STOCK PURCHASE AGREEMENT

                                     Between

                GRASEBY ELECTRO-OPTICS INC., the sole Shareholder

                                       of

                         GRASEBY CONTROLS INCORPORATED,
                             a Delaware corporation,

                                    as SELLER

                                       and

                             TB WOOD'S INCORPORATED,
                           a Pennsylvania Corporation

                                    as BUYER


                             Dated As of May 8, 1997



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<PAGE>



                                TABLE OF CONTENTS




ARTICLE I    DEFINITIONS ......................................................1

ARTICLE II   PURCHASE AND SALE OF SHARES ......................................6

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF SELLER .........................7

             Section 3.01 - Organization, Good Standing and Authority
                            of the Company ....................................7
             Section 3.02 - Warranty of Title to the Shares ...................7
             Section 3.03 - Capital Structure of the Company ..................7
             Section 3.04 - No Subsidiaries ...................................7
             Section 3.05 - Authorized and Effective Agreement;
                            No Violation ......................................8
             Section 3.06 - Financial Statements; Organizational Documents;
                            Minute Books ......................................8
             Section 3.07 - Operations Subsequent to December 31, 1996 ........9
             Section 3.08 - Governmental Authorizations ......................10
             Section 3.09 - Consents .........................................10
             Section 3.10 - Intangibles ......................................10
             Section 3.11 - Properties .......................................11
             Section 3.12 - Environmental Matters ............................12
             Section 3.13 - Tax Matters ......................................14
             Section 3.14 - Employee Benefit Plans ...........................15
             Section 3.15 - Certain Contracts ................................19
             Section 3.16 - Legal Proceedings; Regulatory Approvals ..........19
             Section 3.17 - Compliance with Laws .............................19
             Section 3.18 - Brokers and Finders ..............................20
             Section 3.19 - Inventory ........................................20
             Section 3.20 - Accounts Receivable ..............................20
             Section 3.21 - No Undisclosed Liabilities .......................20
             Section 3.22 - Title ............................................21
             Section 3.23 - Transactions with Related Parties ................21
             Section 3.24 - Compensation Arrangements; Bank Accounts;
                            Officers and Directors ...........................21
             Section 3.25 - Labor Relations ..................................21
             Section 3.26 - Products Liability ...............................22
             Section 3.27 - Insurance ........................................22



                                       (i)



                                       40
<PAGE>



ARTICLE IV   REPRESENTATIONS AND WARRANTIES OF BUYER .........................23

             Section 4.01 - Organization, Standing and Authority of Buyer ....23
             Section 4.02 - Authorized and Effective Agreement ...............23
             Section 4.03 - Legal Proceedings; Regulatory Approvals ..........23
             Section 4.04 - Securities .......................................24
             Section 4.05 - Brokers and Finders ..............................24

ARTICLE V    CONDITIONS PRECEDENT ............................................24

             Section 5.01 - Conditions Precedent -- Buyer and Seller .........24
             Section 5.02 - Conditions Precedent -- Seller ...................25
             Section 5.03 - Conditions Precedent -- Buyer ....................25

ARTICLE VI   CLOSING .........................................................27

ARTICLE VII  WAIVER ..........................................................27

ARTICLE VIII CERTAIN POST-CLOSING OBLIGATIONS ................................28

             Section 8.01 - Confidential Information .........................28
             Section 8.02 - Indemnification by Seller ........................28
             Section 8.03 - Indemnification by Buyer .........................30
             Section 8.04 - Indemnification Procedures .......................30
             Section 8.05 - Claims Against the Company .......................31
             Section 8.06 - Tax Matters ......................................32
             Section 8.07 - Noncompetition Covenant ..........................35
             Section 8.08 - Nature and Survival of Representations ...........35
             Section 8.09 - Employees; 401(k) Plan ...........................35

ARTICLE IX   MISCELLANEOUS ...................................................36

             Section 9.01 - Authorized and Effective Agreement;
                                        No Violation (Guarantors) ............36
             Section 9.02 - Expenses .........................................37
             Section 9.03 - Consent to Jurisdiction; Forum Selection .........37
             Section 9.04 - Entire Agreement .................................37
             Section 9.05 - Assignment .......................................37
             Section 9.06 - Notices ..........................................37
             Section 9.07 - Captions; Headings ...............................39
             Section 9.08 - Amendments .......................................39


                                      (ii)



                                       41
<PAGE>




             Section 9.09 - Severability .....................................39
             Section 9.10 - Construction .....................................39
             Section 9.11 - Counterparts .....................................39
             Section 9.12 - Post-Closing Cooperation .........................39
             Section 9.13 - Governing Law ....................................40

List of Exhibits..............................................................44

List of Schedules.............................................................44




                                       42
<PAGE>




                                      (iii)


                            STOCK PURCHASE AGREEMENT


         THIS STOCK PURCHASE  AGREEMENT (the  "Agreement"),  is made and entered
into  this 8th day of May,  1997 by and among  GRASEBY  ELECTRO-OPTICS  INC.,  a
Delaware  corporation  ("Seller"),  the sole  shareholder  of  Graseby  Controls
Incorporated (the "Company"), a Delaware corporation, TB WOOD'S INCORPORATED,  a
Pennsylvania  corporation  ("Buyer"),  GRASEBY plc, an English corporation,  and
GRASEBY ANDERSEN INC., a Delaware  corporation (Graseby plc and Graseby Andersen
Inc. are sometimes collectively referred to hereinafter as "Guarantors").

                              W I T N E S S E T H:

     WHEREAS,  Seller  owns  one  hundred  percent  (100%)  of  the  issued  and
outstanding  shares  of  $1.00  par  value  common  stock  of the  Company  (the
"Shares"); and

     WHEREAS,  Seller desires to sell,  transfer and assign to Buyer,  and Buyer
desires to purchase,  assume,  and accept from Seller, the Shares, for the price
and on the terms and conditions hereinafter set forth;

     NOW,  THEREFORE,  in consideration of the foregoing premises and the mutual
covenants  and  promises  contained  herein,  Seller and Buyer,  intending to be
legally bound, hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

     "Affiliate"  shall have the  meaning  set forth in Rule  12b-2  promulgated
under the Securities Exchange Act of 1934, as amended.

     "Business"  shall mean the  business  presently  conducted  by the Company,
including  the business of  designing,  manufacturing,  selling,  and  servicing
electronic controllers for rotating electrical machinery.

     "Buyer" shall mean TB Wood's Incorporated.

     "Closing" shall have the meaning set forth in Article VI of this Agreement.

     "Closing  Date"  shall  have the  meaning  set forth in  Article VI of this
Agreement.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Company" shall mean Graseby Controls Incorporated.

     "Consents"  shall mean  consents,  permits or  approvals  of third  parties
necessary  to  transfer  the  Shares  to  Buyer  or  otherwise   consummate  the
transactions contemplated hereby and to conduct the Business.

     "Damage"  or  "Damages"   shall  mean  the  aggregate   amount  of  losses,
liabilities, claims, obligations,  damages, deficiencies, costs, expenses, fines
or penalties,  including without limitation  reasonable  attorney fees and other
defense costs,  costs of  investigation,  remediation or other response actions,
each to the extent  reasonable and actually  incurred,  with respect to a matter
for which an indemnification obligation exists under this Agreement.

     "Effective Time" shall mean the time and date specified pursuant to Article
VI hereof as the effective time of the Sale.



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<PAGE>


     "Encroachment"  shall  mean (i)  encroachments  of any  buildings  or other
improvements onto the Real Property,  and (ii) encroachments of any buildings or
other   improvements   situated  on  the  Real  Property   onto   properties  or
rights-of-way abutting the Real Property.

     "Financial  Statements"  shall mean the unaudited balance sheets (including
related notes and schedules,  if any) of the Company as of December 31, 1995 and
1996 and the related unaudited statements of operations and shareholders' equity
(including  related notes and  schedules,  if any) for each of the periods ended
December  31,  1994,  1995,  and 1996,  copies of which are  attached  hereto as
Exhibit A.

     "GAAP" shall mean generally accepted accounting principles in effect in the
United  States  from time to time,  as applied by the entity in respect of which
the term is used, consistently with its past practices.

     "Governmental Body" shall mean any foreign,  federal, state, local or other
governmental authority or regulatory body.

     "Intangibles"   shall  mean  (a)  all  inventions  (whether  patentable  or
unpatentable and whether or not reduced to practice),  all improvements thereto,
and all patents, patent applications, and patent disclosures,  together with all
reissuances,  continuations,  continuations-in-part,  revisions, extensions, and
reexaminations  thereof, (b) all trademarks,  service marks, trade dress, logos,
and trade names, together with all translations,  adaptations,  derivations, and
combinations  thereof and including all goodwill associated  therewith,  and all
applications,  registrations,  and  renewals in  connection  therewith,  (c) all
copyrightable works, all copyrights,  and all applications,  registrations,  and
renewals  in  connection  therewith,  (d) all mask  works and all  applications,
registrations  and renewals in connection  therewith,  (e) all trade secrets and
confidential  business information  (including ideas,  research and development,
know-how,  formulas,  compositions,  manufacturing and production  processes and
techniques,  technical data,  designs,  drawings,  specifications,  customer and
supplier lists,  pricing and cost information,  and business and marketing plans
and  proposals),   (f)  all  computer  software   (including  data  and  related
documentation),  (g) all  other  proprietary  rights,  and (h)  all  copies  and
tangible  embodiments thereof (in whatever form or medium).  Notwithstanding the
foregoing and any other provision in this Agreement or any agreement,  document,
or  instrument  delivered  or  to  be  delivered  pursuant  to  this  Agreement,
"Intangibles"  does not and shall not include,  and this  Agreement  shall in no
manner  represent  an  agreement  by Seller  to  convey  to Buyer,  any right or
interest in or to the name "Graseby" or any translation, adaptation, derivation,
or  combination  thereof,  provided,  however,  that (i) Seller hereby grants to
Buyer a license to use the corporate name "Graseby Controls Incorporated" as the
name of the  Company,  and for no other  purpose,  for the one (1) month  period
commencing on the Closing Date, it being agreed by the parties that on or before
the  expiration  of such one (1) month  period Buyer shall cause the name of the
Company to be changed to a name which does not include the name "Graseby" or any
translation,  adaptation,  derivation,  or  combination  thereof,  and  (ii) the
Company  may use and sell,  for a period  of six (6)  months  commencing  on the
Closing  Date,  the Company's  inventories

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<PAGE>


of products, components,  supplies, brochures,  stationery,  business forms, and
other  similar  materials in stock as of the Closing Date which contain the name
"Graseby Controls Incorporated" and translations,  adaptations, derivations, and
combinations  thereof,  it being agreed by the parties that after the expiration
of such six (6)  month  period  Buyer  shall  no  longer  use the name  "Graseby
Controls   Incorporated"  or  any  translation,   adaptation,   derivation,   or
combination thereof on any product,  component,  supply,  brochure,  stationery,
business forms, or other similar materials.


     "Knowledge,"  when used in the  phrase "to the  knowledge  of" or a similar
phrase,  shall mean the  knowledge of the officers  and  management  (including,
without limitation,  the officers  responsible for tax matters) of the Person to
whom such phrase refers,  it being understood that the Knowledge of Seller shall
always be deemed to include the Knowledge of the Company.

     "Licenses" shall mean all licenses, permits and other authorizations issued
by any  federal,  state or local  governmental  authorities  to the  Company  in
connection with the Business or required for the conduct of the Business.

     "Lien" shall mean any mortgage,  lease, covenant,  condition,  restriction,
deed of trust, lien, pledge,  hypothecation,  assignment,  deposit  arrangement,
option,  right  of  first  refusal,   indenture,   license,  security  interest,
encumbrance, right of way, easement,  encroachment or similar arrangement of any
kind or nature or any title defect whatsoever.

     "Material Adverse Effect" shall mean, with reference to any event,  matter,
item or  circumstance  (other than as a result of changes (a) in applicable laws
or regulations of general  applicability or interpretations  thereof by court or
governmental  entities, or (b) in GAAP), that in and of itself, or when combined
with all other events, matters, items or circumstances, such event, matter, item
or circumstance  reasonably  could be expected to have, now or in the future,  a
material  adverse  effect  on the  Business,  properties,  financial  condition,
operations,  or results of  operations  of the Company,  as the case may be, but
shall not include those changes which would reasonably be expected to occur as a
reasonable  consequence  of  the  Sale,  including,   without  limitation,   the
consequences of employee resignations and employee relations difficulties.

     "Ordinary Course of Business" shall mean the ordinary course of business of
the entity with respect to which this term is used, conducted in the same manner
as theretofore  conducted during the three (3) year period preceding the date of
this Agreement and consistent  with the entity's past policies,  practices,  and
methods (including with respect to quantity and frequency) in effect during such
three (3) year period. When used with reference to the Company,  Ordinary Course
of Business shall mean the (a) Ordinary  Course of Business of the Company,  and
(b) the Ordinary Course of Business of Graseby Volkmann Corporation prior to its
merger with and into the Company.

     "Permitted  Exceptions"  shall  have  the  meaning  set  forth  in  Section
3.11(b)(ii) of this Agreement.

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<PAGE>


     "Person"  shall  mean  an  individual,  a  partnership,  a  corporation,  a
commercial  bank, an industrial bank, a savings  association,  a savings bank, a
limited liability  company,  an association,  a joint stock company,  a trust, a
business  trust,  a  joint  venture,  an  unincorporated   organization,   or  a
governmental  entity  (or  any  department,  agency,  or  political  subdivision
thereof).

     "Personal Property" shall mean the machinery,  equipment,  tools, vehicles,
furniture,  leasehold improvements,  office equipment,  plant and other tangible
personal  property  used or useful in the Business,  and all computer  disks and
tapes, plans, diagrams, blueprints, schematics and books and records relating to
the Company or the Business.

     "Predecessor  in Interest"  shall mean, with respect to the entity to which
such phrase  refers,  all entities to which such entity has  succeeded by way of
merger or  acquisition.  When used  with  respect  to the  Company,  the  phrase
"Predecessor in Interest"  shall mean and include,  but shall not be limited to,
Graseby Volkmann Corporation, Tasc Drives, Inc., and Electrical South, Inc.

     "Purchase Price" shall have the meaning set forth in Article II.

     "Real  Property"  shall mean that certain parcel or parcels of land located
in Greensboro,  Guilford County, North Carolina and more particularly  described
in Exhibit B hereto, together with all fixtures, fittings, buildings, structures
and other  improvements  thereon,  and all  easements,  rights and privileges of
every type and nature used by the Company in connection therewith or appurtenant
thereto.

