AMENDED AND RESTATED

                           ASSET PURCHASE AGREEMENT


                                 By and Among


                      HYDROCHEM INDUSTRIAL SERVICES, INC.

                                   as Buyer


                                      and


                         VALLEY SYSTEMS OF OHIO, INC.

                                  as a Seller

                                      and

                             VALLEY SYSTEMS, INC.

       as a Seller and Sole Stockholder of Valley Systems of Ohio, Inc.


<PAGE>



                              TABLE OF CONTENTS


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

                                      i

<PAGE>



      GAAP  ................................................................ 3
      Governmental Body..................................................... 3
      Hazardous Materials................................................... 4
      HSR Act............................................................... 4
      Indemnified Party..................................................... 4
      Indemnifying Party.................................................... 4
      knowledge............................................................. 4
      Leases................................................................ 4
      Legal Requirement..................................................... 4
      Losses................................................................ 4
      material.............................................................. 4
      Order ................................................................ 4
      Person................................................................ 5
      Preliminary Schedules................................................. 5
      Proceeding............................................................ 5
      Proxy Materials....................................................... 5
      Purchase Price........................................................ 5
      Receivables Guaranty.................................................. 5
      Release............................................................... 5
      Rules ................................................................ 5
      Schedules............................................................. 5
      SEC   ................................................................ 5
      SEC Reports........................................................... 5
      Securities Act........................................................ 5
      Seller................................................................ 5
      Seller's Ceiling Amount............................................... 5
      Stockholders.......................................................... 5
      Superior Takeover Proposal............................................ 5
      Termination Date...................................................... 5
      Third Party........................................................... 5
      Third Party Claim..................................................... 6
      Threatened............................................................ 6
      VSI   ................................................................ 6
      WARN  ................................................................ 6

1.    Purchase and Sale of Assets; Assumption of Specified Liabilities...... 6
      1.1   Agreement to Purchase and Sell.................................. 6
      1.2   Purchase Price; Payment.  ...................................... 9
      1.3   Assumption of Specified Liabilities............................ 10
      1.4   Non-Assumption of Certain Liabilities.......................... 10
      1.5   Stockholder Approval; Voting................................... 11
      1.6   Closing.  ..................................................... 12
      1.7   Delivery of Schedules.......................................... 12

                                      ii

<PAGE>



      1.8   Allocation of Purchase Price................................... 12
      1.9   Closing Balance Sheet Adjustment............................... 12

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

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

4.    Indemnification...................................................... 27
      4.1   Indemnification by Seller and VSI.............................. 27
      4.2   Indemnification by Buyer.  .................................... 28

                                     iii

<PAGE>



      4.3   Conditions of Indemnification.................................. 29
      4.4   Monetary Limits of Indemnification............................. 30
      4.5   Environmental Remediation...................................... 31

5.    Other Covenants and Agreements....................................... 32
      5.1   Guaranty of Receivables........................................ 32
      5.2   Restrictive Covenants.......................................... 33
      5.3   Escrow......................................................... 35
      5.4   Conduct of the Business........................................ 37
      5.5   Due Diligence; Access to Information and Customers............. 39
      5.6   Acquisition Proposals.......................................... 40
      5.7   Public Announcements........................................... 41
      5.8   Notification of Certain Matters................................ 41
      5.9   Best Efforts................................................... 41
      5.10  Execution of Additional Documents.............................. 42
      5.11  Fees and Expenses.............................................. 42
      5.12  Limitation of Liability........................................ 42
      5.13  HSR Act Filings................................................ 42
      5.14  Employees...................................................... 43
      5.15  Dispute Resolution............................................. 43

6.    Conditions of Closing................................................ 44
      6.1   Buyer's Conditions to Closing.................................. 44
      6.2   Seller's and VSI's Conditions to Closing....................... 46

7.    Termination and Abandonment.......................................... 48
      7.1   Reasons for Termination........................................ 48
      7.2   Procedure Upon and Effect of Termination....................... 49

8.    Miscellaneous........................................................ 49
      8.1   Notices.  ..................................................... 49
      8.2   Binding Effect; Benefits....................................... 50
      8.3   Entire Agreement............................................... 50
      8.4   Governing Law.................................................. 51
      8.5   Survival....................................................... 51
      8.6   Counterparts................................................... 51
      8.7   Headings....................................................... 51
      8.8   Waivers........................................................ 51
      8.9   Incorporation of Exhibits and Schedules........................ 52
      8.10  Severability................................................... 52
      8.11  Assignability.................................................. 52
      8.12  Drafting....................................................... 52
      8.13  References..................................................... 52

                                      iv

<PAGE>



      8.14  Calendar Days, Weeks and Months................................ 53
      8.15  Gender; Plural and Singular.................................... 53
      8.16  Cumulative Rights.............................................. 53
      8.17  No Implied Covenants........................................... 53
      8.18  Attorneys' Fees................................................ 53
      8.19  Indirect Action................................................ 53

SCHEDULES...................................................................55

EXHIBITS....................................................................56

      EXHIBIT "A"
      BILL OF SALE, ASSIGNMENT
      ANDASSUMPTION AGREEMENT............................................A - 1

      EXHIBIT "B"
      GUARANTY AGREEMENT.................................................B - 1

      EXHIBIT "C"
      ESCROW AGREEMENT...................................................C - 1

      EXHIBIT "D"
      SELLER'S OPINION...................................................D - 1

      EXHIBIT "E"
      BUYER'S OPINION....................................................E - 1


                                      v

<PAGE>



                             AMENDED AND RESTATED

                           ASSET PURCHASE AGREEMENT

      This Amended and Restated Asset  Purchase  Agreement is entered into as of
the 8th day of September 1998, by and among HydroChem Industrial Services, Inc.,
a Delaware corporation  ("Buyer"),  Valley Systems, Inc., a Delaware corporation
("VSI") and Valley Systems of Ohio, Inc. an Ohio  corporation  and  wholly-owned
subsidiary of VSI ("Seller").

      WHEREAS,  Buyer and VSI have  entered  into that  certain  Asset  Purchase
Agreement dated September 8, 1998 (the "Purchase Agreement"); and

      WHEREAS,  the assets  intended to be  purchased  pursuant to the  Purchase
Agreement  (other than certain  assets which are owned by VSI) are the assets of
Seller  and the  obligations  and  liabilities  intended  to be assumed by Buyer
pursuant to the Purchase Agreement are the obligations and liabilities of Seller
as well as VSI; and

      WHEREAS,  VSI is willing  to be jointly  and  severally  responsible  with
Seller for any  obligations  of Seller  which have arisen or may arise under the
Purchase Agreement; and

      WHEREAS,  the parties  hereto  desire to amend and  restate  the  Purchase
Agreement in light of the foregoing and to make such other  modifications as are
provided for herein.

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

                                  Definitions

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

      "affiliate"--as defined in Section 4.1.

      "Agreement"--this Asset Purchase Agreement.

      "Assets"--as defined in Section 1.1.1.

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

      "Board"--as defined in Section 1.5.

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


                                       1

<PAGE>



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

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

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

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

      "Claim"--as defined in Section 4.3.

      "Closing"--as defined in Section 1.6.

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

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

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

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

      "control"--as defined in Section 4.1.

      "Customer"--as defined in Section 5.2.1.

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

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

      "Encumbrances"--options,    indentures,   mortgages,   leases,   licenses,
restrictions (other than restrictions under applicable  securities laws), liens,
charges,  assessments,  pledges,  security interests,  adverse claims, equities,
limitations,  community property  interests,  conditions,  equitable  interests,
rights of first  refusal,  easements,  servitudes or other  encumbrances  of any
kind, including any restriction on use, voting, transfer,  receipt of income, or
exercise of any other attribute of ownership.

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


                                       2

<PAGE>



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

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

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

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

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

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

      "Escrow Agent"--as defined in Section 5.3.1

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

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

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

      "Expenses"--as defined in Section 5.11.

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

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

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

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

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


                                       3

<PAGE>



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

      "Governmental Body"--any:

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

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

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

      (d)   multi-national organization or body; or

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

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

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

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

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

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

      "Leases"--as defined in Section 2.12.2.

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

      "Losses"--as defined in Section 4.1.

      "material"--an  item is "material" if its presence or absence, as required
by the context, would have a material adverse effect upon the assets,  financial
condition, results of operations, business or

                                       4

<PAGE>



affairs of a Person and any affiliates of such Person with whom such Person,  in
accordance with GAAP, consolidates financial statements, taken as a whole.

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

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

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

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

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

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

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

      "Rules"--as defined in Section 5.15.

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

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

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

      "Seller"--Valley Systems of Ohio, Inc., an Ohio corporation (including all
prior subsidiaries).

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


                                       5

<PAGE>



      "Stockholders"--Rollins Investment Fund; Rollins Holding Company, Inc.;and
their respective affiliates.

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

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

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

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

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

      "VSI"--Valley  Systems,  Inc., a Delaware corporation (including all prior
subsidiaries).

      "WARN"--as defined in Section 2.18.7.

