ASSET PURCHASE AGREEMENT


                                 By and Between


                       HYDROCHEM INDUSTRIAL SERVICES, INC.

                                    as Buyer


                                       and


                              VALLEY SYSTEMS, INC.

                                    as Seller

589876.1

<PAGE>



                                TABLE OF CONTENTS


         Definitions.....................................................1
                  affiliate..............................................1
                  Agreement..............................................1
                  Assets.................................................1
                  Bill of Sale, Assignment and Assumption Agreement......1
                  Board..................................................1
                  Business Property Rights...............................1
                  Buyer..................................................1
                  Buyer Indemnitees......................................1
                  Buyer's Ceiling Amount.................................1
                  CERCLA.................................................1
                  Claim..................................................1
                  Closing................................................1
                  Closing Balance Sheet..................................1
                  Closing Date...........................................2
                  Closing Financial Statements...........................2
                  Closing Schedules......................................2
                  Code...................................................2
                  control................................................2
                  Customer...............................................2
                  Delivery Date..........................................2
                  Employee...............................................2
                  Encumbrances...........................................2
                  Environment............................................2
                  Environmental Contamination............................2
                  Environmental Due Diligence Review.....................2
                  Environmental Law......................................2
                  Environmental Liabilities..............................2
                  Environmental Remediation..............................2
                  ERISA..................................................2
                  Escrow Agent...........................................2
                  Escrow Agreement.......................................2
                  Escrow Fund............................................2
                  Exchange Act...........................................3
                  Expenses...............................................3
                  Facilities.............................................3
                  Former Facilities......................................3
                  Financial Statements...................................3
                  Floor Amount...........................................3
                  fraud..................................................3
                  GAAP...................................................3
                  Governmental Body......................................3

589876.1
                                        i

<PAGE>



                  Hazardous Materials.........................................3
                  HSR Act.....................................................3
                  Indemnified Party...........................................3
                  Indemnifying Party..........................................4
                  knowledge...................................................4
                  Leases......................................................4
                  Legal Requirement...........................................4
                  Losses......................................................4
                  material....................................................4
                  Order.......................................................4
                  Person......................................................4
                  Preliminary Schedules.......................................4
                  Proceeding..................................................4
                  Proxy Materials.............................................4
                  Purchase Price..............................................4
                  Receivables Guaranty........................................4
                  Release.....................................................4
                  Rules.......................................................4
                  Schedules...................................................5
                  SEC.........................................................5
                  SEC Reports.................................................5
                  Securities Act..............................................5
                  Seller......................................................5
                  Seller's Ceiling Amount.....................................5
                  Stockholders................................................5
                  Stockholders' Meeting.......................................5
                  Subsidiary..................................................5
                  Superior Takeover Proposal..................................5
                  Termination Date............................................5
                  Third Party.................................................5
                  Third Party Claim...........................................5
                  Threatened..................................................5
                  WARN........................................................5
                                                          
         1. Purchase and Sale of Assets; Assumption of Specified Liabilities..5
            -------- --- ---- -- ------- ---------- -- --------- -----------    
                  1.1      Agreement to Purchase and Sell.....................5
                  1.2      Purchase Price; Payment.  .........................9
                           -------- ------ -------                             
                  1.3      Assumption of Specified Liabilities................9
                           ---------- -- --------- -----------                 
                  1.4      Non-Assumption of Certain Liabilities..............9
                           -------------- -- ------- -----------               
                  1.5      Stockholder Approval; Voting......................10
                           ----------- --------- ------                        
                  1.6      Closing...........................................11
                           -------                                             
                  1.7      Delivery of Schedules.............................11
                           -------- -- ---------                               
                  1.8      Allocation of Purchase Price......................11
                           ---------- -- -------- -----                        
                  1.9      Closing Balance Sheet Adjustment..................11
                           ------- ------- ----- ----------                     


589876.1
                                       ii

<PAGE>
         2.       Representations and Warranties of Seller...................12
                  --------------- --- ---------- -- ------                     
                  2.1      Existence; Good Standing; Corporate Authority;
                           ---------- ---- --------- --------- ----------
                           Compliance With Law...............................12
                           ---------- ---- ---                                  
                  2.2      Authorization, Validity and Effect of Agreements..13
                           -------------- -------- --- ------ -- ----------    
                  2.3      Capitalization and Ownership......................13
                           -------------- --- ---------                        
                  2.4      Affiliated Entities...............................14
                           ---------- --------                                 
                  2.5      Jurisdictions.....................................15
                           -------------                                       
                  2.6      Records...........................................15
                           -------                                              
                  2.7      Officers and Directors; Bank Accounts; Powers of
                           -------- --- ---------- ---- --------- ------ --
                             Attorney........................................15
                             --------                               
                  2.8      Financial Statements.  ...........................15
                           --------- ----------                                
                  2.9      Undisclosed Liabilities...........................16
                           ----------- -----------                             
                  2.10     Absence of Certain Changes or Events..............17
                           ------- -- ------- ------- -- ------                
                  2.11     Taxes.............................................18
                           -----                                               
                  2.12     Real Property.....................................18
                           ---- --------                                       
                  2.13     Personal Property.................................18
                           -------- --------                                   
                  2.14     Title to Property; Encumbrances...................19
                           ----- -- --------- ------------                     
                  2.15     Insurance.........................................19
                           ---------                                           
                  2.16     Business Property Rights..........................19
                           -------- -------- ------                            
                  2.17     Collective Bargaining Agreements..................20
                           ---------- ---------- ----------                    
                  2.18     Employees.........................................21
                           ---------                                           
                  2.19     Other Contracts...................................22
                           ----- ---------                                     
                  2.20     No Breach or Default..............................22
                           -- ------ -- -------                                
                  2.21     Litigation........................................22
                           ----------                                          
                  2.22     Accounts Receivable...............................23
                           -------- ----------                                 
                  2.23     Inventories and Supplies..........................23
                           ----------- --- --------                            
                  2.24     Environmental Matters.............................23
                           ------------- -------                               
                  2.25     Customers and Suppliers...........................24
                           --------- --- ---------                             
                  2.26     No Brokers........................................24
                           -- -------                                          
                  2.27     No Misrepresentation or Omission..................24
                           -- ----------------- -- --------                    
                  2.28     Survival of Representations and Warranties........25
                           -------- -- --------------- --- ----------           

         3.       Representations and Warranties of Buyer....................25
                  --------------- --- ---------- -- -----                       
                  3.1      Existence; Good Standing; Corporate Authority; 
                           ---------- ---- --------- --------- ----------
                              Compliance With Law............................25
                              ---------- ---- ---                      
                  3.2      Authorization, Validity and Effect of Agreements. 25
                           -------------- -------- --- ------ -- ----------    
                  3.3      Survival of Representations and Warranties........26
                           -------- -- --------------- --- ----------          

         4.       Indemnification............................................26
                  ---------------                                              
                  4.1      Indemnification by Seller.........................26
                           --------------- -- ------                           
                  4.2      Indemnification by Buyer.  .......................28
                           --------------- -- -----                            
                  4.3      Conditions of Indemnification.....................28
                           ---------- -- ---------------                       
                  4.4      Monetary Limits of Indemnification................29
                           -------- ------ -- ---------------                  
                  4.5      Environmental Remediation.........................31
                           ------------- -----------                           

         5.       Other Covenants and Agreements.............................32
                  ----- --------- --- ----------
                  5.1      Guaranty of Receivables...........................32
                           -------- -- -----------  
589876.1
                                       iii

<PAGE>



                  5.2      Restrictive Covenants.............................32
                           ----------- ---------                               
                  5.3      Escrow............................................34
                           ------                                              
                  5.4      Conduct of the Business...........................36
                           ------- -- --- --------                             
                  5.5      Due Diligence; Access to Information and Customers37
                           --- ---------- ------ -- ----------- --- ---------  
                  5.6      Acquisition Proposals.............................39
                           ----------- ---------                               
                  5.7      Public Announcements..............................40
                           ------ -------------                                
                  5.8      Notification of Certain Matters...................40
                           ------------ -- ------- -------                     
                  5.9      Best Efforts......................................40
                           ---- -------                                        
                  5.10     Execution of Additional Documents.................40
                           --------- -- ---------- ---------                   
                  5.11     Fees and Expenses.................................41
                           ---- --- --------                                   
                  5.12     Limitation of Liability...........................41
                           ---------- -- ---------                             
                  5.13     HSR Act Filings...................................41
                           --- --- -------                                     
                  5.14     Employees.........................................41
                           ---------                                           
                  5.15     Dispute Resolution................................42
                           ------- ----------                                  

         6.       Conditions of Closing......................................42
                  6.1      Buyer's Conditions to Closing.....................42
                  6.2      Seller's Conditions to Closing....................45

         7.       Termination and Abandonment................................46
                  7.1      Reasons for Termination...........................46
                  7.2      Procedure Upon and Effect of Termination..........47

         8.       Miscellaneous..............................................48
                  -------------
                  8.1      Notices.  ........................................48
                           -------                                             
                  8.2      Binding Effect; Benefits..........................49
                           ------- ------- --------                            
                  8.3       Entire Agreement.................................49
                            ------ ---------                                   
                  8.4      Governing Law.....................................49
                           --------- ---                                       
                  8.5      Survival..........................................49
                           --------                                            
                  8.6      Counterparts......................................49
                           ------------                                        
                  8.7      Headings..........................................50
                           --------                                            
                  8.8      Waivers...........................................50
                           -------                                             
                  8.9      Incorporation of Exhibits and Schedules...........50
                           ------------- -- -------- --- ---------             
                  8.10     Severability......................................50
                           ------------                                        
                  8.11     Assignability.....................................50
                           -------------                                       
                  8.12     Drafting..........................................50
                           --------                                            
                  8.13     References........................................51
                           ----------                                          
                  8.14     Calendar Days, Weeks and Months...................51
                           -------- ----- ----- --- ------                     
                  8.15     Gender; Plural and Singular.......................51
                           ------- ------ --- --------                         
                  8.16     Cumulative Rights.................................51
                           ---------- ------                                   
                  8.17     No Implied Covenants..............................51
                           -- ------- ---------                                
                  8.18     Attorneys' Fees...................................51
                           ---------- ----                                     
                  8.19     Indirect Action...................................51
                           -------- ------                                      


589876.1
                                       iv

<PAGE>



         SCHEDULES...........................................................53

         EXHIBITS............................................................54


589876.1
                                        v

<PAGE>



                            ASSET PURCHASE AGREEMENT


         This Asset Purchase  Agreement (the  "Agreement")  is entered into this
_____ day of September,  1998,  by and between  HydroChem  Industrial  Services,
Inc., a Delaware  corporation  ("Buyer"),  and Valley Systems,  Inc., a Delaware
corporation ("Seller").

         WHEREAS,  Seller  desires  to sell,  and  Buyer  desires  to  purchase,
substantially  all of the  assets of Seller for the  consideration  and upon the
terms and subject to the conditions hereinafter set forth;

         NOW,  THEREFORE,  in consideration of the premises,  the provisions and
the respective agreements hereinafter set forth, the parties hereto hereby agree
as follows:

                                   Definitions

         For purposes of this Agreement,  the following terms have the following
meanings.

         "affiliate"--as defined in Section 4.1.

         "Agreement"--this Asset Purchase Agreement.

         "Assets"--as defined in Section 1.1.1.

          "Bill of Sale,  Assignment  and Assumption  Agreement"--as  defined in
Section 1.1.3.

         "Board"--as defined in Section 1.5.

         "Business Property Rights"--as defined in Section 2.16.2.

         "Buyer"--HydroChem Industrial Services, Inc., a Delaware corporation.

         "Buyer Indemnitees"--as defined in Section 4.1.

         "Buyer's Ceiling Amount"--as defined in Section 4.4.2.

         "CERCLA"--the Comprehensive Environmental Response,  Compensation,  and
Liability Act of 1980 or any  successor  law, and  regulations  and rules issued
pursuant to that Act or any successor law.

         "Claim"--as defined in Section 4.3.

         "Closing"--as defined in Section 1.6.

         "Closing Balance Sheet"--as defined in Section 2.8.5.



<PAGE>



         "Closing Date"--as defined in Section 1.6.

         "Closing Financial Statements"--as defined in Section 2.8.5.

         "Closing Schedules"--as defined in Section 1.7.
 .
         "Code"--the  Internal  Revenue  Code  of  1986,  as  amended,  and  the
regulations and rules issued pursuant thereto, as amended.

         "control"--as defined in Section 4.1.

         "Customer"--as defined in Section 5.2.1.

         "Delivery Date"--as defined in Section 1.7.

         "Employee"--any employee of Seller or any Subsidiary.

         "Encumbrances"--as defined in Section 2.4.2.

         "Environment"--soil,  land surface or subsurface strata, surface waters
(including navigable water, ocean waters,  streams,  ponds, drainage basins, and
wetlands), ground water, sediments, ambient air and natural resources.

         "Environmental Contamination"--as defined in Section 4.5.1.

         "Environmental Due Diligence Review"--as defined in Section 5.5.2.

         "Environmental  Law"--any  federal,  state,  or local law that  governs
protection  of  the  Environment,  including,  without  limitation,  those  laws
relating  to the  Release,  storage or handling of  Hazardous  Materials;  those
relating to the treatment, storage, transport,  disposal, or other management of
waste   materials  of  any  kind,  and  those  relating  to  the  protection  of
Environmentally sensitive areas.

         "Environmental   Liabilities"--any   costs,  damages,   expense,  fine,
penalty,  costs of investigation  and remediation or any other liability arising
from or under any Environmental Law.

         "Environmental Remediation"--as defined in Section 4.5.2.

         "ERISA"--the  Employee  Retirement  Income  Security Act of 1974 or any
successor  law, and  regulations  and rules  issued  pursuant to that Act or any
successor law.

         "Escrow Agent"--as defined in Section 5.3.1

         "Escrow Agreement"--as defined in Section 5.3.1.


a-72684.2
                                        2

<PAGE>



         "Escrow Fund"--as defined in Section 1.2.

         "Exchange Act"--as defined in Section 2.8.1.

         "Expenses"--as defined in Section 5.11.

         "Facilities"--any  real  property,   leaseholds,   or  other  interests
currently  owned or  operated  by Seller or any  Subsidiary  and any  buildings,
plants or structures currently owned or operated by Seller or any Subsidiary.

         "Former Facilities"--any real property,  leaseholds, or other interests
formerly owned or operated by Seller or any Subsidiary and any buildings, plants
or structures formerly owned or operated by Seller or any Subsidiary.

         "Financial Statements"--as defined in Section 2.8.4.

         "Floor Amount"--as defined in Section 4.4.

         "fraud"--fraud  perpetrated  or alleged to have been  perpetrated by an
Indemnifying Party against an Indemnified Party.

          "GAAP"--United   States  generally  accepted  accounting   principles,
applied on a consistent basis.

         "Governmental Body"--any:

          (a) nation,  state,  county, city, town, village,  district,  or other
jurisdiction of any nature;

         (b)     federal, state, local, municipal, foreign, or other government;

          (c) governmental  authority of any nature  (including any governmental
agency, branch, department, or entity and any court or other tribunal);

         (d)      multi-national organization or body; or

         (e) body  exercising,  or entitled  to  exercise,  any  administrative,
executive,  judicial,  legislative,  police,  regulatory, or taxing authority or
power of any nature.

         "Hazardous   Materials"--any   "hazardous   substance,"  "pollutant  or
contaminant,"  and  "petroleum"  and "natural  gas  liquids," as those terms are
defined or used in Section  101 of CERCLA,  and any other  substances  regulated
because  of their  effect  or  potential  effect  on public  health  and/or  the
Environment  including,  without limitation,  PCB's, lead paint,  asbestos,  and
radioactive materials.


a-72684.2
                                        3

<PAGE>



         "HSR Act"--the  Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
any successor law, and  regulations and rules issued pursuant to that Act or any
successor law.

         "Indemnified Party"--as defined in Section 4.3.

         "Indemnifying Party"--as defined in Section 4.3.

         "knowledge"--the  actual knowledge of any director,  officer,  regional
manager, or branch manager of Seller.

         "Leases"--as defined in Section 2.12.2.

         "Legal  Requirement"--any  applicable federal, state, local, municipal,
foreign,   international,   multinational,   or  other   administrative   order,
constitution,  law, ordinance, principle of common law, regulation,  statute, or
treaty.

         "Losses"--as defined in Section 4.1.

         "material"--an  item is  "material"  if its  presence  or  absence,  as
required by the context,  would have a material  adverse effect upon the assets,
financial condition, results of operations,  business or affairs of a Person and
any  affiliates of such Person with whom such Person,  in accordance  with GAAP,
consolidates financial statements, taken as a whole.

         "Order"--any award, decision,  injunction,  judgment, order, ruling, or
verdict entered, issued, made, or rendered by any court,  administrative agency,
or other Governmental Body or by any arbitrator.

         "Person"--any   individual,   corporation   (including  any  non-profit
corporation),  general or limited partnership,  limited liability company, joint
venture, estate, trust, association,  organization, labor union, or other entity
or Governmental Body.

         "Preliminary Schedules"--as defined in Section 1.7.
 .
         "Proceeding"--any action, arbitration,  audit, hearing,  investigation,
inquiry,   litigation,   or  suit  (whether  civil,  criminal,   administrative,
investigative,  or  informal)  commenced,  brought,  conducted,  or  heard by or
before, or otherwise involving, any Governmental Body or arbitrator.

         "Proxy Materials"--as defined in Section 1.5.

         "Purchase Price"--as defined in Section 1.2.

         "Receivables Guaranty"--as defined in Section 5.1.


a-72684.2
                                        4

<PAGE>



         "Release"--any spilling,  leaking, emitting,  discharging,  depositing,
escaping,  leaching,  dumping, pumping, pouring, emptying, or injecting into the
Environment, whether intentional or unintentional.

         "Rules"--as defined in Section 5.15.

          "Schedules"--all   Schedules   to  this   Agreement,   including   the
Preliminary Schedules and the Closing Schedules.

         "SEC"--as defined in Section 2.8.2.
 .
         "SEC Reports"--as defined in Section 2.8.2.

         "Securities Act"--as defined in Section 2.8.1.

         "Seller"--Valley Systems, Inc., a Delaware corporation.

         "Seller's Ceiling Amount"--as defined in Section 4.4.1.

         "Stockholders"--as defined in Section 2.3.

         "Stockholders' Meeting"--as defined in Section 1.5.

         "Subsidiary"--as defined in Section 2.4.1.

         "Superior Takeover Proposal"--as defined in Section 5.6.

         "Termination Date"--as defined in Section 5.4.1.

         "Third Party"--as defined in Section 5.6.

         "Third Party Claim"--as defined in Section 4.3.

         "Threatened"--a  claim,  Proceeding,  dispute,  action, or other matter
will be deemed to have been "Threatened" if any demand,  notice or statement has
been made (orally, to the knowledge of Seller, or in writing).

