's obligations under SECTION 1.8, the
aggregate liability of Purchaser pursuant to this ARTICLE 5 will not exceed
Seven Million ($7,000,000). The foregoing indemnification shall terminate
eighteen (18) months after the Closing Date (and no claims shall be made by any
party indemnified under this SECTION 5.2 thereafter), provided, that the
indemnification contained in SECTIONS 5.2(II), (III) and (IV) shall survive
without termination. Such indemnification obligation shall continue, without
regard to any investigation made at any time by Seller after the Closing Date,
as to any Loss or Expense of which Seller or its affiliates, successors, or
assigns has notified Purchaser in accordance with the requirements of SECTION
5.3 on or prior to the date such indemnification would otherwise terminate in
accordance with this SECTION 5.2, as to which the obligation of Purchaser shall
continue until the liability of Purchaser shall have been determined pursuant to
this ARTICLE 5, and Purchaser shall have reimbursed Seller, Parent, and their
affiliates, successors, or assigns for the full amount of such Loss and Expense
in accordance with this ARTICLE 5.

         5.3      Notice of Claims.

         (a)      If Purchaser or Seller believes that any of the persons
indemnified under this ARTICLE 5 has suffered or incurred any Loss or incurred
any Expense, Purchaser or Seller shall so notify the other promptly in writing
describing such Loss or Expense, the amount thereof, if


                                       34
<PAGE>   40
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or other agreement, instrument or certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred, except that
the failure to so notify shall not relieve a party of its obligations to
indemnify, except to the extent its rights hereunder are materially prejudiced.
If any action at law or suit in equity is instituted by or against a third party
with respect to which any of the indemnified persons intends to claim any
liability or expense as Loss or Expense under this ARTICLE 5, any such
indemnified person shall promptly notify the indemnifying party of such action
or suit.

         (b)      The amount to which an indemnified person shall be entitled
under this ARTICLE 5 shall be determined by the written agreement between the
indemnified person and the indemnifying party. If the parties are unable to
agree upon such amount, the indemnifying party shall pay that amount agreed upon
between the parties and the remainder shall be determined as provided in SECTION
6.13 hereto.

         5.4      Third Party Claims.

         (a)      In the event of a third party claim giving rise to
indemnification hereunder, the indemnified persons shall promptly notify the
indemnifying party in writing.

         (b)      The indemnifying party shall have thirty (30) days after
receipt of the notice referred to in SECTION 5.4(A) to notify the indemnified
persons that it elects to conduct and control such action or suit. If the
indemnifying party does not give the foregoing notice, the indemnified persons
shall have the right to defend and contest such action or suit in any manner the
indemnified person reasonably deems appropriate; provided, however, that the
indemnified persons shall not consent to the entry of any judgment, or into any
settlement of such claim without the prior written consent of the indemnifying
party, not to be unreasonably withheld or delayed. If the indemnifying party
gives the foregoing notice, the indemnifying party shall have the right to
undertake, conduct and control, through counsel of its own choosing and at the
sole expense of the indemnifying party, the conduct and settlement of such
action or suit, and the indemnified persons shall cooperate with the
indemnifying party in connection therewith; provided that (w) the indemnifying
party shall not settle or compromise any such action or suit without the
indemnified party's prior written consent (not to be unreasonably withheld or
delayed), unless the terms of such settlement or compromise release the
indemnified party from any and all liability with respect to such action or
suit, (x) the indemnifying party shall not thereby permit to exist any lien,
encumbrance or other adverse charge upon any asset of any indemnified person, or
permit the issuance of an injunction or other equitable relief against the
indemnified persons; (y) the indemnifying party shall permit the indemnified
persons to participate in such conduct or settlement through one counsel chosen
by the indemnified persons, and the fees and expenses of such counsel shall be
borne by the indemnified persons except as provided in clause (z) below; and (z)
the indemnifying party shall agree promptly to reimburse to the extent required
under this ARTICLE 5 the indemnified persons for the full amount of any Loss
resulting from such action or suit and all related Expense incurred by the
indemnified persons, except fees and expenses of counsel for the indemnified
persons incurred after the assumption of the conduct and control of such action
or suit by the indemnifying party. So long as the indemnifying party is
contesting any such action or suit in good faith, the indemnified persons


                                       35
<PAGE>   41
shall not pay or settle any such action or suit. Notwithstanding the foregoing,
the indemnified persons shall have the right to pay or settle any such action or
suit, provided that in such event the indemnified persons shall waive the right
to indemnity therefore by the indemnifying party, and no amount in respect
thereof shall be claimed as Loss or Expense under this ARTICLE 5 unless
otherwise agreed by the parties.