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

            1.1   Agreement to Purchase and Sell.

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

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

                        (ii)  all notes and accounts receivable;


                                       6

<PAGE>



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

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

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

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

                        (vii) all books and  records  and all files,  documents,
                  papers,  agreements,   books  of  account  and  other  records
                  pertaining  to the Assets or to the  business of Seller  which
                  are  located  at the  offices,  plants,  warehouses  or  other
                  locations used in connection with the Assets;

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

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

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

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

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


                                       7

<PAGE>



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

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

                        (xv) all cash on hand,  including  bank accounts  (other
                  than the Purchase Price depository account) and temporary cash
                  investments;

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

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

                  Without  limiting the generality of the foregoing,  the Assets
            shall,  except as set forth in Section  1.1.2  hereof,  include  all
            assets set forth in a detailed  list of fixed  assets as of June 30,
            1998,  prepared  from  the  accounting  records  of VSI and  Seller,
            indicating  the  respective  assets of VSI and Seller,  and attached
            hereto  as  Schedule  1.1.1,  and all such  assets  as may have been
            acquired by VSI or Seller which would be included on a list prepared
            in like manner from such accounting  records as of the Closing Date,
            except any such  assets  which may have been  disposed of since June
            30, 1998, in the ordinary  course of business on a basis  consistent
            with past practice.

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

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

                       (ii) rights under insurance policies, including rights to
                 any cancellation value on the Closing Date, except that VSI and
                 Seller  shall  assign,   to  the  extent  such   assignment  is
                 enforceable,  to  Buyer  rights  under  policies  (or  make the
                 proceeds  available)  with  respect  to claims  arising  out of
                 transactions  prior to the Closing  Date which Buyer shall have
                 agreed to assume  pursuant to Section  1.3 below;  in the event
                 that such an  assignment is not  enforceable  and in order that
                 the full value of all rights of the character described in this
                 clause  (ii) of this  Section  1.1.2  and  all  claims  on such
                 policies  may be  realized,  each of VSI and Seller  shall,  by
                 itself or by its agents, at the request and expense and

                                       8

<PAGE>



                 under the direction of Buyer,  until the entire Escrow Fund has
                 been  released  pursuant to Section 5.3 hereof,  in the name of
                 VSI or Seller or otherwise as Buyer shall  specify and as shall
                 be permitted by law, take all such action and do or cause to be
                 done all such  things  as shall in the  reasonable  opinion  of
                 Buyer be  necessary  or proper  (x) in order that the rights of
                 each of VSI and Seller under such  policies  shall be preserved
                 and (y) for, and to  facilitate,  the  collection of the monies
                 due and payable,  and to become due and payable, to each of VSI
                 and Seller in and under  every such  policy in respect of every
                 such claim,  and each of VSI and Seller shall hold the same for
                 the benefit of and pay the same over promptly to Buyer;

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

                       (iv)  all shares of capital stock of Seller; and

                       (v) funds held in respect of the VSI 401(k) plan.

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

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

                                       9

<PAGE>



           such contracts shall be preserved and (y) for, and to facilitate, the
           collection  of the  monies  due and  payable,  and to become  due and
           payable,  to VSI or Seller in and under every such contract and claim
           and in respect of every  such claim and  demand,  and each of VSI and
           Seller  shall hold the same for the  benefit of and pay the same over
           promptly to Buyer.

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

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

                 (i) those liabilities or obligations of Seller which are listed
           on Schedule 1.3A hereof (which shall be the detail of the liabilities
           reflected in the balance sheet  included in the Financial  Statements
           dated June 30,  1998 as  updated  to the  Closing  Date  pursuant  to
           Section 1.9 hereof) which updated  Schedule 1.3A shall prevail in the
           event of a  conflict  between  the  Closing  Balance  Sheet  and such
           updated  Schedule 1.3A  (depending upon the category of the liability
           being assumed by Buyer,  the parties shall mutually agree (as denoted
           in Schedule  1.3A) whether (i) Seller will pay the accrued  liability
           to the obligee and Buyer will reimburse Seller for such payments (ii)
           Buyer will pay the amount of the accrued liability directly to Seller
           and Seller will pay the liability to the obligee, or (iii) Buyer will
           pay the  liability  directly  to the  obligee up to the amount of the
           accrued liability); and

                 (ii)  those  liabilities  and  obligations  of either of VSI or
           Seller which arise under the terms of a contract, agreement, license,
           lease,  sales  order,  purchase  order or other  commitment  which is
           listed on  Schedule  1.3B  hereof  (as  updated to the  Closing  Date
           pursuant  to  Section  1.9  hereof)  or is not  required  by the last
           sentence of this Section 1.3(ii) to be so listed. Schedule 1.3B shall
           only list (x) master  service  agreements of Seller  assumed by Buyer
           (y) agreements  under which either VSI or Seller have  indemnified or
           provided a guaranty  to any  Person  and (z)  contracts,  agreements,
           licenses,  leases, sales orders, purchase orders or other commitments
           of Seller assumed by Buyer which involve  services or annual payments
           to or from either of VSI or Seller in excess of $10,000.

                                      10

<PAGE>



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

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

                 (i) under any employee benefit plan of VSI or Seller other than
           any accrued  liabilities  specifically  assumed by Buyer  pursuant to
           Section 1.3 above;

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

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

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

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

           1.5 Stockholder Approval; Voting. Seller, acting through its board of
     directors, shall, unless there exists a Superior Takeover Proposal, as soon
     as practicable after the date

                                      11

<PAGE>



     hereof (i) seek the written consent of its sole stockholder, VSI, approving
     this  Agreement  and all  transactions  contemplated  hereby.  VSI,  acting
     through its board of directors (the "Board"),  shall, unless there exists a
     Superior  Takeover  Proposal,  as soon as practicable after the date hereof
     (i) seek to obtain the written consent of stockholders owning not less than
     that number of shares of VSI capital stock required under applicable law in
     order to approve the transactions  contemplated hereby; (ii) recommend that
     such  stockholders  of VSI  consent to the  approval  and  adoption of this
     Agreement and all transactions contemplated hereby; (iii) distribute to its
     stockholders the definitive information statement materials with respect to
     the sale of the Assets in accordance with Regulation 14C under the Exchange
     Act, other applicable federal and state laws, (the "Proxy Materials"); (iv)
     use its  reasonable  efforts to obtain  the  necessary  approvals  by VSI's
     stockholders of this Agreement and all  transactions  contemplated  hereby;
     and (v) will, as the sole stockholder of Seller,  consent in writing,  with
     respect  to all  outstanding  shares of  capital  stock of  Seller,  to the
     execution   and  delivery  of,  and   consummation   of  the   transactions
     contemplated by, this Agreement by Seller. Contemporaneously herewith, each
     of Rollins Investment Fund and Rollins Holding Company,  Inc., has executed
     an agreement  whereby  each of them has agreed to consent in writing,  with
     respect  to all shares of capital  stock of VSI  respectively  beneficially
     owned by them, to the execution  and delivery of, and  consummation  of the
     transactions  contemplated  by, this Agreement by VSI unless there exists a
     Superior Takeover Proposal.

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

           1.7 Delivery of Schedules and Exhibits.  Within twenty  business days
     of the date of this  Agreement,  VSI and Seller shall  deliver to Buyer all
     schedules  (other  than  Schedule  2.9,  which  shall be  delivered  within
     twenty-five  business days of the date of this  Agreement)  and exhibits to
     this  Agreement (the date of delivery of the last such schedule or exhibit,
     including  Schedule 2.9, being referred to herein as the "Delivery  Date"),
     such schedules being true and correct in all material respects at and as of
     the Delivery Date (except for Schedules 1.1.1 and 1.3A, which shall be true
     and correct at and as of June 30,  1998)  (collectively,  the  "Preliminary
     Schedules").  The  Preliminary  Schedules  shall  be  updated  as  required
     pursuant to Section 1.3 hereof and  otherwise as necessary so as to be true
     and correct at and as of the Closing Date (collectively, as so updated, the
     "Closing   Schedules").   The  Closing  Schedules  shall  be  delivered  in
     accordance with Section 1.9 hereof; provided that any objection by Buyer to
     any of the Closing  Schedules  delivered  not later than five days prior to
     Closing  must be made by Buyer  prior to Closing.  Each of the  Preliminary
     Schedules  and  the  Closing  Schedules  shall  be  in  a  form  reasonably
     satisfactory to Buyer.


                                      12

<PAGE>



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

           1.9   Closing Balance Sheet Adjustment.

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

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

                 1.9.3 In the event that the net assets reflected on the Closing
           Balance  Sheet,  after all of Buyer's  objections  thereto shall have
           been resolved in accordance with Section 1.9.2 hereof, are greater or
           less than $5,353,593  (i.e. the amount of the net assets reflected on
           the balance sheet included in the Financial Statements dated June 30,

                                      13

<PAGE>



           1998), then the amount of any such excess or deficiency shall be paid
           to VSI and Seller (in the case of an excess) or Buyer (in the case of
           a deficiency) by the other by wire transfer of immediately  available
           United States funds within three  business  days of such  resolution,
           receipt of Buyer's written acceptance of the Closing Balance Sheet or
           expiration  of Buyer's  30-day  period for  objection  to the Closing
           Balance Sheet.

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

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

           2.2   Authorization, Validity and Effect of Agreements.

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

                 2.2.2  This  Agreement  constitutes,  and  all  agreements  and
           documents  contemplated  hereby when executed and delivered  pursuant
           hereto for value  received  will  constitute,  the valid and  legally
           binding  obligations of Seller and VSI enforceable in accordance with
           their terms,  except that enforceability may be limited by applicable
           bankruptcy,   insolvency,   reorganization,    fraudulent   transfer,
           moratorium,   bulk  sales,   preference,   equitable   subordination,
           marshalling  or other  similar  laws of  general  application  now or
           hereafter in effect relating to the enforcement of creditors'  rights
           generally  and except  that the  remedies  of  specific  performance,
           injunction and other

                                      14

<PAGE>



           forms of  equitable  relief are  subject  to certain  tests of equity
           jurisdiction,  equitable  defenses  and the  discretion  of the court
           before which any proceeding therefor may be brought.