     "Regulations" shall mean the federal income tax regulations under the Code,
promulgated by the Treasury  Department and contained in Title 26 of the Code of
Federal  Regulations,  including any  amendments or any  substitute or successor
provisions thereto.

     "Related Party" shall mean Seller,  any of the officers or directors of the
Company or Seller,  any  Affiliate of Seller,  the  Company,  or any business or
entity in which Seller, the Company, or any Affiliate of any such Person has any
direct, or material indirect, interest.

     "Rights" shall mean warrants,  options,  rights (whether stock appreciation
rights,  conversion rights,  exchange rights,  profit  participation  rights, or
otherwise),  convertible  securities and other arrangements or commitments which
obligate  a Person  to  issue,  otherwise  cause to  become  outstanding,  sell,
transfer,  pledge,  or  otherwise  dispose  of any of its or any other  Person's
capital stock or other  ownership  interests,  or any voting  rights  thereof or
therein.

     "Sale"  shall  mean the sale of the Shares by Seller to Buyer  pursuant  to
this Agreement.

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<PAGE>


     "Seller"  shall mean Graseby  Electro-Optics  Inc.,  successor by merger to
Graseby Overseas Corporation.

     "Shares"  shall mean all of the issued  and  outstanding  shares of capital
stock of the Company.

     "Significant  Contract"  shall mean,  with respect to the Company,  (a) any
note, bond, mortgage or other instrument which evidences or secures indebtedness
of the  Company  with a balance  outstanding  of Twenty  Five  Thousand  Dollars
($25,000) or more, (b) any agreement, arrangement, commitment, contract or other
instrument, except a lease of Real or Personal Property, to which the Company is
a party or by which the Company is bound, the performance or  nonperformance  of
which could either (i) increase  the  liabilities  or decrease the assets of the
Company or (ii) decrease the income or increase the expenses of the Company,  in
each case by Twenty Five Thousand  Dollars  ($25,000) or more over the remaining
term of the obligation, exclusive of all optional renewal periods and extensions
of  the  term,  provided,   however,  that  any  such  agreement,   arrangement,
commitment, contract or other instrument shall not be deemed to be a Significant
Contract in the event the Company has the  contractual  right to  terminate  the
agreement, arrangement,  commitment, contract or other instrument in question on
thirty (30) days' notice or less without incurring a penalty,  premium, or other
expense in excess of Twenty Five Thousand Dollars ($25,000).

     "Significant Lease" shall mean, with respect to the Company,  (a) any lease
of Real or Personal Property,  or any sublease of Real Property, by the Company,
as lessee or sublessee, pursuant to which the Company reasonably anticipates the
payment of aggregate rent, taxes, insurance, utilities (if applicable) and other
charges in excess of Twenty Five Thousand  Dollars  ($25,000) over the remaining
term of such lease or sublease,  exclusive of all optional  renewal  periods and
optional extensions of the term thereof (provided,  however, that any such lease
or  sublease  shall not be  deemed a  Significant  Lease in the  event  that the
Company has the contractual  right to terminate such lease in question on thirty
(30) days' notice or less without incurring a penalty, premium, or other expense
in excess of Twenty Five Thousand Dollars ($25,000)),  and (b) any lease of Real
or Personal Property, or any sublease of Real Property, by the Company as lessor
or sublessor.

     "Survey"  shall mean that certain  survey of the Real Property  prepared by
Andrew G.  Zoutewelle  (L-3098),  dated April 23,  1997,  last revised on May 6,
1997,  entitled  "Boundary  Survey of Lot 1 Welker's Inc.  Greensboro,  Guilford
County,  N.C.  Graseby  Controls  Inc.," a copy of which is  attached  hereto as
Exhibit C.

     "Survey  Defect"  shall mean any of the following  shown on or  discernable
from the Survey: (a) a lack of vehicular access to and from the Real Property to
and from a dedicated and accepted  public  right-of-way;  (b) any zoning or land
use ordinances (other than Permitted  Exceptions);  (c)  noncompliance  with any
applicable zoning law, including,  without limitation, those relating to setback
or height  restrictions;  (d)  noncompliance  with any covenant,  restriction or
condition  affecting the Real  Property;  or (e) any Lien (other than  Permitted
Exceptions) which


                                       47
<PAGE>


individually or when  aggregated with other matters  affecting title (other than
Permitted  Exceptions):  (i)  materially  detracts  from  the  value of the Real
Property,  (ii) impairs,  or reasonably could be expected to impair,  the use of
the Real  Property in the manner such  property is  currently  being used by the
Company in connection with the Business,  (iii) impairs,  or reasonably could be
expected  to  impair,  the  operations  of the  Company  or the  conduct  of the
Business, or (iv) renders the title to the Real Property unmarketable.

     "Tax" or "Taxes" shall mean any federal, state, local, foreign or other net
income, gross income,  gross receipts,  windfall profits,  severance,  property,
production, sales, use, transfer, gains, license, excise, franchise, employment,
payroll,  withholding (which includes, without limitation,  income, payroll tax,
foreign withholding,  backup withholding,  and any other withholding  obligation
imposed by the Code or a Governmental Body), value added, estimated, alternative
or add-on minimum tax, or any other tax, custom, duty, governmental fee or other
like assessment or charge of any kind whatsoever,  together with any interest or
any penalty,  addition to tax or additional  amount imposed by any  Governmental
Body.

     "Tax Return" shall mean any return, report or similar statement required to
be  filed  with  respect  to  any  Taxes  (including  any  required  schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.

     Other terms used herein are defined elsewhere in this Agreement.

                                   ARTICLE II
                           PURCHASE AND SALE OF SHARES

     At the  Closing,  upon  satisfaction  of the  conditions  contained in this
Agreement,  (i) Seller  shall sell and deliver the Shares to Buyer,  and (ii) in
exchange  therefor,  Buyer  shall pay the  Purchase  Price in full in  immediate
funds. The "Purchase Price" for the Shares shall be the sum of Four Million Nine
Hundred Fifty  Thousand  United States Dollars  ($4,950,000.00),  of which Three
Million Eight Hundred Eighteen Thousand One Hundred  Ninety-Seven  United States
Dollars ($3,818,197.00) shall be paid to Seller in full satisfaction of the loan
in that amount to the Company by Graseby  Overseas  Corporation (to which Seller
has succeeded as payee pursuant to a merger between Graseby Overseas Corporation
and  Seller,  with Seller as the  surviving  entity) and One Million One Hundred
Thirty-One  Thousand Eight Hundred Three United States  Dollars  ($1,131,803.00)
shall be paid to Seller.


                                   ARTICLE III
                    REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller hereby represents and warrants to Buyer as follows:

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<PAGE>


Section 3.1.  Organization, Good Standing and Authority of the Company.


     The Company is duly organized,  validly existing, and in good standing as a
general business  corporation  under the laws of the State of Delaware,  is duly
qualified to do business in the State of North Carolina,  and has the powers and
privileges of a general business  corporation,  including,  without  limitation,
full  power to carry on the  Business.  The  Company is not  required  by law to
qualify to do business in any foreign  jurisdiction  other than North  Carolina,
except where  failure to qualify in such foreign  jurisdiction  would not have a
Material Adverse Effect.

Section 3.2.  Warranty of Title to the Shares.

     Seller holds of record and  beneficially  owns, and has good and marketable
title to, the Shares. The Shares are not subject to any Taxes, Liens, or Rights.
Seller  is not a party to any  voting  trust,  shareholders'  agreement,  proxy,
voting trust,  or other  agreement or  understanding  with respect to the Shares
owned by Seller or the voting rights associated therewith.

Section 3.3.  Capital Structure of the Company.

     The  authorized  capital  stock of the  Company  consists  of One  Thousand
(1,000) shares of common stock, par value $1.00 per share ("Common  Stock").  As
of the date  hereof,  there were One  Thousand  (1,000)  shares of Common  Stock
issued and outstanding.  The Shares  constitute all of such  outstanding  Common
Stock.  The Shares were not issued in violation of the terms of any agreement or
other understanding binding upon the Company, and were issued in compliance with
all applicable  federal and state securities or "blue-sky" laws and regulations.
All Shares have been duly issued and constitute validly outstanding, fully paid,
and nonassessable shares of Common Stock. There are no Rights authorized, issued
or  outstanding  with respect to any capital  stock of the Company.  None of the
outstanding  shares of the Company's  capital stock has been issued in violation
of the preemptive rights of any Person.

Section 3.4.  No Subsidiaries.

     The Company  does not own and has not owned,  directly or  indirectly,  any
outstanding  capital stock or other voting securities or ownership  interests of
any corporation, partnership, limited liability company, or other organization.

Section 3.5.  Authorized and Effective Agreement; No Violation.

     (a) Seller has all requisite power and authority to enter into, to deliver,
and  (subject to receipt of all  Consents  set forth in Schedule  3.9 hereto) to
perform all of its obligations under this

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<PAGE>



Agreement.  This Agreement and all other agreements and instruments  required to
be  executed  and  delivered  by  Seller  and the  Company,  as  applicable,  in
connection  with or pursuant  hereto have been duly  executed  and  delivered by
Seller and the Company,  as  applicable,  and  constitute  the legal,  valid and
binding  obligations of Seller and the Company,  as  applicable,  enforceable in
accordance  with their  terms,  subject  as to  enforceability,  to  bankruptcy,
insolvency  and other laws of general  applicability  relating  to or  affecting
creditors' rights,  and to general equity principles.  Upon delivery to Buyer at
the Closing of  certificates  representing  the Shares in  accordance  herewith,
Buyer will  acquire  good and valid title to the  Shares,  free and clear of all
liens,  claims,  security  interests,   pledges,  charges,  equities,   options,
restrictions and encumbrances of whatsoever nature. The execution,  delivery and
performance  of this  Agreement  have  been  duly  authorized  by all  necessary
corporate  action on the part of Seller and the Company  (including  shareholder
approval).

     (b) Neither the execution and delivery of this Agreement,  the consummation
of the transactions contemplated hereby, nor compliance by Seller or the Company
with any of the provisions  hereof will: (i) conflict with or result in a breach
of any  provision  of the articles of  incorporation  or bylaws of Seller or the
Company;  (ii)  conflict  with or  constitute or result in a breach of any term,
condition or provision  of, or constitute a default  under,  or give rise to any
right of termination,  cancellation  or acceleration  with respect to, any note,
bond, mortgage,  indenture,  lease,  license,  agreement,  instrument,  or other
arrangement  or obligation to which Seller or the Company is a party or by which
any of them is bound,  or result in the creation or  imposition of any Lien upon
any  property or asset of Seller or the Company,  except  where such  occurrence
would not have a Material  Adverse Effect;  or (iii) violate any order,  ruling,
decree,  charge,  writ,  injunction,   regulatory  agreement  or  memorandum  of
understanding,  constitution,  statute, rule or regulation applicable to Seller,
the  Guarantors,  or the Company,  except where such violation  would not have a
Material Adverse Effect.

Section 3.6.  Financial Statements; Organizational Documents; Minute Books.

     (a) The books of account and related  records of the Company fairly reflect
in all material  respects and in reasonable  detail all assets,  liabilities and
transactions  of the  Company in  accordance  with GAAP.  Seller has  previously
delivered to Buyer the Financial Statements.  The Financial Statements:  (i) are
correct and complete in all material  respects and in accordance  with the books
and records of the Company;  (ii) fairly  present in all  material  respects the
financial  condition,  assets and liabilities of the Company and the Business as
of their  respective  dates and the results of operations  and cash flows of the
Company and the  Business for the periods  covered  thereby;  and (iii)  reflect
accurately  in all  material  respects all costs and expenses of the Company and
the  Business as if the Company were  independent  and not  affiliated  with any
other  corporation or business,  except as set forth in Schedule 3.6(a) attached
hereto.

     (b) Seller  previously  has  delivered to Buyer true,  complete and correct
copies  of  the  articles  of  incorporation  and  bylaws  of the  Company,  and
previously has provided to Buyer


                                       50
<PAGE>


access to all minute books,  stock  certificate books and stock transfer records
of the Company.  The minute books of the Company contain all material actions of
its shareholders and its board of directors.

Section 3.7.  Operations Subsequent to December 31, 1996.

     (a) Except as set forth in Schedule 3.7(a) attached hereto,  since December
31, 1996, the Company has conducted the Business only in the Ordinary  Course of
Business consistent with historical practice.

     (b) Except as set forth in Schedule 3.7(b) attached hereto,  since December
31, 1996,  there has not been any change in the Business,  financial  condition,
operations  or results of  operations of the Company which would have a Material
Adverse Effect.

     (c)  Except as set forth in  Schedule  3.7(c)  attached  hereto,  since
December  31,  1996:  (i) the  Company  has not sold,  leased,  transferred,  or
assigned  any of its  assets,  tangible  or  intangible,  other  than for a fair
consideration  in the  Ordinary  Course of  Business;  (ii) the  Company has not
entered into any Significant  Contract or Significant  Lease;  (iii) the Company
has not accelerated,  terminated,  modified or canceled any agreement, contract,
lease,  license,  (or  series  of  related  agreements,  contracts,  leases,  or
licenses),  involving more than Twenty Five Thousand Dollars  ($25,000) to which
the  Company is a party or by which the Company is bound  outside  the  Ordinary
Course  of  Business;  (iv)  the  Company  has not  imposed,  nor  suffered  the
imposition of, any Lien upon any of its assets,  tangible or intangible,  except
Liens  granted in  connection  with the purchase of equipment or supplies in the
Ordinary  Course of Business which in the aggregate do not exceed Fifty Thousand
Dollars  ($50,000);  (v)  there  has been no change  made or  authorized  in the
articles of  incorporation  or bylaws of the  Company;  (vi) the Company has not
issued,  sold, or otherwise disposed of any of its capital stock, or granted any
Rights  with  respect  to its  capital  stock,  or  agreed  to, or  allowed  the
imposition of, any Lien with respect to its capital stock; (vii) the Company has
not  declared,  set aside,  or paid any dividend or made any  distribution  with
respect  to its  capital  stock  (whether  in  cash  or in  kind)  or  redeemed,
purchased,  or otherwise  acquired any of its capital stock;  (viii) the Company
has not experienced any damage,  destruction, or loss (whether or not covered by
insurance)  to its property in excess of Fifty  Thousand  Dollars  ($50,000) per
occurrence;  (ix) the  Company  has not  granted  any  material  increase in the
compensation  of any of  its  directors,  officers,  employees,  or  independent
contractors  outside the Ordinary  Course of  Business;  (x) the Company has not
adopted, amended, modified or terminated any bonus,  profit-sharing,  incentive,
severance,  or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee  Benefit Plan);  (xi) the Company has not made or pledged to make
any charitable or other capital  contribution;  (xii) there has been no material
change in the  Company's  accounting  principles,  practices or methods;  (xiii)
there has been no organized  labor walkout,  work stoppage or slowdown by any of
the Company's  employees or, to the Knowledge of Seller,  any threat  thereof or
any organized attempts to establish unions or collectively  bargain with respect
to the employees of the Company;  (xiv) there has been no cancellation or waiver
by the  Company of any right  material to the  operation  of


                                       51
<PAGE>


the Company nor any  disposition  of or failure to keep in effect any rights in,
to, or for the use of any material  patent,  or any trademark,  service mark, or
tradename used in any  jurisdiction  where the Company has a material  amount of
product  sales,  nor has there been any  disclosure by the Company to any person
not an employee of the Company or other  disposal of any trade secret,  process,
or  know-how;  (xv) the Company has not made,  nor has the Company or any taxing
authority changed or revoked, any Tax election relating to the Company; (xvi) to
the  Knowledge  of  Seller,  there  has not been any  other  occurrence,  event,
incident,  action, failure to act, or transaction outside the Ordinary Course of
Business involving the Company which has or will have a Material Adverse Effect;
and (xvii) the Company has not committed to do, or to permit the  occurrence of,
any of the foregoing.