         "WARN"--as defined in Section 2.18.7.


a-72684.2
                                        5

<PAGE>



          1. Purchase and Sale of Assets; Assumption of Specified Liabilities.

                  1.1      Agreement to Purchase and Sell.

                           1.1.1 Upon the terms and  subject  to the  conditions
                  set forth herein and upon the  representations  and warranties
                  made herein by each of the parties hereto to the other, at the
                  Closing (as such term is  hereinafter  defined),  Seller shall
                  sell, grant,  convey,  assign,  transfer and deliver to Buyer,
                  and Buyer shall  purchase and acquire from Seller,  all of the
                  assets  and  properties  of Seller of every  kind,  nature and
                  description (wherever located), as the same shall exist on the
                  Closing Date, except those assets and properties  specifically
                  excluded  pursuant to Section  1.1.2  hereof  (said assets and
                  properties  so to be  sold,  granted,  conveyed,  transferred,
                  assigned and delivered to Buyer being hereinafter collectively
                  referred to as the "Assets").  Without limiting the generality
                  of the foregoing,  the Assets shall include,  but shall not be
                  limited to, the following assets and properties of Seller:

                                    (i) all  real  property,  interests  in real
                           property (including, without limitation, leases), and
                           structures and improvements located on real property,
                           and all the easements and uses which benefit any such
                           real property;

                                    (ii)    all notes and accounts receivable;

                                    (iii)    all     machinery,     inventories,
                           inventories   of   parts,    computers,    furniture,
                           furnishings, fixtures, office supplies and equipment,
                           automobiles, trucks, vehicles, returnable containers,
                           tools and parts, and work in process;

                                    (iv)  all  technology,   know-how,  designs,
                           devices, processes,  methods,  inventions,  drawings,
                           schematics, specifications,  standards, trade secrets
                           and other  proprietary  information,  and all patents
                           and  applications  therefor  and all  trademarks  and
                           trade names,  trademark and trade name registrations,
                           service   marks  and  service   mark   registrations,
                           copyrights   and   copyright    registrations,    the
                           applications   therefor  and  the  licenses  thereto,
                           together   with  the   goodwill   and  the   business
                           appurtenant thereto;

                                    (v)      all      drawings,      blueprints,
                           specifications, designs and data of Seller (including
                           drawings,  blueprints,  specifications,  designs  and
                           data of Seller  used by or in the  possession  of any
                           Third Party);

                                     (vi)  all  catalogues,   brochures,   sales
                            literature,  promotional  material and other selling
                            material of Seller;

                                     (vii) all books and  records and all files,
                            documents,  papers, agreements, books of account and
                            other records pertaining to the Assets or

a-72684.2
                                        6

<PAGE>



                            to the  business of Seller  which are located at the
                            offices, plants,  warehouses or other locations used
                            in connection with the Assets;

                                    (viii) all  rights,  title and  interest  of
                           Seller  under all  contracts,  agreements,  licenses,
                           leases,  sales  orders,  purchase  orders  and  other
                           commitments Buyer will assume pursuant to Section 1.3
                           hereof;

                                     (ix) all  laboratory  equipment  (including
                            laboratory   notes  and   supplies)   and   chemical
                            inventories;

                                     (x)  all   lists  of  past,   present   and
                            qualified  prospective  customers of the business of
                            Seller;

                                    (xi) all  goodwill  relating to the business
                           of Seller as a going concern, together with the right
                           to  represent  oneself  to third  parties  as the new
                           owner of such business;

                                     (xii) all governmental and product licenses
                            and   permits,   approvals,   license   and   permit
                            applications   and  license  and  permit   amendment
                            applications;

                                    (xiii) all  claims  against  third  parties,
                           whether or not  asserted  and whether now existing or
                           hereafter arising,  related to the business of Seller
                           or the Assets  (including,  without  limitation,  all
                           claims  based on any  indemnities  or  warranties  in
                           favor of Seller relating to any of the Assets);

                                     (xiv) all other  assets and rights of every
                            kind  and  nature,  real or  personal,  tangible  or
                            intangible, of Seller;

                                     (xv)  all  cash  on  hand,  including  bank
                            accounts and temporary cash investments;

                                     (xvi) all claims  for  refunds of taxes and
                            other governmental  charges for periods ending on or
                            prior to the Closing Date;

                                     (xvii) all  shares of capital  stock of the
                            Subsidiaries; and

                                     (xviii)   all  safe   deposit   boxes   and
                            lockboxes, as well as the contents thereof.

                           Without limiting the generality of the foregoing, the
                  Assets  shall,  except as set forth in Section  1.1.2  hereof,
                  include  all  assets  set  forth in a  detailed  list of fixed
                  assets  as of June 30,  1998,  prepared  from  the  accounting
                  records of Seller and attached hereto as Schedule  1.1.1,  and
                  all such  assets as may have  been  acquired  by Seller  which
                  would be included on a list prepared in like manner from such

a-72684.2
                                        7

<PAGE>



                  accounting  records as of the  Closing  Date,  except any such
                  assets which may have been disposed of since June 30, 1998, in
                  the  ordinary  course of business on a basis  consistent  with
                  past practice.

                           1.1.2  Anything  herein  contained  to  the  contrary
                  notwithstanding, the following assets and properties of Seller
                  are  specifically  excluded  from  the  Assets  and  shall  be
                  retained by Seller:

                                     (i) claims or rights  against third parties
                            relating to liabilities or obligations which are not
                            expressly  assumed by Buyer  pursuant to Section 1.3
                            hereof; and

                                  (ii)   rights   under   insurance    policies,
                         including  rights  to  any  cancellation  value  on the
                         Closing Date,  except that Seller shall assign,  to the
                         extent such assignment is enforceable,  to Buyer rights
                         under  policies (or make the proceeds  available)  with
                         respect to claims arising out of transactions  prior to
                         the  Closing  Date which  Buyer  shall  have  agreed to
                         assume pursuant to Section 1.3 below; in the event that
                         such an assignment is not enforceable and in order that
                         the full value of all rights of the character described
                         in  this  clause  (ii) of this  Section  1.1.2  and all
                         claims on such policies may be realized,  Seller shall,
                         by itself or by its agents,  at the request and expense
                         and under the  direction  of  Buyer,  until the  entire
                         Escrow Fund has been  released  pursuant to Section 5.3
                         hereof,  in the name of  Seller or  otherwise  as Buyer
                         shall  specify and as shall be permitted  by law,  take
                         all  such  action  and do or  cause to be done all such
                         things as shall in the  reasonable  opinion of Buyer be
                         necessary  or proper  (x) in order  that the  rights of
                         Seller under such  policies  shall be preserved and (y)
                         for, and to  facilitate,  the  collection of the monies
                         due and  payable,  and to become  due and  payable,  to
                         Seller in and under  every  such  policy in  respect of
                         every such  claim,  and Seller  shall hold the same for
                         the benefit of and pay the same over promptly to Buyer.

                                  (iii) Seller's  stock books,  minute books and
                         other  corporate and  financial  books and records (but
                         Seller shall, upon request by Buyer and, after Closing,
                         at Buyer's  expense,  provide  copies of such financial
                         books and records to Buyer).

                         1.1.3 Subject to Section 1.1.4 hereof,  at the Closing,
                Seller  shall  execute  and deliver to Buyer (i) a Bill of Sale,
                Assignment and Assumption Agreement, in the form attached hereto
                as Exhibit  "A" (the "Bill of Sale,  Assignment  and  Assumption
                Agreement"),  under the terms of which Seller shall sell, grant,
                convey,  assign,  transfer and deliver the Assets to Buyer,  and
                (ii) such other bills of sale, deeds,  instruments of assignment
                and other appropriate  documents as may be reasonably  requested
                by  Buyer in order to  carry  out the  intentions  and  purposes
                hereof.


a-72684.2
                                        8

<PAGE>



                         1.1.4 Nothing in this  Agreement  shall be construed as
                an attempt or agreement to assign (i) any  contract,  agreement,
                license,  lease, sales order, purchase order or other commitment
                which is nonassignable without the consent of the other party or
                parties  thereto  unless such  consent  shall have been given or
                (ii) any  contract or claim as to which all the remedies for the
                enforcement thereof enjoyed by Seller would not pass to Buyer as
                an incident of the  assignments  provided for hereby.  In order,
                however,  that the full value of every contract and claim of the
                character  described  in  clauses  (i) and (ii) of this  Section
                1.1.4  and all  claims  and  demands  on such  contracts  may be
                realized,  Seller  shall,  by  itself or by its  agents,  at the
                request and expense and under the direction of Buyer,  until the
                entire  Escrow  Fund has been  released  pursuant to Section 5.3
                hereof,  in the name of  Seller  or  otherwise  as  Buyer  shall
                specify and as shall be permitted  by law,  take all such action
                and do or  cause  to be done  all  such  things  as shall in the
                reasonable  opinion of Buyer be necessary or proper (x) in order
                that the rights and  obligations  of Seller under such contracts
                shall  be  preserved  and  (y)  for,  and  to  facilitate,   the
                collection of the monies due and payable,  and to become due and
                payable,  to Seller in and under every such  contract  and claim
                and in respect of every such claim and demand,  and Seller shall
                hold the same for the benefit of and pay the same over  promptly
                to Buyer.

                1.2 Purchase Price;  Payment.  Upon the terms and subject to the
        conditions  set forth  herein,  in  reliance  upon the  representations,
        warranties,  covenants and agreements of Seller contained herein, and in
        exchange  for the sale,  grant,  conveyance,  assignment,  transfer  and
        delivery of the Assets, Buyer agrees,  subject to Section 1.9 hereof, to
        pay to Seller the sum of $29,800,771 (the "Purchase Price"),  payable at
        the  Closing  as  follows:  (i)  by  wire  transfer  of  $25,800,771  in
        immediately   available  funds  to  Seller  in  such  bank  accounts  as
        designated  by Seller in writing to Buyer at least 24 hours prior to the
        Closing; and (ii) by depositing  $4,000,000 (the "Escrow Fund") with the
        Escrow  Agent  to be  held  and  disposed  of  pursuant  to  the  Escrow
        Agreement.

                1.3 Assumption of Specified Liabilities.  At the Closing, and as
        additional  consideration for the sale, grant,  conveyance,  assignment,
        transfer and delivery of the Assets, subject, however, to Sections 1.1.4
        and 1.4  hereof,  Buyer  shall  assume  and  agree to pay,  perform  and
        discharge when due only the following:

                         (i) those  liabilities  or  obligations of Seller which
                are listed on Schedule 1.3A hereof (which shall be the detail of
                the  liabilities  reflected in the balance sheet included in the
                Financial  Statements  dated  June 30,  1998 as  updated  to the
                Closing  Date  pursuant  to Section 1.9  hereof)  which  updated
                Schedule 1.3A shall  prevail in the event of a conflict  between
                the Closing Balance Sheet and such updated Schedule 1.3A); and

                         (ii) those  liabilities and obligations of Seller which
                arise under the terms of a contract,  agreement, license, lease,
                sales order,  purchase order or other commitment which is listed
                on Schedule 1.3B hereof (as updated to the Closing Date pursuant
                to Section 1.9 hereof) or is not  required by the last  sentence
                of this Section

a-72684.2
                                        9

<PAGE>



                1.3(ii)  to be so  listed.  Schedule  1.3B  shall  only list (x)
                master  service  agreements  of Seller  assumed by Buyer and (y)
                contracts,  agreements, licenses, leases, sales orders, purchase
                orders or other  commitments  of Seller  assumed by Buyer  which
                involve  services or annual payments to or from Seller in excess
                of $10,000.

                Subject to Sections 1.1.4 and 1.4 hereof, at the Closing,  Buyer
        shall  execute  and deliver to Seller the Bill of Sale,  Assignment  and
        Assumption  Agreement assuming the liabilities and obligations of Seller
        referred to in this Section 1.3.

                1.4  Non-Assumption  of  Certain   Liabilities.   Buyer  is  not
        assuming,  and shall not be deemed to have assumed,  any  liabilities or
        obligations  of  Seller  of any kind or  nature  whatsoever,  except  as
        expressly provided in Section 1.3 hereof. Anything in Section 1.3 hereof
        or elsewhere herein to the contrary notwithstanding and without limiting
        the generality of the  foregoing,  it is hereby agreed that Buyer is not
        assuming,  and shall not be deemed to have  assumed,  any  liability and
        shall not have any  obligation  for or with respect to any  liability or
        obligation of Seller:

                         (i)      under any employee benefit plan of Seller;

                         (ii) in respect of (x) any sales,  use or excise taxes,
                income taxes,  taxes based on or measured by income or franchise
                taxes  attributable  to periods or events  prior to or ending on
                the Closing Date or (y) any sales,  use or excise taxes,  income
                taxes,  or  any  other  taxes,  legal,  accounting,   brokerage,
                finder's  fees, or other  expenses of whatsoever  kind or nature
                incurred  by Seller  or any  affiliate,  stockholder,  director,
                Employee or officer of Seller as a result of the consummation of
                the  transactions  contemplated  hereby  (other than such taxes,
                fees and expenses  which are accrued in the  ordinary  course of
                business prior to Closing);

                         (iii)  arising  out of any action,  condition,  suit or
                proceeding  based upon an event occurring or a claim arising (x)
                prior to the Closing  Date or (y) after the Closing  Date in the
                case of claims in respect of products sold or services  provided
                by Seller  prior to the Closing  Date and  attributable  to acts
                performed  or  omitted  by  Seller  prior to the  Closing  Date,
                provided, however, that Buyer shall assume any such liability or
                obligation  to the  extent it has been  reserved  against on the
                Closing Balance Sheet;

                         (iv) pursuant to existing loan  agreements  (other than
                payment  obligations assumed pursuant to Section 1.3 above), and
                all agreements executed in connection therewith; or

                         (v) to any  present  or  former  shareholder,  officer,
                director or Employee of Seller (including,  without  limitation,
                for bonuses, fringe benefits,  vacation or holiday pay, wages or
                severance   pay,   but   excluding   any   accrued   liabilities
                specifically assumed by Buyer pursuant to Section 1.3 above).


a-72684.2
                                       10

<PAGE>



                1.5 Stockholder  Approval;  Voting.  Seller,  acting through its
        Board of Directors (the "Board"),  shall, unless there exists a Superior
        Takeover Proposal, as soon as practicable after the date hereof (i) duly
        call,  prepare (in  cooperation  with Buyer) and give written notice of,
        convene   and  hold  a  special   meeting  of  its   stockholders   (the
        "Stockholders'  Meeting")  for the  purpose  of  considering  and taking
        action upon this  Agreement and all  transactions  contemplated  hereby;
        (ii) include in such  written  notice of the  Stockholders'  Meeting the
        recommendation  of the Board  that the  stockholders  of Seller  vote in
        favor  of  the  approval  and  adoption  of  this   Agreement   and  all
        transactions  contemplated hereby,  unless the Board has determined,  in
        accordance  with  Section  5.6,  that there  exists a Superior  Takeover
        Proposal, in which case the Board may recommend that the stockholders of
        Seller vote against the approval and adoption of this  Agreement and all
        transactions  contemplated  hereby; (iii) distribute to its stockholders
        the definitive proxy materials with respect to the sale of the Assets in
        accordance with Regulation 14A under the Exchange Act, other  applicable
        federal  and state  laws,  (the  "Proxy  Materials")  and (iv),  use its
        reasonable  efforts  to  obtain  the  necessary  approvals  by  Seller's
        stockholders of this Agreement and all transactions contemplated hereby.
        Contemporaneously  herewith, each of Rollins Investment Fund and Rollins
        Holding  Company,  Inc., has executed an agreement  whereby each of them
        has agreed to vote or cause to be voted at the Stockholders' Meeting all
        shares of capital stock respectively beneficially owned by them in favor
        of the transactions contemplated by this Agreement unless there exists a
        Superior Takeover Proposal.

                1.6 Closing.  The closing of the purchase and sale of the Assets
        provided herein (the "Closing")  shall occur (i) at the office of Haynes
        and Boone,  LLP, 901 Main Street,  Suite 3100,  Dallas,  Texas 75202, at
        10:00 a.m., local time, on the first business day immediately  following
        the  day on or by  which  the  last to be  fulfilled  or  waived  of the
        conditions set forth in Section 6 hereof shall be fulfilled or waived in
        accordance  herewith  or (ii) at such  other  time and  place or on such
        other date as Seller and Buyer may mutually agree (such date and time of
        Closing being herein referred to collectively as the "Closing Date").

                1.7 Delivery of Schedules and Exhibits.  Within twenty  business
        days of the date of this  Agreement,  Seller shall  deliver to Buyer all
        schedules  and  Exhibits to this  Agreement  (the date of such  delivery
        being referred to herein as the "Delivery  Date"),  such schedules being
        true and correct in all material respects at and as of the Delivery Date
        (except for Schedules 1.1.1 and 1.3A, which shall be true and correct at
        and as of June 30, 1998)  (collectively,  the "Preliminary  Schedules").
        The  Preliminary  Schedules  shall be updated as  required  pursuant  to
        Section  1.3  hereof and  otherwise  as  necessary  so as to be true and
        correct at and as of the Closing Date (collectively,  as so updated, the
        "Closing  Schedules").  The  Closing  Schedules  shall be  delivered  in
        accordance with Section 1.9 hereof; provided that any objection by Buyer
        to any of the Closing Schedules delivered not later than five days prior
        to  Closing  must  be  made  by  Buyer  prior  to  Closing.  Each of the
        Preliminary  Schedules  and the  Closing  Schedules  shall  be in a form
        reasonably satisfactory to Buyer.


a-72684.2
                                       11

<PAGE>



                1.8 Allocation of Purchase  Price.  The  consideration  given by
        Buyer under this Agreement  (including without limitation the payment of
        the Purchase Price and the assumption of liabilities pursuant to Section
        1.3  hereof)  shall be  allocated  among the Assets in  accordance  with
        section 1060 of the Internal  Revenue Code of 1986, as amended,  and the
        regulations   thereunder.   A  schedule   setting  forth  such  proposed
        allocations  shall be prepared by Buyer and  delivered to Seller  within
        120 days following the Closing Date. The allocation as set forth on such
        schedule shall be reasonably determined by Buyer and shall be reasonably
        satisfactory  to Seller.  Buyer and Seller agree to make such allocation
        in filing their  respective tax returns or  declarations  for applicable
        United States income tax purposes.

                1.9      Closing Balance Sheet Adjustment.

                         1.9.1  Within  45  days  following  the  Closing  Date,
                Seller, with the reasonable  assistance and cooperation of Buyer
                (including  use of  employees  of Buyer  who were  employees  of
                Seller immediately prior to Closing at no cost to Seller), shall
                prepare and deliver to Buyer the Closing  Balance  Sheet and the
                Closing  Schedules.  The Closing  Balance  Sheet and the Closing
                Schedules shall be prepared from the books and records of Seller
                and the Subsidiaries  concerning their respective  businesses in
                accordance with GAAP on a basis consistent with that used in the
                preparation  of the  balance  sheet  included  in the  Financial
                Statements  dated  June 30,  1998.  Buyer,  with the  reasonable
                assistance  and  cooperation  of  Seller,  shall have 30 days to
                review the Closing Balance Sheet and the Closing Schedules after
                receipt thereof from Seller. On or before the expiration of such
                30-day period, Buyer shall deliver to Seller a written statement
                accepting  or  objecting  to the Closing  Balance  Sheet and the
                Closing  Schedules.  In the event that Buyer shall object to the
                Closing  Balance  Sheet,  the Closing  Schedules  or both,  such
                statement  shall  include  a  detailed  itemization  of  Buyer's
                objections  and  its  reasons  therefor.   If  no  statement  is
                delivered by Buyer to Seller  within such 30-day  period,  Buyer
                shall be deemed to have  accepted the Closing  Balance Sheet and
                the Closing Schedules.

                         1.9.2 In the event that Buyer  shall  timely  object to
                the Closing Balance Sheet,  Buyer and Seller shall promptly meet
                and  in  good  faith  attempt  to  resolve  such   objection  or
                objections.  Any of such  objections  which  cannot be  resolved
                between  Buyer  and  Seller  within 30 days  following  Seller's
                receipt of Buyer's statement of objections shall be submitted to
                binding arbitration conducted by the independent accounting firm
                of Arthur  Andersen  LLP. In the event that Buyer  shall  timely
                object to any of the Closing Schedules,  such objection shall be
                resolved in accordance with Section 5.15 hereof.

                         1.9.3 In the event that the net assets reflected on the
                Closing Balance Sheet,  after all of Buyer's  objections thereto
                shall  have been  resolved  in  accordance  with  Section  1.9.2
                hereof,  are greater or less than $5,353,593 (i.e. the amount of
                the net assets  reflected on the balance  sheet  included in the
                Financial  Statements  dated June 30, 1998),  then the amount of
                any such  excess or  deficiency  shall be paid to Seller (in the
                case of an excess) or Buyer (in the case of a deficiency) by the
                other by wire

a-72684.2
                                       12

<PAGE>



                transfer of  immediately  available  United  States funds within
                three  business  days of such  resolution,  receipt  of  Buyer's
                written acceptance of the Closing Balance Sheet or expiration of
                Buyer's  30-day  period for  objection  to the  Closing  Balance
                Sheet.