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

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

           2.4 Affiliated Entities.  Neither VSI nor Seller owns, nor has either
     of them owned since September 4, 1998,  directly or indirectly,  a majority
     or controlling  interest in any corporation  (other than VSI's ownership of
     Seller), business trust, joint stock company, partnership or other business
     organization or association relating to the business operations of Seller.

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

                                      15

<PAGE>



     had its license or  qualifications  to conduct business in any jurisdiction
     revoked or  suspended,  or (iii) has been  involved  in any  Proceeding  to
     revoke or suspend a license or qualification.

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

           2.7 Bank  Accounts.  Schedule  2.7 hereof sets forth the name of each
     bank,  savings  institution or other Person with which VSI or Seller has an
     account,  lockbox or safe deposit box and the names and  identification  of
     all Persons authorized to drawn thereon or to have access thereto.

           2.8   Financial Statements.  

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

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

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

                 2.8.4  The  audited   consolidated   financial  statements  and
           unaudited interim financial  statements of VSI and Seller included in
           the SEC Reports (collectively,  the "Financial Statements") have been
           prepared, and the audited consolidated financial

                                      16

<PAGE>



           statements  and  unaudited  interim  financial  statements of VSI and
           Seller as included  in all forms,  reports or other  documents  filed
           with the SEC after the date hereof  will be  prepared  in  accordance
           with GAAP (except as may be indicated therein or in the notes thereto
           and except with respect to unaudited  statements as permitted by Form
           10-Q) and  fairly  present in all  material  respects  the  financial
           position of VSI and Seller as of the respective  dates thereof or the
           results of operations and cash flows for the respective  periods then
           ended,  as the case  may be,  subject,  in the case of the  unaudited
           interim financial statements, to normal, recurring audit adjustments.

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

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

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

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


                                      17

<PAGE>



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

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

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

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

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

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

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

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

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

           2.11 Taxes.  Each of VSI and Seller (i) has duly and timely  filed or
     caused to be filed  all  federal,  state,  local and  foreign  tax  returns
     (including,  without limitation,  consolidated and/or combined tax returns)
     required to be filed by it prior to the date hereof  which  relate to it or
     with  respect to which it or the Assets are liable or  otherwise in any way
     subject; (ii) has

                                      18

<PAGE>



     paid or fully  accrued  for all taxes  shown to be due and  payable on such
     returns  (which taxes are all the taxes due and payable  under the laws and
     regulations  pursuant  to which such  returns  were  filed);  and (iii) has
     properly  accrued for all such taxes accrued in respect of it or the Assets
     for  periods  subsequent  to  the  periods  covered  by  such  returns.  No
     deficiency  in payment of taxes for any  period  has been  asserted  by any
     taxing body and remains  unsettled  at the date hereof and no audits are in
     process and no  notification  of audit to begin has been received for which
     claims are unasserted.  The  consolidated tax returns of VSI and Seller for
     tax year 1995 have been audited by the Internal Revenue Service.  Copies of
     all federal,  state, local and foreign income (or franchise) tax returns of
     VSI and Seller for tax years 1996 and  thereafter  have been made available
     for inspection by Buyer.

           2.12  Real Property.

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

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

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

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

           2.14 Title to Property; Encumbrances.  Either VSI or Seller has good,
     valid  and,  in the case of real  properties,  marketable  title to all the
     properties  and assets  shown on the  Financial  Statements  or  thereafter
     acquired, including the Assets (except for (i) inventory

                                      19

<PAGE>



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

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

           2.16  Business Property Rights.

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

                                      20

<PAGE>



           relate, in whole or in part, to any items of the categories mentioned
           in (i) above or to any trade  secret or other  proprietary  rights of
           VSI  or  Seller  which  are  reasonably  necessary  to,  or  used  in
           connection with, the business of VSI or Seller.

                 2.16.2  The  property  referred  to in Section  2.16.1  hereof,
           together with (i) all designs, methods, inventions, know-how, related
           thereto and (ii) all  trademarks,  trade names,  service  marks,  and
           copyrights  claimed  or used by either  VSI or Seller  which have not
           been registered (collectively "Business Property Rights"), constitute
           all such proprietary rights owned or held by either VSI or Seller and
           which are  reasonably  necessary  to, or used in the  conduct  of the
           business of either VSI or Seller.  All of those items  designated  as
           trade  secrets  and all  related  designs,  methods,  inventions  and
           know-how constitute trade secrets of VSI or Seller within the meaning
           of all  applicable  laws,  and each of VSI and  Seller  has taken all
           necessary  steps  required by law to protect  these trade  secrets as
           such.  With  respect to each such  trade  secret,  the  documentation
           relating to such trade secret is current, accurate, and sufficient in
           detail and  content to  identify  it and to allow its full and proper
           use.  No such  trade  secrets  are part of the  public  knowledge  or
           literature,  nor have they been used,  divulged,  or appropriated for
           the benefit of any Third Party or otherwise  to the  detriment of VSI
           or Seller.

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

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


                                      21

<PAGE>



     2.18  Employees.

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

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

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

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

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


                                      22

<PAGE>



                 2.18.6 Each of VSI and Seller is currently  and has always been
           in  compliance  in all material  respects  with all  applicable  laws
           respecting employment and employment practices,  terms and conditions
           of wages and hours, and is not engaged in any unfair labor practice.

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

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

           2.20 No Breach or  Default.  Neither  VSI nor  Seller is in  material
     default  under any contract to which it is a party or by which it is bound,
     nor has any event occurred which, after the giving of notice or the passage
     of time or  both,  would  constitute  a  material  default  under  any such
     contract. Neither VSI nor Seller has any reason to believe that the parties
     to such contracts will not fulfill their  obligations  under such contracts
     in all material respects or are threatened with insolvency.

           2.21  Litigation.

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

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


                                      23

<PAGE>



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

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

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

           2.23  Inventories and Supplies.  The inventories and supplies of each
     of VSI and Seller reflected in the Financial Statements, or acquired by VSI
     or Seller between June 30, 1998, and the date hereof, are carried at not in
     excess of the lower of cost or fair  market  value,  and do not include any
     inventory  which is not  usable  or  saleable  in the  ordinary  course  of
     business  of VSI and Seller as  heretofore  conducted,  in each case net of
     reserves provided therefor in such Financial  Statements in accordance with
     GAAP.

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

                 2.24.1 Each of VSI and Seller is in compliance with and neither
           is liable  under any  Environmental  Law.  Neither VSI nor Seller has
           received any Order or written  notice from any  Governmental  Body or
           other Person  alleging any violation of or failure to comply with any
           Environmental  Law,  or  any  actual  or  Threatened   obligation  to
           undertake  or bear the  cost of any  Environmental  Liabilities  with
           respect to any of the Facilities, or with respect to any property at,
           to, or from which Hazardous  Materials were generated,  manufactured,
           refined,   transferred,   imported,  used,  processed,   transported,
           treated, stored, handled,  disposed,  recycled, or received by VSI or
           Seller or any of their respective Employees.

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

                                      24

<PAGE>



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

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

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

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

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

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

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

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


                                      25

<PAGE>



           2.27   Indemnities  and  Guaranties.   Neither  VSI  nor  Seller  has
     indemnified  or provided a guaranty  to any Person  except (i) as set forth
     and  described  in Schedule  1.3B hereof and (ii) to customers of either in
     the ordinary course of business.

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

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

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

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

           3.2   Authorization, Validity and Effect of Agreements.  


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<PAGE>



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

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

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

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

     4.    Indemnification.


                                      27

<PAGE>



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

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

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

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

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

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

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


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<PAGE>



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

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

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

           4.2  Indemnification  by Buyer.  Upon the terms  and  subject  to the
     conditions  set forth in Section  4.3 hereof and this  Section  4.2,  Buyer
     agrees to indemnify, defend, protect, save and hold harmless Seller and VSI
     against,  and will  reimburse  Seller  and VSI on demand  for,  any and all
     Losses made or incurred by or asserted  against  Seller,  at any time after
     the Closing  Date,  directly  or  indirectly,  arising out of,  related to,
     caused   by,   or   resulting   from   (i)   any   inaccuracy,    omission,
     misrepresentation,  breach  of  warranty,  or  nonfulfillment  of any term,
     provision,  covenant or  agreement on the part of Buyer  contained  herein,
     (ii)  any  inaccuracy  or  misrepresentation  in,  or  omission  from,  any
     certificate  or other  instrument  furnished or to be furnished by Buyer to
     Seller pursuant  hereto or (iii) operation of business  activities of Buyer
     after the Closing Date  involving the Assets.  Within 45 days following the
     first  anniversary  of the Closing  Date,  Buyer  shall  deliver to VSI and
     Seller a certificate of Buyer  certifying  which of those  liabilities  and
     obligations of Buyer assumed from VSI or Seller  pursuant to this Agreement
     and listed on Schedule  1.3A or Schedule  1.3B (each as updated to Closing)
     had become due and  payable but had not been paid in full or resolved as of
     the first  anniversary of the Closing Date. With respect to the liabilities
     and  obligations  listed in such  certificate  (or which  were  erroneously
     omitted  from  such  certificate),  Buyer's  obligations  pursuant  to this
     Section  4.2  shall  terminate  upon  the  payment  or  resolution  of such
     liability or obligation.  With respect to those liabilities and obligations
     of Buyer assumed from VSI or Seller  pursuant to this  Agreement and listed
     on  Schedule  1.3A or Schedule  1.3B (each as updated to Closing)  which by
     their  respective  terms in effect at Closing  will  become due and payable
     later than the first anniversary of the Closing Date,  Buyer's  obligations
     pursuant to this Section 4.2 shall terminate

                                      29

<PAGE>



     upon the payment or  resolution  of such  liability or  obligation.  In the
     event the certificate is not timely delivered,  Buyer's obligation pursuant
     to this Section 4.2 shall  terminate  upon the payment or resolution of all
     liabilities  assumed  pursuant to Section  1.3.  With  respect to all other
     liabilities and obligations of Buyer assumed from VSI or Seller pursuant to
     this  Agreement,  Buyer's  obligations  pursuant to this  Section 4.2 shall
     terminate upon the third anniversary of the Closing Date. There shall be no
     limit on Buyer's  obligation to indemnify and hold harmless  Seller and VSI
     from or against Losses resulting from fraud.