                                   ARTICLE 6.
                                  MISCELLANEOUS

         6.1      Survival. Notwithstanding any otherwise applicable statute of
limitations, all agreements, covenants, representations and warranties of
Purchaser and Seller in this Agreement and in any other agreement, instrument or
document delivered in connection herewith shall survive the Closing in
accordance with their terms. Seller and Purchaser agree that the indemnification
provisions set forth in ARTICLE 5 are the exclusive post-closing remedies with
respect to the liability of Seller or Purchaser for the breach or inaccuracy of
a representation or warranty or the breach of any covenant in this Agreement or
in any agreement or instrument contemplated hereby; provided, however, that
nothing herein shall preclude either party from seeking an equitable remedy or
bringing an action for fraud or intentional misrepresentation.

         6.2      Expenses. Except as otherwise provided herein, Purchaser and
Seller shall assume and bear their own expenses, costs and fees incurred in the
preparation and execution of this Agreement and compliance herewith, including
investment bankers', attorneys' and accountants' fees, whether or not the
purchase and sale provided for herein shall be consummated.

         6.3      Assignment; Successors; Parties in Interest. This Agreement
shall not be assignable by any party hereto without the prior written consent of
all of the other parties (which consent shall not be unreasonably withheld) and
any attempt to assign this Agreement without such consent shall be void and of
no effect; provided, however, that Purchaser may assign all of its rights and
obligations under this Agreement to (i) one or more wholly-owned subsidiaries of
Purchaser so long as Purchaser unconditionally guarantees the performance of
such subsidiaries in a form reasonably acceptable to Seller, or (ii) the lender
to Purchaser which is providing the financing to consummate the transaction
contemplated hereby and any assignee or replacement lender therefore. This
Agreement shall inure to the benefit of, and be binding on and enforceable
against, each party hereto and such permitted successors and assigns of the
respective parties hereto, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under this Agreement.

         6.4      Amendment and Modification. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated orally, but only
with the written consent signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent or other breach, whether similar or not.

         6.5      Access After Closing. Each party shall retain for a period of
two (2) years following Closing (six (6) years for tax, environmental and ERISA
records) all books and records within its possession or control which it is
permitted hereby to retain and which relate to


                                       36
<PAGE>   42
the operation and conduct of the JPSA Division prior to Closing. Each party
shall provide to the other party and its representatives reasonable access
during normal business hours to copies of all such books and records upon
request by the other party hereto.

         6.6      Bulk Sales Law. Purchaser hereby waives compliance by Seller
with any applicable bulk sales law, and Seller agrees to indemnify Purchaser and
hold Purchaser harmless from and against any and all liability thereunder,
provided, however, that this indemnity shall not affect the obligation of
Purchaser to pay and discharge the Assumed Liabilities and no indemnity is made
under this SECTION 6.6 with respect to the Assumed Liabilities.

         6.7      Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal processes
in regard hereto shall be validly given, made or served, if in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by commercial courier or by telecopy (promptly confirmed in writing) to the
following addresses (or at such other addresses for such party as shall be
specified by like notice):

         To Seller:

         JPS Industries, Inc.
         555 North Pleasantburg Drive, Suite 202
         Greenville, South Carolina 29607
         Attention:  Charles R. Tutterow
         Telecopy:  (864) 271-9939
         Telephone:  (864) 239-3915

         With a copy to:
         (which copy shall not constitute notice)