        2.  Representations  and Warranties of Seller.  Subject to attachment of
the Schedules as provided in Section 1.7 hereof,  Seller hereby  represents  and
warrants  to Buyer as  follows  (Seller  reserving  the  right to  attach at the
Delivery Date and update at and as of the Closing Date  Schedules in addition to
those  called  for  herein  and  to add  references  thereto  in  the  following
warranties and representations as appropriate):

                2.1 Existence;  Good Standing;  Corporate Authority;  Compliance
        With  Law.  Seller  (i)  is a  corporation  duly  incorporated,  validly
        existing  and in good  standing  under the laws of its  jurisdiction  of
        incorporation;  (ii) is duly  licensed or  qualified to do business as a
        foreign  corporation and is in good standing under the laws of any other
        jurisdictions  in which the character of the properties  owned or leased
        by it therein or in which the  transaction  of its  business  makes such
        qualification  necessary  except  where the  failure to be so  qualified
        would not be  material;  (iii)  has all  requisite  corporate  power and
        authority  to own  its  properties  and  carry  on its  business  as now
        conducted;  (iv) is not in material default with respect to any Order of
        any  Governmental  Body or  arbitration  board;  (v) is not in  material
        violation of any Legal Requirement to which it is subject;  and (vi) has
        obtained all material licenses, permits and other authorizations and has
        taken  all  actions   required  by  applicable   laws  or   governmental
        regulations in connection with its business as now conducted.

                2.2      Authorization, Validity and Effect of Agreements.

                         2.2.1 The execution and delivery of this  Agreement and
                all agreements and documents  contemplated hereby by Seller, and
                the consummation by it of the transactions  contemplated hereby,
                have  been duly  authorized  by the Board  and,  except  for the
                approval   of   Seller's   stockholders,   no  other   corporate
                proceedings  on the part of Seller are  necessary  to  authorize
                this Agreement and the transactions contemplated hereby.

                         2.2.2 This  Agreement  constitutes,  and all agreements
                and  documents  contemplated  hereby when executed and delivered
                pursuant  hereto for value received will  constitute,  the valid
                and  legally  binding   obligations  of  Seller  enforceable  in
                accordance with their terms,  except that  enforceability may be
                limited by applicable  bankruptcy,  insolvency,  reorganization,
                fraudulent  transfer,   moratorium,   bulk  sales,   preference,
                equitable  subordination,  marshalling  or other similar laws of
                general  application  now or hereafter in effect relating to the
                enforcement of creditors'  rights  generally and except that the
                remedies of specific performance,  injunction and other forms of
                equitable   relief  are  subject  to  certain  tests  of  equity
                jurisdiction, equitable defenses and the discretion of the court
                before which any proceeding therefor may be brought.


a-72684.2
                                       13

<PAGE>



                         2.2.3 The execution  and delivery of this  Agreement by
                Seller  does  not,  and  the  consummation  of the  transactions
                contemplated  hereby by Seller will not,  except as set forth in
                Schedule 2.2 hereof (which  Schedule 2.2 will include  reference
                to  compliance  with the HSR  Act),  (i)  require  the  consent,
                approval  or  authorization   of,  or  declaration,   filing  or
                registration  with,  any  Governmental  Body or any Third Party;
                (ii)  result  in the  breach  of any term or  provision  of,  or
                constitute a default under, or result in the  acceleration of or
                entitle  any party to  accelerate  (whether  after the giving of
                notice or the lapse of time or both) any  obligation  under,  or
                result in the creation or imposition of any Encumbrance upon any
                part of the property of Seller or any Subsidiary pursuant to any
                provision of, any Order,  indenture,  mortgage,  lease, license,
                lien,  or other  agreement or  instrument to which Seller or any
                Subsidiary is a party or by which any of them is bound; or (iii)
                violate  or  conflict  with any  provision  of the bylaws or the
                Certificate of  Incorporation  of Seller or of any Subsidiary as
                amended to the date hereof.

                2.3 Capitalization  and Ownership.  The authorized capital stock
        of Seller consists solely of (i) 12,000,000  shares of common stock, par
        value  $.01  per  share,  of  which  7,906,617  shares  and no more  are
        presently  issued and  outstanding  and (ii)  55,000  shares of Series C
        preferred  stock,  par value $0.10 per share, of which 55,000 shares and
        no more are presently issued and outstanding.  All of such capital stock
        has been  duly  authorized  and  validly  issued  and is fully  paid and
        nonassessable. Except as set forth in Schedule 2.3B hereof, there are no
        outstanding  rights,  warrants,  options,  subscriptions,  agreements or
        commitments  giving anyone any right to require Seller to sell or issue,
        or to  require  the  Stockholders  to sell or  otherwise  transfer,  any
        capital stock or other securities of Seller.

                2.4      Affiliated Entities.

                         2.4.1  Except  as set  forth in  Schedule  2.4  hereof,
                Seller  does not own,  directly  or  indirectly,  a majority  or
                controlling  interest in any corporation,  business trust, joint
                stock company,  partnership or other  business  organization  or
                association  relating to the business  operations of Seller. The
                affiliated  entities  set  forth  in  Schedule  2.4  hereof  are
                hereinafter  referred  to  individually  as a  "Subsidiary"  and
                collectively as the  "Subsidiaries".  Schedule 2.4 includes each
                significant subsidiary,  as such term is defined in Rule 1-02 of
                Regulation S-X promulgated by the SEC, of Seller.

                         2.4.2  Except as  otherwise  set forth in Schedule  2.4
                hereof,  Seller owns, directly or indirectly,  all of the issued
                and outstanding  capital stock or other  securities or ownership
                interest  of each of the  Subsidiaries  free  and  clear  of all
                options, indentures,  mortgages, leases, licenses,  restrictions
                (other than  restrictions  under  applicable  securities  laws),
                liens,  charges,   assessments,   pledges,  security  interests,
                adverse  claims,  equities,   limitations,   community  property
                interests,  conditions,  equitable  interests,  rights  of first
                refusal,  easements,  servitudes  or other  encumbrances  of any
                kind,  including  any  restriction  on  use,  voting,  transfer,
                receipt  of  income,  or  exercise  of any  other  attribute  of
                ownership (collectively,

a-72684.2
                                       14

<PAGE>



                "Encumbrances"),   and  all  of  the  capital   stock  or  other
                securities  or ownership  interests in each of the  Subsidiaries
                which is owned, directly or indirectly, by Seller have been duly
                authorized   and   validly   issued   and  are  fully  paid  and
                nonassessable.  Except as set forth in Schedule 2.4 hereof, none
                of the  Subsidiaries  has any  commitment  to  issue or sell any
                shares of its capital  stock or other  securities  or  ownership
                interest or any  securities or obligations  convertible  into or
                exchangeable  for, or giving any Person  (other than Seller) any
                right to  acquire  from such  Subsidiary,  any shares of capital
                stock  or  other  securities  or  ownership   interest  of  such
                Subsidiary.

                         2.4.3 Each  Subsidiary (i) is duly  organized,  validly
                existing and in good standing under the laws of its jurisdiction
                of  organization;  (ii) has all requisite power and authority to
                own its  properties  and carry on its business as now conducted;
                (iii) is duly  licensed or  qualified  to do business  and is in
                good standing in each jurisdiction in which the character of the
                properties  owned  or  leased  by it  therein  or in  which  the
                transaction of its business makes such  qualification  necessary
                except  where  the  failure  to be so  qualified  would  not  be
                material;  (iv) has obtained all material licenses,  permits and
                other  authorizations  and has taken  all  actions  required  by
                applicable laws or  governmental  regulations in connection with
                its business as now  conducted;  (v) is not in material  default
                with respect to any order of any court,  governmental  authority
                or  arbitration  board or  tribunal to which it is a party or is
                subject;  and (vi) is not in  material  violation  of any  laws,
                ordinances,  governmental  rules or  regulations  to which it is
                subject.

                         2.4.4 No Subsidiary  nominally or beneficially owns any
                material assets or is subject to any material liabilities.

                2.5  Jurisdictions.  Schedule 2.5 hereof  contains a list of all
        jurisdictions in which Seller and each Subsidiary is presently  licensed
        or qualified to do business. To the best knowledge of Seller, Seller and
        each  Subsidiary  has  complied  in  all  material   respects  with  all
        applicable laws of each such  jurisdiction  and all applicable rules and
        regulations of each regulatory  agency  therein.  Neither Seller nor any
        Subsidiary (i) has been denied admission to conduct any type of business
        in any  jurisdiction in which it is not presently  admitted as set forth
        in such  Schedule  2.5,  (ii) has had its license or  qualifications  to
        conduct business in any jurisdiction revoked or suspended,  or (iii) has
        been  involved  in any  Proceeding  to  revoke or  suspend a license  or
        qualification.

                2.6 Records.  Seller shall have  delivered or made  available to
        Buyer and its counsel on or prior to the Delivery Date true and complete
        copies of the  Certificate  of  Incorporation,  bylaws,  minutes  of all
        meetings of directors and shareholders  and certificates  reflecting all
        actions  taken by the  directors  or  shareholders  without  a  meeting,
        partnership  agreements  and  certificates,   and  other  organizational
        documents, of Seller and each Subsidiary, and such documents are in full
        force and effect on the date hereof.


a-72684.2
                                       15

<PAGE>



                2.7 Officers and Directors;  Bank Accounts;  Powers of Attorney.
        The  officers  and  directors  of each  Subsidiary  are as set  forth in
        Schedule 2.7 hereof. Schedule 2.7 hereof also sets forth (i) the name of
        each bank, savings  institution or other Person with which Seller or any
        Subsidiary has an account, lockbox or safe deposit box and the names and
        identification  of all Persons  authorized  to drawn  thereon or to have
        access  thereto,  and (ii) the  names of all  Persons,  if any,  holding
        powers of attorney from any  Subsidiary  and a summary  statement of the
        terms thereof.

                2.8      Financial Statements.

                         2.8.1 Since June 30, 1996,  the filings  required to be
                made by Seller and the Subsidiaries  under the Securities Act of
                1933,  as amended  (the  "Securities  Act"),  or the  Securities
                Exchange Act of 1934, as amended (the "Exchange Act"), have been
                filed with the SEC as required  by each such law or  regulation,
                including all forms,  statements,  reports,  agreements  and all
                documents,  exhibits,  amendments and  supplements  appertaining
                thereto,  and Seller and the  Subsidiaries  have complied in all
                material  respects  with  all  applicable  requirements  of  the
                appropriate act and the rules and regulations thereunder.

                         2.8.2 Seller  shall have made  available to Buyer on or
                prior  to the  Delivery  Date a true and  complete  copy of each
                report,  schedule,  registration  statement and definitive proxy
                statement  filed  by  Seller  and  the  Subsidiaries   with  the
                Securities  and Exchange  Commission  (the "SEC") since June 30,
                1996  (such  documents  as  filed,  and any  and all  amendments
                thereto,  being  collectively  referred  to  herein  as the "SEC
                Reports").

                         2.8.3 The SEC Reports, including without limitation any
                financial  statements or schedules included therein, at the time
                filed, and all forms, reports or other documents filed by Seller
                and the Subsidiaries with the SEC after the date hereof, did not
                and will not contain any untrue  statement of a material fact or
                omit to state a material fact  required to be stated  therein or
                necessary  to make  the  statements  therein,  in  light  of the
                circumstances under which they were made, not misleading.

                         2.8.4 The audited consolidated financial statements and
                unaudited  interim  financial   statements  of  Seller  and  the
                Subsidiaries  included  in the SEC  Reports  (collectively,  the
                "Financial  Statements")  have been  prepared,  and the  audited
                consolidated   financial   statements   and  unaudited   interim
                financial  statements of Seller and the Subsidiaries as included
                in all  forms,  reports  or other  documents  filed with the SEC
                after the date hereof will be prepared in  accordance  with GAAP
                (except as may be indicated  therein or in the notes thereto and
                except with respect to unaudited statements as permitted by Form
                10-Q) and fairly present in all material  respects the financial
                position  of Seller and the  Subsidiaries  as of the  respective
                dates  thereof or the results of  operations  and cash flows for
                the respective periods then ended, as the

a-72684.2
                                       16

<PAGE>



                case  may be,  subject,  in the  case of the  unaudited  interim
                financial statements, to normal, recurring audit adjustments.

                         2.8.5 As soon as  reasonably  practical  following  the
                Closing  Date,  Seller  (with  the  reasonable   assistance  and
                cooperation  of Buyer and employees of Buyer who were  employees
                of Seller immediately prior to Closing, such assistance to be at
                no  cost  to  Seller)  will  cause  to be  prepared  each of the
                following with respect to Seller and the Subsidiaries, as at and
                of the Closing Date: an audited  consolidated balance sheet (the
                "Closing Balance Sheet"), an audited  consolidated  statement of
                operations,  an audited consolidated statement of cash flows and
                an  audited  consolidated   statement  of  stockholders'  equity
                (collectively  with the  Closing  Balance  Sheet,  the  "Closing
                Financial Statements"),  which Closing Financial Statements will
                be prepared in accordance  with GAAP on a basis  consistent with
                the Financial Statements. In addition, the Closing Balance Sheet
                shall  be in the  form  of the  balance  sheet  included  in the
                Financial  Statements  dated June 30, 1998. One half of the fees
                paid to independent accounting firms incurred in connection with
                the  preparation of the Closing  Financial  Statements  shall be
                paid by Seller and the other half shall be paid by Buyer.

                2.9  Undisclosed  Liabilities.  Neither  Seller  nor  any of the
        Subsidiaries  has any  liabilities  or  obligations  (whether  absolute,
        accrued,  contingent or  otherwise)  of a nature  required by GAAP to be
        reflected  in  a  consolidated   balance  sheet,   except   liabilities,
        obligations or contingencies (i) that are accrued or reserved against in
        the audited consolidated  financial statements of Seller or reflected in
        the notes  thereto  for the year  ended  June 30,  1998,  (ii) have been
        accrued or been reserved  against since June 30, 1998, and are disclosed
        on Schedule 2.9 or (iii) that were incurred  after June 30, 1998, in the
        ordinary  course of  business  and would not have a  material  effect on
        Seller or any Subsidiary.

                 2.10 Absence of Certain Changes or Events. Since June 30, 1998,
         neither Seller nor any Subsidiary has:

                         (i) incurred  any  obligation  or  liability  (fixed or
                contingent),   except  normal  trade  or  business   obligations
                incurred in the ordinary  course of business and consistent with
                past practice,  none of which is materially adverse,  and except
                in  connection   with  this   Agreement  and  the   transactions
                contemplated hereby;

                         (ii)  discharged or satisfied any  Encumbrance  or paid
                any obligation or liability (fixed or contingent), other than in
                the  ordinary  course  of  business  and  consistent  with  past
                practice;

                         (iii)   mortgaged,   pledged   or   subjected   to  any
                Encumbrance any of its assets or properties (other than inchoate
                real  estate  tax  liens  not  due  and   payable,   mechanic's,
                materialman's   and  similar  statutory  liens  arising  in  the
                ordinary   course  of  business  and  purchase   money  security
                interests  arising  as a  matter  of law  between  the  date  of
                delivery and payment);

a-72684.2
                                       17

<PAGE>




                         (iv) transferred,  leased or otherwise  disposed of any
                of its assets or properties  except for a fair  consideration in
                the  ordinary  course  of  business  and  consistent  with  past
                practice  or,  except in the  ordinary  course of  business  and
                consistent   with  past   practice,   acquired   any  assets  or
                properties;

                          (v) cancelled or compromised any debt or claim, except
                 in the  ordinary  course of business and  consistent  with past
                 practice;

                          (vi) waived or released any rights of material value;

                         (vii) except pursuant to those contracts  listed on the
                Schedules  hereof,  transferred  or granted any rights under any
                concessions,  leases, licenses, agreements, patents, inventions,
                trademarks,  trade names,  service  marks or  copyrights or with
                respect to any know-how;

                         (viii)  made or  granted  any wage or  salary  increase
                applicable   to  any  group  or   classification   of  Employees
                generally,  entered into any  employment  contract with, or made
                any loan to, or entered  into any  material  transaction  of any
                other  nature  with,  any  officer  or  Employee,  except in the
                ordinary  course  of  business  or as  listed  on the  Schedules
                hereof;

                          (ix)  entered  into  any   transaction,   contract  or
                 commitment, except (a) contracts listed on the Schedules hereof
                 and  (b)  this  Agreement  and  the  transactions  contemplated
                 hereby; or

                         (x) suffered any  casualty  loss or damage  (whether or
                not such loss or damage  shall have been  covered by  insurance)
                which  affects in any  material  respect  its ability to conduct
                business.

                2.11 Taxes.  Seller and each  Subsidiary (i) has duly and timely
        filed or caused to be filed all  federal,  state,  local and foreign tax
        returns (including, without limitation, consolidated and/or combined tax
        returns)  required  to be filed by it  prior  to the date  hereof  which
        relate to it or with  respect  to which it or the  Assets  are liable or
        otherwise  in any way  subject;  (ii) has paid or fully  accrued for all
        taxes shown to be due and payable on such  returns  (which taxes are all
        the taxes due and  payable  under the laws and  regulations  pursuant to
        which such returns were filed);  and (iii) has properly  accrued for all
        such taxes accrued in respect of it or the Assets for periods subsequent
        to the periods  covered by such  returns.  No  deficiency  in payment of
        taxes for any period has been  asserted  by any taxing  body and remains
        unsettled  at the  date  hereof  and no  audits  are in  process  and no
        notification  of audit to begin has been  received  for which claims are
        unasserted.  Seller's tax returns for tax year 1995 have been audited by
        the Internal Revenue Service.  Copies of all federal,  state,  local and
        foreign income (or franchise) tax returns of Seller and the Subsidiaries
        for  tax  years  1996  and  thereafter  have  been  made  available  for
        inspection by Buyer.


a-72684.2
                                       18

<PAGE>



                2.12     Real Property.

                         2.12.1  Schedule  2.12A  hereof   identifies  the  real
                property  owned,  either in whole or in part, by Seller and each
                Subsidiary.

                         2.12.2  Schedule  2.12B  hereof   identifies  the  real
                property  leased or subleased by Seller and any Subsidiary  (the
                "Leases").  Neither  Seller nor any  Subsidiary has received any
                written  notification  that it is in default with respect to any
                of the Leases nor are there any  disputes  between any  landlord
                and Seller or any  Subsidiary  with  respect to the Leases  that
                would affect the right of Seller or such Subsidiary, as the case
                may be, to remain in possession or otherwise  affect the current
                use of the  property  leased.  Except as set  forth in  Schedule
                2.12B hereof, Seller or such Subsidiary, as the case may be, has
                performed all material  obligations  required to be performed by
                it to date under,  and is not in material default in respect of,
                any Lease,  and no event has occurred which,  with due notice or
                lapse of time or both, would constitute such a material default.
                To the best of Seller's  knowledge,  no other party to any Lease
                is in  material  default  in respect  thereof,  and no event has
                occurred which,  with due notice or lapse of time or both, would
                constitute such a default.

                         2.12.3 True and  complete  copies of all Leases and all
                title  reports,  surveys and other  leases  relating to the real
                property  owned by Seller or the  Subsidiaries  shall  have been
                made  available to Buyer or its  representatives  on or prior to
                the Delivery Date.

                2.13 Personal  Property.  The machinery,  equipment,  furniture,
        fixtures and other tangible personal  property owned,  leased or used by
        Seller or any of the  Subsidiaries  are sufficient and adequate to carry
        on their  respective  businesses as presently  conducted and are in good
        operating  condition  and repair and are  suitable  for the purposes for
        which they are used, normal "wear and tear" excepted.