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

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

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

                 4.3.3 If the  Claim  involves  a Third  Party  Claim,  then the
           Indemnifying  Party  shall,  at its sole cost,  expense and  ultimate
           liability  regardless  of the  outcome,  and  through  counsel of its
           choice  (which  counsel  shall  be  reasonably  satisfactory  to  the
           Indemnified Party), litigate,  defend, settle or otherwise attempt to
           resolve such Third Party  Claim;  provided,  however,  that if in the
           Indemnified  Party's  reasonable  judgment a conflict of interest may
           exist with  respect to the Third Party  Claim,  then the  Indemnified
           Party  shall be  entitled  to  select  counsel  of its own  choosing,
           reasonably satisfactory to the Indemnifying Party, in which event the
           Indemnifying Party shall be obligated to pay the fees and expenses of
           such counsel. Notwithstanding the preceding sentence, the Indemnified
           Party may  elect,  at any time and at the  Indemnified  Party's  sole
           cost, expense and ultimate  liability,  regardless of the outcome (in
           the case of reasons other than the  Indemnifying  Party's  failure or
           refusal to provide a defense to such Third Party Claim),  and through
           counsel of its  choice,  to  litigate,  defend,  settle or  otherwise
           attempt to resolve such Third Party Claim. If the  Indemnified  Party
           so elects (for reasons other than the Indemnifying Party's failure or
           refusal to provide a defense to such  Third  Party  Claim),  then the
           Indemnifying Party shall have no obligation to

                                      30

<PAGE>



           indemnify  the  Indemnified  Party with  respect to such Third  Party
           Claim, but such  disposition  will be without  prejudice to any other
           right the Indemnified Party may have to indemnification under Section
           4.1 or 4.2  hereof,  regardless  of the  outcome of such Third  Party
           Claim.  If the  Indemnifying  Party  fails or  refuses  to  provide a
           defense to any Third Party Claim,  then the  Indemnified  Party shall
           have the right to undertake the defense,  compromise or settlement of
           such Third Party Claim,  through counsel of its choice,  on behalf of
           and for the account and at the risk of the  Indemnifying  Party,  and
           the Indemnifying Party shall be obligated to pay the costs,  expenses
           and attorney's fees incurred by the  Indemnified  Party in connection
           with such  Third  Party  Claim.  In any  event,  Seller and the Buyer
           Indemnitees   shall  fully   cooperate  with  each  other  and  their
           respective  counsel in connection with any such litigation,  defense,
           settlement or other attempted resolution.

           4.4   Monetary Limits of Indemnification.

                 4.4.1  Notwithstanding  the  provisions  of Section 4.1 hereof,
           Seller and VSI will not be obligated  to  indemnify or hold  harmless
           any  Buyer  Indemnitee  from  or  against  Losses  arising  out of or
           resulting from matters  described in Section 4.1,  (other than Losses
           directly  or  indirectly  arising out of,  related to,  caused by, or
           resulting  from  any   inaccuracy,   omission  or   misrepresentation
           contained  in, or breach of  warranty or  representation  respecting,
           Section 2.22), until the amount of such Losses individually or in the
           aggregate  exceed the amount of  $200,000  (the "Floor  Amount"),  it
           being  understood and agreed that the Floor Amount shall be deemed to
           have been  reached as to each of VSI and Seller when  Buyer's  Losses
           exceed the amount of $200,000. Upon reaching the Floor Amount, Seller
           and  VSI  shall  be  required  to  indemnify  the  applicable   Buyer
           Indemnitee  for  Losses  comprising  the Floor  Amount as well as all
           Losses occurring  thereafter only from the Escrow Fund and only up to
           (except in the cases of Losses  resulting  from  fraud) an  aggregate
           amount equal to the amount of the Escrow Fund then  outstanding  (the
           "Seller's  Ceiling  Amount").  Seller  and VSI will be  obligated  to
           indemnify  and hold  harmless  any Buyer  Indemnitee  from or against
           Losses directly or indirectly  arising out of, related to, caused by,
           or  resulting  from any  inaccuracy,  omission  or  misrepresentation
           contained  in, or breach of  warranty or  representation  respecting,
           Section 2.22 up to the Seller's  Ceiling Amount without regard to the
           Floor Amount.  Seller and VSI will be obligated to indemnify and hold
           harmless  any Buyer  Indemnitee  from or against  Losses  directly or
           indirectly  arising out of,  related to, caused by, or resulting from
           any inaccuracy, omission or misrepresentation contained in, or breach
           of warranty or  representation  respecting,  Sections  2.12.2 or 2.20
           without  regard  to the  materiality  of such  inaccuracy,  omission,
           misrepresentation,   or  breach  of   warranty   or   representation.
           Notwithstanding  the  provisions  of Section 4.1 hereof and except in
           the cases of Losses resulting from fraud,  Seller and VSI will not be
           obligated to indemnify or hold harmless any Buyer  Indemnitee from or
           against  Losses  to the  extent  such  Losses  are in  excess  of the
           Seller's Ceiling Amount. There shall be no monetary limit on Seller's
           or VSI's

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<PAGE>



           obligation to indemnify and hold harmless any Buyer  Indemnitee  from
           or against Losses resulting from fraud.

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

           4.5   Environmental Remediation.

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

                 4.5.2 The addressing of Environmental  Contamination,  (whether
           by assessment,  negotiation,  compromise, risk assessment, cleanup or
           otherwise) (hereafter "Environmental  Remediation") identified by the
           Environmental  Due  Diligence  Review  shall be  performed by VSI and
           Seller,  to the extent the cost of the  Environmental  Remediation of
           such  contamination does not exceed the funds available in the Escrow
           Fund. If and when funds from the Escrow fund are  exhausted,  VSI and
           Seller  shall  have  no  obligation  to  perform  any   Environmental
           Remediation or otherwise address any Environmental Contamination. The
           remediation  of  Environmental  Contamination  identified  after  the
           Closing shall be the responsibility of Buyer unless Buyer can

                                      32

<PAGE>



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

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

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

     5.    Other Covenants and Agreements.

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

                                      33

<PAGE>



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

           5.2   Restrictive Covenants.

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

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

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

                                      34

<PAGE>



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

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

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

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


                                      35

<PAGE>



                 5.2.7 Use of Name. Each of Seller and VSI shall discontinue all
           use of the name "Valley Systems" and any and all derivations  thereof
           within 30 days after the  Closing  Date (other than in respect of the
           name of VSI's 401(k) plan prior to its termination).

                 5.2.8 No  Liquidation  or  Dissolution.  Neither VSI nor Seller
           shall  liquidate  or dissolve  until the entire  Escrow Fund has been
           released pursuant to Section 5.3 hereof.

           5.3   Escrow.

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

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

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

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


                                      36

<PAGE>



                 5.3.5 Provided no dispute or disputes in excess of an aggregate
           of $3,000,000 (or $2,000,000, if that part of the Escrow Fund subject
           to Section 5.3.6 hereof has been released to VSI or Seller), less the
           amount of any payments  theretofore  made in satisfaction of Seller's
           or VSI's indemnification and guaranty obligations hereunder, exist as
           to any  Claim or  Claims by any  Buyer  Indemnitee  against  all or a
           portion of the Escrow  Fund on the first  anniversary  of the Closing
           Date,   then   $1,000,000,   less  the  amount  of  any  payments  in
           satisfaction  of  VSI's  or  Seller's  indemnification  and  guaranty
           obligations hereunder, will be released to Seller or VSI on the first
           business day following such first anniversary of the Closing Date. To
           the  extent  such a  dispute  or  disputes  do exist as to a Claim or
           Claims on the first  anniversary of the Closing Date, an amount equal
           to the  amount of such  Claim or Claims  will be  withheld  from such
           partial  release of the Escrow  Fund and will  continue to be held in
           accordance  with the  provisions of the Escrow  Agreement  until such
           Claim or Claims  have been  fully  resolved.  Provided  no dispute or
           disputes in excess of an aggregate of $2,000,000 (or  $1,000,000,  if
           that part of the Escrow Fund subject to Section 5.3.6 hereof has been
           released  to  VSI  or  Seller),  less  the  amount  of  any  payments
           theretofore made in satisfaction of Seller's or VSI's indemnification
           and guaranty obligations  hereunder,  exist as to any Claim or Claims
           by any Buyer  Indemnitee  against all or a portion of the Escrow Fund
           on the second  anniversary  of the Closing  Date,  then an additional
           $1,000,000,  less the  amount  of any  payments  theretofore  made in
           satisfaction  of  VSI's  or  Seller's  indemnification  and  guaranty
           obligations hereunder, will be released to Seller or VSI on the first
           business day following  such second  anniversary of the Closing Date.
           To the extent  such a dispute or  disputes  do exist as to a Claim or
           Claims on the second anniversary of the Closing Date, an amount equal
           to the  amount of such  Claim or Claims  will be  withheld  from such
           partial  release of the Escrow  Fund and will  continue to be held in
           accordance  with the  provisions of the Escrow  Agreement  until such
           Claim or Claims  have been  fully  resolved.  Provided  no dispute or
           disputes  exist as to any Claim or  Claims  by any  Buyer  Indemnitee
           against all or a portion of the Escrow Fund on the third  anniversary
           of the Closing  Date,  then the  remainder of the Escrow Fund will be
           released to Seller or VSI on the first  business day  following  such
           third  anniversary of the Closing Date and the Escrow Agreement shall
           thereupon terminate.  To the extent a dispute or disputes do exist as
           to a Claim or Claims on the third anniversary of the Closing Date, an
           amount  equal to the amount of such Claim or Claims  will be withheld
           from such release of the Escrow Fund and will  continue to be held in
           accordance  with the  provisions of the Escrow  Agreement  until such
           Claim  or  Claims  have  been  fully  resolved.  Seller's  and  VSI's
           obligations hereunder shall not be affected by any termination of the
           Escrow Agreement.