Section 3.8.  Governmental Authorizations.

     To the  Knowledge  of Seller,  the  Company  possesses  and is in  material
compliance  with  all of the  Licenses  and  other  federal,  state,  and  local
governmental approvals,  certificates,  filings, franchises,  licenses, notices,
permits,  and rights  ("Permits")  necessary for the Company to own,  lease,  or
operate  its  properties  and assets and to carry on the  Business  as it is now
conducted,  which are set forth in Schedule 3.8 attached hereto.  No default has
occurred  under any License  which  would have a Material  Adverse  Effect.  The
Company has conducted  the Business and is now doing so in  compliance  with all
applicable  laws,  rules,  regulations,  judgments  and orders,  except for such
non-compliance which could not have a Material Adverse Effect.

Section 3.9.  Consents.

     Except as set forth in Schedule 3.9 attached hereto, no consent,  approval,
permit or authorization  of, or declaration to, or filing with, any governmental
or regulatory  authority or any other third party is required to consummate this
Agreement and the transactions contemplated hereby.

Section 3.10.  Intangibles.

     Schedule 3.10 attached  hereto sets forth all  Intangibles  owned by or
licensed to the Company (the  "Company's  Intangibles").  Except as set forth in
Schedule 3.10: (a) no  Intangibles,  other than the Company's  Intangibles,  are
required to conduct the Business in the Ordinary Course of Business; (b) none of
the  Company's  Intangibles  is used pursuant to a license from a third party or
licensed to a third party; (c) all of the Company's Intangibles which consist of
patents,  registered trademarks,  service marks and copyrights are in full force
and  effect  and are held of  record  in the  Company's  name;  (d)  there is no
agreement  to which the  Company  is a party or to which the  Company is legally
bound,  and to Seller's  Knowledge  no  restriction,  materially  and  adversely
affecting the use by the Company of any of the Company's Intangibles;  (e) there
is no pending  reexamination of or pending litigation with respect to any of the
Company's  Intangibles;  (f) there is no order,  holding,  decision  or judgment
which has been rendered by any governmental authority, and no agreement, consent
or  stipulation  exists to which the  Company is a party or of which the Company
has  Knowledge  which would  prevent the


                                       52
<PAGE>


Company from using any of the Company's Intangibles; (g) there is no pending or,
to the Company's knowledge threatened, objection or claim being asserted against
the Company in any  administrative or judicial  proceeding or by any person with
respect  to  the  ownership,  validity,  enforceability,  or  use  of any of the
Company's   Intangibles  or   challenging   or   questioning   the  validity  or
effectiveness  of the  Company's  ownership  or license of any of the  Company's
Intangibles; (h) no notice of rejection, opposition,  interference or refusal to
register  has been  received  by the  Company  in  connection  with  any  patent
application  or  any  application  for  trademark,  service  mark  or  copyright
registration included within the Company's Intangibles;  (i) the Company has not
infringed or misappropriated  any rights of any other Person with respect to any
United  States or foreign  patents,  trademarks,  trade  names,  service  marks,
copyrights or applications therefor or any other intellectual property rights in
its  operation  of the  Business,  nor does the Company  have  Knowledge  of any
infringement or  misappropriation  which will occur as a result of the continued
operation  of the Business as now  conducted;  and (j) the Company has not taken
any action which would  permit any party other than the Company,  or its agents,
officers  or  employees  (acting  on behalf of the  Company),  to use,  license,
sublicense or operate under any of the Company's Intangibles.

Section 3.11.  Properties.

     (a)  Personal  Property;  Company's  Intangibles.  The Company has good and
marketable title to, or leasehold interests in, all of the Personal Property and
the  Company's  Intangibles  reflected  on the  balance  sheet  included  in the
Financial  Statements as of December 31, 1996, or acquired between that date and
the Effective Time, free and clear of all Liens,  except (i) such  imperfections
of title, restrictions, covenants, and encumbrances, if any, as would not have a
Material  Adverse Effect,  and (ii)  dispositions  and encumbrances for adequate
consideration  in the Ordinary  Course of Business of the Company.  The Personal
Property constitutes  substantially all of the personal property that is used or
held by the Company for use in the operation of the Business.

     (b)  Real Property.

     (i)  Except  for the Real  Property,  the  Company  does not own,  lease or
otherwise  occupy  any real  property  or  interest  therein  and no other  real
property or interest therein is used in the conduct of the Business.

     (ii) The  Company has (and will  continue to have  immediately
following  consummation of the transactions  contemplated  hereby) good,  valid,
marketable and indefeasible fee simple title to, and is in actual possession of,
the Real Property. The legal description of the Real Property attached hereto as
Exhibit B is  accurate,  current and  complete.  Seller has  delivered  to Buyer
complete  copies  of  all  title  reports,   title  opinions,   title  insurance
commitments,  title insurance  policies and surveys,  if any,  pertaining to the
Real Property that are known by Seller,  after reasonable  inquiry, to exist and
are in the  possession  or control of Seller,  the Company or any  Affiliate  of
either of the same (Seller, the Company and all Affiliates of either of the same
being  hereinafter  collectively  referred  to in this  Section  3.11(b)(ii)  as
"Seller


                                       53
<PAGE>


Entities"). The Real Property is free and clear of all Liens and Survey Defects,
including,   without   limitation,   security  interests,   including,   without
limitation, any conditional sale or other title or interest retention agreements
or arrangements,  options to purchase, liens, encumbrances,  mortgages, pledges,
assessments, easements, covenants, restrictions, reservations, defects in title,
Encroachments,  leases,  subleases,  rights of occupancy,  chattel mortgages and
collateral  security  arrangements,  rights-of-way,  building use  restrictions,
exceptions,  variances  or  reservations  of any nature  whatsoever,  except the
following  (collectively,  "Permitted  Exceptions"):  (A)  matters  set forth on
Schedule  3.22;  (B)  minor  imperfections  of  title,  conditions,   easements,
covenants  and  restrictions,  if any,  none of which  have a  Material  Adverse
Effect;  (C) zoning and land use ordinances,  none of which,  individually or in
the aggregate, to the Knowledge of Seller has a Material Adverse Effect; and (D)
liens for real estate taxes and assessments not yet due and payable. None of the
Seller Entities has received written notice of any violation of or nonconformity
with any zoning,  subdivision,  wetlands,  or other  similar  law,  code,  rule,
regulation or ordinance from any governmental authority with respect to the Real
Property,  or of any  condemnation  action,  eminent domain  proceeding or other
litigation concerning any of the Real Property.  The water, gas, electricity and
other utilities  serving the Real Property have been and are currently  adequate
to service the Business.

Section 3.12.  Environmental Matters.

     (a) The Company holds and is in compliance with all Permits  required under
all applicable environmental statutes, rules, regulations, ordinances and orders
of any governmental entity, including those relating to Hazardous Substances (as
defined below)  ("Environmental  Laws") in connection with the Business, and all
of such  Permits  are in full force and effect.  All such  Permits are listed on
Schedule  3.8  attached  hereto  and  any  that  are  not  transferable  are  so
designated.   The  Company  has  complied  with  and  is  not  in  violation  of
Environmental  Laws. The Company has made timely application for renewals of all
such Permits for which  Environmental  Laws require  that  applications  must be
filed on or before  the  Closing  to  maintain  such  Permits  in full force and
effect.  Neither Seller nor the Company has reason to believe that such renewals
will not be issued in the ordinary  course or will  require  payment of money or
imposition of conditions, other than as set forth in Schedule 3.8.

     (b) No notice, citation, summons or order has been issued, no complaint has
been  filed,  no penalty has been  assessed  and no  investigation  or review is
pending,  or to Seller's  Knowledge  threatened,  by any  governmental  or other
entity:  (i)  with  respect  to any  alleged  violation  by the  Company  of any
Environmental  Laws;  (ii) with respect to any alleged failure by the Company to
have any Permit required in connection with the Business;  or (iii) with respect
to   any   use,   possession,   generation,   treatment,   storage,   recycling,
transportation  or disposal  (collectively,  "Management"  or  "Manage")  of any
hazardous  or toxic  substance  or waste,  pollutant  or  contaminant  including
petroleum products and radioactive materials  ("Hazardous  Substances") by or on
behalf of the Company or any Predecessor in Interest of the Company.

     (c) The  Company has not  received  any  written  request for  information,
notice  of  claim,  demand  or  notification  that  it is or may be  potentially
responsible with respect to any


                                       54
<PAGE>


investigation  or cleanup of any threatened or actual Release (as defined below)
of any Hazardous Substance.

     (d) Except as set forth on Schedule 3.12(d):  (i) the Company has not used,
generated,  treated, stored for more than ninety (90) days, recycled or disposed
of any Hazardous Substances on any property now or previously owned, operated or
leased by the Company,  nor to Seller's  Knowledge has any other Person treated,
stored for more than  ninety (90) days,  recycled  or disposed of any  Hazardous
Substances on any property now or previously owned,  operated,  or leased by the
Company at any time during the Company's ownership,  lease, or operation of such
property;  (ii) no  polychlorinated  biphenyls  ("PCBs") or  asbestos-containing
materials  are or have been  present at any property  now or  previously  owned,
operated or leased by the Company at any time  during the  Company's  ownership,
operation,  or lease of such property;  and (iii) no underground  storage tanks,
active or abandoned,  are or have been present at any property now or previously
owned,  operated  or leased by the  Company  at any time  during  the  Company's
ownership, operation, or lease of such property.

     (e) No  Hazardous  Substance  Managed  by the  Company  has been  recycled,
treated,  stored,  disposed  of or  transported  by any Person  other than those
listed  on  Schedule  3.12(e).  Except  as set  forth on  Schedule  3.12(e),  no
Hazardous Substance Managed by or on behalf of the Company or any Predecessor in
Interest  of the  Company  has come to be located at any site which is listed or
proposed for listing under the National  Priority List  promulgated  pursuant to
the  Comprehensive  Environmental  Response,  Compensation  and Liability Act of
1980,  as  amended  ("CERCLA"),   the  Comprehensive   Environmental   Response,
Compensation  and Liability  Information  System  ("CERCLIS")  or on any similar
state  list,  or which is the  subject of  federal,  state or local  enforcement
actions or other  investigations which may lead to claims against the Company or
Buyer for clean-up  costs,  remedial work,  damages to natural  resources or for
personal injury claims, including, but not limited to, claims under CERCLA.

     (f) Except as set forth in Schedule  3.12(f),  no Hazardous  Substance  has
been released,  spilled,  leaked,  discharged,  or disposed of, pumped,  poured,
emitted,  emptied,  injected,  leached, dumped or allowed to escape ("Released")
at, on, about or under any property now or formerly owned, operated or leased by
the Company or any Predecessor in Interest of the Company at any time during the
ownership,  operation, or lease of such property by the Company or a Predecessor
in Interest of the Company, which Release would have a Material Adverse Effect.

     (g)  Except  as  set  forth  in  Schedule  3.12(g),   no  oral  or  written
notification of a Release or threat of Release of a Hazardous Substance has been
filed by or on behalf of the  Company  or in  relation  to any  property  now or
previously  owned,  operated  or leased by the  Company  or any  Predecessor  in
Interest of the Company. No property currently owned, leased, or operated by the
Company  is listed  or  proposed  for  listing  on the  National  Priority  List
promulgated  pursuant to CERCLA or CERCLIS or on any similar state list of sites
requiring investigation or clean-up.

                                       55
<PAGE>


     (h) There are no environmental  liens on any properties  currently owned or
leased by the  Company  and no  government  actions  have  been  taken or are in
process or pending which could subject any of such properties to such liens.

     (i) The Company  would not be  required to place any notice or  restriction
relating to the  presence of  Hazardous  Substances  in the deed to any property
currently  owned by it, and to Seller's  Knowledge  no property  now or formerly
owned by the Company has such notice or restriction in its deed.

     (j) No consent,  approval or  authorization  of, or  registration or filing
with  any  Person,   including  any  environmental   governmental  authority  or
regulatory  agency, is required in connection with the execution and delivery of
this Agreement or the consummation of the transactions  contemplated hereby. The
Company has or will prepare and file all applications for Permit  transfers,  if
any, in adequate time for transfer to occur prior to the Closing.

     (k) Except as set forth in Schedule  3.12(k) and as heretofore  provided to
Buyer,  to  Seller's  Knowledge  there have been no  environmental  inspections,
investigations,  studies,  audits, tests, reviews or other analyses conducted in
relation to any  property  now or  previously  owned,  operated or leased by the
Company.

     (l)  Neither  Seller nor the Company  has  Knowledge  of any other facts or
circumstances  related to the  properties of the Company or any  Predecessor  in
Interest of the Company,  or to the Business,  that could reasonably be expected
to lead to any future  environmental  claims,  liabilities  or  responsibilities
affecting the Company or Buyer.

Section 3.13.  Tax Matters.