                2.14 Title to Property; Encumbrances. Seller and each Subsidiary
        has good, valid and, in the case of real properties, marketable title to
        all the  properties  and assets  shown on the  Financial  Statements  or
        thereafter  acquired,  including  the Assets  (except for (i)  inventory
        subsequently  sold  or  otherwise  disposed  of for  fair  value  in the
        ordinary course of business consistent with past practice, (ii) accounts
        receivable  subsequently  collected in the  ordinary  course of business
        consistent with past practice and (iii) immaterial amounts of inventory,
        machinery  and  equipment  that have been  determined  to be obsolete or
        otherwise not necessary and have been disposed of in the ordinary course
        of business consistent with past practice),  in each case free and clear
        of all  Encumbrances  except for any  Encumbrance  reflected in Schedule
        2.14 hereof. All buildings, structures, improvements and fixtures owned,
        leased or used by  Seller  or any  Subsidiary  in the  conduct  of their
        respective businesses conform in all material respects to all applicable
        codes, and rules adopted by any applicable Governmental Body or national
        and local  associations  and boards of insurance  underwriters;  and all
        such  buildings,  structures,  improvements  and  fixtures  are in  good
        operating condition and repair, normal "wear and tear" excepted.

a-72684.2
                                       19

<PAGE>




                2.15 Insurance.  Schedule 2.15 hereof sets forth a complete list
        of all policies of or binders for fire, liability, worker's compensation
        and other forms of insurance  owned or held by Seller or any Subsidiary.
        All such policies, or binders thereof, are in full force and effect, all
        premiums with respect  thereto  covering all periods up to and including
        the  respective  dates set forth in Schedule 2.15 hereof have been paid,
        and no notice of  cancellation  or  termination  has been  received with
        respect to any such policy or binder.  Such  policies or binders (i) are
        sufficient  for  compliance  with  all  requirements  of  law  currently
        applicable to Seller or any  Subsidiary  and of all  agreements to which
        Seller  or any such  Subsidiary  is a party  or by which  any of them is
        bound; (ii) are in such amounts and types of coverage as are customarily
        maintained  by  businesses  of the size and type as Seller's or any such
        Subsidiary's;  (iii) provide insurance  coverage adequate for the Assets
        and  present  operations  of Seller and any such  Subsidiary;  (iv) will
        remain in full force and effect through the  respective  dates set forth
        in Schedule 2.15 hereof without the payment of additional premiums;  and
        (v) will not in any way be affected  by, or terminate or lapse by reason
        of, the  transactions  contemplated  by this  Agreement.  Schedule  2.15
        hereof also  identifies  all risks which  Seller or any  Subsidiary  has
        designated as being self-insured.  Neither Seller nor any Subsidiary has
        been refused any insurance with respect to its assets or operations, nor
        has its coverage been limited,  by any insurance carrier to which it has
        applied for any such  insurance  or with which it has carried  insurance
        during the last five years.

                2.16     Business Property Rights.

                         2.16.1 Schedule 2.16 hereof sets forth (i) all computer
                software,  patents,  and  registrations  for  trademarks,  trade
                names,  service marks and  copyrights  which are unexpired as of
                the  date  hereof  and  which  are used in  connection  with the
                operation of Seller's and each Subsidiary's business, as well as
                all  applications  pending  on  said  date  for  patents  or for
                trademark,  trade name, service mark or copyright registrations,
                and all other trade  secrets and  proprietary  rights,  owned or
                held by Seller  and each  Subsidiary  and  which are  reasonably
                necessary to, or used in connection with, the business of Seller
                or such  Subsidiary;  and (ii) all  licenses  (other than shrink
                wrap licenses) granted by or to Seller or any Subsidiary and all
                other  agreements  to which Seller or any  Subsidiary is a party
                and  which  relate,  in whole or in  part,  to any  items of the
                categories  mentioned  in (i)  above or to any  trade  secret or
                other  proprietary  rights of Seller or any Subsidiary which are
                reasonably  necessary  to,  or  used  in  connection  with,  the
                business of Seller or any Subsidiary.

                         2.16.2  The  property  referred  to in  Section  2.16.1
                hereof,  together  with (i) all  designs,  methods,  inventions,
                know-how, related thereto and (ii) all trademarks,  trade names,
                service marks,  and copyrights  claimed or used by Seller or any
                Subsidiary   which  have  not  been   registered   (collectively
                "Business  Property  Rights"),  constitute all such  proprietary
                rights owned or held by Seller or any  Subsidiary  and which are
                reasonably  necessary to, or used in the conduct of the business
                of Seller or any  Subsidiary.  All of those items  designated as
                trade secrets and all related designs,  methods,  inventions and
                know-how constitute trade secrets of Seller or any

a-72684.2
                                       20

<PAGE>



                Subsidiary within the meaning of all applicable laws, and Seller
                and each  Subsidiary  has taken all necessary  steps required by
                law to protect these trade secrets as such. With respect to each
                such trade  secret,  the  documentation  relating  to such trade
                secret is  current,  accurate,  and  sufficient  in  detail  and
                content to  identify it and to allow its full and proper use. No
                such  trade  secrets  are  part  of  the  public   knowledge  or
                literature,  nor have they been used, divulged,  or appropriated
                for the benefit of any Third Party or otherwise to the detriment
                of Seller or any Subsidiary.

                         2.16.3 Seller or a Subsidiary, as the case may be, owns
                or has valid  rights to use all such  Business  Property  Rights
                without conflict with the rights of others.  Except as set forth
                in Schedule 2.21 hereof,  no Person or corporation  has made or,
                to the  knowledge of Seller or the  Subsidiaries,  Threatened to
                make any claims that the  operation of the business of Seller or
                the  Subsidiaries  is in  violation  of or  infringes  any other
                proprietary or trade rights of any Third Party. To the knowledge
                of Seller or the Subsidiaries, no Third Party is in violation of
                or is infringing upon any Business Property Rights.

                 2.17 Collective Bargaining Agreements.  There are no collective
 bargaining  agreements  which  relate to any Seller or  Subsidiary  or to which
 Seller or any Subsidiary is a party or which cover one or more Employees.

        2.18    Employees.

                         2.18.1  Schedule  2.18.  to this  Agreement  contains a
                complete and accurate list of the following information for each
                Employee,  including each Employee on leave of absence or layoff
                status:  (i) name; (ii) address;  (iii) telephone  number;  (iv)
                social security number; (v) date of birth; (vi) job title; (vii)
                date of hire;  (viii)  hourly  or  weekly  compensation  rate in
                effect on June 30, 1998,  and a comparison  of such rate to that
                in effect  on June 30,  1997;  (ix)  vacation  accrued;  and (x)
                service  credited  for  purposes of vesting and  eligibility  to
                participate  under  any  pension,  retirement,   profit-sharing,
                thrift-savings,   deferred  compensation,   stock  bonus,  stock
                option,   cash  bonus,   employee  stock  ownership   (including
                investment  credit or payroll stock  ownership),  severance pay,
                insurance,  medical,  welfare,  or vacation  plan,  or any other
                employee benefit plan. To the best of Seller's knowledge, during
                the past four  years  neither  Seller  nor any  Subsidiary  has,
                directly or indirectly, purchased, leased, acquired any property
                or obtained any services from, or sold, leased,  disposed of any
                property or furnished  any services to, or otherwise  dealt with
                any Employee or any Person, firm or corporation which,  directly
                or  indirectly,  alone or together  with  others,  controls,  is
                controlled  by or is under  common  control  with any  Employee,
                except with respect to remuneration  for services  rendered as a
                director, officer or employee of Seller or any Subsidiary.

                         2.18.2 To the best of  Seller's  knowledge,  no part of
                the property or assets of any Employee or any Person, individual
                or organization  directly or indirectly  related to any Employee
                is used by Seller or any Subsidiary.

a-72684.2
                                       21

<PAGE>




                         2.18.3   Neither   Seller   nor  any   Subsidiary   has
                encountered  any  actual or  threatened  Employee  strike,  work
                stoppage, slowdown or lockout, or had any material change in its
                relations with Employees, agents, customers or suppliers for the
                three  years  prior to the date of this  Agreement.  No question
                concerning  representation has been raised or is threatened with
                respect to the Employees.

                         2.18.4 No  "leased  employee",  as that term is defined
                within  the  meaning  of  Section  414(n) of the Code,  performs
                services  for  Seller or any  Subsidiary  other  than  temporary
                employees.

                         2.18.5   The    consummation   of   the    transactions
                contemplated  by this Agreement will not (i) entitle any current
                or former  Employee or current or former  officer or director of
                Seller  or  any  Subsidiary  to  severance   pay,   unemployment
                compensation or any other payment,  except as expressly provided
                in this  Agreement;  (ii)  accelerate  the  time or  payment  or
                vesting,  or increase  the amount of  compensation  due any such
                Employee, officer or director; or (iii) result in any prohibited
                transaction described in Section 406 of ERISA or Section 4975 of
                the Code for which an exemption is not available.

                         2.18.6  Seller and the  Subsidiaries  are currently and
                have always been in compliance in all material respects with all
                applicable laws respecting  employment and employment practices,
                terms and conditions of wages and hours,  and are not engaged in
                any unfair labor practice.

                         2.18.7  Neither Seller nor any Subsidiary (i) has taken
                any action which, alone or in conjunction with actions committed
                by Seller or such  Subsidiary  prior to the  Closing  Date to be
                taken in the future, would constitute a "plant closing" or "mass
                layoff"  within  the  meaning  of  the  Worker   Adjustment  and
                Retraining Notification Act ("WARN") or applicable state law; or
                (ii) has issued any  notification  of a "plant closing" or "mass
                layoff" required by WARN or by applicable state law.

                2.19  Other  Contracts.  Schedule  2.19  hereof  sets  forth all
        contracts,    understandings   and   commitments   (including,   without
        limitation,  mortgages,  indentures and loan agreements) to which Seller
        or any  Subsidiary  is a party,  or to which it or any of its  assets or
        properties are subject,  and which are not  specifically  referred to in
        the other  Schedules  hereof  other than those which are exempted by the
        terms of Section 1.3(ii) hereof from being listed on Schedule 1.3B. True
        and complete  copies of all documents and complete  descriptions  of all
        oral  understandings,  if  any,  referred  to in the  Schedules  will be
        provided or made  available  to Buyer and its counsel on or prior to the
        Delivery Date.

                2.20 No Breach or Default.  Neither Seller nor any Subsidiary is
        in  material  default  under any  contract  to which it is a party or by
        which it is bound, nor has any event occurred which, after the giving of
        notice or the  passage  of time or both,  would  constitute  a  material
        default under any such contract.  Neither Seller nor any such Subsidiary
        have any

a-72684.2
                                       22

<PAGE>



        reason to believe  that the parties to such  contracts  will not fulfill
        their  obligations  under such contracts in all material respects or are
        threatened with insolvency.

                2.21     Litigation.

                         2.21.1  Schedule  2.21  hereof  sets forth a list and a
                summary description of all pending or Threatened  Proceedings in
                respect  of Seller and the  Subsidiaries,  setting  forth,  with
                respect to each action or suit,  (i) the  reserves  reflected in
                the most recent Financial  Statements and (ii) the existence and
                extent of insurance coverage.

                         2.21.2  Except as set forth in  Schedule  2.21  hereof,
                there are no claims or Proceedings  pending or Threatened before
                any  Governmental  Body or before any  arbitrator of any nature,
                brought by or against Seller or any of the  Subsidiaries  or any
                of their respective officers,  directors,  Employees,  agents or
                affiliates  involving,  affecting  or  relating  to any  assets,
                properties or operations of Seller or any of the Subsidiaries or
                the transactions  contemplated by this Agreement, nor does there
                exist any fact which might  reasonably  be expected to give rise
                to any such suit, Proceeding, dispute or investigation.

                         2.21.3 Neither Seller nor any of the  Subsidiaries  nor
                any of their  respective  assets or properties is subject to any
                Order of any  Governmental  Body or arbitrator,  which adversely
                affects  or  might   reasonably  be  expected  to  affect  their
                respective assets,  properties,  business operation,  prospects,
                net  income  or  financial  condition  or  which  would or might
                reasonably  be  expected  to  interfere  with  the  transactions
                contemplated hereby.

                         2.21.4  Other than as  provided  in  Section  1.4(iii),
                Buyer is not assuming any  liabilities  or obligations of Seller
                or the Subsidiaries set forth on Schedule 2.21. Schedule 2.21 is
                provided to Buyer solely for informational purposes. Buyer does,
                however,  agree to  cooperate,  at  Seller's  expense,  with the
                reasonable   requests  of  Seller  to  make  available   certain
                witnesses and other evidence  during the pendency of the matters
                set forth in Schedule 2.21.

                2.22  Accounts  Receivable.  All trade  accounts  receivable  of
        Seller and the  Subsidiaries  reflected in the Financial  Statements and
        all trade  accounts  receivable of Seller and the  Subsidiaries  arising
        between  June 30, 1998 and the Closing  Date have arisen in the ordinary
        course of business  and  represent  bona fide,  undisputed  indebtedness
        (subject to no  counterclaim,  right of setoff or  warranty  claim other
        than as will be reserved  against in the Closing Balance Sheet) incurred
        by the  applicable  account  debtor for goods held  subject to  delivery
        instructions  or shipped or delivered  pursuant to a contract of sale or
        for services  performed by Seller or the  Subsidiaries,  as the case may
        be.

                 2.23 Inventories and Supplies.  The inventories and supplies of
         Seller and the Subsidiaries  reflected in the Financial Statements,  or
         acquired by Seller or the  Subsidiaries  between June 30, 1998, and the
         date hereof, are carried at not in excess of the lower of cost

a-72684.2
                                       23

<PAGE>



        or fair market  value,  and do not include  any  inventory  which is not
        usable or  saleable in the  ordinary  course of business of Seller or of
        the Subsidiaries as heretofore  conducted,  in each case net of reserves
        provided therefor in such Financial Statements in accordance with GAAP.

                 2.24  Environmental  Matters.  Except as set forth in  Schedule
         2.24 hereof, 

                         2.24.1  Seller and all  Subsidiaries  are in compliance
                with and are not liable  under any  Environmental  Law.  Neither
                Seller  nor any  Subsidiary  has  received  any Order or written
                notice from any  Governmental  Body or other Person alleging any
                violation of or failure to comply with any Environmental Law, or
                any actual or  Threatened  obligation  to  undertake or bear the
                cost of any Environmental Liabilities with respect to any of the
                Facilities,  or with  respect  to any  property  at, to, or from
                which Hazardous Materials were generated, manufactured, refined,
                transferred,  imported, used, processed,  transported,  treated,
                stored,  handled,  disposed,  recycled, or received by Seller or
                any Subsidiary or any of their respective employees.

                         2.24.2   There  are  no  Claims   resulting   from  any
                Environmental  Liabilities  that have been asserted with respect
                to or  affecting  any  of  the  Facilities  or  that  relate  to
                ownership or operation by Seller or any Subsidiary.

                         2.24.3 There are no Hazardous  Materials  present on or
                in the  Environment at the  Facilities,  including any Hazardous
                Materials  contained in barrels,  above or  underground  storage
                tanks,  landfills,  land  deposits,  dumps,  equipment  (whether
                moveable  or fixed) or other  containers,  either  temporary  or
                permanent,  and deposited or located in land,  water,  sumps, or
                any  other  part of the  Facilities,  or  incorporated  into any
                structure   therein  or  thereon   except  in  compliance   with
                Environmental  Laws and with regard to which no remedial  action
                would be required if brought to the attention of a  Governmental
                Body with jurisdiction.

                         2.24.4 Seller has delivered or made  available to Buyer
                true and complete  copies and results of any  reports,  studies,
                analyses,  tests,  or  monitoring  possessed  by  Seller  or any
                Subsidiary  pertaining to Hazardous  Materials in, on, or under,
                or to Environmental issues relating to, the Facilities or Former
                Facilities.

                 2.25 Customers and  Suppliers.  Except as set forth in Schedule
         2.25 hereof, 

                         (i)  neither  Seller nor any  Subsidiary  has  received
                notice  that,  nor  does  Seller  or  any  Subsidiary  have  any
                knowledge  that, any customer of Seller or any  Subsidiary  has,
                will or plans to  discontinue  doing business with Seller or any
                Subsidiary;

                         (ii)  neither   Seller  nor  any   Subsidiary  has  any
                outstanding  purchase  contracts or  commitments  or  unaccepted
                purchase orders which are in excess of the normal,  ordinary and
                usual requirements;

a-72684.2
                                       24

<PAGE>




                         (iii) no  supplier  or  subcontractor  to Seller or any
                Subsidiary  has reduced its shipments of orders issued by Seller
                or any Subsidiary, or threatened to discontinue,  supplying such
                items or  services  to Seller or any  Subsidiary  on  reasonable
                terms; and

                         (iv)  neither  Seller nor any  Subsidiary  has received
                notice  that,  nor  does  Seller  or  any  Subsidiary  have  any
                knowledge that, any such supplier or subcontractor  has, will or
                plans  to   discontinue   doing  business  with  Seller  or  any
                Subsidiary  on  substantially  the same terms as are  consistent
                with its past practices.

                2.26 No Brokers.  Neither  Seller nor any Subsidiary has entered
        into any contract,  arrangement or understanding with any Person or firm
        which may result in the obligation of Buyer, Seller or any Subsidiary to
        pay any finder's  fees,  brokerage or agent's  commissions or other like
        payments in connection with the  negotiations  leading to this Agreement
        or the consummation of the transactions contemplated hereby, and neither
        Seller nor any  Subsidiary  is aware of any claim or basis for any claim
        for payment of any finder's  fees,  brokerage or agent's  commissions or
        other like payments in connection with the negotiations  leading to this
        Agreement or the consummation of the transactions contemplated hereby.

                2.27 No  Misrepresentation  or Omission.  No  representation  or
        warranty  by Seller in this  Section 2 or in any other  Section  of this
        Agreement,  or in any  certificate or other document  furnished or to be
        furnished by Seller pursuant hereto, contains or will contain any untrue
        statement  of a material  fact or omits or will omit to state a material
        fact necessary to make the statements  contained  therein not misleading
        or will omit to state a  material  fact  necessary  in order to  provide
        Buyer with accurate information as to Seller and the Subsidiaries.

                2.28   Survival   of   Representations   and   Warranties.   All
        representations  and  warranties  by Seller in this  Section 2 or in any
        other Section hereof, or in any certificate or other document  furnished
        or to be furnished by Seller pursuant hereto,  shall survive delivery by
        Buyer of the  consideration  to be given by it hereunder and delivery by
        Seller  of the  consideration  to be given by it  hereunder,  and  shall
        survive the  execution  hereof,  the Closing  hereunder  and the Closing
        Date; provided,  however,  that no claim based on any breach of any such
        warranty or any  misrepresentation  may be made by any Buyer  Indemnitee
        unless  written  notice with  respect  thereto is given on or before the
        third anniversary of the Closing Date.

        3.  Representations and Warranties of Buyer. Buyer hereby represents and
warrants  to  Seller  as  follows  (Buyer  reserving  the right to attach at the
Delivery Date and update at and as of the Closing Date  Schedules in addition to
those  called  for  herein  and  to add  references  thereto  in  the  following
warranties and representations as appropriate):

                 3.1 Existence; Good Standing;  Corporate Authority;  Compliance
         With  Law.  Buyer  (i)  is a  corporation  duly  incorporated,  validly
         existing in good standing under the laws

a-72684.2
                                       25

<PAGE>



        of its jurisdiction of incorporation; (ii) is duly licensed or qualified
        to do business as a foreign  corporation  and is in good standing  under
        the laws of all  other  jurisdictions  in  which  the  character  of the
        properties  owned or leased by it therein or in which the transaction of
        its business makes such qualification necessary except where the failure
        to be so  qualified  would  not be  material;  (iii)  has all  requisite
        corporate  power and  authority to own its  properties  and carry on its
        business as now conducted;  (iv) is not in material default with respect
        to any  Order of any  Governmental  Body or  arbitration  board to which
        Buyer is a party or is subject;  (v) is not in material violation of any
        laws,  ordinances,  governmental  rules  or  regulations  to which it is
        subject; and (vi) has obtained all material licenses,  permits and other
        authorizations  and has taken all actions required by applicable laws or
        governmental   regulations  in  connection  with  its  business  as  now
        conducted.

                3.2      Authorization, Validity and Effect of Agreements.

                         3.2.1 The execution and delivery of this  Agreement and
                all agreements and documents  contemplated  hereby by Buyer, and
                the consummation by it of the transactions  contemplated hereby,
                have been duly authorized by all requisite corporate action.

                         3.2.2 This  Agreement  constitutes,  and all agreements
                and  documents  contemplated  hereby when executed and delivered
                pursuant  hereto for value received will  constitute,  the valid
                and  legally  binding   obligations  of  Buyer   enforceable  in
                accordance with their terms,  except that  enforceability may be
                limited by applicable  bankruptcy,  insolvency,  reorganization,
                fraudulent  transfer,   moratorium,   bulk  sales,   preference,
                equitable  subordination,  marshalling  or other similar laws of
                general  application  now or hereafter in effect relating to the
                enforcement of creditors'  rights  generally and except that the
                remedies of specific performance,  injunction and other forms of
                equitable   relief  are  subject  to  certain  tests  of  equity
                jurisdiction, equitable defenses and the discretion of the court
                before which any proceeding therefor may be brought.