                 5.3.6 On or before the first  anniversary  of the Closing Date,
           VSI shall certify in writing to Buyer that VSI or Seller or both have
           completed  the   Environmental   Remediation  of  the   Environmental
           Contamination identified by the Environmental Due Diligence Review as
           required by the terms of Section 4.5 hereof as to all  Facilities not
           excluded  by Buyer  pursuant to Section  5.5.2  hereof as well as any
           Environmental

                                      37

<PAGE>



           Contamination identified during the Environmental Remediation (or, in
           the event that such Environmental Remediation is not completed at the
           first   anniversary   of  the  Closing  Date,  VSI  shall  deliver  a
           certificate of the  environmental  engineering  and  consulting  firm
           which is effecting  such  Environmental  Remediation  estimating  the
           additional  time required for such completion and the additional cost
           thereof ("Estimated  Additional  Remediation Cost"). Upon delivery to
           Buyer of VSI's  certificate  or the  certificate of such firm, as the
           case may be, an amount equal to  $1,000,000,  less the sum of (i) the
           aggregate  cost  of such  Environmental  Remediation  (including  the
           Estimated Additional  Remediation Cost) and (ii) the aggregate amount
           of  other   Losses  of  all  other  Buyer   Indemnitees   subject  to
           indemnification   pursuant   to  Section  4.1  hereof  in  excess  of
           $3,000,000,  shall forthwith be released to VSI and Seller out of the
           Escrow Fund. In the event that such Environmental Remediation was not
           completed at the first  anniversary  of the Closing  Date,  VSI shall
           deliver  to Buyer a  certificate  of  completion  thereof  upon  such
           completion  containing  a  statement  of the  aggregate  cost  of the
           Environmental  Remediation effected following such first anniversary,
           and  Buyer  shall  immediately  release  to  Seller or VSI out of the
           Escrow Fund the  amount,  if any,  which would have been  released to
           Seller  or  VSI  under  this  Section  5.3.6   following  such  first
           anniversary   had  such  actual  cost,   rather  than  the  Estimated
           Additional Remediation Cost, been used in such calculation.

           5.4   Conduct of the Business.

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

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

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

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


                                      38

<PAGE>



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

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

                       (iii)  incur  any  indebtedness  for  borrowed  money  or
                 guarantee  any  such  indebtedness  or  issue  or sell any debt
                 securities or guarantee any debt  securities of others,  except
                 that  it may  incur  indebtedness  in the  ordinary  course  of
                 business consistent with prior practice;

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

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

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

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

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

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

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


                                      39

<PAGE>



           5.5   Due Diligence; Access to Information and Customers.

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

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

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

                       5.5.4 Access.  Each of VSI and Seller  shall,  as soon as
                 possible and in any event no later than the Delivery  Date, (i)
                 afford to Buyer and to its  officers,  employees,  accountants,
                 counsel and other authorized representatives reasonable access,
                 throughout  the period prior to the earlier of the Closing Date
                 or the Termination  Date, to each of VSI's and Seller's plants,
                 properties, equipment, personnel, books and records (including,
                 but not limited to, audit

                                      40

<PAGE>



                 and tax work papers and surveys, reports, studies,  evaluations
                 and the like pertaining to the Environment at the Facilities or
                 Former Facilities (during the time of ownership or operation by
                 VSI or Seller, or to activities of VSI or Seller); (ii) use its
                 reasonable best efforts to cause its representatives to furnish
                 to Buyer and to its authorized  representatives such additional
                 financial and operating  data and other  information  as to its
                 respective  businesses  and  properties  as  Buyer  or its duly
                 authorized  representatives  may from  time to time  reasonably
                 request; (iii) provide all authorizations  reasonably necessary
                 for  Buyer to  review  records  of any  Governmental  Body with
                 jurisdiction;  and (iv)  afford  Buyer and its  representatives
                 reasonable  access,  throughout the period prior to the earlier
                 of the Closing Date or the Termination Date, to its present and
                 potential    customers,    and   Buyer   and   its   authorized
                 representatives  shall have the right to contact such customers
                 and  conduct  such  due  diligence  investigation  relating  to
                 customer  relations  as Buyer  deems  reasonably  necessary  or
                 appropriate.  Buyer agrees to perform all due  diligence  under
                 this Section 5.5 using its reasonable  best efforts to minimize
                 disruption to VSI's and Seller's business. Buyer further agrees
                 to  indemnify,  defend and hold Seller  harmless for all losses
                 resulting  from physical  damages caused by Buyer or its agents
                 in the  course of Buyer's  due  diligence,  and to restore  the
                 Facilities to  substantially  the same  condition  they were in
                 prior thereto. Buyer further agrees to dispose of any wastes or
                 materials it or its agents generated  during the  Environmental
                 Due  Diligence  Review,  and to do so in  accordance  with  all
                 applicable Legal Requirements.

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

           5.6 Acquisition Proposals.  Neither VSI nor Seller shall, directly or
     indirectly, through any officer, director, agent, affiliate, representative
     (including,   without  limitation,   investment   bankers,   attorneys  and
     accountants) or otherwise, (i) solicit, initiate or encourage submission of
     inquiries, proposals or offers from any Person, corporation, partnership or
     other  entity  or group (as such term is used in  Section  13(d)(3)  of the
     Exchange  Act)  other  than  Buyer  (a  "Third  Party"),  relating  to  any
     acquisition or purchase of all or a portion of the assets of, or any equity
     interest in, VSI or Seller;  or (ii) unless the Board has  determined  that
     such Third Party has made a Superior Takeover Proposal,  participate in any
     discussions or  negotiations  regarding,  or furnish to any Third Party any
     information with respect to, or otherwise

                                      41

<PAGE>



     cooperate  in any way with,  or assist or  participate  in,  facilitate  or
     encourage,  any effort or  attempt by any Third  Party to do or seek any of
     the  foregoing.  VSI and Seller  shall  promptly  notify  Buyer if any such
     proposal  or offer,  or any  inquiry or contact  with any Third  Party with
     respect  thereto,  is  made,  and  shall in any such  notice  set  forth in
     reasonable  detail  the  identity  of the  Third  Party  and the  terms and
     conditions  of such inquiry,  proposal or offer.  In the event that (a) the
     Closing  shall fail to occur as the result of VSI or Seller  violating  the
     terms of this Section 5.6 or (b) VSI or Seller shall have determined that a
     Superior  Takeover  Proposal  exists,  shall have  elected  to accept  such
     Superior Takeover Proposal and either the transaction  contemplated thereby
     is  consummated or VSI or Seller  terminates  this Agreement as a result of
     such election,  VSI and Seller shall  promptly,  but in no event later than
     one day after the first of such events shall occur,  pay Buyer an aggregate
     fee of  $2,000,000,  which amount shall be payable in same day funds,  plus
     all Expenses. A "Superior Takeover Proposal" means any bona fide (w) tender
     or exchange  offer;  (x) proposal for a merger to which VSI or Seller would
     be a party; (y) consolidation or other business  combination  involving VSI
     or Seller; or (z) any other arrangement to acquire, directly or indirectly,
     for consideration  consisting of cash, securities or a combination thereof,
     all of  the  common  stock  of VSI or  Seller  then  outstanding  or all or
     substantially  all of the  assets of VSI or Seller on terms  that the Board
     determines in its good faith reasonable judgment (after consultation with a
     financial advisor of nationally recognized reputation) to be more favorable
     to the  stockholders  of VSI than  the  transactions  contemplated  by this
     Agreement.

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

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

           5.9  Best  Efforts.  Each of VSI and  Seller  agrees  to use its best
     efforts to take, or cause to be taken, all actions,  and to do, or cause to
     be done, all things reasonably necessary, proper or advisable to consummate
     and make effective the transactions contemplated hereby, including, without
     limitation,  obtaining all authorizations,  consents, waivers and approvals
     as may be required in connection  with the  assignment of those  contracts,
     agreements, licenses,

                                      42

<PAGE>



     leases,  sales orders,  purchase orders and other commitments to be assumed
     by Buyer  pursuant  hereto;  provided that Seller shall not be obligated to
     make any  payments  in order to obtain any such  authorizations,  consents,
     waivers or approvals.