     (a) All Tax  Returns  that are  required  to have been filed by the Company
have been filed within the time and in the manner  required by law, and all such
Tax Returns are in all material respects true and correct and accurately reflect
the Tax  liabilities  of the Company.  All Taxes of the Company that have become
due  pursuant  to such Tax  Returns,  or any  assessments  or demand for payment
received,  have been paid.  The provision  for Taxes  reflected on the Company's
December  31,  1996,  balance  sheet is adequate  to cover all Tax  liabilities,
whether or not disputed,  of the Company and any  Predecessor in Interest of the
Company with respect to any taxable year or taxable  period  ending on or before
December 31, 1996, and nothing has occurred  subsequent to December 31, 1996, to
make any such provision inadequate.  All Taxes related to taxable periods of the
Company  subsequent  to  December  31,  1996,  have been paid or are  adequately
reserved  for on the books and  records of the  Company.  Except as set forth in
Schedule 3.13(a), there are no current, pending, or to Seller's Knowledge or the
Company's  Knowledge  threatened,  claims,  assessments,  notices,  proposals to
assess, deficiencies,  or audits with respect to any Taxes. No Governmental Body
with respect to which the Company does not file Tax Returns has claimed that the
Company is or may be subject to taxation by that Governmental  Body. The Company
has  withheld  and paid all Taxes  required  to have been  withheld  and paid in
connection  with amounts paid or owing to any employee,  shareholder,  creditor,
independent  contractor  or  other  party.  The  Company  has not  executed  any
presently  effective  waiver or extension of any statute of limitations  against
assessments and collections of Taxes.  Except as set forth in Schedule  3.13(a),
no Tax Returns of the Company are  presently  subject to an extension of time to
file.




                                       56
<PAGE>



     (b) The  Company  has not  filed  and has not had  filed on its  behalf  an
election  under Section  341(f) of the Code that is applicable to the Company or
any of its assets.  The Company has not made any  payments,  is not obligated to
make any payments,  nor is a party to any agreement that under any circumstances
could  obligate it to make any payments that will not be  deductible  under Code
Section  280G.  The  Company  is not a party to any Tax  allocation  or  sharing
agreement.  Except as  disclosed  on  Schedule  3.13(b)(i),  the Company (or any
Predecessor  in  Interest  of  the  Company),  has  never  been a  member  of an
affiliated  group that  elected  to file or was  required  to file  consolidated
returns for federal income tax purposes or consolidated, combined or unitary tax
returns for state or local income tax purposes.  Except for this Agreement,  and
except as set forth in  Schedule  3.13(b)(ii),  there is no  agreement  with any
Person pursuant to which the Company would have any obligation  after Closing in
respect of Taxes of such other Person.

     (c) None of the  assets of the  Company  is  property  that the  Company is
required  to treat as being  owned by any  other  Person  pursuant  to the "safe
harbor lease"  provisions of former Section  168(f)(8) of the Code.  None of the
assets of the Company  directly or  indirectly  secures any debt the interest on
which is tax-exempt  under Section 103(a) of the Code. None of the assets of the
Company is "tax-exempt use property" within the meaning of Section 168(h) of the
Code.

     (d) The  Company  has not  agreed  to make nor is it  required  to make any
adjustment  under Section 481(a) of the Code by reason of a change in accounting
or otherwise.

     (e) Neither the Company nor Seller is a "foreign person" within the meaning
of the Code and the Regulations.

     (f) The Company has no interest in any entity that is treated as a
partnership for federal income tax purposes.

     (g) Except as disclosed in Schedule 3.13(g), the Company is not a successor
to any other business  entity by way of merger,  reorganization,  liquidation or
similar transaction.

     (h) There is no ruling issued to the Company,  or closing agreement or gain
recognition agreement to which the Company is a party,  concerning Taxes from or
with any Governmental  Body which would have a continuing  effect on the Company
after the Closing Date.

                                       57
<PAGE>


Section 3.14.  Employee Benefit Plans.

     (a) Schedule  3.14(a)  lists all  "employee  benefit  plans," as defined in
Section 3(3) of the Employee  Retirement Income Security Act of 1974, as amended
("ERISA"), and all pension, profit sharing, retirement, supplemental retirement,
stock, stock option, basic and supplemental  accidental death and dismemberment,
basic and supplemental  life and health  insurance,  post-retirement  medical or
life, welfare, dental, vision, savings, bonus, deferred compensation,  incentive
compensation,  business travel and accident,  holiday, vacation,  severance pay,
salary  continuation,  sick pay,  sick  leave,  short and long term  disability,
tuition refund,  service award,  company car,  scholarship,  relocation,  patent
award, fringe benefit and other employee benefit plans, arrangements, contracts,
policies,  or practices whether written or unwritten,  qualified or unqualified,
funded  or  unfunded,  (i)  maintained,   contributed  to,  or  required  to  be
contributed  to by the Company or any ERISA  Affiliate  (as defined  below) with
respect to any Company  employees,  or (ii) pursuant to which the Company or any
ERISA  Affiliate may have any liability  with respect to any Company  employees,
within the United States (the "Benefit Plans").  For purposes of this Agreement,
the term "ERISA Affiliate" means: (i) any corporation  included with the Company
in a controlled  group of  corporations  within the meaning of Section 414(b) of
the Code;  (ii) any trade or  business  (whether or not  incorporated)  which is
under common  control with the Company  within the meaning of Section  414(c) of
the Code;  (iii) any member of an affiliated  service group of which the Company
is a member within the meaning of Section  414(m) of the Code; or (iv) any other
person or entity  treated as an affiliate of the Company under Section 414(o) of
the Code.

     (b) As  applicable,  with  respect to each of the Benefit  Plans,  true and
complete  copies of the  following  have been  delivered to Buyer:  (i) all plan
documents (including all amendments and modifications thereof) pertaining to the
"Graseby Savings and Investment Plan" and the Company's medical plan with United
Health Care of North  Carolina,  Inc.,  and in the case of an unwritten  Benefit
Plan a written  description  thereof;  (ii) the filed  Form 5500  series and all
schedules thereto, as applicable,  for 1993, 1994 and 1995; (iii) the "Financial
Statements  and  Supplemental  Schedules to the Graseby  Savings and  Investment
Plan" for 1992, 1993,  1994, and 1995; and (iv) copies of determination  letters
issued with respect to the Benefit Plans within the past five years.

     (c) The Company and each ERISA  Affiliate are in compliance in all material
respects  with the  provisions  of ERISA and the Code  applicable to the Benefit
Plans.  Each Benefit Plan has been  maintained,  operated  and  administered  in
compliance in all material  respects with its terms and any related documents or
agreements and the applicable provisions of ERISA and the Code.

     (d) No Benefit Plan is, or at any time has been, a "multiemployer  plan" as
defined in Section 3(37) of ERISA.

     (e) The Company's  401(k) plan is the only Benefit Plan which are "employee
pension benefit plans" within the meaning of Section 3(2) of ERISA and which are
intended to meet the  qualification  requirements  of Section 401(a) of the Code
(each a "Pension Plan").  Each Pension Plan now meets and at all times since its
inception has met the  qualification  requirements of Section 401(a) of the Code
and each related  trust is now, and at all times since its  inception  has been,
exempt from taxation under Section 501(a) of the Code.

     (f) Each Pension Plan has received a  determination  letter from the IRS to
the effect that such Pension Plan is qualified and all related trusts are exempt
from  federal  income  taxes and no  determination  letter  with  respect to any
Pension Plan has been revoked nor, is there any reason for such revocation,  nor
has  any  Pension  Plan  been  amended   since  the  date  of  its  most  recent
determination   letter  in  any  respect  which  would   adversely   affect  its
qualification.

     (g) All  contributions  to, and payments  from,  any Benefit Plan which may
have been  required in  accordance  with the terms of such  Benefit  Plan or any
related  document and, when  applicable,  Section 302 of ERISA or Section 412 of
the Code,  have been timely made.  No Benefit Plan has incurred an  "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of
the Code, nor has any waiver of the minimum funding  standards of Section 302 of
ERISA or Section 412 of the Code been requested, or granted, with respect to any
Benefit Plan. The funding method used in connection with each Benefit Plan which
is  subject  to the  minimum  funding  requirements  of  ERISA  and the  Code is
acceptable under current IRS guidelines,  and the actuarial  assumptions used in
connection with funding each such Benefit Plan are reasonable.


                                       58
<PAGE>


     (h) Each Benefit Plan subject to Title IV of ERISA has assets sufficient on
a plan  termination  basis to be  eligible  on the  Closing  Date  for  standard
termination  pursuant  to  Section  4041 of ERISA.  The PBGC has not  instituted
proceedings   to  terminate  any  Benefit  Plan  or  to  appoint  a  trustee  or
administrator  of any  such  Benefit  Plan,  and  no  circumstances  exist  that
constitute  grounds under Title IV of ERISA for any such  proceeding.  There has
been no "reportable  event" within the meaning of Section 4043 of ERISA that has
not been fully and  accurately  reported in a timely  fashion,  as required,  or
which,  whether  or  nor  reported,   would  authorize  the  PBGC  to  institute
termination  proceedings  with respect to any Benefit Plan.  No liability  under
Title IV of ERISA has been  incurred or is  expected  to be incurred  that could
result in liability to any Benefit Plan, the Seller,  any ERISA Affiliate or the
Buyer,  other than for  premiums  pursuant to Section 4007 of ERISA that are not
yet due.

     (i)  There are no  pending  audits or  investigations  by any  governmental
agency  involving the Benefit Plans,  and no pending,  or to Seller's  Knowledge
threatened,  claims  (except for individual  claims for benefits  payable in the
normal  operation of the Benefit  Plans),  suits or  proceedings  involving  any
Benefit Plan,  any fiduciary  thereof or service  provider  thereto,  nor to the
Knowledge of the Seller is there any reasonable  basis for any such claim,  suit
or proceeding.

     (j) Neither the Company  nor any ERISA  Affiliate,  or any  employee of the
Company or any ERISA Affiliate, has engaged in a "prohibited transaction" within
the  meaning of Section  406 of ERISA or Section  4975 of the Code,  nor has any
such Person  breached any duty imposed by Title I of ERISA,  with respect to any
Benefit Plan. To the Knowledge of Seller,  no other Person has engaged in such a
prohibited transaction or breach.

     (k) Any insurance  premium under any insurance  policy related to a Benefit
Plan for any period up to and  including  the  Closing  Date has been  paid,  or
accrued and booked on or before the Closing Date,  and, with respect to any such
insurance  policy or premium  payment  obligation,  none of the Company,  or any
ERISA  Affiliate  nor Buyer shall be subject to a retroactive  rate  adjustment,
loss sharing arrangement or other actual or contingent liability.

     (l) With respect to each Benefit Plan that is a "group  health plan" within
the meaning of Section 607 of ERISA and that is subject to Section  4980B of the
Code, the Company and each ERISA Affiliate comply in all material  respects with
the continuation coverage requirements of the Code and ERISA.

     (m)  Except as set forth in  Schedule  3.14(m),  no Benefit  Plan  provides
benefits,  including,  without  limitation,  death or medical  benefits,  beyond
termination of service or retirement other than (i) coverage  mandated by law or
(ii) death or retirement  benefits under a Benefit Plan qualified  under Section
401(a) of the Code.



                                       59
<PAGE>



     (n)  Except  as set  forth in  Schedule  3.14(n),  the  execution  of,  and
performance  of the  transactions  contemplated  by,  this  Agreement  will  not
constitute  an event  under the  "Graseby  Savings and  Investment  Plan" or the
Company's medical plan with United Health Care of North Carolina, Inc. that will
result in any payment  (whether as severance  pay or  otherwise),  acceleration,
vesting or increase  in benefits  with  respect to any  employee.  Except as set
forth in Schedule  3.14(n),  no Benefit Plan provides for  "parachute  payments"
within the meaning of Section 280G of the Code.

     (o)  Schedule  3.14(o)  lists  all  pension,  profit  sharing,  retirement,
supplemental retirement,  stock, stock option, basic and supplemental accidental
death and  dismemberment,  basic and  supplemental  life and  health  insurance,
post-retirement  medical  or life,  welfare,  dental,  vision,  savings,  bonus,
deferred  compensation,  incentive  compensation,  business travel and accident,
holiday,  vacation,  severance pay, salary  continuation,  sick pay, sick leave,
short and long term  disability,  tuition  refund,  service award,  company car,
scholarship, relocation, patent award, fringe benefit and other employee benefit
plans,  arrangements,  contracts,  policies  or  practices  whether  written  or
unwritten, funded or unfunded (i) maintained,  contributed to, or required to be
contributed  to by the  Company or any  Affiliate  with  respect to any  Company
employees,  or (ii)  pursuant to which the Company or any Affiliate may have any
liability with respect to any Company employees,  outside the United States (the
"Foreign Plans").

     (p) A true and complete copy of each Foreign Plan, including all amendments
and  modifications  thereof  (and in the case of an  unwritten  Foreign  Plan, a
written description  thereof),  together with all related agreements  including,
without  limitation,  trust  agreements,   insurance  contracts  and  investment
management agreements have been delivered to Buyer.

     (q) Each Foreign Plan has been  maintained,  operated and  administered  in
compliance in all material  respects with its terms and any related documents or
agreements and with all applicable laws.

     (r) There are no unfunded  liabilities with respect to any Foreign Plan and
all  contributions  and other payments required to be made by the Company or any
affiliate to any Foreign Plan with respect to any period up to and including the
Closing Date shall have been made or accrued and booked on or before the Closing
Date.

     (s) There are no pending audits or  investigations  by any  governmental or
quasi-governmental  agency  involving  the  Foreign  Plans  and  pending,  or to
Seller's Knowledge threatened, claims (except for individual claims for benefits
payable in the normal  operation  of the  Foreign  Plan),  suits or  proceedings
involving any Foreign Plan, any fiduciary  thereof or service provider  thereto,
nor to the  Knowledge of the Seller is there any  reasonable  basis for any such
claim, suit or proceeding.


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<PAGE>



Section 3.15.  Certain Contracts.

     (a)  Except as set forth in  Schedule  3.15(a),  as of the date  hereof the
Company is not a party to, bound or affected by, nor receives benefits under (in
each case  whether  written or oral):  (i) any  Significant  Contract;  (ii) any
Significant  Lease; (iii) any agreement,  arrangement or commitment  relating to
the  employment  of an  independent  contractor or the  employment,  election or
retention  in office of any present or former  officer,  director,  or employee,
other than contracts terminable at will or on less than thirty (30) days' notice
with no liability other than paying that person's usual compensation through the
date of  termination;  or (iv)  any  collective  bargaining  agreement  or other
understanding with a labor union.