                         3.2.3 The execution  and delivery of this  Agreement by
                Buyer  does  not,  and  the  consummation  of  the  transactions
                contemplated  hereby  will  not,  (i)  except  as set  forth  on
                Schedule   3.2  hereof,   require  the   consent,   approval  or
                authorization of, or declaration,  filing or registration  with,
                any  Governmental  Body or any Third  Party,  (ii) result in the
                breach  of any term or  provision  of, or  constitute  a default
                under, or result in the  acceleration of or entitle any party to
                accelerate  (whether  after the giving of notice or the lapse of
                time or both) any obligation under, or result in the creation or
                imposition of any  Encumbrance  upon any part of the property of
                Buyer  pursuant  to any  provision  of,  any  Order,  indenture,
                mortgage, lease, license, lien, or other agreement or instrument
                to which  Buyer is a party or by which it is  bound,  and  (iii)
                violate  or  conflict  with  any  provision  of  the  bylaws  or
                Certificate  of  Incorporation  of Buyer as  amended to the date
                hereof.


a-72684.2
                                       26

<PAGE>



                3.3   Survival   of   Representations   and   Warranties.    All
        representations  and  warranties  by Buyer in this  Section  3 or in any
        other Section hereof, or in any certificate or other document  furnished
        or to be furnished by Buyer pursuant  hereto,  shall survive delivery by
        Buyer of the  consideration  to be given by it hereunder and delivery by
        Seller  of the  consideration  to be given by it  hereunder,  and  shall
        survive the  execution  hereof,  the Closing  hereunder  and the Closing
        Date;  provided,  however,  that, other than as set forth in Section 4.2
        hereof,  no  claim  based on any  breach  of any  such  warranty  or any
        misrepresentation  may be made by  Seller  unless  written  notice  with
        respect  thereto  is given on or  before  the third  anniversary  of the
        Closing Date.

        4.      Indemnification.

                4.1  Indemnification  by Seller.  Subject to the  provisions  of
        Section 5.15 below and upon the terms and subject to the  conditions set
        forth in Sections 4.3 and 4.5 hereof and this Section 4.1, Seller agrees
        to  indemnify,  defend,  protect,  save  and  hold  harmless  the  Buyer
        Indemnitees (or any Buyer  Indemnitee)  against,  and will reimburse the
        Buyer Indemnitees (or any Buyer Indemnitee) for, any and all Losses made
        or incurred by or asserted  against the Buyer  Indemnitees (or any Buyer
        Indemnitee), at any time after the Closing Date, directly or indirectly,
        arising out of,  related  to,  caused by, or  resulting  from any of the
        following (in each case regardless of by whom asserted):

                         4.1.1 any and all  liabilities or obligations of Seller
                or claims  against or imposed on the Buyer  Indemnitees  (or any
                Buyer Indemnitee), of any nature, including, without limitation,
                those relating to the respective  business  activities of Seller
                and the  Subsidiaries  or to  conditions  existing on any of the
                Facilities prior to the Closing Date (whether accrued, absolute,
                contingent  or  otherwise  and  whether  a   contractual,   tax,
                statutory or other type of  liability,  obligation or claim) not
                specifically   assumed  by  Buyer  pursuant  hereto  (including,
                without  limitation,  those liabilities or obligations of Seller
                specifically referred to in Section 1.4 hereof);

                         4.1.2  any  inaccuracy,  omission,   misrepresentation,
                breach of warranty or  representation,  or nonfulfillment of any
                term,  provision,  covenant or  agreement  on the part of Seller
                contained herein, or any inaccuracy or misrepresentation  in, or
                omission from, any certificate or other instrument  furnished or
                to be furnished by Seller to Buyer pursuant hereto;

                         4.1.3 Seller's failure to comply with any bulk transfer
                provisions  which  may be in  effect  in the  state or states in
                which the Assets are located;

                         4.1.4   (i)  any   Breach   by   Seller   of   Seller's
                environmental  representation  and  warranty  contained  herein;
                (this indemnity is intended to allocate  responsibility  between
                Seller and Buyer and any other Indemnified Party as contemplated
                by Section 107(e)(1) of CERCLA or similar law);


a-72684.2
                                       27

<PAGE>



                         4.1.5  any  and  all  items  listed  on  the  Schedules
                delivered  subsequent  to the Closing,  objected to by Buyer and
                determined  in  accordance  with  Section  5.15 hereof not to be
                items assumed by Buyer pursuant hereto.

                As used herein,  the term "Losses"  shall mean,  with respect to
        any Person or party, any payment,  loss, liability,  obligation,  damage
        (including,  without  limitation,  consequential,  punitive,  special or
        otherwise),  deficiency,  lien, claim, suit, cause of action,  judgment,
        cost or expense (including,  without limitation,  reasonable  attorneys'
        fees and  court  costs  and  costs  of  cleanup,  containment,  or other
        remediation of the Environment) of any kind, nature or description.

                 As used herein,  the term "Buyer  Indemnitees" shall mean Buyer
         and any affiliate of Buyer;

                As used herein, the term "affiliate" shall mean, with respect to
        any Person or party, (i) any Person or party controlling,  controlled by
        or  under  common  control  with any  such  Person  or party or (ii) any
        director  or  executive  officer  of any such  Person or party or of any
        Person or party  referred  to in clause (i) of this  paragraph.  As used
        herein,  the term  "control"  shall  mean the  possession,  directly  or
        indirectly,  of the  power to  direct  or  cause  the  direction  of the
        management  and  policies  of a Person or  party,  whether  through  the
        ownership  of voting  securities  or voting  interests,  by  contract or
        otherwise.

                Notwithstanding  anything to the contrary  contained herein, the
        parties agree that any Buyer  Indemnitee's sole remedy for any claim for
        damages  (excluding  equitable  remedies and those resulting from fraud)
        arising  under this  Agreement  (including  the  Schedules) or any other
        agreement  between Buyer and Seller entered into in connection  herewith
        (including any claim based upon Seller's warranties, representations and
        covenants contained herein) shall be limited to the remedies provided in
        the  indemnification  provisions  of  this  Section  4  and  the  Escrow
        Agreement.  Further,  Buyer  waives  all other  statutory  or common law
        rights  to  recover   against   Seller  for  any  matter   relating   to
        Environmental  Contamination,  Environmental  Liabilities  or  Hazardous
        Materials.  There shall be no limit on Seller's  obligation to indemnify
        and hold harmless any Buyer  Indemnitee from or against Losses resulting
        from fraud.

                4.2  Indemnification by Buyer. Upon the terms and subject to the
        conditions  set forth in Section 4.3 hereof and this Section 4.2,  Buyer
        agrees to indemnify,  defend,  protect,  save and hold  harmless  Seller
        against,  and will  reimburse  Seller on demand for,  any and all Losses
        made or incurred by or asserted  against  Seller,  at any time after the
        Closing Date, directly or indirectly, arising out of, related to, caused
        by, or resulting from (i) any inaccuracy,  omission,  misrepresentation,
        breach of warranty, or nonfulfillment of any term,  provision,  covenant
        or agreement on the part of Buyer contained herein,  (ii) any inaccuracy
        or  misrepresentation  in, or omission  from,  any  certificate or other
        instrument  furnished  or to be  furnished  by Buyer to Seller  pursuant
        hereto or (iii)  operation  of  business  activities  of Buyer after the
        Closing Date  involving the Assets.  Within 45 days  following the first
        anniversary  of the  Closing  Date,  Buyer  shall  deliver  to  Seller a
        certificate of Buyer certifying

a-72684.2
                                       28

<PAGE>



        which of those  liabilities and obligations of Buyer assumed from Seller
        pursuant to this  Agreement and listed on Schedule 1.3A or Schedule 1.3B
        (each as updated to Closing) had become due and payable but had not been
        paid in full or  resolved  as of the first  anniversary  of the  Closing
        Date. With respect to the  liabilities  and  obligations  listed in such
        certificate (or which were erroneously  omitted from such  certificate),
        Buyer's  obligations  pursuant to this Section 4.2 shall  terminate upon
        the payment or resolution of such liability or obligation.  With respect
        to those  liabilities  and  obligations  of Buyer  assumed  from  Seller
        pursuant to this  Agreement and listed on Schedule 1.3A or Schedule 1.3B
        (each as updated to Closing) which by their  respective  terms in effect
        at Closing will become due and payable later than the first  anniversary
        of the Closing Date,  Buyer's  obligations  pursuant to this Section 4.2
        shall  terminate  upon the payment or  resolution  of such  liability or
        obligation.  In the  event  the  certificate  is not  timely  delivered,
        Buyer's obligation pursuant to this Section 4.2 shall terminate upon the
        payment or resolution  of all  liabilities  assumed  pursuant to Section
        1.3.  With respect to all other  liabilities  and  obligations  of Buyer
        assumed  from Seller  pursuant to this  Agreement,  Buyer's  obligations
        pursuant to this Section 4.2 shall terminate upon the third  anniversary
        of the Closing  Date.  There shall be no limit on Buyer's  obligation to
        indemnify and hold harmless Seller from or against Losses resulting from
        fraud.

                4.3 Conditions of Indemnification. With respect to any actual or
        potential claim, any written demand,  the commencement of any action, or
        the  occurrence of any other event which  involves any matter or related
        series  of  matters  (a  "Claim")   against  which  a  party  hereto  is
        indemnified   (the   "Indemnified   Party")  by  the  other  party  (the
        "Indemnifying Party") under Section 4.1 or 4.2 hereof:

                         4.3.1  Promptly  after  the  Indemnified   Party  first
                receives written  documents  pertaining to the Claim, or if such
                Claim  does not  involve a Third  Party  Claim (a  "Third  Party
                Claim"),  promptly after the Indemnified  Party first has actual
                knowledge of such Claim, the Indemnified Party shall give notice
                to the Indemnifying Party of such Claim in reasonable detail and
                stating the amount involved,  if known,  together with copies of
                any such written documents.

                         4.3.2  The  obligation  of the  Indemnifying  Party  to
                indemnify the Indemnified  Party with respect to any Claim shall
                not be affected by the failure of the Indemnified  Party to give
                the notice with respect thereto in accordance with Section 4.3.1
                hereof unless the Indemnifying Party shall establish that it has
                been materially prejudiced thereby.

                         4.3.3 If the Claim  involves a Third Party Claim,  then
                the  Indemnifying  Party  shall,  at its sole cost,  expense and
                ultimate  liability  regardless  of  the  outcome,  and  through
                counsel  of  its  choice  (which  counsel  shall  be  reasonably
                satisfactory to the Indemnified Party), litigate, defend, settle
                or  otherwise   attempt  to  resolve  such  Third  Party  Claim;
                provided, however, that if in the Indemnified Party's reasonable
                judgment a conflict  of interest  may exist with  respect to the
                Third Party Claim,  then the Indemnified Party shall be entitled
                to select counsel of its own choosing,  reasonably  satisfactory
                to the Indemnifying Party, in which event the Indemnifying

a-72684.2
                                       29

<PAGE>



                Party shall be  obligated  to pay the fees and  expenses of such
                counsel. Notwithstanding the preceding sentence, the Indemnified
                Party may elect, at any time and at the Indemnified Party's sole
                cost, expense and ultimate liability,  regardless of the outcome
                (in the case of  reasons  other  than the  Indemnifying  Party's
                failure or  refusal  to  provide a defense  to such Third  Party
                Claim), and through counsel of its choice, to litigate,  defend,
                settle or  otherwise  attempt to resolve such Third Party Claim.
                If the  Indemnified  Party so elects (for reasons other than the
                Indemnifying  Party's failure or refusal to provide a defense to
                such Third Party Claim),  then the Indemnifying Party shall have
                no obligation to indemnify the Indemnified Party with respect to
                such Third Party  Claim,  but such  disposition  will be without
                prejudice to any other right the  Indemnified  Party may have to
                indemnification  under Section 4.1 or 4.2 hereof,  regardless of
                the outcome of such Third Party Claim. If the Indemnifying Party
                fails or refuses to provide a defense to any Third Party  Claim,
                then the Indemnified Party shall have the right to undertake the
                defense,  compromise  or  settlement  of such Third Party Claim,
                through counsel of its choice,  on behalf of and for the account
                and at the risk of the Indemnifying  Party, and the Indemnifying
                Party  shall  be  obligated  to  pay  the  costs,  expenses  and
                attorney's fees incurred by the Indemnified  Party in connection
                with such Third Party Claim. In any event,  Seller and the Buyer
                Indemnitees  shall  fully  cooperate  with each  other and their
                respective  counsel  in  connection  with any  such  litigation,
                defense, settlement or other attempted resolution.

                4.4      Monetary Limits of Indemnification.

                         4.4.1  Notwithstanding  the  provisions  of Section 4.1
                hereof,  Seller  will  not be  obligated  to  indemnify  or hold
                harmless any Buyer Indemnitee from or against Losses arising out
                of or resulting  from matters  described in Section 4.1,  (other
                than Losses  directly or indirectly  arising out of, related to,
                caused  by,  or  resulting  from  any  inaccuracy,  omission  or
                misrepresentation   contained  in,  or  breach  of  warranty  or
                representation  respecting,  Section 2.22),  until the amount of
                such Losses  individually or in the aggregate  exceed the amount
                of  $200,000  (the  "Floor  Amount").  Upon  reaching  the Floor
                Amount,  Seller  shall be required to indemnify  the  applicable
                Buyer Indemnitee for Losses  comprising the Floor Amount as well
                as all Losses occurring thereafter only from the Escrow Fund and
                only up to (except in the cases of Losses  resulting from fraud)
                an aggregate  amount equal to the amount of the Escrow Fund then
                outstanding  (the  "Seller's  Ceiling  Amount").  Seller will be
                obligated to indemnify  and hold  harmless any Buyer  Indemnitee
                from or against  Losses  directly or indirectly  arising out of,
                related  to,  caused  by,  or  resulting  from  any  inaccuracy,
                omission  or  misrepresentation   contained  in,  or  breach  of
                warranty or  representation  respecting,  Section 2.22 up to the
                Seller's  Ceiling  Amount  without  regard to the Floor  Amount.
                Seller will be  obligated  to  indemnify  and hold  harmless any
                Buyer  Indemnitee  from or against Losses directly or indirectly
                arising out of,  related to,  caused by, or  resulting  from any
                inaccuracy,  omission  or  misrepresentation  contained  in,  or
                breach of warranty or representation respecting, Sections 2.12.2
                or 2.20 without regard to the  materiality  of such  inaccuracy,
                omission,

a-72684.2
                                       30

<PAGE>



                misrepresentation,  or breach  of  warranty  or  representation.
                Notwithstanding  the provisions of Section 4.1 hereof and except
                in the cases of Losses resulting from fraud,  Seller will not be
                obligated  to indemnify  or hold  harmless any Buyer  Indemnitee
                from or against  Losses to the extent  such Losses are in excess
                of the Seller's Ceiling Amount. There shall be no monetary limit
                on Seller's  obligation to indemnify and hold harmless any Buyer
                Indemnitee from or against Losses resulting from fraud.

                         4.4.2  Notwithstanding  the  provisions  of Section 4.2
                hereof,  Buyer  will  not be  obligated  to  indemnify  or  hold
                harmless  Seller  from  or  against  Losses  arising  out  of or
                resulting  from matters  described  in Section 4.2,  (other than
                Losses directly or indirectly arising out of, related to, caused
                by, or resulting from any  nonfulfillment of any covenant on the
                part of Buyer contained in Section 1.3 hereof or any certificate
                related thereto),  until the amount of such Losses  individually
                or in the aggregate  exceed the Floor Amount.  Upon reaching the
                Floor  Amount,  Buyer shall be required to indemnify  Seller for
                Losses  comprising  the  Floor  Amount  as  well  as all  Losses
                occurring  thereafter  only up to (except in the cases of Losses
                resulting  from fraud) an aggregate  amount equal to $12,000,000
                (the  "Buyer's  Ceiling  Amount").  Buyer will be  obligated  to
                indemnify  and  hold  harmless  Seller  from or  against  Losses
                directly or indirectly arising out of, related to, caused by, or
                resulting from any nonfulfillment of any covenant on the part of
                Buyer  contained in Section 1.3 hereof up to the Buyer's Ceiling
                Amount without regard to the Floor Amount.  Notwithstanding  the
                provisions  of  Section  4.2  hereof  and except in the cases of
                Losses  resulting  from fraud,  Buyer will not be  obligated  to
                indemnify or hold harmless  Seller from or against Losses to the
                extent such Losses are in excess of the Buyer's  Ceiling Amount.
                There  shall be no  monetary  limit  on  Buyer's  obligation  to
                indemnify  and  hold  harmless  Seller  from or  against  Losses
                resulting from fraud.

                4.5      Environmental Remediation.

                         4.5.1.  The term  "Environmental  Contamination"  shall
                mean  the  presence  of  Hazardous   Materials  at  any  of  the
                Facilities.  Environmental  Contamination  is indemnifiable as a
                Loss under Section 4.1 hereof if it has resulted in the issuance
                of  a  final  Order  or  legally  enforceable   directive  by  a
                Governmental  Body or if it  triggers a Legal  Requirement  that
                imposes  an  obligation  to act,  or, for  Facilities  on leased
                property,  when  brought to the  attention  of the landlord as a
                result of a legal  requirement or a requirement  under the lease
                to so  notify,  results in a legally  enforceable  demand by the
                landlord for remediation.

                         4.5.2 The  addressing of  Environmental  Contamination,
                (whether   by   assessment,   negotiation,    compromise,   risk
                assessment,  cleanup  or  otherwise)  (hereafter  "Environmental
                Remediation")  identified  by the  Environmental  Due  Diligence
                Review shall be  performed by Seller,  to the extent the cost of
                the  Environmental  Remediation of such  contamination  does not
                exceed the funds available in the Escrow Fund. If and when funds
                from the Escrow fund are

a-72684.2
                                       31

<PAGE>



                exhausted,  Seller  shall  have no  obligation  to  perform  any
                Environmental Remediation or otherwise address any Environmental
                Contamination.  The remediation of  Environmental  Contamination
                identified  after the  Closing  shall be the  responsibility  of
                Buyer unless Buyer can establish that such  contamination  arose
                prior to the Closing.  Buyer acknowledges that Seller shall have
                no  obligation  to  perform  Environmental   Remediation  unless
                Environmental   Contamination   is  discovered  (i)  during  the
                Environmental  Due Diligence  review set forth in Section 5.5.2;
                or (ii) by, or as a result of a third party claim or demand;  or
                (iii) due to a Legal Requirement  under any  Environmental  Law.
                Notwithstanding  any other provision of this Section 4.5.2,  if,
                after the Closing Date,  Buyer is informed of, or  inadvertently
                discovers Environmental  Contamination that does not require the
                giving  of  notice  to  either a  Governmental  Body or,  to the
                landlord  pursuant  to the  applicable  lease,  Buyer shall give
                notice of same to Seller and Seller shall perform  Environmental
                Remediation to the standards set forth in Section 4.5.4.

                         4.5.3   Seller   has  the   right  to   undertake   any
                Environmental Remediation for which it is responsible subject to
                reasonable  agreement of Buyer and Seller  regarding  access to,
                and   non-interference   with   activities   of  Buyer  on,  the
                Facilities.   Seller  shall  be  entitled  to  receive   monthly
                reimbursement  from  the  Escrow  Fund  for  the  costs  of that
                Environmental Remediation to the extent funds are available.

                         4.5.4 The extent to which  Environmental  Contamination
                must be  remediated,  if at all,  shall be to the highest levels
                allowed  by  law  that  do  not   require  the   imposition   of
                institutional  controls  unless those  controls would not impair
                the  value,  or  interfere  with  the  reasonable  use,  of  the
                property,  and,  if  the  Facility  is on  leased  property,  to
                whatever level the landlord ultimately agrees; provided however,
                institutional  controls  that  impair  value may be  allowed  if
                Seller pays Buyer for the  diminution in value  attributable  to
                that impairment.