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

           5.11  Fees and Expenses.

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

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

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


                                      43

<PAGE>



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

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

           5.15  Dispute  Resolution.  Other than as provided  in Section  1.9.2
     hereof and notwithstanding any provision of this Agreement to the contrary,
     all disputes,  controversies  or claims  arising out of or relating to this
     Agreement  and the  transactions  contemplated  hereby shall be resolved by
     agreement among the parties,  or, if not so resolved within forty five (45)
     days  following  written  notice of dispute given by either party hereto to
     the  other,  and if  written  notice is given by either of the  parties  as
     provided  below and the matter is not  otherwise  resolved  by the  parties
     hereto,  by resort to arbitration in accordance  with Title 9 of the United
     States  Code  (the  United  States  Arbitration  Act)  and  the  Commercial
     Arbitration  Rules,  as  amended  from  time to time (the  "Rules")  by the
     American Arbitration  Association and the following  provisions;  provided,
     however,  that the provisions of this Section shall prevail in the event of
     any conflict  with such Rules.  Within thirty (30) days after the giving of
     notice by a party to the other parties of its desire to refer the matter in
     dispute  to  arbitration,  the  parties  agree  that  the  matter  shall be
     presented to a panel of three  arbitrators  at least one of whom shall have
     at least ten years of industry experience relating to the subject matter of
     the dispute. Such selection of arbitrators shall be made in accordance with
     the Rules. Any such  arbitration  proceeding shall be held at a location to
     be  determined by the  arbitrators.  Any  provisional  remedy that would be
     available from a court of law shall be available from the arbitrator to the
     parties to this Agreement  pending  arbitration.  The written decisions and
     conclusions  of a majority  of the  arbitration  panel with  respect to the
     matters  referred to them  pursuant  hereto shall be final and binding upon
     the parties to the dispute, and confirmation and enforcement thereof may be
     rendered thereon by any court having  jurisdiction  upon application of any
     person who is a party to the arbitration proceeding. The costs and expenses
     incurred in the course of such  arbitration  shall be borne by the party or
     parties   against  whose  favor  the  decisions  and   conclusions  of  the
     arbitration panel are rendered;  provided, however, that if the arbitration
     panel  determines  that its decisions are not rendered  wholly  against the
     favor of one party or parties or the other, the arbitration  panel shall be
     authorized to apportion such costs

                                      44

<PAGE>



     and  expenses  in the  manner  that it deems  fair and just in light of the
     merits of the dispute and its resolution.  The arbitration panel shall have
     no power or authority under this Agreement or otherwise to award or provide
     for the award of punitive or  consequential  damages  against any party. In
     any arbitration  relating to whether Buyer has "reasonably  concluded" (for
     purposes of Section  6.1.16) that there has been no material  breach of the
     warranties in Section 2.24, the burden of establishing reasonableness shall
     be on Buyer.

     6.    Conditions of Closing.

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

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

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

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

                 6.1.4  Seller and VSI shall have  executed  and  delivered  the
           Receivables Guaranty.

                 6.1.5 VSI shall have  delivered to Buyer a  Certificate  of the
           Secretary of State (or other authorized public official) of VSI's and
           Seller's  respective  jurisdiction of  incorporation  (and each other
           jurisdiction listed in Schedule 2.5 hereof) certifying as

                                      45

<PAGE>



           of a date  reasonably  close to the Closing Date that each of VSI and
           Seller has filed all required  reports,  paid all  required  fees and
           taxes,  and is, as of such date, in good  standing and  authorized to
           transact business as a domestic or foreign  corporation,  as the case
           may be.

                  6.1.6  Seller and VSI shall have  executed and  delivered  the
            Escrow Agreement.

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

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

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

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

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

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

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

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

                 6.1.13 No Proceeding  shall have been  instituted or threatened
           which  questions  the  validity  or  legality  of  the   transactions
           contemplated hereby or any governmental

                                      46

<PAGE>



           consent,  approval or authorization necessary for the consummation of
           the transactions of the transactions contemplated by this Agreement.

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

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

                 6.1.16 Buyer shall have  reasonably  concluded,  following  the
           Environmental  Due  Diligence  Review,  that  there  are no  material
           breaches in the warranties in Section 2.24; provided,  however,  that
           such conclusion shall not preclude the remedies of Buyer provided for
           herein. For purposes of this Section 6.1.16 only, "material breaches"
           shall be  defined  as those  matters,  which  in the  opinion  of the
           environmental  consultant  retained as provided in Section 5.5.2, are
           reasonably likely to cost in the aggregate in excess of $1,000,000 to
           remedy (excluding the cost of addressing any environmental  issues on
           Facilities that Buyer elects to exclude from the purchase pursuant to
           Section 5.5.2). If Buyer's consultant so concludes,  then Buyer shall
           promptly so inform VSI of the consultant's opinion. At such time, VSI
           may ask  Buyer  for the  information  and  data  upon  which  Buyer's
           consultant bases his or her opinion. If VSI does not agree that it is
           reasonably  likely  to cost in  excess of  $1,000,000  to remedy  the
           environmental  problems,  then VSI shall promptly inform Buyer of its
           belief.  If the parties cannot resolve this issue within fifteen days
           after VSI so informs  Buyer,  then the matter  shall be  submitted to
           arbitration in accordance  with Section 5.15 and the Closing shall be
           delayed   pending  the  resolution  of  such   arbitration.   If  the
           transaction closes, then VSI's and Seller's obligation to perform any
           Environmental  Remediation  shall be governed by the  provisions  and
           standards set forth in Section 4.5

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

                 6.2.1  The  holders  of shares of the  issued  and  outstanding
           capital  stock of VSI  shall  have duly  adopted  and  approved  this
           Agreement and all transactions contemplated

                                      47

<PAGE>



           hereby in accordance  with the  requirements  of Delaware law and the
           Certificate of  Incorporation  and Bylaws,  as amended to the date of
           such adoption, of VSI.

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

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

                 6.2.4  Buyer  shall  have  executed  and  delivered  the Escrow
           Agreement.

                 6.2.5 Buyer shall have effected payment of the Escrow Fund.

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

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

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

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

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

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

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

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<PAGE>



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

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

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

     7.    Termination and Abandonment.

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

                 7.1.1 by the mutual consent of VSI, Seller and Buyer;

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

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

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

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

                 7.1.6 by Buyer or by VSI and  Seller  at any time if there  has
           been a material breach of any  representation or warranty made by the
           other party herein or in any

                                      49

<PAGE>



           certificate or other document  delivered  pursuant hereto or if there
           has been any  failure by the other  party to perform in all  material
           respects all  obligations or to comply with all covenants on its part
           to be performed hereunder; or

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

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

           7.2  Procedure  Upon and Effect of  Termination.  In the event of any
     termination and abandonment pursuant to Section 7.1 hereof,  written notice
     thereof  shall  forthwith be given to the other party and the  transactions
     contemplated  hereby shall  thereupon be terminated and abandoned,  without
     further  action by Buyer or by VSI and Seller (except for the provisions of
     Sections 5.6, 5.11 and 5.12 hereof), and there shall be no liability on the
     part of either VSI, Seller or Buyer or their respective officers, directors
     or  stockholders,  except for the provisions of Sections 5.6, 5.11 and 5.12
     hereof or except for the material breach of any representation, warranty or
     covenant  contained  herein  that is within the  reasonable  control of the
     party in breach.

     8.    Miscellaneous.

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


                                      50

<PAGE>



           If to Buyer:

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

           with a copy to:

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

           If to Seller or VSI:

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

                 with a copy to:

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

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

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


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<PAGE>



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

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

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

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


                                      52

<PAGE>



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

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

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

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

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

                                      53

<PAGE>



     shall  effect a release  of Buyer or its  successors  or  assigns  from any
     liabilities or obligations hereunder.

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

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

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

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

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

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

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

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

                        *     *     *     *     *     *

                                      54

<PAGE>



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


                                   SELLER:

                                   VALLEY SYSTEMS OF OHIO, INC.


                                   By: /s/ Ed Strickland                        
                                         Ed Strickland
                                         President and
                                         Chief Executive Officer

                                   VSI:

                                   VALLEY SYSTEMS, INC.


                                   By: /s/ Ed Strickland                        
                                         Ed Strickland
                                         President and
                                         Chief Executive Officer




                                   BUYER:

                       HYDROCHEM INDUSTRIAL SERVICES, INC.


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

                                      55

<PAGE>



                                   SCHEDULES





SCHEDULE                                TITLE
1.1.1.................................. Fixed Assets
1.3A................................... Assumed Liabilities
1.3B................................... Material Contacts, Leases, etc.
2.2.................................... Required Consents, Approvals, etc.
2.4.................................... Affiliated Entities, etc.
2.5.................................... Jurisdictions
2.7.................................... Officers, Directors, Banks, etc.
2.9.................................... Certain Liabilities
2.12A.................................. Owned Realty
2.12B.................................. Leases, etc.
2.14................................... Encumbrances
2.15................................... Insurance Matters
2.16................................... Intellectual Property
2.18................................... Employee Matters
2.19................................... Other Contracts
2.21................................... Litigation
2.24................................... Environmental Matters
2.25................................... Customers/Suppliers
3.2.................................... Buyer's Required Consent

======================================= ===============================


                                      56

<PAGE>



                                   EXHIBITS



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

=================================  =======================================


                                      57

<PAGE>



                                  EXHIBIT "A"

                           BILL OF SALE, ASSIGNMENT
                                     AND
                             ASSUMPTION AGREEMENT


     This Bill of Sale, Assignment and Assumption Agreement, dated , 1998, is by
and among Valley Systems,  Inc., a Delaware  corporation,  and Valley Systems of
Ohio,  Inc., an Ohio  corporation  (collectively,  the  "Grantor") and HydroChem
Industrial Services, Inc., a Delaware corporation  ("Grantee").  All capitalized
terms  not  defined  herein  shall  have the  meanings  assigned  to them in the
Purchase Agreement (defined below).