         Jones, Day, Reavis & Pogue
         3500 SunTrust Plaza
         303 Peachtree Street
         Atlanta, Georgia  30308-3242
         Attention:  Lizanne Thomas, Esq.
         Telecopy:  (404) 581-8330
         Telephone:  (404) 581-8411


                                       37
<PAGE>   43
         To Purchaser:
         JPSA Acquisition Corp.
         55 Beattie Place
         I Liberty Square, Suite 1500
         P.O. Box 2790
         Greenville, South Carolina 29602
         Telecopy:  (864) 235-1155
         Telephone:  (864) 235-0201

         With a copy to:
         (which copy shall not constitute notice)

         Kilpatrick Stockton LLP
         3500 One First Union Center
         301 South College Street
         Charlotte, North Carolina  28202-6001
         Attention:  David B. Whelpley, Jr., Esq.
         Telecopy:  (704) 338-5125
         Telephone:  (704) 338-5000

         6.8      Public Announcement. During the period through the Closing
Date, neither Seller nor Purchaser will make, directly or indirectly, any public
announcement with respect to this transaction without prior written approval of
the other party, except as required by law.

         6.9      Captions. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

         6.10 Entire Agreement. This Agreement (including the Schedules and
Exhibits) and any further agreements entered into by Purchaser and Seller at the
Closing constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.

         6.11     Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute one and the same instrument.

         6.12     Severability. If any term or provision of this Agreement is
held by a court or other authority of competent jurisdiction to be invalid, void
or unenforceable, the remaining terms and provisions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.

         6.13     Arbitration. Except for (i) matters relating to specific
performance, injunctive relief or other equitable remedies, or (ii)
indemnifiable third party claims pursuant to ARTICLE 5, the parties hereto agree
to submit to arbitration any and all matters in dispute or in controversy among
them concerning the terms and provisions of this Agreement. All such disputes
and controversies shall be determined and adjudged by an arbitrator, and the
hearing shall be held in Greenville, South Carolina. The selection of an
arbitrator and the procedure shall be in accordance with the commercial
arbitration rules then in effect of the American Arbitration


                                       38
<PAGE>   44
Association. Any award rendered shall be final and conclusive upon the parties
and a judgment thereon may be entered in the highest court of the forum, state
or federal, having jurisdiction. The expenses of the arbitration shall be borne
equally by the parties to the arbitration, provided that each party pay for and
bear the costs of its own experts, evidence and counsel's fees, except that in
the discretion of the arbitrator, any award may include the costs of a party's
counsel if the arbitrator expressly determines that the party against whom such
award is entered has caused the dispute, controversy or claim to be submitted to
arbitration in bad faith.

         6.14     Confidential Nature of Information. Each party agrees that it
will treat in confidence all documents, materials and other information which it
shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents and, in the event the transactions contemplated hereby shall not be
consummated, each party will return to the other party all copies of nonpublic
documents and materials which have been furnished in connection therewith. The
obligation of each party to treat such documents, materials and other
information in confidence shall not apply to any information which (i) such
party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (ii) is known to the public and did not
become so known through any violation of a legal obligation, (iii) became known
to the public through no fault of such party or (iv) is later lawfully acquired
by such party from other sources and, following the Closing, Purchaser shall
have no obligation to treat in confidence documents, materials and other
information so long as Purchaser's use of such information is related to the
ongoing operation of the JPSA Division.

         6.15     Schedules and Exhibits. The Schedules and Exhibits are a part
of this Agreement as if fully set forth herein. All references to Sections,
subsections, Schedules and Exhibits shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require.

         6.16     Definitions. Used in this Agreement, the following terms have
the meanings specified or referred to in this SECTION 6.16:

         (a)      "Accounts Receivable" shall have the meaning set forth in
SECTION 2.1.6.

         (b)      "Adjustment Amount" shall have the meaning set forth in
SECTION 1.7(C)

         (c)      "Adjustment Report" shall have the meaning set forth in
SECTION 1.7(B).

         (d)      "Agreement" shall have the meaning set forth on Page 1 of this
Agreement.

         (e)      "Amount Limitation" shall have the meaning set forth in
SECTION 5.1.