        5.      Other Covenants and Agreements.

                5.1  Guaranty  of  Receivables.  At the  Closing,  Seller  shall
        execute and deliver to Buyer a Guaranty in the form set forth as Exhibit
        "B" hereto (the "Receivables Guaranty"), under the terms of which Seller
        shall unconditionally guarantee that all indebtedness represented by the
        accounts  receivable  of Seller and the  Subsidiaries  as of the Closing
        Date (less the reserve for  doubtful  accounts  not to exceed  $125,000)
        will be received by Buyer.  Within 160 days  following the Closing Date,
        Buyer shall prepare and deliver to Seller an  accounting of  collections
        on such  receivables  on or before 150 days  following the Closing Date,
        certified as true and correct by the Chief  Financial  Officer of Buyer.
        In the event such net indebtedness is not received by Buyer on or before
        150 days after the Closing  Date,  Seller shall within ten business days
        following  receipt from Buyer of such  accounting  giving notice to such
        effect  cause the Escrow  Agent to make  payment from the Escrow Fund to
        Buyer of an  amount in cash  equal to the  difference  between  such net
        indebtedness  and  the  amount  received  by  Buyer  for  such  accounts
        receivable, whereupon Buyer shall promptly

a-72684.2
                                       32

<PAGE>



        assign or cause to be assigned to Seller all rights,  claims, actions or
        causes  of  action  which  Buyer  may  have   relating  to  such  unpaid
        receivables.  In the event  that the amount  received  by Buyer for such
        accounts  receivable  shall be in excess of such net  indebtedness,  the
        amount of such excess will be paid by Buyer to Seller (from  Buyer's own
        funds and not from the Escrow Fund) within such ten business day period.
        During  the 150  days  following  the  Closing  Date,  Buyer  shall  use
        reasonable and customary  efforts to collect such receivables (but shall
        not be obligated  to initiate  litigation)  and any amounts  received by
        Buyer in respect of such accounts  receivable  shall be applied first to
        the oldest such account  receivable  of the  respective  account  debtor
        unless the account  debtor  specifically  directs  otherwise  in writing
        without any direction from Buyer.

                5.2      Restrictive Covenants.

                         5.2.1 Customer Restriction. Seller covenants and agrees
                that it shall not, for a period of five years from and after the
                Closing Date,  working alone or in conjunction  with one or more
                other Persons or entities,  for compensation or not, (i) provide
                or offer to provide to any Customer (as such term is hereinafter
                defined)  any  product  or  service  the same or similar to that
                offered by Seller or any  Subsidiary  prior to the  Closing,  or
                (ii)  induce or  attempt  to induce any  Customer  to  withdraw,
                curtail or cancel its business  with any  Subsidiary or Buyer or
                in any  manner  modify  or fail to  enter  into  any  actual  or
                potential business relationship with Buyer or any Subsidiary. As
                used herein,  the term "Customer" means any Person or entity for
                whom Seller or any Subsidiary  provided  services on or prior to
                the Closing Date or to whom Seller or any Subsidiary  provided a
                product on or prior to the Closing Date.

                         5.2.2  Non-Raid.  Seller  covenants  and agrees that it
                shall not, for a period of five years from and after the Closing
                Date,  working  alone or in  conjunction  with one or more other
                Persons or  entities,  for  compensation  or not, (i) recruit or
                otherwise  solicit or induce any Person or entity who is, on the
                Closing Date or  thereafter,  an employee or vendor of Seller or
                any Subsidiary to terminate their  employment with, or otherwise
                cease their  relationship with, Buyer or any of its subsidiaries
                or affiliates,  or (ii) hire,  recruit or otherwise  solicit any
                Person  or  entity  who,  within  the  six  months   immediately
                preceding  the Closing  Date,  had been an employee or vendor of
                Seller or any Subsidiary.

                         5.2.3 Noncompetition.  Seller covenants and agrees that
                it shall  not,  for a period  of five  years  from and after the
                Closing Date,  working alone or in conjunction  with one or more
                other  Persons or  entities,  for  compensation  or not,  permit
                Seller's  name to be used by or engage in or carry on,  directly
                or indirectly, either for itself or as a member of a partnership
                or as a stockholder, investor, agent, associate or consultant of
                any Person,  partnership or  corporation  (other than Buyer or a
                subsidiary or affiliate of Buyer),  any business in  competition
                with the business as carried on by Seller or any  Subsidiary  on
                the Closing Date,  but only for as long as such like business is
                carried on by (i) Buyer or any subsidiary or affiliate of Buyer,
                or (ii) any  Person,  corporation,  partnership,  trust or other
                organization or entity deriving title

a-72684.2
                                       33

<PAGE>



                from Buyer to the  assets and  goodwill  of the  business  being
                carried on by Seller or any  Subsidiary  on the Closing Date, in
                any county in which  Buyer or any  subsidiary  or  affiliate  of
                Buyer conducts business,  or in any other county in any state of
                the United States, or in any country or political subdivision of
                the world.  The parties  intend that the covenants  contained in
                this  Section  5.2.3  shall be deemed to be a series of separate
                covenants,  one for each  county  in each  state  of the  United
                States and for each  country and  political  subdivision  of the
                world and,  except for geographic  coverage,  each such separate
                covenant  shall be identical in terms to the covenant  contained
                in this Section 5.2.3.

                         5.2.4 Tolling.  The term of the covenants  contained in
                Section  5.2.1,  5.2.2 or 5.2.3  hereof  shall be tolled for the
                period commencing on the date any successful action is filed for
                injunctive  relief or damages  arising out of a breach by Seller
                of Section  5.2.1,  5.2.2 or 5.2.3  hereof and ending upon final
                adjudication (including appeals) of such action.

                         5.2.5 Reformation.  If, in any judicial proceeding, the
                court  shall  refuse to enforce  all of the  separate  covenants
                contained in Section  5.2.1,  5.2.2 or 5.2.3 hereof  because the
                time limit is too long,  it is expressly  understood  and agreed
                between the parties hereto that for purposes of such  proceeding
                such time  limitation  shall be  deemed  reduced  to the  extent
                necessary to permit  enforcement of such  covenants.  If, in any
                judicial  proceeding,  the court shall  refuse to enforce all of
                the  separate  covenants  contained in Section  5.2.1,  5.2.2 or
                5.2.3  hereof  because  it  is  more  extensive  (whether  as to
                geographic  area, scope of business or otherwise) than necessary
                to protect the business  and goodwill of Buyer,  it is expressly
                understood  and  agreed  between  the  parties  hereto  that for
                purposes  of such  proceeding  the  geographic  area,  scope  of
                business or other aspect  shall be deemed  reduced to the extent
                necessary to permit enforcement of such covenants.

                         5.2.6 Injunctive  Relief.  Seller  acknowledges  that a
                breach of  Section  5.2.1,  5.2.2 or 5.2.3  hereof  would  cause
                irreparable  damage to Buyer,  and in the event of its actual or
                threatened  breach of the provisions of Section 5.2.1,  5.2.2 or
                5.2.3 hereof, Buyer shall be entitled to a temporary restraining
                order and an injunction  restraining  Seller from breaching such
                covenants  without  the  necessity  of  posting  bond or proving
                irreparable  harm, such being  conclusively  admitted by Seller.
                Nothing  shall be construed as  prohibiting  Buyer from pursuing
                any other  available  remedies  for such  breach  or  threatened
                breach,  including  the recovery of damages from Seller.  Seller
                acknowledges  that the restrictions set forth in Sections 5.2.1,
                5.2.2 and 5.2.3  hereof are  reasonable  in scope and  duration,
                given the nature of the business of Buyer.

                         5.2.7 Use of Name.  Seller shall discontinue all use of
                the name  "Valley  Systems,  Inc."  and any and all  derivations
                thereof within 30 days after the Closing Date.


a-72684.2
                                       34

<PAGE>



                         5.2.8 No Liquidation or  Dissolution.  Seller shall not
                liquidate  or  dissolve  until the entire  Escrow  Fund has been
                released pursuant to Section 5.3 hereof.

                5.3      Escrow.

                         5.3.1 The Escrow Fund shall be the exclusive  source of
                recovery  in respect  of  Seller's  indemnification  obligations
                pursuant  to Section 4 hereof or  otherwise  arising  under this
                Agreement   (including  the  Schedules   hereto)  or  any  other
                agreement  between  Buyer and Seller  entered into in connection
                herewith  including  any claim based upon  Seller's  warranties,
                representations  and covenants  contained herein including those
                contained  in Section 5.1 hereof.  The Escrow Fund shall be held
                and  distributed,  with interest,  by Bank One Texas,  N.A. (the
                "Escrow Agent"), pursuant to an Escrow Agreement in the form set
                forth as Exhibit  "C" hereto  (the  "Escrow  Agreement"),  which
                shall be  executed  and  delivered  by  Seller  and Buyer at the
                Closing.

                         5.3.2  Buyer  shall be  entitled  to  receive  from the
                Escrow Fund a payment equal to the amount,  if any, provided for
                in Section 5.1 hereof without regard to the Floor Amount.

                         5.3.3  Subject  to  Sections  4.5.2 and  5.3.6  hereof,
                Seller  shall be  entitled  to receive  from the Escrow Fund the
                costs  of  Environmental   Remediation  at  all  Facilities  not
                excluded  by Buyer from the  Assets  pursuant  to Section  5.5.2
                hereof and in accordance with the terms of the Escrow Agreement.

                         5.3.4 In the event  that any Buyer  Indemnitee  has any
                claim   for   damages    based   upon    Seller's    warranties,
                representations  and  covenants  contained  herein or  otherwise
                arising  hereunder  or any  other  agreement  between  Buyer and
                Seller entered into in connection  herewith (other than Seller's
                obligations under Section 5.1 hereof),  Buyer shall give written
                notice of same to Seller and shall forward a copy of such notice
                to the Escrow  Agent.  If Seller has not  corrected  or remedied
                such  failure  of  performance,   representation,   warranty  or
                covenant within 30 days following  receipt of such notice,  then
                Seller  acknowledges,  subject to the provisions of Section 5.15
                hereof,  that Buyer shall be entitled to receive from the Escrow
                Fund, in accordance with the terms of the Escrow Agreement,  the
                amount of  indemnification  that Buyer is due  pursuant  to this
                Agreement.

                         5.3.5  Provided  no dispute or disputes in excess of an
                aggregate  of  $3,000,000  (or  $2,000,000,  if that part of the
                Escrow Fund subject to Section 5.3.6 hereof has been released to
                Seller),  less the amount of any  payments  theretofore  made in
                satisfaction   of   Seller's    indemnification   and   guaranty
                obligations  hereunder,  exist as to any  Claim or Claims by any
                Buyer Indemnitee  against all or a portion of the Escrow Fund on
                the first anniversary of the Closing Date, then $1,000,000, less
                the  amount  of  any  payments  in   satisfaction   of  Seller's
                indemnification  and  guaranty  obligations  hereunder,  will be
                released to Seller on the first business day following

a-72684.2
                                       35

<PAGE>



                such first anniversary of the Closing Date. To the extent such a
                dispute  or  disputes  do exist as to a Claim or  Claims  on the
                first  anniversary  of the Closing  Date, an amount equal to the
                amount  of such  claim or  claims  will be  withheld  from  such
                partial  release of the Escrow Fund and will continue to be held
                in accordance with the provisions of the Escrow  Agreement until
                such  claim or claims  have been  fully  resolved.  Provided  no
                dispute or disputes in excess of an aggregate of $2,000,000  (or
                $1,000,000,  if that part of the Escrow Fund  subject to Section
                5.3.6  hereof has been  released to Seller),  less the amount of
                any  payments  theretofore  made  in  satisfaction  of  Seller's
                indemnification and guaranty obligations hereunder,  exist as to
                any Claim or Claims by any  Buyer  Indemnitee  against  all or a
                portion of the  Escrow  Fund on the  second  anniversary  of the
                Closing Date, then an additional $1,000,000,  less the amount of
                any  payments  theretofore  made  in  satisfaction  of  Seller's
                indemnification  and  guaranty  obligations  hereunder,  will be
                released  to Seller on the first  business  day  following  such
                second  anniversary  of the Closing  Date.  To the extent such a
                dispute  or  disputes  do exist as to a Claim or  Claims  on the
                second  anniversary  of the Closing Date, an amount equal to the
                amount  of such  claim or  claims  will be  withheld  from  such
                partial  release of the Escrow Fund and will continue to be held
                in accordance with the provisions of the Escrow  Agreement until
                such  claim or claims  have been  fully  resolved.  Provided  no
                dispute or disputes exist as to any Claim or Claims by any Buyer
                Indemnitee  against  all or a portion of the Escrow  Fund on the
                third anniversary of the Closing Date, then the remainder of the
                Escrow Fund will be released to Seller on the first business day
                following  such third  anniversary  of the Closing  Date and the
                Escrow  Agreement  shall  thereupon  terminate.  To the extent a
                dispute  or  disputes  do exist as to a Claim or  Claims  on the
                third  anniversary  of the Closing  Date, an amount equal to the
                amount  of such  claim or  claims  will be  withheld  from  such
                release  of the  Escrow  Fund  and will  continue  to be held in
                accordance  with the  provisions of the Escrow  Agreement  until
                such  claim  or  claims  have  been  fully  resolved.   Seller's
                obligations  hereunder  shall not be affected by any termination
                of the Escrow Agreement.

                         5.3.6 On or before the first anniversary of the Closing
                Date,  Seller shall  certify in writing to Buyer that Seller has
                completed the  Environmental  Remediation  of the  Environmental
                Contamination  identified  by the  Environmental  Due  Diligence
                Review as  required by the terms of Section 4.5 hereof as to all
                Facilities  not  excluded  by Buyer  pursuant  to Section  5.5.2
                hereof  as well as any  Environmental  Contamination  identified
                during the Environmental Remediation (or, in the event that such
                Environmental   Remediation   is  not  completed  at  the  first
                anniversary  of  the  Closing  Date,   Seller  shall  deliver  a
                certificate of the environmental engineering and consulting firm
                which is effecting such Environmental Remediation estimating the
                additional  time required for such completion and the additional
                cost thereof  ("Estimated  Additional  Remediation  Cost"). Upon
                delivery to Buyer of Seller's  certificate or the certificate of
                such firm,  as the case may be, an amount  equal to  $1,000,000,
                less  the sum of (i) the  aggregate  cost of such  Environmental
                Remediation  (including  the  Estimated  Additional  Remediation
                Cost) and (ii) the aggregate amount of other Losses of all other
                Buyer Indemnitees subject to

a-72684.2
                                       36

<PAGE>



                indemnification  pursuant  to  Section  4.1  hereof in excess of
                $3,000,000,  shall  forthwith  be  released to Seller out of the
                Escrow Fund.  In the event that such  Environmental  Remediation
                was not completed at the first  anniversary of the Closing Date,
                Seller  shall  deliver  to  Buyer a  certificate  of  completion
                thereof  upon such  completion  containing  a  statement  of the
                aggregate  cost  of  the  Environmental   Remediation   effected
                following such first  anniversary,  and Buyer shall  immediately
                release  to Seller out of the Escrow  Fund the  amount,  if any,
                which  would have been  released  to Seller  under this  Section
                5.3.6  following  such first  anniversary  had such actual cost,
                rather than the Estimated Additional Remediation Cost, been used
                in such calculation.

                5.4      Conduct of the Business.

                         5.4.1  Affirmative  Covenants.  On and  after  the date
                hereof and until the Closing Date or the date,  if any, on which
                this Agreement is earlier  terminated and abandoned  pursuant to
                Section 7 hereof (the  "Termination  Date"),  Seller shall,  and
                Seller shall cause each Subsidiary to:

                                   (i) conduct its  operations  according to its
                          ordinary and usual course of business  consistent with
                          past practice; and

                                  (ii)  use  its  reasonable   best  efforts  to
                         preserve intact its business organization and goodwill,
                         to keep  available  the  services of its  officers  and
                         directors,  and to maintain satisfactory  relationships
                         with  suppliers,  distributors,  licensors,  licensees,
                         customers,   Employees  and  others   having   business
                         relationships with it.

                         5.4.2   Negative   Covenants.   Without   limiting  the
                generality of the foregoing,  and except for actions to be taken
                in connection with any of the transactions  contemplated hereby,
                without  Buyer's  prior written  consent,  Seller shall not, and
                Seller shall cause each  Subsidiary not to, on or after the date
                hereof  and  until  the  earlier  of  the  Closing  Date  or the
                Termination Date:

                                  (i) other than dividends that would be paid to
                         the  holders  of the  Series C  Preferred  Stock in the
                         ordinary  course,  declare or pay any cash dividends on
                         its outstanding shares of capital stock;

                                  (ii) merge with,  consolidate  with,  sell its
                         assets to or  acquire  substantially  all the assets or
                         capital stock of, any other  corporation or Person,  or
                         enter into any other  transaction  not in the  ordinary
                         and usual course of its business;

                                  (iii)  incur  any  indebtedness  for  borrowed
                         money or guarantee  any such  indebtedness  or issue or
                         sell any debt securities or guarantee any debt

a-72684.2
                                       37

<PAGE>



                          securities  of  others,   except  that  it  may  incur
                          indebtedness   in  the  ordinary  course  of  business
                          consistent with prior practice;

                                   (iv) make any direct or indirect  redemption,
                          purchase  or other  acquisition  of any of its capital
                          stock;

                                  (v)  create  or amend  any  pension  or profit
                         sharing  plan,  bonus,  deferred  compensation,   death
                         benefit,  or retirement plan, or any other benefit plan
                         or program;

                                   (vi) amend its  Certificate of  Incorporation
                          or Bylaws,  as amended to the date  hereof,  except as
                          may be  necessary  to carry out this  Agreement  or as
                          required by law;

                                  (vii) issue any shares of its  capital  stock,
                         effect  any  stock  split  or   otherwise   change  its
                         capitalization as it exists on the date hereof;

                                  (viii)  grant,  confer or award  any  options,
                         warrants,   conversion  rights  or  other  rights,  not
                         existing on the date  hereof,  to acquire any shares of
                         its capital stock;

                                  (ix)  enter  into  any  agreement  or make any
                         undertaking   which  could  be   violated,   or  create
                         obligations which could be accelerated,  as a result of
                         changes or  developments  or the  absence of changes or
                         developments  in,  the  business,   assets,   earnings,
                         operations or condition, financial or otherwise, of any
                         other  party  hereto  or  any of  its  subsidiaries  or
                         affiliates; or

                                   (x) make any material changes in any of their
                          respective management employment arrangements.

                5.5      Due Diligence; Access to Information and Customers.

                                  5.5.1 General Due Diligence  Review.  From and
                         after the date hereof and  throughout  the period prior
                         to the earlier of the Closing  Date or the  Termination
                         Date, Buyer and its officers,  employees,  accountants,
                         counsel  and  other  authorized   representatives   may
                         perform  a due  diligence  review  of  Seller  and  the
                         Subsidiaries    relating   to   matters    other   than
                         Environmental  matters.  In the event that the  results
                         thereof are not reasonably satisfactory to Buyer, Buyer
                         may  terminate  this  Agreement  as provided in Section
                         7.1.4 hereof.

                                   5.5.2  Environmental  Due  Diligence  Review.
                          From and after the date  hereof  through  the  Closing
                          Date, Buyer and its officers, employees,  accountants,
                          counsel  and  other  authorized  representatives  will
                          perform  a due  diligence  review  of  Seller  and the
                          Subsidiaries relating to Environmental

a-72684.2
                                       38

<PAGE>



                         matters associated with the Facilities,  and activities
                         of  Seller  or  any   Subsidiary   (collectively,   the
                         "Environmental  Due  Diligence  Review").  Buyer  shall
                         cause a qualified independent environmental engineering
                         and consulting firm reasonably  acceptable to Seller to
                         perform  such a review.  Buyer shall not provide a copy
                         of any  report  resulting  from the  Environmental  Due
                         Diligence  to  Seller,   unless   Seller   specifically
                         requests otherwise.  If the Environmental Due Diligence
                         Review  reveals that one or more  Facilities has one or
                         more problems  relating to the Environment  (including,
                         but not  limited  to,  Environmental  Liabilities)  the
                         remedying of which is or are reasonably advisable,  and
                         the aggregate  estimated  cost of such remedy as quoted
                         to Buyer is in excess of  $1,000,000,  then  Buyer will
                         have  the  right  to  exclude  any  one or more of such
                         Facilities  from  the  Assets  so  that  the  aggregate
                         estimated  cost of the  remedying  the  problems at the
                         remaining Facilities shall be as close to $1,000,000 as
                         practicable without exceeding $1,000,000.

                                  5.5.3   Reimbursement  for  Environmental  Due
                         Diligence Review.  If, as a result of the Environmental
                         Due Diligence  Review,  Environmental  Contamination is
                         discovered  that  is  indemnifiable  as  a  Loss  under
                         Section 4.1 hereof  pursuant to Section  4.5.1  hereof,
                         Seller shall  reimburse  Buyer from the Escrow Fund for
                         the  total  costs of the  Environmental  Due  Diligence
                         Review  of  each  property  where  such   indemnifiable
                         Environmental Contamination is present.