     Grantor,  for the consideration and upon the terms and conditions set forth
in that  certain  Amended and Restated  Asset  Purchase  Agreement,  dated as of
September 8, 1998, by and among Grantee,  as buyer, and Grantor, as seller, (the
"Purchase  Agreement"),  does by these presents hereby grant,  convey,  bargain,
sell, assign, set over, transfer, and deliver unto Grantee, its successors,  and
assigns all right, title, and interest in and to the Assets.

     TO  HAVE  AND  TO  HOLD  all  and  singular  the  Assets  hereby  conveyed,
transferred, and assigned unto the Grantee, its successors, and assigns forever.

     Grantor  hereby  covenants and agrees with  Grantee,  its  successors,  and
assigns to execute and  deliver to Grantee,  its  successors,  and assigns  such
other and further  instruments of transfer,  assignment,  and conveyance and all
such notices,  releases,  acquittances,  and other documents and to use its best
efforts to secure all such  consents  and  waivers as may be  necessary  to more
fully transfer,  assign,  and convey to and vest in Grantee all and singular the
Assets  hereby  transferred,  assigned,  and  conveyed  or  intended  so to  be;
provided,  however,  Grantor  shall be under no  obligation to make any payments
(except payments which are not accrued on the Closing Balance Sheet with respect
to periods  prior to the Closing  Date),  incur any  material (as defined in the
Purchase  Agreement)  cost or expense,  or undertake any material (as defined in
the Purchase Agreement) obligation to obtain any of the foregoing.

     In consideration of the conveyance of the Assets contained herein, Grantee,
for the benefit of Grantor, its successors and assigns, and obligees thereunder,
hereby expressly assumes and agrees to perform, pay, and discharge those certain
liabilities  and obligations  assumed by Grantee  pursuant to Section 1.3 of the
Purchase Agreement.

     This  instrument  shall be governed by and construed in accordance with the
laws of the  State of  Delaware  exclusive  of the  conflict  of laws  provision
thereof.


                                    A - 1

<PAGE>



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

     This instrument and the transfer,  assignment,  conveyance,  and assumption
provided for in this  instrument  shall be  effective as of 10:00 a.m.,  Dallas,
Texas, time on the date first written above.

     IN WITNESS  WHEREOF,  the parties hereto have caused this  instrument to be
executed on the date first above written.


VALLEY SYSTEMS, INC.                           HYDROCHEM INDUSTRIAL
                                               SERVICES, INC.


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


VALLEY SYSTEMS OF OHIO, INC.



By:                          
     Ed Strickland
     President and Chief Executive
     Officer

                                    A - 2

<PAGE>



                                 EXHIBIT "B"

                              GUARANTY AGREEMENT

     This Guaranty Agreement is made this _______ day of __________, 1998, among
Valley Systems, Inc., a Delaware corporation,  and Valley Systems of Ohio, Inc.,
(collectively,  "Seller") and HydroChem  Industrial  Services,  Inc., a Delaware
corporation ("Buyer").

                                   Recitals

a.   Pursuant to an Amended and Restated Asset Purchase  Agreement,  dated as of
     September 8, 1998 (the "Purchase  Agreement")  (all  capitalized  terms not
     defined  herein  shall have the  meanings  assigned to them in the Purchase
     Agreement), Seller has sold, transferred, and assigned to Buyer the Assets.

b.   Such  assets  include the  accounts  receivable  set forth in the  schedule
     attached  hereto as Annex "A"  (which  Annex "A" shall be updated by Seller
     within 45 days of the date  hereof in  accordance  with  Section 1.9 of the
     Purchase Agreement) ("Accounts").

c.   Pursuant to Section 5.1 of the  Purchase  Agreement,  Seller is required to
     guarantee the payment of such Accounts.

d.   If such Accounts are not paid to Buyer by the respective debtors within 150
     days  from the date  hereof  (such  unpaid  amounts  less the  reserve  for
     doubtful  accounts not to exceed  $125,000  being referred to herein as the
     "Unpaid  Accounts"),  Seller has agreed to pay such Unpaid  Accounts on the
     terms herein.

     NOW, THEREFORE, Seller and Buyer hereby agree as follows:

     For good and valuable  consideration,  the receipt and sufficiency of which
is hereby acknowledged,  Seller, as surety,  hereby  unconditionally  guarantees
that all indebtedness  represented by the Unpaid Accounts as of the Closing Date
will be received by Buyer.  Within 160 days  following the Closing  Date,  Buyer
shall prepare and deliver to Seller an accounting of collections on the Accounts
on or before 150 days following the Closing Date,  certified as true and correct
by the Chief Financial  Officer of Buyer.  Seller shall within ten (10) business
days following receipt from Buyer of such accounting giving notice of any Unpaid
Accounts,  cause the Escrow  Agent to make payment from the Escrow Fund to Buyer
of an  amount  in cash  equal to the  Unpaid  Accounts,  whereupon  Buyer  shall
promptly assign or cause to be assigned to Seller all rights, claims, actions or
causes of action which Buyer may have  relating to the Unpaid  Accounts.  In the
event that the amount  received by Buyer for such Accounts shall be in excess of
the amount of the Accounts (less the reserve for doubtful accounts not to exceed
$125,000),  the  amount of such  excess  will be paid by Buyer to  Seller  (from
Buyer's own funds and not from the Escrow  Fund)  within such ten  business  day
period.  During  the 150 days  following  the  Closing  Date,  Buyer  shall  use
reasonable and customary efforts to collect

                                    B - 1

<PAGE>



such  Accounts  (but shall not be  obligated  to  initiate  litigation)  and any
amounts  received by Buyer in respect of such Accounts shall be applied first to
the oldest such  Account of the  respective  account  debtor  unless the account
debtor  specifically  directs  otherwise in writing  without any direction  from
Buyer.

     The foregoing guaranty is an absolute, present, and continuing guarantee of
payment (and not of collectability).

     Seller hereby waives notice of the acceptance of the foregoing  guaranty by
Buyer and of Buyer's  intention to act in reliance  thereon.  No act or omission
(other than as specified in Section 5.1 of the Purchase  Agreement)  on the part
of Buyer of any kind shall affect or impair the  foregoing  guaranty;  provided,
however,  Seller shall have no obligation to pay any Unpaid Accounts until Buyer
has delivered the written notice herein provided.

     No waiver of any breach of any term of the Guaranty shall be construed as a
waiver of any subsequent  breach of such terms or of any other terms of the same
or different nature.

     The Guaranty is being  executed and delivered  pursuant to the terms of the
Purchase Agreement and is subject to all of the terms,  covenants and agreements
thereof.

                        *     *     *     *     *     *

                                    B - 2

<PAGE>



     IN WITNESS  WHEREOF,  the parties have caused this Agreement to be executed
by their respective duly authorized officers as of the date first written above.


                                   VALLEY SYSTEMS, INC.



                                   By:                                        
                                         Ed Strickland
                                         President and Chief Executive Officer


                                   VALLEY SYSTEMS OF OHIO, INC.



                                   By:                                        
                                         Ed Strickland
                                         President and Chief Executive Officer


                                   HYDROCHEM INDUSTRIAL SERVICES, INC.



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


                                    B - 3

<PAGE>



                                    ANNEX A


                          List of Accounts Receivable



                                    B - 4

<PAGE>



                                 EXHIBIT "C"

                               ESCROW AGREEMENT

     This Escrow Agreement, dated as of ____________, 1998 (the "Closing Date"),
among HydroChem  Industrial Services,  Inc., a Delaware  corporation  ("Buyer"),
Valley Systems, Inc., a Delaware corporation,  and Valley Systems of Ohio, Inc.,
an Ohio  corporation  (collectively,  "Seller"),  and Bank One  Texas,  N.A.,  a
national banking association, as escrow agent ("Escrow Agent").

     This is the Escrow Agreement  referred to in the Amended and Restated Asset
Purchase Agreement, dated as of September 8, 1998, by and among Buyer and Seller
(the "Purchase  Agreement").  Capitalized  terms used in this agreement  without
definition  shall have the  respective  meanings  given to them in the  Purchase
Agreement.

     The parties, intending to be legally bound, hereby agree as follows:

1.   ESTABLISHMENT OF ESCROW

           (a) Buyer is depositing with Escrow Agent the amount of $4,000,000 in
     immediately  available  funds (as increased by any earnings  thereon and as
     reduced by any disbursements,  amounts withdrawn under Section 5(j) hereof,
     or losses on  investments,  the "Escrow Fund").  Escrow Agent  acknowledges
     receipt thereof.

           (b) Escrow  Agent  hereby  agrees to act as escrow agent and to hold,
     safeguard,  and  disburse  the  Escrow  Fund  pursuant  to  the  terms  and
     conditions hereof.