         (f)      "Annual Financials" shall have the meaning set forth in
SECTION 2.1.3.

         (g)      "AR Ledger" shall have the meaning set forth in SECTION 2.1.6.

         (h)      "Assets" shall have the meaning set forth in SECTION 1.1.


                                       39
<PAGE>   45

         (i)      "Assumed Liabilities" shall have the meaning set forth in
SECTION 1.5.

         (j)      "Bank of America Lease" shall mean that certain equipment
lease between Bank of America Leasing and Capital, LLC (successor to Nationsbanc
Leasing Corporation of North Carolina) and Seller dated May 1, 1995.

         (k)      "Benefit Plan" shall have the meaning set forth in SECTION
2.1.16.

         (l)      "Cash Purchase Price" shall have the meaning set forth in
SECTION 1.4.

         (m)      "Cash Purchase Price Adjustment" shall have the meaning set
forth in SECTION 1.6(B).

         (n)      "CERCLA" shall have the meaning set forth in SECTION 2.1.19.

         (o)      "CERCLIS" shall have the meaning set forth in SECTION 2.1.19.

         (p)      "Charge-Backs" shall mean charge-backs against amounts payable
to Purchaser arising out of or relating to any period prior to the Closing Date.

         (q)      "Closing" shall have the meaning set forth in SECTION 1.3.

         (r)      "Closing Date" shall have the meaning set forth in SECTION
1.3.

         (s)      "Closing Date Balance Sheet" shall have the meaning set forth
in SECTION 1.7.

         (t)      "Closing Date Working Capital" means the following with
respect to assets and liabilities of the JPSA Division, the sum of inventory
(net of reserves), accounts receivable (net of reserves) and prepaid expenses;
minus, trade payables and accrued expenses. For purposes of the computation of
the Closing Date Working Capital, (y) inventory, accounts receivable and prepaid
expenses shall include only those items and amounts included in the Assets
pursuant to SECTION 1.1 (including all related reserves), and (z) trade payables
and accrued expenses shall include only those items and amounts included in the
Assumed Liabilities pursuant to SECTION 1.5.

         (u)      "Code" shall have the meaning set forth in SECTION 2.1.16.

         (v)      "COBRA" shall have the meaning set forth in SECTION 3.3.

         (w)      "Contaminant" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, PCBs, or any hazardous or toxic constituent thereof and
includes, but is not limited to, any substance defined in or regulated under
Environmental, Health or Safety Requirements of Law.

         (x)      "Cumulative Adjusted EBITDA" shall mean net income determined
in accordance with GAAP consistent with past practice before consideration of
(i) interest income or expense; (ii) income taxes; (iii) depreciation; (iv)
payment to reduce any principal of debt or


                                       40
<PAGE>   46

capital lease obligations or any non-operating income or expenses, excluding
non-operating income or expenses and including, but not limited to, warrants or
preferred stock accretion, foreign currency gains or losses, and goodwill
amortization; (vi) provisions for capital expenditures; (vii) any unusual or
extraordinary items, including, but not limited to, management fees, or (viii)
the amount of any Losses described in SECTION 1.12, except for the amount of any
Losses required to be paid by Seller pursuant to SECTION 1.12 that Seller shall
have failed to pay to Purchaser.

         (y)      "Customer Lists" shall mean all customer lists, customer data,
e-mail directories and other customer information relating to the JPSA Division.

         (z)      "Dispute Notice" shall have the meaning set forth in SECTION
1.7.

         (aa)     "Disputed Amount" shall have the meaning set forth in SECTION
1.7(C).

         (bb)     "DOL" shall have the meaning set forth in SECTION 2.1.16.

         (cc)     "Earnout Amount" shall have the meaning set forth in SECTION
1.8.

         (dd)     "Earnout Payment Date" shall have the meaning set forth in
SECTION 1.8.

         (ee)     "Earnout Report" shall have the meaning set forth in SECTION
1.8.

         (ff)     "EHS Permits" shall have the meaning set forth in SECTION
2.1.19.

         (gg)     "Employees" shall have the meaning set forth in SECTION 3.3.