                                  5.5.4 Access.  Seller shall,  and Seller shall
                         cause each  Subsidiary  to, as soon as possible  and in
                         any event no later than the Delivery  Date,  (i) afford
                         to Buyer and to its officers,  employees,  accountants,
                         counsel and other authorized representatives reasonable
                         access,  throughout  the period prior to the earlier of
                         the Closing Date or the  Termination  Date, to Seller's
                         and the  Subsidiary's  plants,  properties,  equipment,
                         personnel,   books  and  records  (including,  but  not
                         limited  to,  audit and tax work  papers  and  surveys,
                         reports,  studies,  evaluations and the like pertaining
                         to  the   Environment   at  the  Facilities  or  Former
                         Facilities  (during the time of  ownership or operation
                         by Seller or any Subsidiary, or to activities of Seller
                         or  any  Subsidiary);  (ii)  use  its  reasonable  best
                         efforts  to cause its  representatives  to  furnish  to
                         Buyer  and  to  its  authorized   representatives  such
                         additional  financial  and  operating  data  and  other
                         information  as  to  its   respective   businesses  and
                         properties   as   Buyer   or   its   duly    authorized
                         representatives   may  from  time  to  time  reasonably
                         request;  (iii) provide all  authorizations  reasonably
                         necessary   for   Buyer  to  review   records   of  any
                         Governmental  Body with  jurisdiction;  and (iv) afford
                         Buyer  and  its   representatives   reasonable  access,
                         throughout  the  period  prior  to the  earlier  of the
                         Closing Date or the  Termination  Date,  to its present
                         and potential  customers,  and Buyer and its authorized
                         representatives  shall have the right to  contact  such
                         customers and conduct such due diligence  investigation
                         relating   to   customer   relations   as  Buyer  deems
                         reasonably  necessary or  appropriate.  Buyer agrees to
                         perform all due diligence under

a-72684.2
                                       39

<PAGE>



                         this Section 5.5 using its  reasonable  best efforts to
                         minimize disruption to Seller's business. Buyer further
                         agrees to  indemnify,  defend and hold Seller  harmless
                         for all losses  resulting from physical  damages caused
                         by Buyer or its  agents in the  course of  Buyer's  due
                         diligence,   and   to   restore   the   Facilities   to
                         substantially  the same  condition  they  were in prior
                         thereto.  Buyer further agrees to dispose of any wastes
                         or  materials  it or its  agents  generated  during the
                         Environmental  Due  Diligence  Review,  and to do so in
                         accordance with all applicable Legal Requirements.

                                  5.5.5   Monthly   Financial   Statements   and
                         Reports.   Seller  shall  deliver  to  Buyer  unaudited
                         financial statements  (including a consolidated balance
                         sheet,    consolidated    statement   of    operations,
                         consolidated  statement of cash flows, and consolidated
                         statement of stockholders'  equity) and other operating
                         reports  for each  month  beginning  with July 1998 and
                         ending with the month  preceding the month during which
                         the  Closing  occurs.  Such  financial  statements  and
                         operating  reports shall be delivered to Buyer no later
                         than  twenty  business  days after the end of the month
                         the subject thereof and shall be subject to no warranty
                         or representation of Seller.

                5.6  Acquisition  Proposals.  Neither  Seller nor any Subsidiary
        shall,  directly or indirectly,  through any officer,  director,  agent,
        affiliate,  representative  (including,  without limitation,  investment
        bankers,  attorneys and accountants) or otherwise, (i) solicit, initiate
        or  encourage  submission  of  inquiries,  proposals  or offers from any
        Person, corporation,  partnership or other entity or group (as such term
        is used in Section  13(d)(3)  of the  Exchange  Act) other than Buyer (a
        "Third  Party"),  relating  to any  acquisition  or purchase of all or a
        portion  of the  assets of, or any  equity  interest  in,  Seller or any
        Subsidiary;  or (ii)  unless  the Board has  determined  that such Third
        Party  has  made  a  Superior  Takeover  Proposal,  participate  in  any
        discussions or negotiations regarding, or furnish to any Third Party any
        information with respect to, or otherwise  cooperate in any way with, or
        assist or participate in, facilitate or encourage, any effort or attempt
        by any Third  Party to do or seek any of the  foregoing.  Seller and the
        Subsidiaries  shall promptly notify Buyer if any such proposal or offer,
        or any inquiry or contact with any Third Party with respect thereto,  is
        made,  and shall in any such notice set forth in  reasonable  detail the
        identity  of the  Third  Party  and the  terms  and  conditions  of such
        inquiry, proposal or offer. In the event that (a) the Closing shall fail
        to occur as the result of Seller or any  Subsidiary  violating the terms
        of  this  Section  5.6  or  (b)  Seller  or any  Subsidiary  shall  have
        determined that a Superior Takeover Proposal exists,  shall have elected
        to accept such  Superior  Takeover  Proposal and either the  transaction
        contemplated  thereby is consummated or Seller terminates this Agreement
        as a result of such  election,  Seller shall  promptly,  but in no event
        later than one day after the first of such events shall occur, pay Buyer
        a fee of  $2,000,000,  which  amount shall be payable in same day funds,
        plus all Expenses.  A "Superior  Takeover  Proposal" means any bona fide
        (w) tender or exchange offer;  (x) proposal for a merger to which Seller
        or any Subsidiary would be a party; (y)  consolidation or other business
        combination  involving  Seller and or any  Subsidiary;  or (z) any other
        arrangement  to  acquire,  directly  or  indirectly,  for  consideration
        consisting of cash, securities or a combination thereof, all of the

a-72684.2
                                       40

<PAGE>



        common  stock of  Seller  or a  Subsidiary  then  outstanding  or all or
        substantially  all of the assets of Seller or a Subsidiary on terms that
        the  Board  determines  in its good  faith  reasonable  judgment  (after
        consultation   with  a  financial   advisor  of  nationally   recognized
        reputation) to be more favorable to the  stockholders of Seller than the
        transactions contemplated by this Agreement.

                5.7 Public Announcements. On or after the date hereof, and until
        the earlier of the Closing Date or the Termination Date,  neither Seller
        nor any Subsidiary shall furnish any written  communication  (other than
        the Proxy Materials) to its stockholders, customers, creditors or to the
        public   generally  if  the  subject  matter  thereof   relates  to  the
        transactions  contemplated hereby without the prior approval of Buyer as
        to the content thereof; provided,  however, that the foregoing shall not
        be deemed to prohibit any  disclosure  required by any applicable law or
        by any Governmental Body having jurisdiction over such matters.

                5.8 Notification of Certain Matters. Seller and the Subsidiaries
        shall give prompt notice to Buyer, and Buyer shall give prompt notice to
        Seller,  of (i) the occurrence,  or failure to occur, of any event which
        occurrence  or failure  would be likely to cause any  representation  or
        warranty of such party  contained  herein to be untrue or  inaccurate in
        any  material  respect at any time from the date  hereof to the  Closing
        Date; and (ii) any material  failure of Seller,  of any Subsidiary or of
        Buyer,  as the case may be, or of any  officer,  director,  employee  or
        agent  thereof,  to comply with or satisfy any  covenant,  condition  or
        agreement to be complied with or satisfied by it hereunder.

                5.9 Best Efforts. Seller agrees to use its best efforts to take,
        or cause to be taken,  all actions,  and to do, or cause to be done, all
        things reasonably necessary,  proper or advisable to consummate and make
        effective  the  transactions  contemplated  hereby,  including,  without
        limitation,   obtaining  all  authorizations,   consents,   waivers  and
        approvals as may be required in connection  with the assignment of those
        contracts,  agreements,  licenses, leases, sales orders, purchase orders
        and other  commitments to be assumed by Buyer pursuant hereto;  provided
        that  Seller  shall not be  obligated  to make any  payments in order to
        obtain any such authorizations, consents, waivers or approvals.

                5.10 Execution of Additional  Documents.  Each party hereto will
        at any time, and from time to time after the Closing Date,  upon request
        of the other party  hereto,  execute,  acknowledge  and deliver all such
        further deeds, assignments,  transfers,  conveyances, powers of attorney
        and assurances,  and take all such further action,  as may be reasonably
        required to carry out the intent of this Agreement,  and to transfer and
        vest title to any Asset being transferred hereunder,  and to protect the
        right,  title and  interest in and  enjoyment of all of the Assets sold,
        granted, assigned, transferred,  delivered and conveyed pursuant hereto;
        provided,  however, that this Agreement shall be effective regardless of
        whether any such additional documents are executed.

                5.11     Fees and Expenses.


a-72684.2
                                       41

<PAGE>



                         5.11.1  Expense  Reimbursement.  If this  Agreement  is
                terminated  by Seller  for any  reason  whatsoever  other than a
                failure of any  condition  set forth in  Section  6.2 hereof and
                Buyer is not in material  breach of its material  covenants  and
                agreements  hereunder,  then  Seller  shall,  whether or not any
                payment is made  pursuant to Section  5.11.2  hereof,  reimburse
                each of Buyer and its  stockholders  and  affiliates  (not later
                than one day after  submission of  statements  therefor) for all
                reasonable  out-of-pocket expenses and fees actually incurred by
                it  or  on  its  behalf  in  connection  with  the  negotiation,
                preparation, execution and performance of this Agreement and the
                transactions  contemplated  hereby,  or reasonably  and actually
                incurred by banks and other financial  institutions  and assumed
                by Buyer or its  stockholders  or affiliates in connection  with
                the negotiation,  preparation, execution and performance of this
                Agreement,  any  financing  related  hereto  and any  definitive
                financing  agreements  relating  thereto  (all of the  foregoing
                being referred to herein collectively as the "Expenses").

                         5.11.2  Other Costs and  Expenses.  Except as otherwise
                provided herein,  all costs and expenses  incurred in connection
                with this  Agreement and the  transactions  contemplated  hereby
                shall be paid by the party incurring such costs and expenses.

                5.12   Limitation  of  Liability.   Notwithstanding   any  other
        provision hereof, no shareholder,  officer,  director,  employee, agent,
        attorney,  affiliate,  servant,  successor,  assign or representative of
        either party hereto or of any affiliate thereof shall have any personal,
        partnership,  corporate or other  liability or obligation  whatsoever in
        respect  of or  relating  to the  covenants,  obligations,  indemnities,
        representations  or  warranties  of Buyer or  Seller  under or by reason
        hereof or in respect of any certificate or other document delivered with
        respect hereto.

                5.13 HSR Act Filings.  Each of Seller and Buyer shall as soon as
        practicable  after  the date of this  Agreement  file  their  respective
        notification  and report forms with the Federal Trade Commission and the
        United States  Department of Justice as required under the HSR Act. Each
        of Seller and Buyer agree to use their  respective good faith efforts to
        eliminate any concern on the part of any Governmental Body regarding the
        legality of the transactions contemplated under this Agreement.

                5.14  Employees.  Buyer shall,  effective  as of Closing,  offer
        employment  to all  Employees  of Seller  (subject  to  satisfaction  of
        Buyer's  standard  conditions  to  employment)  other than as  otherwise
        reasonably  determined  by Buyer (but in no event shall Buyer  terminate
        such number of former  employees  of Seller  during such time periods as
        would  require any action on the part of Seller under WARN).  Seller and
        each Subsidiary shall fully cooperate with Buyer and lend all assistance
        reasonably  requested by Buyer for the purpose of  facilitating  Buyer's
        employment of and communication with Employees of Seller, including, but
        not limited to,  allowing access to the Facilities and any Employees and
        payroll and other Employee records requested by Buyer.


a-72684.2
                                       42

<PAGE>



                5.15 Dispute Resolution. Other than as provided in Section 1.9.2
        hereof  and  notwithstanding  any  provision  of this  Agreement  to the
        contrary,  all  disputes,  controversies  or  claims  arising  out of or
        relating to this  Agreement  and the  transactions  contemplated  hereby
        shall be resolved by agreement among the parties, or, if not so resolved
        within forty five (45) days following written notice of dispute given by
        either  party  hereto to the other,  and if  written  notice is given by
        either of the parties as provided  below and the matter is not otherwise
        resolved by the parties  hereto,  by resort to arbitration in accordance
        with Title 9 of the United  States Code (the United  States  Arbitration
        Act) and the Commercial  Arbitration Rules, as amended from time to time
        (the "Rules") by the American Arbitration  Association and the following
        provisions; provided, however, that the provisions of this Section shall
        prevail in the event of any conflict with such Rules. Within thirty (30)
        days after the  giving of notice by a party to the other  parties of its
        desire to refer the matter in dispute to arbitration,  the parties agree
        that the matter shall be presented  to a panel of three  arbitrators  at
        least one of whom shall have at least ten years of  industry  experience
        relating  to the  subject  matter  of the  dispute.  Such  selection  of
        arbitrators  shall  be made in  accordance  with  the  Rules.  Any  such
        arbitration  proceeding  shall be held at a location to be determined by
        the arbitrators.  Any provisional  remedy that would be available from a
        court of law shall be available  from the  arbitrator  to the parties to
        this  Agreement   pending   arbitration.   The  written   decisions  and
        conclusions of a majority of the  arbitration  panel with respect to the
        matters referred to them pursuant hereto shall be final and binding upon
        the parties to the dispute, and confirmation and enforcement thereof may
        be rendered thereon by any court having jurisdiction upon application of
        any person who is a party to the arbitration  proceeding.  The costs and
        expenses  incurred in the course of such  arbitration  shall be borne by
        the party  against  whose favor the  decisions  and  conclusions  of the
        arbitration  panel  are  rendered;   provided,   however,  that  if  the
        arbitration  panel determines that its decisions are not rendered wholly
        against the favor of one party or the other, the arbitration panel shall
        be authorized to apportion such costs and expenses in the manner that it
        deems  fair  and  just in light of the  merits  of the  dispute  and its
        resolution. The arbitration panel shall have no power or authority under
        this  Agreement  or  otherwise  to award  or  provide  for the  award of
        punitive or consequential  damages against any party. In any arbitration
        relating to whether Buyer has  "reasonably  concluded"  (for purposes of
        Section 6.1.16) that there has been no material breach of the warranties
        in Section 2.24, the burden of establishing  reasonableness  shall be on
        Buyer.

        6.      Conditions of Closing.

                6.1 Buyer's  Conditions to Closing.  The  obligation of Buyer to
        purchase and pay for the Assets and to assume the specified  liabilities
        and  obligations  set forth herein  shall be subject to and  conditioned
        upon, at Buyer's option,  the satisfaction at the Closing of each of the
        following conditions:

                         6.1.1  The   holders   of  shares  of  the  issued  and
                outstanding  capital stock of Seller shall have duly adopted and
                approved this Agreement and all transactions contemplated hereby
                in accordance with the requirements of Delaware law and the

a-72684.2
                                       43

<PAGE>



                Certificate of Incorporation  and Bylaws, as amended to the date
                of such adoption and approval, of Seller.

                         6.1.2  All  representations  and  warranties  of Seller
                contained  herein  shall be true  and  correct  in all  material
                respects at and as of the Closing Date (provided however that in
                respect  of the  warranties  and  representations  contained  in
                Section 2.24 hereof Section 6.1.16 shall apply) and Seller shall
                have  performed  all  agreements  and  covenants in all material
                respects  and  satisfied  all  conditions  on  its  part  to  be
                performed or satisfied by the Closing Date pursuant to the terms
                hereof,  and Buyer shall have received a certificate  of Seller,
                signed by its President and dated the Closing Date, to both such
                effects.

                         6.1.3  As of the  Closing,  there  shall  have  been no
                material  change  since  the date of the most  recent  Financial
                Statements in the Seller or any  Subsidiary,  and neither Seller
                nor  any  Subsidiary  shall  have  suffered  any  material  loss
                (whether or not insured) by reason of physical  damage caused by
                fire, earthquake, accident or other calamity which substantially
                affects  the value of their  respective  assets,  properties  or
                business, and Buyer shall have received a certificate of Seller,
                signed by its principal  financial officer and dated the Closing
                Date, to such effect.

                          6.1.4 Seller shall have  executed  and  delivered  the
                 Receivables Guaranty.

                         6.1.5   Seller   shall  have   delivered   to  Buyer  a
                Certificate  of the  Secretary  of State  (or  other  authorized
                public  official) of Seller's and each  Subsidiary's  respective
                jurisdiction  of  incorporation  (and  each  other  jurisdiction
                listed  in  Schedule  2.5  hereof)   certifying  as  of  a  date
                reasonably  close  to the  Closing  Date  that  Seller  or  such
                Subsidiary,  as the case may be, has filed all required reports,
                paid all required  fees and taxes,  and is, as of such date,  in
                good standing and authorized to transact  business as a domestic
                or foreign corporation, as the case may be.

                          6.1.6 Seller shall have  executed  and  delivered  the
                 Escrow Agreement.

                           6.1.7  The  Escrow  Agent  shall  have   acknowledged
                  receipt of the Escrow Fund and  accepted  the same  subject to
                  the terms and conditions of the Escrow Agreement.

                           6.1.8 Buyer shall have  received from Arnall Golden &
                  Gregory,  LLP,  counsel  for  Seller,  an  opinion,  dated the
                  Closing Date, in the form attached hereto as Exhibit "D".

                           6.1.9 Seller shall have obtained all  authorizations,
                  consents,   waivers  and  approvals  as  may  be  required  in
                  connection with the assignment of those contracts, agreements,
                  licenses,  leases,  sales  orders,  purchase  orders and other
                  commitments to be assigned to Buyer pursuant hereto.


a-72684.2
                                       44

<PAGE>



                           6.1.10  Seller shall have  executed and delivered the
                  Bill of Sale, Assignment and Assumption Agreement.

                           6.1.11  Seller  shall  have   delivered  to  Buyer  a
                  certificate,  dated the Closing  Date,  of Seller's  corporate
                  Secretary certifying:

                                    (i)  Resolutions  of the Board and  Seller's
                           stockholders  approving and adopting  this  Agreement
                           and  all   transactions   contemplated   hereby   and
                           authorizing  execution  of  this  Agreement  and  the
                           execution,    performance   and   delivery   of   all
                           agreements,  documents and transactions  contemplated
                           hereby; and

                                    (ii)   The   incumbency   of  its   officers
                           executing  this  Agreement  and  all  agreements  and
                           documents contemplated hereby.

                           6.1.12 The approval  and all consents  from any Third
                  Party  or   Governmental   Body  required  to  consummate  the
                  transactions  contemplated hereby shall have been obtained and
                  the  waiting  period  and  any  statutory   extension  thereof
                  applicable   to   the   consummation   of   the   transactions
                  contemplated  by this  Agreement  under the HSR Act shall have
                  expired or been terminated.

                         6.1.13 No  Proceeding  shall  have been  instituted  or
                threatened  which  questions  the  validity  or  legality of the
                transactions  contemplated  hereby or any governmental  consent,
                approval or authorization  necessary for the consummation of the
                transactions of the transactions contemplated by this Agreement.

                         6.1.14 As of the  Closing,  there shall be no effective
                injunction,  writ, preliminary restraining order or any order of
                any nature issued by a court of competent jurisdiction directing
                that the transactions  provided for herein or any of them not be
                consummated  as so provided or imposing  any  conditions  on the
                consummation of the transactions  contemplated  hereby, which is
                unduly burdensome on Buyer.

                         6.1.15  Buyer  shall  have  received  from each of LOR,
                Inc., Rollins Investment Fund and Rollins Holding Company, Inc.,
                an executed  agreement whereby each of them, on their own behalf
                and on behalf of their respective affiliates, agrees to be bound
                by certain restrictive covenants  substantially similar to those
                imposed on Seller  pursuant  to Section  5.2 of this  Agreement;
                provided,  however,  that no such  provision  shall  prohibit an
                investment in any  publicly-traded  entity that does not require
                the filing of a Schedule 13D nor Schedule 13G under the Exchange
                Act.