     (b) All  agreements to which the Company is a party or by which it is bound
are in full force and effect.  The Company (i) is not in default  under any such
agreement,  (ii) has not, during the three-year period  immediately prior to the
Closing,  been in default under any agreement  with any of its  distributors  or
agents,  which  default  could  have a  Material  Adverse  Effect,  and (iii) to
Seller's Knowledge, all other parties to any agreement to which the Company is a
party or by which it is bound have  complied  with the  provisions  thereof.  To
Seller's Knowledge,  no such other party is in default, which default would have
a Material Adverse Effect, under any Significant Contract, Significant Lease, or
any agreement,  commitment,  arrangement or other indenture described in Section
3.15(a),  whether  written or oral,  and there has not  occurred any event that,
with the lapse of time or giving of  notice  or both,  would  constitute  such a
default.

Section 3.16.  Legal Proceedings; Regulatory Approvals.

     Except as set forth in Schedule  3.16, as of the date hereof there are: (i)
no outstanding  injunctions,  judgments,  orders, decrees, rulings or regulatory
directives  against the Company or to which the Company is a party;  and (ii) no
actions,  suits,  claims,  governmental  investigations or proceedings have been
instituted,  are pending, or to the Knowledge of Seller are threatened,  against
the Company that in any such case,  if decided  adversely,  would  reasonably be
expected to have a Material Adverse Effect.  There are no actual or, to Seller's
Knowledge  threatened,  actions,  suits or proceedings against the Company which
present a claim to restrain or which  would have the effect of  prohibiting  the
transactions contemplated herein.

Section 3.17.  Compliance with Laws.

     The  Company is, and for the  three-year  period  immediately  prior to the
Closing has been, in compliance  in all respects  with all federal,  state,  and
local statutes and regulations applicable to the conduct of the Business (except
for any violations that do not have a Material Adverse Effect),  and the Company
has not received notification from any agency or department of federal, state or
local  government  (i)  asserting a violation or possible  violation of any such
statute or regulation,  which  violation  would have a Material  Adverse Effect,
(ii) threatening to revoke any License,  or (iii) restricting or limiting in any
respect its operation of the Business,  which  restriction  or limitation  would
have a Material Adverse Effect.


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<PAGE>



Section 3.18.  Brokers and Finders.

     Except as set forth in Schedule 3.18 hereto,  neither Seller,  the Company,
nor any of their  respective  officers,  directors,  employees or Affiliates has
employed any broker,  finder or financial  advisor or incurred any liability for
any fees or commissions or other  payments in connection  with the  transactions
contemplated herein (except for fees to accountants, lawyers and advisors).

Section 3.19.  Inventory.

     All of the  inventories  of the  Company are valued at the lower of cost or
market value, the cost thereof being determined on a first-in,  first-out basis,
except as disclosed in the  Financial  Statements.  Attached  hereto as Schedule
3.19 is a summary of the  Company's  inventory of finished  goods as of the last
day of the month for the month  immediately  preceding the present month. All of
the net inventories of the Company reflected in the balance sheet dated December
31, 1996 (the "Balance Sheet") and all such inventories  acquired since the date
of the  Balance  Sheet  consist of items of a quality and  quantity  useable and
saleable in the Ordinary Course of Business  within a reasonable  period of time
and at normal profit margins.

Section 3.20.  Accounts Receivable.

     All of the accounts and notes receivable of the Company  represent  amounts
receivable for merchandise actually delivered or services actually provided (or,
in the case of  non-trade  accounts or notes  represent  amounts  receivable  in
respect of other bona-fide business  transactions),  have arisen in the Ordinary
Course of Business,  are not subject to any defenses,  counterclaims  or offsets
and have been billed and are  generally  due within  thirty (30) days after such
billing.  Schedule  3.20  attached  hereto  sets  forth (a) the total  amount of
accounts  receivable of the Company  outstanding as of the last day of the month
immediately  preceding the present month, and (b) the agings of such receivables
based on the following schedule:  0-30 days, 31-60 days, 61-90 days, and over 90
days, from the due date thereof.  All such receivables are fully  collectible in
the  Ordinary  Course of  Business  of the  Company,  except to the  extent of a
reserve  in an  amount  not in  excess  of the  reserve  for  doubtful  accounts
reflected on the Balance Sheet.

Section 3.21.  No Undisclosed Liabilities.

     The Company has no liability or obligation of any nature, whether due or to
become due, absolute,  contingent or otherwise,  including liabilities for or in
respect of federal, state and local taxes and any interest or penalties relating
thereto, except (a) to the extent reflected as a liability on the Balance Sheet,
(b)  liabilities  incurred in the Ordinary Course of Business since December 31,
1996, and of the same character,  kind and magnitude as are consistent with past
practice and fully  reflected as liabilities on the Company's  books of account,
none of  which  would  have a  Material  Adverse  Effect,  and  (c)  liabilities
disclosed on Schedule 3.21 attached hereto.



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<PAGE>



Section 3.22.  Title.

     The Company has good and marketable title to all of its personal properties
and assets,  including the properties and assets  reflected in the Balance Sheet
(except those disposed of in the Ordinary  Course of Business since December 31,
1996), free and clear of any mortgage,  pledge, lien, restriction,  encumbrance,
tenancy, license,  encroachment,  covenant,  condition,  right of way, easement,
claim, security interest, charge or any other matter affecting title, except (a)
minor  imperfections of title, none of which,  individually or in the aggregate,
materially  detracts  from  the  value  of or  impairs  the use of the  affected
properties or impairs the operations of the Company, (b) liens for current taxes
not yet due and payable,  and (c) Permitted Exceptions (as set forth in Schedule
3.22).

Section 3.23.  Transactions with Related Parties.

         Except as disclosed on Schedule 3.23 attached hereto, no Related Party:

          (a)  has  borrowed  money or loaned  money to the Company that has not
               been repaid;

          (b)  has any  contractual or other claim,  express or implied,  of any
               kind whatsoever against the Company;

          (c)  has any  interest in any  Intangibles  used by the  Company  with
               respect to the Business; or

          (d)  has been engaged, since January 1, 1996, in any other transaction
               (or series of  transactions)  involving  in excess of Twenty Five
               Thousand Dollars  ($25,000) in any  twelve-month  period with the
               Company  (other than  employment  relationships  at the  salaries
               disclosed on Schedule 3.24 attached hereto).

Section 3.24.  Compensation Arrangements; Bank Accounts; Officers and Directors.

         Schedule 3.24 attached hereto sets forth the following information:

          (a)  the names and current  annual  salary,  including  any bonus,  if
               applicable,  of all present officers and employees of the Company
               whose current annual salary, including any promised,  expected or
               customary  bonus,   equals  or  exceeds  Fifty  Thousand  Dollars
               ($50,000),  together  with a statement  of the full amount of all
               remuneration  paid by the  Company to each such person and to any
               director of the Company, during the twelve-month period preceding
               the date hereof; and

          (b)  the name of each bank in which the Company has an account or safe
               deposit box, the  identifying  numbers or symbols thereof and the
               names of all persons authorized to draw thereon or to have access
               thereto;  and the names and titles of all  directors and officers
               of  the  Company  and  of  each   trustee,   fiduciary   or  plan
               administrator of each employee benefit plan of the Company.



                                       63
<PAGE>



Section 3.25.  Labor Relations.

     Except as set forth in Schedule  3.25 attached  hereto:  (a) no employee of
the Company is represented by any union or other labor  organization;  (b) there
is no unfair  labor  practice  complaint  against  the  Company  pending,  or to
Seller's  Knowledge  threatened,  before the National Labor Relations Board; (c)
there is no labor strike, dispute, slow down or stoppage actually pending or, to
Seller's  Knowledge  threatened,  against  or  involving  the  Company;  (d)  no
grievance is pending which would have a Material Adverse Effect;  (e) no private
agreement  restricts the Company from relocating,  closing or terminating any of
its  operations or  facilities;  and (f) the Company in the past three (3) years
has not experienced any work stoppage or other labor difficulty or committed any
unfair labor practice.

Section 3.26.  Products Liability.

     Except for lawsuits,  claims,  damages and expenses  adequately  covered by
insurance  or fully  indemnified  by the  Company's  suppliers,  and  except  as
disclosed on Schedule 3.26 attached hereto,  there are no (a) liabilities of the
Company,  fixed or  contingent,  asserted  or  unasserted,  with  respect to any
product  liability  or any similar  claim that  relates to any  product  stored,
distributed or sold by the Company to others, or (b) liabilities of the Company,
fixed or contingent,  asserted or unasserted,  with respect to any claim for the
breach of any express or implied  product  warranty or any other  similar  claim
with  respect  to any  product  stored,  distributed  or sold by the  Company to
others.

Section 3.27.  Insurance.

     Attached  hereto as Schedule  3.27 is a complete  and  correct  list of all
policies and binders of insurance of which the Company is the owner,  insured or
beneficiary, or covering any of its property (showing for each policy or binder,
the carrier, risks insured, the amounts of coverage,  deductible,  premium rate,
cash value if any, expiration date and any pending claims thereunder).  All such
policies are outstanding and in full force and effect.  There is no default with
respect to any  provision  contained in any such policy,  nor has there been any
failure  to give any  notice or  present  any claim  under any such  policy in a
timely fashion or in the manner or detail  required by the policy.  There are no
outstanding  unpaid  premiums  or claims  under  such  policies.  Schedule  3.27
attached hereto  contains an accurate and complete  description of any provision
contained  in such  policies  which  provide for  retrospective  or  retroactive
premium  adjustments.  No notice of cancellation or non-renewal with respect to,
or  disallowance  of any claim under,  any such policy has been  received by the
Company.  The Company has not been refused any  insurance,  nor has its coverage
been limited by any  insurance  carrier to which it has applied for insurance or
with which it has carried  insurance,  during the last five years. Since January
1992, all products liability and general liability policies maintained by or for
the benefit of the Company have been "occurrence" policies and not "claims made"
policies;  Schedule 3.27 attached hereto contains a complete and correct list of
all such products liability and general liability policies,  indicating for each
policy, the carrier, risks insured, the amount and dates of coverage, deductible
and any pending claims  thereunder;  and all such policies are in full force and
effect.


                                       64
<PAGE>



                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer represents and warrants to Seller as follows:

Section 4.1.  Organization, Standing and Authority of Buyer.

     Buyer  is a  corporation  duly  organized,  validly  existing  and in  good
standing under the laws of the Commonwealth of Pennsylvania  with full corporate
power  and  authority  to carry on its  business  as now  conducted  and is duly
qualified  to do  business  in the  states  of the  United  States  and  foreign
jurisdictions  where its  ownership or leasing of property or the conduct of its
business requires such qualification.

Section 4.2.  Authorized and Effective Agreement.

     (a) Buyer has all requisite corporate power and authority to enter into and
perform all of its obligations under this Agreement.  The execution and delivery
of this Agreement and the consummation of the transactions  contemplated  hereby
have been duly and  validly  authorized  by all  necessary  corporate  action in
respect thereof on the part of Buyer. This Agreement  constitutes a legal, valid
and binding obligation of Buyer,  enforceable  against it in accordance with its
terms subject, as to enforceability, to bankruptcy, insolvency and other laws of
general applicability  relating to or affecting creditors' rights and to general
equity principles.

     (b)  Neither  the  execution  and  delivery  of  this  Agreement,  nor  the
consummation of the transactions  contemplated  hereby,  nor compliance by Buyer
with any of the provisions  hereof shall (i) conflict with or result in a breach
of any provision of the articles or certificate of incorporation (or charter) or
bylaws of Buyer, (ii) constitute or result in a breach of any term, condition or
provision  of,  or  constitute  a  default  under,  or give rise to any right of
termination,  cancellation  or  acceleration  with  respect to, or result in the
creation of any lien,  charge or encumbrance upon any property or asset of Buyer
pursuant to, any note, bond, mortgage,  indenture,  license,  agreement or other
instrument or obligation,  or (iii) subject to receipt of all required Consents,
violate  any  order,  ruling,  decree,  charge,  writ,  injunction,   regulatory
agreement  or  memorandum  of  understanding,  constitution,  statute,  rule  or
regulation applicable to Buyer.

Section 4.3.  Legal Proceedings; Regulatory Approvals.

     There are no actual,  or to the  Knowledge  of Buyer  threatened,  actions,
suits  or  proceedings  which  present  a claim  or  restrain  or  prohibit  the
transactions  contemplated herein. To the Knowledge of Buyer, Buyer is qualified
legally,  financially and otherwise to become the owner, as contemplated herein,
of the Shares.



                                       65
<PAGE>



Section 4.4.  Securities.

     Solely for purposes of enabling  Seller to comply with  applicable  federal
and state securities laws: (a) Buyer  acknowledges that the offering and sale of
the Shares  pursuant  hereto will not be registered  under the Securities Act of
1933, as amended,  or any other securities laws (the "Acts") and that the Shares
are  characterized  as  "restricted  securities"  under  the Acts and may not be
transferred unless a registration  statement for the re-offering and sale of the
Shares is appropriately filed or unless the Shares are subject to exemption from
registration  under the Acts; and (b) Buyer agrees that it (i) shall acquire the
Shares for  investment  for its own  account,  not as a nominee or agent and not
with a view to the  resale  or  distribution  of any part  thereof,  (ii) has no
present  intention  of  selling,  granting  or  participating  in, or  otherwise
distributing all or part of the Shares, (iii) has had sufficient  opportunity to
ask  questions  and receive  answers from Seller and the Company  regarding  the
Company, the Business, and the terms and conditions of this Agreement,  (iv) has
received all the information it considers  necessary or appropriate for deciding
whether to acquire the Shares, and if so under what terms and conditions, (v) is
an "accredited  investor," as defined in Rule 501(a) under  Regulation D adopted
by the Securities and Exchange Commission under the Securities Act of 1933, (vi)
has no need for liquidity in its investment in the Shares, and (vii) is aware of
and able to bear the risks of the  investment  in the Shares  for an  indefinite
period of time.

Section 4.5.  Brokers and Finders.

     Neither Buyer nor its  officers,  directors,  employees or  Affiliates  has
employed any broker,  finder or financial  advisor or incurred any liability for
any fees or commissions or other  payments in connection  with the  transactions
contemplated herein (except for fees to accountants, lawyers, and advisors).

                                    ARTICLE V
                              CONDITIONS PRECEDENT

Section 5.1.  Conditions Precedent -- Buyer and Seller.

     The respective  obligations of Buyer and Seller to effect the  transactions
contemplated by this Agreement shall be subject to satisfaction or waiver of the
following  conditions at or prior to the Effective Time: Neither Buyer,  Seller,
nor the  Company  shall be  subject to any order,  decree,  judgment,  ruling or
injunction  of a court or  governmental  body of  competent  jurisdiction  which
enjoins or prohibits  consummation of the transactions  contemplated herein, nor
shall  any of  them  be a  party  or  subject  to any  pending  action,  suit or
proceeding  before any court or  governmental  agency of competent  jurisdiction
wherein an unfavorable order, decree,  judgment,  ruling or injunction would (i)
enjoin or prohibit  consummation of the transactions  contemplated  herein, (ii)
cause any of the  transactions  contemplated  herein to be  rescinded  following
consummation,  (iii)  adversely  affect the right of Buyer to own and/or to vote
the Shares or to control the Company,  or (iv) affect adversely the right of the
Company to own its assets and to operate the Business.