         (hh)     "Environmental Damages" means all claims, judgments, damages
(including punitive damages), losses, penalties, fines, interest, fees,
liabilities (including strict liability), encumbrances, liens, costs, and
expenses of investigation and defense of any claim, whether or not such claim is
ultimately defeated, and of any good faith settlement or judgment, of whatever
kind or nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including, without limitation, reasonable attorneys' fees and
disbursements and consultants' fees, any of which are incurred at any time as a
result of the existence of Contaminants or noncompliance with Environmental,
Health or Safety Requirements of Law with respect to the period prior to the
Closing, including without limitation:

         (i)      Damages related to the Real Property or Leased Real Property
         for personal injury or threatened personal injury (including sickness,
         disease or death), or injury or threatened injury to property or
         natural resources, foreseeable or unforeseeable, including, without
         limitation, the cost of demolition and rebuilding of any improvements
         on real property;

         (ii)     Reasonable fees incurred for the services of attorneys,
         consultants, contractors, doctors, experts, laboratories and all other
         reasonable costs incurred in relation to the Real Property or Leased
         Real Property in connection with any damages as described in
         subparagraph (i) of this definition, and the investigation or
         remediation of Contaminants or the suspected presence of Contaminants
         or the violation or threatened violation of


                                       41
<PAGE>   47

         Environmental, Health or Safety Requirements of Law related to the Real
         Property, including, but not limited to, the preparation of any
         feasibility studies or reports or the performance of any
         investigations, cleanup, treatment, remediation, removal, response,
         abatement, containment, closure, storage, disposal, transport,
         restoration or monitoring work required by any federal, state or local
         governmental agency or political subdivision, or otherwise expended in
         connection with such conditions, and including, without limitation, any
         reasonable attorneys' fees, costs and expenses incurred in enforcing
         this Agreement or collecting any sums due hereunder; and

         (iii)    Liability related to the Real Property or Leased Real Property
         to any third person or Governmental Authority to indemnify such person
         or Governmental Authority for costs expended in connection with the
         items referenced in subparagraphs (i) and (ii) of this definition.

         (ii)     "Environmental, Health or Safety Requirements of Law" means
all federal, state and local laws, statutes, codes, ordinances, rules,
regulations, EHS Permits, or orders relating to or addressing the environment,
health or safety in effect and as adopted as of the date of Closing, including,
but not limited to, any law, statute, code, ordinance, rule, regulation, EHS
Permit or order relating to (x) the use, handling or disposal of any Contaminant
or (y) workplace or worker safety and health, as such requirements are
promulgated by the specifically authorized Governmental Authority responsible
for administering such requirements.

         (jj)     "Environmental Lien" means a lien in favor of any Governmental
Authority for any (a) liability under any Environmental, Health or Safety
Requirement of Law, or (b) damages arising from, or costs incurred by, such
Governmental Authority in response to a Release or threatened Release of a
Contaminant into the environment.

         (kk)     "ERISA" shall have the meaning set forth in SECTION 2.1.16.

         (ll)     "ERISA Affiliate" shall have the meaning set forth in SECTION
2.1.16.

         (mm)     "Excluded Liabilities" shall have the meaning set forth in
SECTION 1.5.

         (nn)     "Expense" shall have the meaning set forth in SECTION 5.1.

         (oo)     "Facilities" shall mean Seller's facilities located in
Greenville, South Carolina, South Boston, Virginia, and Laurens, South Carolina,
collectively.

         (pp)     "FUSI" shall have the meaning set forth in SECTION 2.1.20.

         (qq)     "GAAP" shall have the meaning set forth in SECTION 1.7.

         (rr)     "Governmental Authority" means any agency, department, court
or other administrative, legislative or regulatory authority of any federal,
state or local governmental body.

         (ss)     "Hired Employees" shall have the meaning set forth in SECTION
3.3.


                                       42
<PAGE>   48
         (tt)     "IBM Capital Corporation Lease" shall mean that certain master
lease agreement, together with all supplements thereto, between IBM Capital
Corporation and Seller.

         (uu)     "Intellectual Property" shall have the meaning set forth in
SECTION 2.1.8.