                         6.1.16 Buyer shall have reasonably concluded, following
                the  Environmental  Due  Diligence  Review,  that  there  are no
                material  breaches in the warranties in Section 2.24;  provided,
                however, that such conclusion shall not preclude the remedies of
                Buyer  provided for herein.  For purposes of this Section 6.1.16
                only, "material

a-72684.2
                                       45

<PAGE>



                breaches"  shall  be  defined  as  those  matters,  which in the
                opinion of the environmental  consultant retained as provided in
                Section 5.5.2, are reasonably likely to cost in the aggregate in
                excess of $1,000,000 to remedy (excluding the cost of addressing
                any  environmental  issues on  Facilities  that Buyer  elects to
                exclude from the purchase pursuant to Section 5.5.2). If Buyer's
                consultant  so  concludes,  then Buyer shall  promptly so inform
                Seller of the consultant's opinion. At such time, Seller may ask
                Buyer for the information and data upon which Buyer's consultant
                bases his or her  opinion.  If Seller  does not agree that it is
                reasonably  likely to cost in excess of $1,000,000 to remedy the
                environmental  problems, then Seller shall promptly inform Buyer
                of its belief.  If the parties  cannot resolve this issue within
                fifteen  days  after  Seller so informs  Buyer,  then the matter
                shall be submitted to  arbitration  in  accordance  with Section
                5.15 and the Closing shall be delayed  pending the resolution of
                such  arbitration.  If the  transaction  closes,  then  Seller's
                obligation  to perform any  Environmental  Remediation  shall be
                governed by the  provisions  and  standards set forth in Section
                4.5

                6.2 Seller's Conditions to Closing.  The obligation of Seller to
        sell, grant,  convey,  assign,  transfer and deliver the Assets shall be
        subject to and conditioned upon, at Seller's option, the satisfaction at
        the Closing of each of the following conditions:

                         6.2.1  The   holders   of  shares  of  the  issued  and
                outstanding  capital stock of Seller shall have duly adopted and
                approved this Agreement and all transactions contemplated hereby
                in  accordance  with the  requirements  of Delaware  law and the
                Certificate of Incorporation  and Bylaws, as amended to the date
                of such adoption, of Seller.

                         6.2.2  All  representations  and  warranties  of  Buyer
                contained  herein  shall  be true and  correct  at and as of the
                Closing  Date in all  material  respects  and Buyer  shall  have
                performed all agreements and covenants in all material  respects
                and  satisfied  all  conditions  on its part to be  performed or
                satisfied by the Closing Date pursuant to the terms hereof,  and
                Seller shall have received a certificate of Buyer, signed by its
                Chief Executive Officer and dated the Closing Date, to both such
                effects.

                         6.2.3 Buyer shall have effected payment of the Purchase
                Price  (less  the  Escrow  Fund) in  accordance  with the  prior
                written instructions of Seller.

                          6.2.4  Buyer shall have  executed  and  delivered  the
                 Escrow Agreement.

                          6.2.5 Buyer shall have effected  payment of the Escrow
                 Fund.

                         6.2.6 The Escrow Agent shall have acknowledged  receipt
                of the Escrow Fund and  accepted  the same  subject to the terms
                and conditions of the Escrow Agreement.


a-72684.2
                                       46

<PAGE>



                         6.2.7 Buyer shall have  executed and delivered the Bill
                of Sale, Assignment and Assumption Agreement.

                         6.2.8   Buyer   shall  have   delivered   to  Seller  a
                certificate,  dated  the  Closing  Date,  of  Buyer's  corporate
                Secretary certifying:

                                  (i)  Resolutions  of its  Board  of  Directors
                         adopting  and   approving   this   Agreement   and  all
                         transactions   contemplated   hereby  and   authorizing
                         execution  of  this   Agreement   and  the   execution,
                         performance and delivery of all  agreements,  documents
                         and transactions contemplated hereby; and

                                   (ii) The incumbency of its officers executing
                          this   Agreement  and  all  agreements  and  documents
                          contemplated hereby.

                         6.2.9 Seller shall have received from Haynes and Boone,
                LLP,  counsel for Buyer, an opinion,  dated the Closing Date, in
                the form attached hereto as Exhibit "E".

                         6.2.10 The  approval  and all  consents  from any Third
                Party  or   Governmental   Body  required  to   consummate   the
                transactions  contemplated  hereby shall have been  obtained and
                the  waiting   period  and  any  statutory   extension   thereof
                applicable to the consummation of the transactions  contemplated
                by this  Agreement  under the HSR Act shall have expired or been
                terminated.

                         6.2.11 No  Proceeding  shall  have been  instituted  or
                threatened  which  questions  the  validity  or  legality of the
                transactions  contemplated  hereby or any governmental  consent,
                approval or authorization  necessary for the consummation of the
                transactions of the transactions contemplated by this Agreement

                         6.2.12 As of the  Closing,  there shall be no effective
                injunction,  writ, preliminary restraining order or any order of
                any nature issued by a court of competent jurisdiction directing
                that the transactions  provided for herein or any of them not be
                consummated  as so provided or imposing  any  conditions  on the
                consummation of the transactions  contemplated  hereby, which is
                unduly burdensome on Seller.

                         6.2.13   Seller   and  all   guarantors   of  any  bank
                indebtedness  of Seller  shall have  received a written  release
                therefrom in form and substance  satisfactory to Seller and such
                guarantors.

        7.      Termination and Abandonment.

                7.1 Reasons for Termination. Anything herein or elsewhere to the
        contrary notwithstanding, this Agreement may be terminated and abandoned
        at any time after the date hereof but not later than the Closing:

a-72684.2
                                       47

<PAGE>




                         7.1.1    by the mutual consent of Seller and Buyer;

                         7.1.2 by Buyer at any time after December 31, 1998, if,
                by that date,  the  conditions  set forth in Section  6.1 hereof
                shall not have been fulfilled or waived;

                         7.1.3 by Seller at any time after  December  31,  1998,
                if, by that date, the conditions set forth in Section 6.2 hereof
                shall not have been fulfilled or waived;

                         7.1.4 by Buyer  at any time  prior to the  later of (i)
                the fifteenth  business day after the Delivery Date and (ii) the
                fifteenth  business day after such later date as Buyer  actually
                receives  the  Preliminary  Schedules  required  by Section  1.7
                hereof, if the general due diligence  investigation of Seller or
                of any Subsidiary by Buyer pursuant to Section 5.5.1 hereof,  or
                any Schedule hereto or any other document  delivered to Buyer as
                contemplated   hereby,   shall  have   revealed   any  facts  or
                circumstances  which,  in the  reasonable  judgment of Buyer and
                regardless  of the cause  thereof,  reflect in a material way on
                Seller or any Subsidiary;


                          7.1.5  by  Buyer  at any  time  if  there  has  been a
                 material  change  in Seller  or any  Subsidiary  after the date
                 hereof;

                         7.1.6 by Buyer or by  Seller  at any time if there  has
                been a material breach of any representation or warranty made by
                the other party herein or in any  certificate  or other document
                delivered  pursuant  hereto or if there has been any  failure by
                the  other  party  to  perform  in  all  material  respects  all
                obligations  or to comply with all  covenants  on its part to be
                performed hereunder; or

                         7.1.7 by Buyer or by  Seller if there  shall  have been
                any statute, rule or regulation enacted or promulgated or deemed
                applicable  to  the  transactions  contemplated  hereby  by  any
                Governmental  Body that, in the reasonable  judgment of Buyer or
                of Seller, as the case may be, might (i) result in a significant
                delay  in  the  ability  of  the  parties  to   consummate   the
                transactions contemplated hereby; (ii) render the parties unable
                to consummate the transactions  contemplated  hereby; (iii) make
                such  consummation   illegal;   or  (iv)  otherwise   materially
                adversely affect Seller or any Subsidiary.

                         7.1.8 by Buyer if Seller  shall fail to deliver  one or
                more  of  the   Preliminary   Schedules  to  this  Agreement  in
                accordance  with  Section  1.7  hereof  or if one or more of the
                Preliminary Schedules, as delivered, differs materially from the
                information  concerning Seller and the Subsidiaries  provided by
                Seller to Buyer prior to the execution of this Agreement

                 7.2 Procedure Upon and Effect of  Termination.  In the event of
         any termination and abandonment pursuant to Section 7.1 hereof, written
         notice  thereof  shall  forthwith  be given to the other  party and the
         transactions contemplated hereby shall

a-72684.2
                                       48

<PAGE>



        thereupon be terminated and abandoned,  without  further action by Buyer
        or by Seller  (except for the  provisions of Sections 5.6, 5.11 and 5.12
        hereof), and there shall be no liability on the part of either Seller or
        Buyer or their respective  officers,  directors or stockholders,  except
        for the  provisions  of Sections 5.6, 5.11 and 5.12 hereof or except for
        the  material  breach  of  any  representation,   warranty  or  covenant
        contained  herein that is within the reasonable  control of the party in
        breach.

        8.      Miscellaneous.

                8.1 Notices. Any notice, consent,  approval,  request, demand or
        other  communication  required or permitted hereunder must be in writing
        to be  effective  and  shall be deemed  delivered  and  received  (i) if
        personally   delivered  or  delivered   by  telecopy   with   electronic
        confirmation,  when actually received by the party to whom sent, or (ii)
        if delivered by mail (whether actually received or not), at the close of
        business on the third business day next following the day when placed in
        the federal mail, postage prepaid,  certified or registered mail, return
        receipt requested, addressed as follows:

                If to Buyer:

                HydroChem Industrial Services, Inc.
                5956 Sherry Lane, Suite 930
                Dallas, Texas 75225
                Attention: Chief Executive Officer
                Facsimile No.: (214) 361-4715

                with a copy to:

                Haynes and Boone, LLP
                600 Congress Avenue, Suite 1600
                Austin, Texas 78701
                Attention: Dennis R. Cassell
                Facsimile No.: (512) 867-8470

                If to Seller:

                         Valley Systems, Inc.
                         11580 Lafayette Drive, NW
                         Canal Fulton, Ohio 44614
                         Attention: Chief Executive Officer
                         Facsimile #:  (330) 854-3444


a-72684.2
                                       49

<PAGE>



                         with a copy to:

                         Arnall Golden & Gregory, LLP
                         2800 One Atlantic Center
                         1201 West Peachtree Street
                         Atlanta, Georgia 30309
                         Attention: Jonathan Golden
                         Facsimile #: (404) 873-8701

         (or to such other address as any party shall specify by written  notice
         so given).

                8.2 Binding  Effect;  Benefits.  This Agreement shall be binding
        upon and shall  inure to the  benefit  of the  parties  hereto and their
        respective  successors and permitted assigns.  Notwithstanding  anything
        contained herein to the contrary,  nothing in this Agreement,  expressed
        or implied,  is intended to confer on any Person (other than the parties
        hereto,  the  Buyer  Indemnitees  (but only with  respect  to  Section 4
        hereof),  or their  respective  successors  and  permitted  assigns) any
        rights, remedies,  obligations or liabilities under or by reason of this
        Agreement.

                8.3  Entire  Agreement.   This  Agreement,   together  with  the
        Exhibits,  Schedules and other documents contemplated hereby, constitute
        the  final  written  expression  of all of the  agreements  between  the
        parties,  and is a complete  and  exclusive  statement  of those  terms.
        Except as  specifically  included or referred to herein,  this Agreement
        and the Exhibits,  Schedules  and other  documents  contemplated  hereby
        supersede all  understandings  and  negotiations  concerning the matters
        specified  herein.   Any   representations,   promises,   warranties  or
        statements  made by any party  that  differ in any way from the terms of
        this written Agreement, and the Exhibits,  Schedules and other documents
        contemplated  hereby,  shall be given no  force  or  effect  (except  as
        specifically  included or referred to herein).  The parties specifically
        represent,   each  to  the  other,  that  there  are  no  additional  or
        supplemental  agreements  between them related in any way to the matters
        herein contained unless specifically  included or referred to herein. No
        addition to or  modification  of any  provision  hereof shall be binding
        upon any party unless made in writing and signed by all parties.

                8.4 Governing Law. THIS AGREEMENT, AND ALL QUESTIONS RELATING TO
        ITS VALIDITY,  INTERPRETATION,  PERFORMANCE AND ENFORCEMENT  (INCLUDING,
        WITHOUT  LIMITATION,  PROVISIONS  CONCERNING  LIMITATIONS OF ACTION, BUT
        EXCLUDING THE  PROVISIONS  OF SECTION 5.2 HEREOF),  SHALL BE GOVERNED BY
        AND  CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE  STATE OF  DELAWARE
        (EXCLUSIVE  OF THE CONFLICT OF LAW  PROVISIONS  THEREOF)  APPLICABLE  TO
        AGREEMENTS  MADE AND TO BE  PERFORMED  ENTIRELY  WITHIN SUCH STATE.  THE
        PROVISIONS  OF SECTION 5.2 HEREOF SHALL BE GOVERNED BY AND  CONSTRUED IN
        ACCORDANCE  WITH  THE  LAWS OF THE  STATE  OF  TEXAS  (EXCLUSIVE  OF THE
        CONFLICT OF LAW PROVISIONS THEREOF)

a-72684.2
                                       50

<PAGE>



        APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
        WITHIN SUCH STATE.

                8.5  Survival.   All  of  the  terms,   conditions,   covenants,
        agreements,   warranties  and  representations  contained  herein  shall
        survive,  in  accordance  with their terms,  the execution  hereof,  the
        Closing hereunder and the Closing Date.

                8.6  Counterparts.  This Agreement may be executed in any number
        of  counterparts,  each of which shall be deemed an original  but all of
        which shall constitute one and the same instrument;  but in making proof
        of this  Agreement,  it shall not be necessary to produce or account for
        more than one such  counterpart.  It is not  necessary  that each  party
        hereto execute the same counterpart,  so long as identical  counterparts
        are executed by all parties.

                 8.7  Headings.  Headings of the Sections of this  Agreement are
         for the  convenience  of the  parties  only,  and  shall  be  given  no
         substantive or interpretive effect whatsoever.

                8.8  Waivers.  Any party  hereto may,  by written  notice to the
        other party hereto,  (i) extend the time for the  performance  of any of
        the  obligations  or other  actions of the other party  hereunder;  (ii)
        waive any inaccuracies in the representations or warranties of the other
        party contained  herein or in any document  delivered  pursuant  hereto;
        (iii) waive  compliance  with any of the  conditions or covenants of the
        other party contained  herein;  or (iv) waive  performance of any of the
        obligations  of the other  party  hereunder.  Except as  provided in the
        preceding sentence,  no action taken pursuant hereto,  including without
        limitation  any  investigation  by or on behalf of any  party,  shall be
        deemed  to  constitute  a waiver  by the  party  taking  such  action of
        compliance with any representations, warranties, covenants or agreements
        contained  herein.  The  waiver by any  party  hereto of a breach of any
        provision hereunder shall not operate or be construed as a waiver of any
        prior or subsequent breach of the same or any other provision hereunder.

                8.9  Incorporation  of Exhibits and Schedules.  All Exhibits and
        Schedules attached hereto are by this reference  incorporated herein and
        made a part hereof for all purposes as if fully set forth herein.

                8.10 Severability. If for any reason whatsoever, any one or more
        of the  provisions  hereof  shall  be  held  or  deemed  to be  illegal,
        inoperative,  unenforceable or invalid as applied to any particular case
        or in all  cases,  such  circumstances  shall  not  have the  effect  of
        rendering such provision illegal, inoperative,  unenforceable or invalid
        in any other case or of  rendering  any of the other  provisions  hereof
        illegal, inoperative,  unenforceable or invalid. Furthermore, in lieu of
        each illegal,  invalid,  unenforceable or inoperative  provision,  there
        shall be added  automatically,  as part of this  Agreement,  a provision
        similar in terms of such illegal, invalid,  unenforceable or inoperative
        provision as may be possible and as shall be legal,  valid,  enforceable
        and operative.


a-72684.2
                                       51

<PAGE>



                8.11  Assignability.  Neither  this  Agreement  nor  any  of the
        parties'  rights  hereunder  shall be  assignable  by any  party  hereto
        without the prior written consent of the other parties hereto; provided,
        however,  that Buyer's or its successors' or assigns'  rights  hereunder
        may be assigned or otherwise  transferred,  in whole or in part, without
        any  other   party's   consent  (i)  to  any   successor  by  merger  or
        consolidation  or (ii) to any  individual,  partnership,  corporation or
        other entity  deriving  title from Buyer or its successors or assigns to
        all or substantially all of the assets as constituted on the date of any
        such transfer,  provided that no such assignment  shall effect a release
        of  Buyer  or  its  successors  or  assigns  from  any   liabilities  or
        obligations hereunder.

                8.12 Drafting.  The parties acknowledge and confirm that each of
        their respective  attorneys have participated  jointly in the review and
        revision of this  Agreement  and that it has not been written  solely by
        counsel for one party. The parties hereto therefore  stipulate and agree
        that the rule of  construction to the effect that any ambiguities are to
        be or may be resolved  against the drafting  party shall not be employed
        in the  interpretation  of this  Agreement  to favor any  party  against
        another.

                8.13  References.  The  use of  the  words  "hereof,"  "herein,"
        "hereunder," "herewith," "hereto," "hereby," and words of similar import
        shall refer to this entire Agreement, and not to any particular article,
        section, subsection,  clause, or paragraph of this Agreement, unless the
        context clearly indicates otherwise.

                 8.14  Calendar  Days,   Weeks  and  Months.   Unless  otherwise
         specified  herein,  any reference to "day",  "week",  or "month" herein
         shall mean a calendar day, week or month.

                 8.15 Gender;  Plural and Singular.  Where the context hereof so
         requires,  the  masculine  gender shall include the feminine or neuter,
         and the singular shall include the plural and the plural the singular.

                 8.16  Cumulative  Rights.  All  rights and  remedies  specified
         herein are cumulative and are in addition to, not in limitation of, any
         rights or remedies  the  parties may have at law or in equity,  and all
         such rights and remedies may be exercised singularly or concurrently.

                8.17 No Implied Covenants. Each party, against the other, waives
        and relinquishes any right to assert, either as a claim or as a defense,
        that  the  other   party  is  bound  to   perform   or  liable  for  the
        nonperformance  of any  implied  covenant  or  implied  duty or  implied
        obligation.

                8.18  Attorneys'  Fees.  The  prevailing  party  in any  dispute
        between the parties  arising out of the  interpretation,  application or
        enforcement of any provision  hereof shall be entitled to recover all of
        its reasonable  attorney's  fees and costs whether suit be filed or not,
        including  without  limitation  costs and attorneys'  fees related to or
        arising out of any trial or appellate proceedings.


a-72684.2
                                       52

<PAGE>



                8.19  Indirect  Action.  Where any  provision  hereof  refers to
        action to be taken by any Person or party, or which such Person or party
        is prohibited from taking,  such provision  shall be applicable  whether
        the action in question is taken directly or indirectly by such Person or
        party.

                                          *     *     *     *     *     *


a-72684.2
                                       53

<PAGE>



        IN WITNESS WHEREOF,  the parties have executed this Agreement and caused
the same to be duly  delivered on their  behalf on the day and year  hereinabove
first set forth.


                                            SELLER:

                                            VALLEY SYSTEMS, INC.


                                            By:
                                                  Ed Strickland
                                                  President and
                                                  Chief Executive Officer



                                            BUYER:

                                            HYDROCHEM INDUSTRIAL SERVICES, INC.


                                            By:
                                                     B. Tom Carter, Jr.
                                                     Chairman of the Board and
                                                     Chief Executive Officer

a-72684.2
                                       54

<PAGE>



                                    SCHEDULES





SCHEDULE                                         TITLE
--------                                         ----- 
1.1.1...............................   Fixed Assets

1.3A................................   Assumed Liabilities

1.3B................................   Material Contacts, Leases, etc.

2.2.................................   Required Consents, Approvals, etc.

2.4.................................   Affiliated Entities, etc.

2.5.................................   Jurisdictions

2.7.................................   Officers, Directors, Banks, etc.

2.9.................................   Certain Liabilities

2.12A...............................   Owned Realty

2.12B...............................   Leases, etc.

2.14................................   Encumbrances

2.15................................   Insurance Matters

2.16................................   Intellectual Property

2.18................................   Employee Matters

2.19................................   Other Contracts

2.21................................   Litigation

2.24................................   Environmental Matters

2.25................................   Customers/Suppliers

3.2.................................   Buyer's Required Consent



a-72684.2
                                       55

<PAGE>


                                    EXHIBITS


EXHIBIT                                             TITLE
"A"..................................   Bill of Sale, Assignment and Assumption
                                        Agreement
"B"..................................   Receivables Guaranty              
"C"..................................   Escrow Agreement              
"D"..................................   Opinion of Arnall Golden & Gregory, LLP
"E"..................................   Opinion of Haynes and Boone, LLP



a-72684.2
                                       56