                                       66
<PAGE>




Section 5.2.  Conditions Precedent -- Seller.

     The obligations of Seller to effect the  transactions  contemplated by this
Agreement  shall  be  subject  to  satisfaction  of  the  following   additional
conditions at or prior to the Effective Time unless waived by Seller pursuant to
Article VII hereof:

     (a) The  representations  and  warranties  of Buyer set forth in Article IV
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective  Time with the same force and effect as though
such  representations and warranties had been made on, as of, and with reference
to such Effective Time;

     (b) Buyer  shall have  performed  all  obligations  and  complied  with all
covenants  required  by this  Agreement  to be  performed  by Buyer on or before
Closing;

     (c) Buyer  shall  have  demonstrated  its  ability  to make the  deliveries
required of it pursuant to this Agreement;

     (d) The Company shall have received the Consents;

     (e) Buyer shall have assumed  responsibility  for payment of the  severance
obligations of the Company set forth in Schedule 5.2(e) attached hereto; and

     (f) All  instruments  and documents  required on Buyer's part to effectuate
and consummate the transactions contemplated hereby shall be delivered to Seller
and shall be in form and  substance  reasonably  satisfactory  to Seller and its
counsel.

Section 5.3.  Conditions Precedent -- Buyer.

     The  obligations of Buyer to effect the  transactions  contemplated by this
Agreement  shall  be  subject  to  satisfaction  of  the  following   additional
conditions at or prior to the Effective  Time unless waived by Buyer pursuant to
Article VII hereof:

     (a) The  representations  and warranties of Seller set forth in Article III
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective  Time with the same force and effect as though
such  representations and warranties had been made on, as of, and with reference
to such Effective Time;

     (b) Seller and the Company  shall have in all material  respects  performed
all material  obligations and complied with all material  covenants  required by
this Agreement to be performed by them on or before Closing;

     (c)  Seller  shall have  demonstrated  its  ability to make the  deliveries
required pursuant to this Agreement;

     (d) The Company shall have received the Consents;



                                       67
<PAGE>



     (e) All  instruments  and documents  required on Seller's and the Company's
part to effectuate and consummate the transactions  contemplated hereby shall be
delivered to Buyer and shall be in form and substance reasonably satisfactory to
Buyer and its counsel;

     (f) No order of any court or administrative agency shall be in effect which
restrains or prohibits the transactions contemplated hereby or which would limit
or adversely affect Buyer's ownership or control of the Company or the Business,
and there shall not have been threatened, nor shall there be pending, any action
or proceeding by or before any court or governmental  agency or other regulatory
or administrative agency or commission,  (i) challenging any of the transactions
contemplated  by this  Agreement  or  seeking  monetary  relief by reason of the
consummation of such  transactions or (ii) by any present or former owner of any
capital stock or equity  interest in the Company  (whether  through a derivative
action or otherwise) against the Company or any officer, director or shareholder
of the Company in his,  her or its  capacity as such or (iii) which might have a
Material Adverse Effect;

     (g) All loans by the Company to any Related Party shall have been repaid in
full and there shall be no outstanding debts or obligations due from any Related
Party to the Company;

     (h) Buyer shall have received all Licenses,  Permits and  certificates  and
governmental approvals listed on Schedule 3.8;

     (i) Seller shall have  delivered to Buyer the written  resignation  of each
member of the board of directors and each of the officers of the Company;

     (j) Buyer  shall  have  obtained,  at  Buyer's  expense,  a good and valid,
irrevocable ALTA title insurance binder or commitment (the "Title  Commitment"),
in final form from First American Title Insurance Company (the "Title Company"),
committing the Title Company to issuing an ALTA extended  coverage form of title
insurance policy (the "Title Policy") insuring the Buyer's fee title to the Real
Property  in  the  amount  of  not  less  than  Six  Hundred   Thousand  Dollars
($600,000.00),  subject  to no  Liens or  exceptions  to  title  other  than the
Permitted Exceptions; provided that the commitment of the Title Company to issue
the Title Policy may be subject to and the Title  Commitment may set forth or be
subject to such standard requirements relating to the issuance of final policies
of title  insurance as are reasonably  acceptable to Buyer and to the payment of
the Title  Company's  premiums  and other  charges for the issuance of the Title
Policy.  The Title  Commitment  shall be  effective as of a date  occurring  not
earlier than April 18, 1997 and, if required by Buyer, the effective date of the
Title Commitment shall be brought down to the morning of the Closing Date; and

     (k) Buyer shall have  received from Seller and Graseby plc a release in the
form of Exhibit D attached hereto.



                                       68
<PAGE>



                                   ARTICLE VI
                                     CLOSING

         The transactions contemplated by this Agreement shall be consummated at
a closing (the "Closing") to be held at the offices of Seller's counsel, Brooks,
Pierce, McLendon, Humphrey & Leonard, L.L.P., Suite 2000, Renaissance Plaza, 230
North Elm  Street,  Greensboro,  North  Carolina,  or such other place as may be
agreed to by Buyer and  Seller,  on the date hereof or such later date as may be
agreed to by Buyer and Seller (the "Closing Date").  The Sale shall be effective
as of the Closing on the Closing  Date or at such other time and date  specified
by the parties at the Closing (the "Effective Time");  provided,  however,  that
solely for financial  accounting and Tax reporting  purposes,  the Sale shall be
deemed effective as of 11:59:59 o'clock p.m.,  Greensboro,  North Carolina local
time, on the Closing Date.

     At Closing: (a) Seller shall deliver to Buyer (i) the various certificates,
instruments and documents required of it pursuant to this Agreement,  (ii) stock
certificates  representing  ownership  of the Shares,  endorsed  for transfer to
Buyer,  and (iii) any other  documents  that are  necessary to transfer to Buyer
good  title  to the  Shares  free  and  clear  of all  liens,  claims,  security
interests, pledges, charges, equities, options,  restrictions,  and encumbrances
of  whatever  nature;  and (b) Buyer  shall (i)  deliver to Seller  the  various
certificates,  instruments  and  documents  required  of  it  pursuant  to  this
Agreement,  (ii)  deliver  to Seller  copies  of  resolutions  adopted  by Buyer
authorizing  and approving the execution of this Agreement and the  consummation
of the transactions contemplated herein, certified by Buyer's Secretary as being
true and correct on the Closing  Date,  and (iii) deliver to Seller the Purchase
Price in immediately available funds.

     In the case at any time after the Effective Time any further action is
necessary  to carry out the purposes of this  Agreement,  Seller and Buyer shall
take such further  action  (including the execution and delivery of such further
instruments and documents) as the other may reasonably request,  all at the sole
cost and expense of the requesting party.

                                   ARTICLE VII
                                     WAIVER

     Except with respect to any required regulatory approval,  each party hereto
by written  instrument,  may at any time extend the time for the  performance of
any of the obligations or other acts of the other party hereto and may waive (a)
any  inaccuracies  of the  other  party in the  representations  and  warranties
contained in this  Agreement  or any document  delivered  pursuant  hereto,  (b)
compliance  with any of the covenants,  undertakings  or agreements of the other
party, or satisfaction  of any of the conditions  precedent to its  obligations,
contained  herein  or (c)  the  performance  by the  other  party  of any of its
obligations  set out  herein.  No waiver by either  such  party of any  default,
misrepresentation,   or  breach  of  warranty  or  covenant  hereunder,  whether
intentional  or not,  shall be  deemed  to  extend  to any  prior or  subsequent
default,  misrepresentation,  or breach of  warranty or  covenant  hereunder  or
affect in any way any rights  arising by virtue of any prior or subsequent  such
occurrence.


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<PAGE>



                                  ARTICLE VIII
                        CERTAIN POST-CLOSING OBLIGATIONS

Section 8.1.  Confidential Information.

     Seller  acknowledges  that after the  Closing,  Buyer could be  irreparably
damaged if  Seller's or any of its  Affiliates'  confidential  knowledge  of the
operations of the Company were  disclosed to or utilized on behalf of any Person
other than Buyer or its Affiliates, and Seller covenants and agrees that it will
not following the Closing,  without the prior written consent of Buyer, disclose
(or permit to be disclosed) or use in any way any such confidential information,
unless (i) compelled to disclose such  confidential  information  by judicial or
administrative  process or, in the opinion of its counsel, by other requirements
of law, or (ii) such  confidential  information  is  generally  available to the
public through no fault of Seller.

Section 8.2.  Indemnification by Seller, Graseby Andersen Inc. and Graseby plc.

     (a) Extent of Indemnity. Seller and the Guarantors,  jointly and severally,
hereby agree to indemnify,  defend and hold harmless  Buyer and the Company from
and against:

     (i) any Damages of or to Buyer or the Company  arising out of or  resulting
from any  misrepresentation  or breach of  representation  or warranty of Seller
contained  in this  Agreement or in any  agreement  or statement or  certificate
furnished or to be furnished by Seller or the Company to Buyer  pursuant  hereto
or in connection with the transactions contemplated hereby;

     (ii) any Damages of or to Buyer or the Company  arising out of or resulting
from any  breach  or  nonfulfillment  of any  covenant  or  agreement  of Seller
contained  in this  Agreement or in any  agreement  or statement or  certificate
furnished or to be furnished by Seller or the Company to Buyer  pursuant  hereto
or in connection with the transactions contemplated hereby;

     (iii)  regardless  of whether any of the  following  are  contained  in any
disclosure schedule to this Agreement or were otherwise disclosed to Buyer prior
to the Closing,  any and all Damages known or unknown,  foreseen or  unforeseen,
whether contingent or otherwise,  fixed or absolute, present or future, asserted
against or incurred by Buyer or the Company arising out of or related to (A) the
off-site transportation,  storage, treatment, recycling or disposal of Hazardous
Materials  Managed or Released by the Company or in connection with the Business
prior to the Closing; (B) any Release at, on, in or under the Real Property that
requires  investigation,  remediation,  or other response  action relating to or
arising from the Company's drum handling  prior to Closing;  and (C) any failure
by the  Company at any time prior to the  Closing to have any Permit or give any
notice required in connection  with the Company's  wastewater or other discharge
to the applicable sewer authority including without limitation fines, penalties,
and assessments arising from any such discharge;

     (iv) the matters described on Schedule 8.2(a)(iv); and




                                       70
<PAGE>



     (v) any Damages  incident  to any of the  foregoing,  including  reasonable
attorneys' fees actually  incurred by Buyer as the prevailing party in an action
to enforce this Section.

     (b) Time Limit on Certain  Indemnification  Claims.  No action or claim for
Damages resulting from breaches of the  representations and warranties of Seller
shall be brought or made after June 1, 1998,  except  that such time  limitation
shall not apply to (i) claims for  misrepresentations  or  breaches  of warranty
relating  to  Sections  3.2  (Warranty  of Title to the  Shares),  3.3  (Capital
Structure of the  Company),  and 3.5  (Authorized  and Effective  Agreement;  No
Violation),  (ii) claims for misrepresentations or breaches of warranty relating
to Sections 3.13 (Tax Matters), 3.14 (Employee Benefit Plans), 3.18 (Brokers and
Finders),  3.23  (Transactions  with Related  Parties),  or 9.1  (Authorized and
Effective Agreement; No Violations (Guarantors)),  each of which may be asserted
until the running of the applicable  statute of limitations  with respect to the
period to which the  particular  claims  relate,  or (iii) any claims which have
been  the  subject  of a  written  notice  from  Buyer  to  Seller  prior to the
expiration of any of the foregoing periods, which notice specifies in reasonable
detail the  nature of the  claim.  No action or claim for  Damages  pursuant  to
Section 8.2(a)(iii)(A) or Section 8.2(a)(iii)(B) shall be brought by Buyer after
expiration of the five-year period  commencing on the Closing Date. No action or
claim for Damages pursuant to Section  8.2(a)(iii)(C)  shall be brought by Buyer
after the expiration of the three-year period commencing on the Closing Date.

     (c)  Limitations  on Liability.  None of Seller or either of the Guarantors
shall be required to make an indemnity  payment for Damages arising  pursuant to
Section  8.2(a)(i)  unless and until the  aggregate  amount of  Damages  arising
pursuant   to  Section   8.2(a)(i)   exceeds  Two   Hundred   Thousand   Dollars
($200,000.00)(the  "Deductible").  Only  Damages  arising  pursuant  to  Section
8.2(a)(i)  which,  with respect to a single claim or a series of related  claims
arising  pursuant to Section  8.2(a)(i),  exceed  Seven  Thousand  Five  Hundred
Dollars  ($7,500.00)  shall be taken into  account in  determining  whether  the
Deductible  has been reached.  After the  Deductible  has been reached,  Seller,
Graseby Andersen Inc. and Graseby plc,  jointly and severally,  shall thereafter
(subject to the time  limitations  indemnification  procedures set forth in this
section  8.2) be required  to make an  indemnity  payment  for  Damages  arising
pursuant to Section  8.2(a)(i) which, with respect to a single claim or a series
of related claims,  in the aggregate  exceed Seven Thousand Five Hundred Dollars
($7,500.00)(the "Basket"). None of Seller or either of the Guarantors shall have
any obligation to indemnify Buyer for aggregate indemnification payments arising
pursuant to Section  8.2(a)(i) in excess of the Purchase Price,  notwithstanding
any provision in this  Agreement to the contrary,  provided.  however,  that the
foregoing  limitations  on liability  shall not apply to Damages which arise (i)
from fraud or other intentional  misrepresentations  or omissions on the part of
Seller  or the  Company  with  respect  to this  Agreement  or the  transactions
contemplated  by  this  Agreement,  or (ii) a  misrepresentation  or  breach  of
warranty  with respect to any one or more of Sections 3.2  (Warranty of Title to
the  Shares),  3.3 (Capital  Structure  of the  Company),  3.5  (Authorized  and
Effective Agreement;  No Violation),  3.13 (Tax Matters), 3.14 (Employee Benefit
Plans), 3.18 (Brokers and Finders), 3.23 (Transactions with Related Parties), or
9.1  (Authorized  and  Effective  Agreement;  No  Violations  (Guarantors))  For
purposes  of  this  section,  all  qualifications  in this  Agreement  regarding
Material  Adverse Effects and  materiality  shall be disregarded for purposes of
applying the Deductible and the Basket to claims for Damages arising pursuant to
Section 8.2(a)(i).