         (vv)     "Interim Financials" shall have the meaning set forth in
SECTION 2.1.3.

         (ww)     "Interim Period" shall have the meaning set forth in SECTION
3.3.

         (xx)     "JPSA Division" shall have the meaning set forth on page 1 of
this Agreement.

         (yy)     "Knowledge, Knows or Known" with respect to any Person, shall
mean the actual conscious awareness of such Person, and Knowledge or Known as to
Seller shall mean such awareness of any of Michael Fulbright, Charles Tutterow,
Monnie Broome, Reid McCarter, or Charlie O'Mahoney.

         (zz)     "Leases" shall have the meaning set forth in SECTION 1.12.

         (aaa)    "Leased Real Property" shall have the meaning set forth in
SECTION 1.1(A).

         (bbb)    "Liens" means, with respect to any assets or properties
(whether real, personal or mixed or tangible or intangible), any mortgage,
pledge, option, escrow, hypothecation, lien, pledge, security interest,
financing statement, lease, charge, preemptive subscription, encumbrance,
easement, option, conditional sale or other title retention or security
agreement or any other similar restriction, claim or right of others, on, in, or
with respect to such assets or properties, whether arising by contract,
operation of law or otherwise.

         (ccc)    "Listed Intellectual Property" shall have the meaning set
forth in SECTION 2.1.8.

         (ddd)    "Loss" shall have the meaning set forth in SECTION 5.1.

         (eee)    "Material Adverse Effect" or "Material Adverse Change" shall
mean a material adverse effect on the properties, assets (tangible and
intangible), liabilities or financial condition of the JPSA Division.

         (fff)    "Material Agreements" shall mean all contracts, franchises,
agreements, plans, leases and licenses described in SCHEDULES 2.1.4, 2.1.5,
2.1.8 AND 2.1.9.

         (ggg)    "Monaghan Plant" shall have the meaning set forth in the
introductory paragraph to this Agreement.

         (hhh)    "Net Working Capital" means the following with respect to
assets and liabilities of the JPSA Division, the sum of inventory (net of
reserves), accounts receivable (net of reserves) and prepaid expenses (but
specifically excluding all cash and cash equivalent items); minus, trade
payables and accrued expenses. For purposes of the computation of the Net
Working Capital, (y) inventory, accounts receivable and prepaid expenses shall
include only those items and amounts included in the Assets pursuant to SECTION
1.1 (including all related


                                       43
<PAGE>   49
reserves), and (z) trade payables and accrued expenses shall include only those
items and amounts included in the Assumed Liabilities pursuant to SECTION 1.5.

         (iii)    "New York Lease" shall mean that certain Office lease between
1185 Sixth, LLC (Lessor) and JPS Converter and Industrial Corp. (Lessee) dated
September 1, 1999.

         (jjj)    "NPL" shall have the meaning set forth in SECTION 2.1.19.

         (kkk)    "Office Property" shall have the meaning set forth in the
introductory paragraph to this Agreement.

         (lll)    "Owned Real Property" shall have the meaning set forth in
SECTION 1.1(A).

         (mmm)    "Parent Designee" shall have the meaning set forth in SECTION
1.11.

         (nnn)    "Paying Party" shall have the meaning set forth in SECTION
1.7(C).

         (ooo)    "PBGC" shall have the meaning set forth in SECTION 2.1.16.

         (ppp)    "PCBs" shall have the meaning set forth in SECTION 2.1.19.

         (qqq)    "Permitted Liens" means (i) Liens for taxes not yet due or
which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of Seller in
accordance with GAAP; (ii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than thirty (30) days or which are being
contested in good faith and by appropriate proceedings, if adequate reserves
with respect thereto are maintained on the books of Seller in accordance with
GAAP; (iii) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation; (iv) deposits,
which in the aggregate are not material, to secure the performance of any or all
of the following: bids, trade contracts (other than for borrowed money), leases
(other than financing leases), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business consistent with past practice; (v) with respect to
real property easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business consistent with past
practice which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the JPSA Division; (vi) such
imperfections or irregularities of title and encumbrances, if any, as are not
substantial in character, amount or extent so as to materially detract from the
value or interfere with the present use of the Real Property affected thereby or
otherwise materially impair present business operations, and (vii) those liens
or encumbrances described on Schedule attached hereto.