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<PAGE>



Section 8.3.  Indemnification by Buyer.

     Buyer hereby agrees to indemnify,  defend and hold harmless Seller from and
against:

     (a) any  Damage  of or to  Seller  arising  out of or  resulting  from  any
misrepresentation  or breach of representation or warranty of Buyer contained in
this Agreement or in any agreement or statement or  certificate  furnished or to
be furnished by Buyer  pursuant  hereto or in connection  with the  transactions
contemplated hereby;

     (b) any Damage of or to Seller  arising out of or resulting from any breach
or  nonfulfillment  of any  covenant or  agreement  of Buyer  contained  in this
Agreement or in any  agreement or  statement or  certificate  furnished or to be
furnished  to Buyer  pursuant  hereto  or in  connection  with the  transactions
contemplated hereby; and

     (c) any Damages  incident  to any of the  foregoing,  including  reasonable
attorneys' fees actually incurred by Seller as the prevailing party in an action
to enforce this Section.

Section 8.4.  Indemnification Procedures.

     (a)  A  party  seeking  indemnification  pursuant  to  this  Agreement  (an
"Indemnified  Party")  shall  give  prompt  notice to the  party  from whom such
indemnification  is sought (the  "Indemnifying  Party") of the  assertion of any
claim, or the  commencement  of any action,  suit or proceeding by a third party
which is not an Affiliate of any party hereto in respect of which  indemnity may
be sought  hereunder (a "Third  Party  Claim"),  and will give the  Indemnifying
Party  such  information  with  respect  thereto as the  Indemnifying  Party may
reasonably  request,  but  failure to give such  notice  shall not  relieve  the
Indemnifying  Party of any  liability  hereunder  except to the extent  that the
Indemnifying Party is actually prejudiced thereby.


     (b) The  Indemnifying  Party shall have the right,  exercisable  by written
notice to the  Indemnified  Party  within  thirty (30) days of receipt of notice
from the Indemnified  Party of the  commencement or assertion of any Third Party
Claim in  respect  of which  indemnity  may be sought  hereunder,  to assume and
conduct  the  defense of such Third  Party  Claim with  counsel  selected by the
Indemnifying Party and reasonably  acceptable to the Indemnified Party; provided
that: (i) the defense of such Third Party Claim by the  Indemnifying  Party will
not, in the judgment of the Indemnified Party, have a Material Adverse Effect on
the Indemnified  Party;  (ii) the  Indemnifying  Party has sufficient  financial
resources,  in the judgment of the  Indemnified  Party, to satisfy the amount of
any adverse  monetary  judgment that is reasonably  likely to result;  (iii) the
Third Party Claim solely seeks (and  continues to seek)  monetary  damages;  and
(iv) the  Indemnifying  Party  expressly  agrees in writing  that as between the
Indemnifying  Party and the Indemnified  Party, the Indemnifying  Party shall be
solely  obligated to satisfy and discharge the Third Party Claim (the conditions
set forth in  clauses  (i)  through  (iv) are  collectively  referred  to as the
"Litigation Conditions") . If the Indemnifying Party does not assume the defense
of such Third Party Claim in accordance  with this Section 8.4, the  Indemnified
Party may continue to defend the Third Party Claim.  If the  Indemnifying  Party
has assumed the defense of a Third Party Claim, the Indemnifying  Party will not
be liable for any legal expenses  subsequently incurred by the Indemnified Party
in  connection  with the defense  thereof;  provided,  however,  that if (i) the
Litigation  Conditions cease to be met, or (ii) the Indemnifying  Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim, the
Indemnified Party may assume its own defense, and the Indemnifying Party will be
liable for all  reasonable  costs or expenses  paid or  incurred  in  connection
therewith.

     (c) The  Indemnifying  Party or the Indemnified  Party, as the case may be,
shall have the right to  participate  in (but not control),  at its own expense,
the defense of any Third Party Claim which the other is defending as provided in
this Agreement.

     (d) The  Indemnifying  Party,  if it shall have  assumed the defense of any
Third Party Claim as provided in this  Agreement,  shall not,  without the prior
written  consent of the  Indemnified  Party,  consent to a settlement of, or the
entry of any judgment  arising  from,  any such Third Party Claim (i) which does
not include as an  unconditional  term thereof the giving by the claimant or the
plaintiff to the  Indemnified  Party a complete  release  from all  liability in
respect of such  Third  Party  Claim,  or (ii) which  grants any  injunctive  or
equitable  relief,  or (iii) which may reasonably be expected to have a Material
Adverse  Effect  on  the  affected  business  of  the  Indemnified   Party.  The
Indemnified  Party  shall have the right to settle any Third  Party  Claim,  the
defense  of which  has not been  assumed  by the  Indemnifying  Party,  with the
written  consent  of  the  Indemnifying   Party,  which  consent  shall  not  be
unreasonably withheld or delayed.

     (e)  Amounts  payable  in  respect of  indemnification  obligations  of the
parties shall be treated as an adjustment to the Purchase Price.  Whether or not
the Indemnifying Party chooses to defend or prosecute any Third Party Claim, all
the parties  hereto shall  cooperate in the defense or  prosecution  thereof and
shall  furnish  such  records,   information  and  testimony,  and  attend  such
conferences,  discovery  proceedings,  hearings,  trials and appeals,  as may be
reasonably requested in connection therewith.

     (f)  Sections 8.2 through 8.4 shall not be  interpreted  to permit a double
recovery  with  respect to Taxes for which  indemnification  is  provided  under
Section 8.6 nor to permit a party to recover  amounts with respect to Taxes that
are such party's responsibility under Section 8.6.

Section 8.5.  Claims Against the Company.

     Notwithstanding  any provision in this  Agreement to the  contrary,  Seller
agrees that it shall not be entitled to any indemnification  from, or to make or
receive any amount for any claim  against,  the Company in respect of any Damage
or Damages  arising out of or resulting from this Agreement or the  transactions
contemplated by this Agreement.



                                       72
<PAGE>



Section 8.6.  Tax Matters.

     (a) Seller's Pre-Closing Returns.

     (i) The  Company  shall  continue to be  included  for all taxable  periods
ending on or before the  Closing  Date in the  consolidated  federal  income Tax
Return that  includes  Seller and any required  state or local  consolidated  or
combined  income or  franchise  Tax  Returns  of Seller or its  Affiliates  that
include the Company.

     (ii) Seller  shall  timely  prepare  and file (or cause to be prepared  and
filed)  (A) all  federal,  state and local  income  and  franchise  tax  returns
required by law,  covering  the Company  for all  taxable  periods  ending on or
before  the  Closing  Date  (including  all Tax  Returns  due by  virtue  of the
Elections  described  below in  section  8.6(f))  and (B) all other Tax  Returns
required by law  covering the Company that are required to be filed on or before
the Closing  Date (all Tax Returns  specified in  subparagraphs  (A) and (B) are
hereinafter referred to as "Seller's Pre-Closing Returns"). Sellers shall timely
pay (or cause to be paid) on behalf of the  Company  all Taxes  shown as due and
payable on Seller's Pre-Closing Returns.

     (iii)  Buyer and Seller  agree that if the Company is  permitted  under any
applicable  state or local  income tax law to treat the Closing Date as the last
day of the taxable  period  during  which the Closing  occurs,  Buyer and Seller
shall treat (and cause their  respective  affiliates  to treat) such date as the
last day of such taxable period.

     (b) Buyer's Tax Returns.  Buyer shall timely  prepare and file (or cause to
be so prepared and filed) (i) all federal,  state or local income and  franchise
Tax Returns  required by law covering the Company for all taxable periods ending
after the Closing  Date and (ii) all other Tax Returns  required by law covering
the  Company  that are  required  to be filed  after the  Closing  Date (all Tax
Returns specified in subparagraphs  (i) and (ii) are hereinafter  referred to as
"Buyer's Tax  Returns").  Buyer shall submit to Seller copies of all Buyer's Tax
Returns,  as filed,  that include a taxable period or date prior to or including
the Closing Date.

     (c) Tax Cooperation.  After the Closing Date,  Seller shall submit to Buyer
blank Tax Return work paper  packages.  Buyer shall cause the Company to prepare
completely and accurately all information that Seller shall  reasonably  request
in such work paper packages and shall submit to Seller such packages  within the
later of sixty (60) calendar days after  Buyer's  receipt  thereof or sixty (60)
calendar  days  after the  close of the  taxable  period  to which a work  paper
package  relates.  Buyer  and  Seller  and  their  Affiliates  shall  reasonably
cooperate  with each other in  connection  with the  preparation  of Tax Returns
related to the Company  and shall  preserve  all  information,  returns,  books,
records and documents  relating to any  liabilities  for Taxes with respect to a
taxable period until the later of the  expiration of all applicable  statutes of
limitation  and extensions  thereof,  or a final  determination  with respect to
Taxes for such period and shall not destroy or  otherwise  dispose of any record
without first providing the other party with a reasonable  opportunity to review
and copy the same.  Buyer shall provide  Seller (or cause the Company to provide
Seller) with applicable powers of attorney with respect to Seller's  Pre-Closing
Returns.




                                       73
<PAGE>



     (d) Post-Closing Audits.

     (i) Buyer shall notify Seller in writing within ten (10) days after receipt
by Buyer,  the Company,  or any  Affiliate  thereof,  of any  official  inquiry,
examination,  audit or proceeding  ("Audit")  regarding any Tax Return or period
with respect to which Seller may be liable for Taxes  pursuant to section 8.6(a)
or for which Seller may have an indemnification obligation under section 8.6(e).
Seller shall have the right to exercise, at its own expense, control at any time
over the  handling,  disposition  and/or  settlement  of any issue raised in any
Audit  regarding any Seller's  Pre-Closing  Return.  Buyer shall  cooperate with
Seller, as Seller may reasonably request, in any such Audit.

     (ii) Buyer shall have the right, at its own expense, to exercise control at
any time over the handling, disposition and/or settlement of any issue raised in
any official inquiry,  examination or proceeding  regarding any Tax Return other
than as described in section  8.6(d)(i) above  (including the right to settle or
otherwise  terminate any contest with respect  thereto);  provided  that, in the
case of any Tax Return for a period  beginning  before the Closing  Date,  Buyer
shall  settle  any  issue  (if  such  settlement  would  result  in  a  required
indemnification  payment by Seller  under  section  8.6(e))  only with the prior
consent of Seller, which consent shall not be unreasonably withheld.

     (e) Indemnification.

     (i) After the Closing Date,  and regardless of whether Buyer or the Company
would be entitled to  indemnification  for such amount under Section 8.2, Seller
shall  indemnify  and hold  harmless  Buyer  and the  Company  and each of their
respective affiliates, successors and assigns from and against any Tax liability
with  respect to  Seller's  Pre-Closing  Returns  (whether or not such Taxes are
shown to be due on such  Seller's  Pre-Closing  Returns).  Seller shall pay such
amounts as it is  obligated to pay to Buyer or the Company  within  fifteen (15)
calendar  days after  payment of any  applicable  Tax  liability by Buyer or the
Company.  Seller shall also  indemnify and hold harmless  Buyer and the Company,
regardless of whether Buyer or the Company would be entitled to  indemnification
for such amount under  Section 8.2,  from and against (A) any Tax  liability for
periods prior to and including the Closing Date resulting from the Company being
severally liable for any Taxes of any consolidated group of which the Company as
of the  Closing  Date is, or prior the  Closing  Date was, a member  pursuant to
Treasury Regulations  ss.1.1502-6 or any analogous state or local tax provision,
and (B) any Tax liability for Buyer's Tax Returns  attributable  to the Business
and/or the Company for the period prior to the Closing.

     (ii) Any Taxes for a period of time including both a pre-Closing period and
a post-Closing  period shall be apportioned  between such pre-Closing period and
the post-Closing  period based, in the case of real and personal property Taxes,
on a per diem basis and in the case of other  Taxes,  on the actual  activities,
taxable income or taxable loss of the Company during such pre-Closing period and
post-Closing period determined as if the books of the Company were closed on the
close of the Closing Date.



                                       74
<PAGE>


     (f) Section 338(h)(10). Seller and Buyer agree that they shall jointly make
or  cause to be made  the  election  under  Section  338(h)(10)  of the Code and
Treasury Regulation Section  1.338(h)(10)-1(d)  (and any corresponding  election
under state,  local or foreign tax law) with respect to the purchase and sale of
the Shares (the  "Election").  If Seller is not the common  parent of a "selling
consolidated  group" of which the  Company is a member,  as that term is defined
under Treasury Regulation Section 1.338(h)(10)-1,  Seller shall cause the Person
that is the common  parent  with  respect  to the  Company to join in making the
Election with Buyer. (The Person authorized to make the Election with respect to
the Company is referred to as the "Authorized  Person" herein.)  Schedule 8.6(f)
sets forth the principles of Seller's and the Buyer's allocation of the modified
aggregate deemed sale price ("MADSP") (as defined in Treasury Regulation section
1.338(h)(10)-1(f)) among the assets of the Company. Seller and Buyer shall agree
to a final  allocation of the MADSP  consistent with the principles set forth in
Schedule 8.6(f) as soon as practicable  following the Closing Date.  Buyer shall
prepare  IRS Form  8023-A and any  similar  state,  local or  foreign  tax forms
required to make the Election  (collectively,  the "Election  Forms") and submit
the  Election  Forms to Seller no later than seventy five (75) days prior to the
date the Election  Forms are required to be filed.  Seller then shall deliver to
Buyer the  Election  Forms,  which shall have been  executed  by the  Authorized
Person,  no later than thirty (30) days prior to the date the Election Forms are
required to be filed. Buyer shall thereafter  complete any required  attachments
to the Election Forms,  execute and timely file the Election Forms,  and provide
Seller with a copy of the Election  Forms as filed.  Seller and Buyer shall each
take or cause to be taken any other  actions  that are  necessary  for making or
perfecting  the Elections.  Seller and Buyer shall each report all  transactions
pursuant to this Agreement in a manner that is consistent with the Elections and
shall take no position  contrary  thereto unless required to do so pursuant to a
"determination"  within the  meaning of Section  1313 of the Code.  The  parties
agree that a violation  of the  provisions  of this  Section  8.6(f) is a proper
subject of injunctive relief.

     (g) Tax Effect of Payments.  The amount of any payments required to be made
under  this  section  8.6 shall be  reduced  by the  amount  of any tax  benefit
actually  received by (including by refund or by reduction of or offset  against
Taxes otherwise payable) the recipient by reason of the payment or incurrence by
such  recipient of the item for which the indemnity is being sought.  Each party
shall notify the other of such receipt of any such tax benefits.