         (rrr)    "Personal Property Assets" shall have the meaning set forth in
SECTION 2.1.4.

         (sss)    "Purchase Price" shall have the meaning set forth in SECTION
1.4.

         (ttt)    "Purchaser" shall have the meaning set forth on Page 1 of this
Agreement.


                                       44
<PAGE>   50
         (uuu)    "Qualified Benefit Plan" shall have the meaning set forth in
SECTION 2.1.16.

         (vvv)    "RCRA" shall have the meaning set forth in SECTION 2.1.19.

         (www)    "Real Property" shall have the meaning set forth in SECTION
2.1.19.

         (xxx)    "Real Property Leases" shall have the meaning set forth in
SECTION 1.1(A).

         (yyy)    "Receiving Party" shall have the meaning set forth in SECTION
1.7(C).

         (zzz)    "Release" means the release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migrating into the indoor or outdoor environment of any Contaminant through or
in the air, soil, surface water or groundwater.

         (aaaa)   "Remedial Action" means actions required to (i) clean up,
remove, treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed, to design such a response and post-remedial
investigation, monitoring, operation, maintenance and care.

         (bbbb)   "Returns" shall mean all liabilities and obligations for
discounts, credit, allowances and refunds to customers issued by Purchaser
subsequent to the Closing Date in the ordinary course of business with respect
to merchandise sold by Seller, whether manufactured by Seller or a third party,
prior to the Closing Date.

         (cccc)   "Review Period" shall have the meaning set forth in SECTION
1.7.

         (dddd)   "Seller" shall have the meaning set forth on page 1 of this
Agreement.

         (eeee)   "Seller's 401(k) Plan" shall have the meaning set forth in
SECTION 3.3(H).

         (ffff)   "Senior Debt" shall have the meaning set forth in SECTION
1.8(E).

         (gggg)   "Senior Lender" shall have the meaning set forth in SECTION
1.8(E).

         (hhhh)   "South Boston Plant" shall have the meaning set forth in the
introductory paragraph to this Agreement.

         (iiii)   "Survival Period" shall have the meaning set forth in SECTION
5.1.

         (jjjj)   "Taxes" shall have the meaning set forth in SECTION 2.1.15.

         (kkkk)   "Threshold Limitation" shall have the meaning set forth in
SECTION 5.1.

         (llll)   "Time Limitation" shall have the meaning set forth in SECTION
5.1.

         (mmmm)   "WARN Act" shall have the meaning set forth in SECTION 3.3.


                                       45
<PAGE>   51
         (nnnn)   "Watts Plant" shall have the meaning set forth in the
introductory paragraph to this Agreement.

         6.17     Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of South Carolina, without giving effect to the conflict of laws rules
thereof. Subject to the provisions of SECTION 6.13, Seller and Purchaser hereby
consent to the jurisdiction of any State or Federal court located within the
State of South Carolina and each irrevocably agrees that all actions or
proceedings relating to this Agreement may be litigated in such courts, and each
hereby waives any objection which each may have based on improper venue or forum
non conveniens to the conduct of any proceeding in any such court.


                                       46
<PAGE>   52
         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.

                                       JPS INDUSTRIES, INC.


                                                /s/ Charles R. Tutterow
                                       -----------------------------------
                                       Name:    Charles R. Tutterow
                                       Title:   Executive Vice President


                                       JPS CONVERTER AND INDUSTRIAL CORP.


                                                /s/ Charles R. Tutterow
                                       -----------------------------------
                                       Name:    Charles R. Tutterow
                                       Title:   Executive Vice President


                                       JPSA ACQUISITION CORP.


                                                /s/ Rod W. Grandy, III
                                       -----------------------------------
                                       Name:    Rod W. Grandy, III
                                       Title:   CFO & V.P.


                                       47
</TEXT>
</DOCUMENT>