     (h)  Refunds.  Buyer  shall pay to Seller  or cause the  Company  to pay to
Seller any refund of any Tax received with respect to any taxable  period ending
on or before the Closing Date reduced by the amount of any cost  incurred by the
Company  or  Buyer as a  result  of such  refund.  If any  refund  of any Tax is
received  with  respect to a taxable  period that  includes  both a  pre-Closing
period and a post-Closing  period,  such a refund shall be  apportioned  between
Seller  and Buyer  (or the  Company)  in the same  manner  as Tax  liability  is
apportioned under section 8.6(e)(ii).



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<PAGE>



Section 8.7.  Noncompetition Covenant.

     Neither Seller nor any of Seller's Affiliates shall compete with Buyer with
respect to the  Business for a period of two (2) years after the Closing Date at
any location within (a) North America, (b) the State of North Carolina,  and (c)
the  Commonwealth of  Pennsylvania.  Notwithstanding  the foregoing,  Seller and
Seller's  Affiliates shall,  during such two (2) year period,  have the right to
acquire or merge with one or more entities  which,  as an incidental  portion of
their  business,  are engaged in the business of designing,  manufacturing,  and
selling motor drives, provided that within one (1) year after the effective date
of such acquisition or merger Seller or Seller's Affiliate,  as the case may be,
shall divest itself of such motor drive business.

Section 8.8.  Nature and Survival of Representations.

     (a) The representations,  warranties, covenants and agreements of Buyer and
Seller  contained  in this  Agreement,  and  all  statements  contained  in this
Agreement  or any  exhibit or schedule  hereto,  or any  certificate,  financial
statement or report or other document delivered  pursuant to this Agreement,  or
in connection  with the  transactions  contemplated  hereby,  shall be deemed to
constitute  representations,   warranties,   covenants  and  agreements  of  the
respective party delivering the same.

     (b) Seller and the  Company  acknowledge  that  their  representations  and
warranties  in  this  Agreement  shall  not  be  affected  or  mitigated  by any
investigation  conducted by Buyer or its representatives  prior to Closing or to
any Knowledge of Buyer.

Section 8.9.  Employees; 401(k) Plan.

     (a) Employee  Matters.  Buyer  intends to continue the  employment of those
employees  of the  Company  who wish to  continue  employment  with the  Company
following  Buyer's purchase of the Shares  ("Employees") on terms and conditions
that provide employee benefits  substantially similar to those provided to other
similarly  situated  employees of Buyer, with credit for services under Seller's
Benefit Plans taken into account and with no pre-existing  condition limitations
or waiting  periods  beyond  those  imposed by Seller's  Benefit  Plans.  Seller
covenants  and agrees that it will provide  Buyer with any  employment,  benefit
participation, medical, OSHA or other records pertaining to those Employees that
are not in the  Company's  custody  that Buyer may  reasonably  request.  Seller
further agrees that it will cause any Benefit Plan, other than a plan maintained
exclusively by the Company for the benefit of its  employees,  to cooperate with
Buyer,  as Buyer may reasonably  request,  to effect the transfer of coverage of
the  Employees  from any Benefit  Plan  maintained  by Seller to those  employee
benefit  plans  maintained  by  Buyer,  in  accordance  with  the  terms  of the
respective plans.


                                       76
<PAGE>


     (b) 401(k) Transfer.

          (i)  Participation.  Effective as of the Closing  Date,  all Employees
               shall cease  participation  in the Graseby  Savings &  Investment
               Plan ("Seller's 401(k) Plan"). As soon as practicable,  following
               Closing,   Buyer  shall  designate  an  existing   savings  plan,
               qualified  under  Code ss.  401(a)  and ss.  401(k),  and a trust
               thereunder   that   is   exempt   from   tax   under   Code   ss.
               501(a)(collectively,  "Buyer's  Savings  Plan"),  and shall allow
               Employees  to  participate  in Buyer's  Savings  Plan on the same
               terms  and  conditions  as  apply  to  other  similarly  situated
               employees of Buyer.

          (ii) 401(k) Transfer.  As soon as practicable after the designation of
               Buyer's Savings Plan, and upon evidence  reasonably  satisfactory
               to  Seller,  which may be in the form of an  opinion  of  Buyer's
               counsel,  that Buyer's  Savings Plan is qualified  under  Codess.
               401(a) and exempt from tax under  Codess.501(a),  Seller's 401(k)
               Plan  shall  allow  all  participating  Employees  the  option to
               transfer  their full  account  balances in Seller's  401(k) Plan,
               determined as of the most recent  valuation  date and  determined
               without regard to any applicable vesting schedule,  either to (A)
               Buyer's Savings Plan, or (B) to an individual  retirement account
               selected  by  the  Employee,  in  either  case  in a  transaction
               qualifying as a direct rollover under Codess.401(a)(31).

                                   ARTICLE IX
                                  MISCELLANEOUS

Section 9.1.  Authorized and Effective Agreement; No Violation (Guarantors).

         Guarantors hereby represent and warrant to Buyer as follows:

     (a) Each of the Guarantors  has all requisite  power and authority to enter
into, to deliver, and to perform all of their respective  obligations under this
Agreement.  This Agreement and all other agreements and instruments  required to
be executed  and  delivered by the  Guarantors  in  connection  with or pursuant
hereto have been duly executed and delivered by the  Guarantors  and  constitute
the  legal,  valid  and  binding  obligations  of  Guarantors,   enforceable  in
accordance  with their  terms,  subject  as to  enforceability,  to  bankruptcy,
insolvency  and other laws of general  applicability  relating  to or  affecting
creditors' rights, and to general equity principles. The execution, delivery and
performance  of this  Agreement  have  been  duly  authorized  by all  necessary
corporate action on the part of the Guarantors.

     (b) Neither the execution and delivery of this Agreement,  the consummation
of the transactions contemplated hereby, nor compliance by either or both of the
Guarantors  with any of the provisions  hereof will: (i) conflict with or result
in a breach of any provision of the articles of incorporation,  bylaws, or other
constitutive  documents  of  either of the  Guarantors;  (ii)  conflict  with or
constitute  or result in a breach of any term,  condition  or  provision  of, or
constitute  a  default  under,  or  give  rise  to  any  right  of  termination,
cancellation  or  acceleration  with  respect  to,  any  note,  bond,  mortgage,
indenture,  lease,  license,  agreement,  instrument,  or other  arrangement  or
obligation  to which either of the  Guarantors  is a party or by which either of
the  Guarantors  is bound,  or result in the creation or  imposition of any Lien
upon any  property  or asset of  either of the  Guarantors,  except  where  such
occurrence would not have a Material Adverse Effect; or (iii) violate any order,
ruling, decree, charge, writ, injunction,  regulatory agreement or memorandum of
understanding,  constitution,  statute,  rule or  regulation  applicable  to the
Guarantors,  except  where  such  violation  would not have a  Material  Adverse
Effect.



                                       77
<PAGE>


Section 9.2.  Expenses.

     Each party hereto shall bear and pay all costs and expenses  incurred by it
in connection with the  transactions  contemplated by this Agreement,  including
fees and expenses of its own  financial  consultants,  accountants  and counsel,
except as may otherwise be specifically provided for herein.

Section 9.3.  Consent to Jurisdiction; Forum Selection.

     (a) Buyer hereby  irrevocably  (i) consents to the  non-exclusive  personal
jurisdiction  of the state and federal courts located in the City of Greensboro,
North  Carolina  in any  action,  claim or other  proceeding  arising out of any
dispute in connection  with this Agreement or the  transactions  contemplated or
consummated  pursuant to this  Agreement,  and (ii) consents to the service of a
summons  and  complaint  and other  process in any action,  claim or  proceeding
brought by Seller  arising out of any dispute in connection  with this Agreement
or the  transactions  contemplated or consummated  pursuant to this Agreement in
the manner set forth in Section 9.6 of this Agreement.

     (b) All parties to this Agreement hereby acknowledge and agree that nothing
in this  Agreement  affects  Graseby  plc's  amenability,  if any, to service of
process in the United  States,  nor the  ability,  if any, of any state,  or any
state or federal  court,  in the United States to assert  personal  jurisdiction
over  Graseby  plc,  nor the  right  of  Graseby  plc to  contest  the  personal
jurisdiction,  if any, of any state,  or of any state or federal  court,  in the
United States.

Section 9.4.  Entire Agreement.

     This  Agreement  contains  the entire  agreement  between the parties  with
respect to the  transactions  contemplated  hereunder and  supersedes  all prior
arrangements or understandings with respect thereto, written or oral, other than
documents  referred to herein that are to be executed at or in  connection  with
the  Closing.  The terms and  conditions  of this  Agreement  shall inure to the
benefit  of and be  binding  upon  the  parties  hereto,  and  their  respective
successors and permissible  assignees.  Nothing in this Agreement,  expressed or
implied,  is intended to confer upon any party,  other than the parties  hereto,
and their successors, any rights, remedies, obligations or liabilities.

Section 9.5.  Assignment.

     No party  hereto may assign  any of its  rights or  obligations  under this
Agreement to any other  Person  without the prior  written  consent of the other
parties hereto.

Section 9.6.  Notices.

     All  notices  or other  communications  which  are  required  or  permitted
hereunder shall be in writing and sufficient if delivered  personally or sent by
overnight express or by registered or certified mail, postage prepaid, addressed
as follows:



                                       78
<PAGE>


     If to Seller, Graseby Andersen Inc., or Graseby plc:

                  Graseby plc
                  Lynton House
                  7-12 Tavistock Square
                  London, UK WC1H 9LT
                  c/o  Lawrence Irving, Financial Director

                  (For Overnight Delivery):

                  Same.

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

                  Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
                  Post Office Box 1800
                  Raleigh, North Carolina  27602
                  Attn:    Robert A. Singer, Esq. and
                           Daniel M. Sroka, Esq.

                  (For Overnight Delivery):

                  Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
                  2000 Renaissance Plaza, 230 North Elm Street
                  Greensboro, North Carolina  27401
                  Attn:    Robert A. Singer, Esq.
                           Daniel M. Sroka, Esq.

         If to Buyer:

                  TB Wood's Incorporated
                  440 North Fifth Avenue
                  Chambersburg, Pennsylvania  17201-1778

                  (For Overnight Delivery):

                  Same.

         With a required copy to:

                  Dechert Price & Rhoads
                  1717 Arch Street
                  Philadelphia, Pennsylvania  19103
                  Attention:........David E. Schulman, Esq.

                  (For Overnight Delivery):

                  Same.

Section 9.7.  Captions; Headings.

     The  captions and section  headings  contained  in this  Agreement  are for
reference purposes only and are not part of this Agreement.

Section 9.8.  Amendments.

     No amendment of any provision of this  Agreement  shall be valid unless the
same shall be in writing and signed by Buyer and Seller.

Section 9.9.  Severability.

     Any term or provision of this Agreement that is invalid or unenforceable in
any   situation   in  any   jurisdiction   shall  not  affect  the  validity  or
enforceability  of the remaining terms and provisions  hereof or the validity or
enforceability  of the offending term or provision in any other  situation or in
any other jurisdiction.

Section 9.10.  Construction.

     Seller and Buyer have participated  jointly in the negotiation and drafting
of this  Agreement.  In the  event an  ambiguity  or a  question  of  intent  or
interpretation  arises,  this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring either party by virtue of the authorship of any of the provisions
of this  Agreement.  Any  reference to any  federal,  state,  local,  or foreign
statute  or law  shall be  deemed  also to refer to all  rules  and  regulations
promulgated  thereunder,   unless  the  context  requires  otherwise.  The  word
"including"  shall mean including  without  limitation.  Seller and Buyer intend
that each  representation,  warranty,  covenant and agreement  contained  herein
shall have independent significance.

Section 9.11.  Counterparts.

     This Agreement may be executed in any number of counterparts, and each such
counterpart  shall  be  deemed  to be  an  original  instrument,  but  all  such
counterparts together shall constitute but one agreement.

Section 9.12.  Post-Closing Cooperation.

     Buyer and Seller and their Affiliates shall reasonably  cooperate with each
other  subsequent to the Closing by preparing,  executing,  and  delivering  any
documents  reasonably  requested by another party hereto necessary to effectuate
and consummate the transactions contemplated by this Agreement.

Section 9.13.  Governing Law.

     This  Agreement  shall be governed by and construed in accordance  with the
laws of the State of North Carolina  applicable to agreements  made and entirely
to be performed within such jurisdiction,  without giving effect to any conflict
of laws  provisions of North Carolina law that would otherwise cause the laws of
another jurisdiction to apply.




                                       79
<PAGE>



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


ATTEST:                             TB Wood's Incorporated

____________________                By:  ____________________
__________ Secretary                     ___________ President

[Corporate Seal]



                                       80
<PAGE>



ATTEST:                             Graseby Electro-Optics Inc.


_________________________           By:  _______________________________
_________ Secretary                      Title:

[Corporate Seal]



                                       81
<PAGE>



Graseby Andersen Inc.

By:

Title:



                                       82
<PAGE>



Graseby plc

By:

Title:



                                       83
<PAGE>




                                List of Exhibits

Exhibit A                  Financial Statements
Exhibit B                  Real Property
Exhibit C                  Survey
Exhibit D                  Release

                                List of Schedules

Schedule                   Topic

3.6(a)                              Business with Affiliated Persons
3.7(a), (b) and (c)                 Operations Subsequent to December 31, 1996
3.8                                 Permits
3.9                                 Consents
3.10                                Company's Intangibles
3.12(d), (e), (f) and (g)  Hazardous Substances
3.12(k)                    Environmental Reports
3.13(a)                    Tax Matters
3.13(b)(i)                          Consolidated Groups
3.13(b)(ii)                         Post-Closing Tax Agreements
3.13(g)                    Company as Successor by Merger
3.14(a), (m), (n) and (o)  Employee Benefit Plans
3.15(a)                    Certain Contracts
3.16                                Legal Proceedings; Regulatory Approvals
3.18                                Brokers and Finders
3.19                                Inventory
3.20                                Accounts Receivable
3.21                                Undisclosed Liabilities
3.22                                Permitted Exceptions
3.23                                Transactions With Related Parties
3.24                                Compensation Arrangements; Bank Accounts;
                                    Officers and Directors
3.25                                Labor Relations
3.26                                Products Liability
3.27                                Insurance
5.2(e)                              Severance Obligations
8.2(a)(iv)                          Certain Indemnification Obligations
8.6(f)                              Modified Aggregate Deemed Sale Price