2.   INVESTMENT OF FUNDS

     Except as Buyer and Seller may from time to time  jointly  instruct  Escrow
Agent in writing,  the Escrow Fund shall be invested  from time to time,  to the
extent possible,  in United States Treasury Bills having a remaining maturity of
90 days  or less  and  repurchase  obligations  secured  by such  United  States
Treasury  Bills,  with any remainder  being  deposited and  maintained in demand
deposits with Escrow Agent, until disbursement of the entire Escrow Fund. Escrow
Agent is authorized to liquidate in accordance with its customary procedures any
portion of the Escrow Fund  consisting  of  investments  to provide for payments
required to be made under this Agreement.

3.   CLAIMS

           (a) From time to time on or before the third  anniversary of the date
     of this Agreement,  Buyer may give notice (a "Notice") to Seller and Escrow
     Agent  specifying in reasonable  detail the nature and dollar amount of any
     Claim it may have under the terms of the Purchase Agreement; Buyer may make
     more than one claim  with  respect  to any  underlying  state of facts.  If
     Seller gives notice to Buyer and Escrow Agent disputing any Claim (a

                                    C - 1

<PAGE>



     "Counter Notice") within ten (10) business days following receipt by Escrow
     Agent of the Notice  regarding such Claim,  such Claim shall be resolved as
     provided in Section 3(b) hereof. If no Counter Notice is received by Escrow
     Agent  within  such ten  business  day  period,  then the dollar  amount of
     damages  claimed  by  Buyer  as set  forth in its  Notice  shall be  deemed
     established for purposes of this Agreement and the Purchase  Agreement and,
     at the end of such ten business day period, Escrow Agent shall pay to Buyer
     the dollar  amount  claimed in the Notice  from (and only to the extent of)
     the Escrow Fund.  Escrow Agent shall not inquire into or consider whether a
     Claim complies with the requirements of the Purchase Agreement.

           (b) If a Counter  Notice is given  with  respect  to a claim,  Escrow
     Agent shall make payment with respect  thereto only in accordance  with (i)
     joint   written   instructions   of  Buyer  and  Seller  or  (ii)  a  final
     non-appealable order of a court of competent jurisdiction.  Any court order
     shall be accompanied by a legal opinion by counsel for the presenting party
     satisfactory  to the Escrow Agent to the effect that the order is final and
     non-appealable.  Escrow Agent shall act on such court order without further
     question.

4.   RELEASE OF ESCROW

           (a)(i)Provided  no dispute or disputes in excess of an  aggregate  of
     $3,000,000  (or  $2,000,000,  if that part of the  Escrow  Fund  subject to
     Section  4(b) below has been  released to  Seller),  less the amount of any
     payments  theretofore made in satisfaction of Seller's  indemnification and
     guaranty  obligations,  exist  as to any  Claim  or  Claims  by  any  Buyer
     Indemnitee  against  all or a  portion  of the  Escrow  Fund  on the  first
     anniversary of the Closing Date,  then  $1,000,000,  less the amount of any
     payments  in   satisfaction  of  Seller's   indemnification   and  guaranty
     obligations, will be released to Seller on the first business day following
     such first anniversary of the Closing Date. To the extent such a dispute or
     disputes do exist as to a Claim or Claims on the first  anniversary  of the
     Closing  Date, an amount equal to the amount of such Claim or Claims (or if
     the amount of said Claims cannot be  quantified,  then Buyer's  reasonable,
     good faith estimate of the amount of the Claims) will be withheld from such
     partial  release  of the  Escrow  Fund  and  will  continue  to be  held in
     accordance with the provisions of the Escrow  Agreement until such claim or
     claims have been fully resolved and the balance of the partial release will
     be paid to Seller.

           (ii)  Provided no dispute or disputes  in excess of an  aggregate  of
     $2,000,000  (or  $1,000,000,  if that part of the  Escrow  Fund  subject to
     Section  4(b) below has been  released to  Seller),  less the amount of any
     payments  theretofore made in satisfaction of Seller's  indemnification and
     guaranty  obligations,  exist  as to any  Claim  or  Claims  by  any  Buyer
     Indemnitee  against  all or a  portion  of the  Escrow  Fund on the  second
     anniversary of the Closing Date,  then an additional  $1,000,000,  less the
     amount  of any  payments  theretofore  made  in  satisfaction  of  Seller's
     indemnification and guaranty obligations, will be released to Seller on the
     first business day following  such second  anniversary of the Closing Date.
     To the extent  such a dispute or  disputes do exist as to a Claim or Claims
     on the second  anniversary  of the  Closing  Date,  an amount  equal to the
     amount of such Claim or Claims (or if the precise amount

                                    C - 2

<PAGE>



     of said Claims cannot be quantified,  then Buyer's  reasonable,  good faith
     estimate of the amount of the Claims)  will be withheld  from such  partial
     release of the Escrow Fund and will continue to be held in accordance  with
     the provisions of the Escrow Agreement until such claim or claims have been
     fully  resolved  and the  balance of the  partial  release  will be paid to
     Seller.

           (iii) Provided no dispute or disputes exist as to any Claim or Claims
     by any Buyer Indemnitee  against all or a portion of the Escrow Fund on the
     third  anniversary  of the Closing  Date,  then the remainder of the Escrow
     Fund will be released to Seller on the first  business day  following  such
     third  anniversary  of the  Closing  Date and the  Escrow  Agreement  shall
     thereupon  terminate.  To the extent a dispute or disputes do exist as to a
     Claim or Claims on the third  anniversary  of the Closing  Date,  an amount
     equal to the  amount  of such  Claim or  Claims  (or if the  amount of said
     Claims cannot be quantified,  then Buyer's reasonable,  good faith estimate
     of the amount of the Claims) will be withheld from such partial  release of
     the  Escrow  Fund  and  will  continue  to be held in  accordance  with the
     provisions  of the Escrow  Agreement  until such claim or claims  have been
     fully  resolved  and the  balance of the  partial  release  will be paid to
     Seller.

           (b) Upon  delivery to Buyer of Seller's  certificate  pursuant to the
     terms  of  Section  5.3.6 of the  Purchase  Agreement  certifying  that the
     Environmental   Remediation  has  been   completed,   an  amount  equal  to
     $1,000,000,  less the sum of (i) the aggregate  cost of such  Environmental
     Remediation  (including the Estimated Additional Remediation Cost) and (ii)
     the aggregate amount of other Losses of all other Buyer Indemnitees subject
     to  indemnification  pursuant to Section 4.1 of the  Purchase  Agreement in
     excess of  $3,000,000,  shall  forthwith  be  released to Seller out of the
     Escrow  Fund.  In the event  that such  Environmental  Remediation  was not
     completed  at the first  anniversary  of the  Closing  Date,  Seller  shall
     deliver to Buyer a certificate of completion  thereof upon such  completion
     containing  a  statement  of  the  aggregate  cost  of  the   Environmental
     Remediation  effected  following  such first  anniversary,  and Buyer shall
     immediately  release to Seller out of the Escrow Fund the  amount,  if any,
     which  would  have been  released  to  Seller  under  Section  5.3.6 of the
     Purchase  Agreement  following such first anniversary had such actual cost,
     rather than the Estimated  Additional  Remediation  Cost, been used in such
     calculation.

5.   DUTIES OF ESCROW AGENT

           (a) Escrow  Agent shall not be under any duty to give the Escrow Fund
     held by it  hereunder  any  greater  degree  of care  than it gives its own
     similar  property  and  shall not be  required  to  invest  any funds  held
     hereunder  except as  directed  in this  Agreement.  Uninvested  funds held
     hereunder shall not earn or accrue interest.

           (b)  Escrow  Agent  shall  not be  liable,  except  for its own gross
     negligence or willful  misconduct  and, except with respect to claims based
     upon such gross  negligence  or willful  misconduct  that are  successfully
     asserted  against the Escrow Agent,  the other parties hereto shall jointly
     and  severally  indemnify  and hold  harmless  the  Escrow  Agent  (and any
     successor

                                    C - 3

<PAGE>



     to the Escrow  Agent) from and  against  any and all  losses,  liabilities,
     claims, actions, damages and expenses, including reasonable attorneys' fees
     and  disbursements,  arising out of and in connection  with this Agreement.
     Without limiting the foregoing, Escrow Agent shall in no event be liable in
     connection  with its  investment  or  reinvestment  of any cash  held by it
     hereunder in good faith,  in accordance  with the terms hereof,  including,
     without  limitation,  any liability for any delays (not  resulting from its
     gross  negligence or willful  misconduct) in the investment or reinvestment
     of the Escrow Fund, or any loss of interest incident to any such delays.

           (c) Escrow Agent shall be entitled to rely upon any order,  judgment,
     certification,  demand, notice, instrument or other writing delivered to it
     hereunder  without  being  required to determine  the  authenticity  or the
     correctness  of any fact stated therein or the propriety or validity of the
     service  thereof.  Escrow Agent may act in reliance upon any  instrument or
     signature  believed  by it to be  genuine  and may  assume  that the person
     purporting  to give receipt or advice or make any  statement or execute any
     document in connection with the provisions  hereof has been duly authorized
     to do so.  Escrow  Agent  may  conclusively  presume  that the  undersigned
     representative  of any party hereto which is an entity other than a natural
     person has full power and  authority to instruct  Escrow Agent on behalf of
     that party  unless  written  notice to the  contrary is delivered to Escrow
     Agent.

           (d) Escrow  Agent may act  pursuant  to the  advice of  counsel  with
     respect to any matter  relating to this  Agreement  and shall not be liable
     for any action taken or omitted by it in good faith in accordance with such
     advice.

           (e)  Escrow  Agent  does not have any  interest  in the  Escrow  Fund
     deposited  hereunder  but is serving as escrow  holder only and having only
     possession  thereof.  Any payments of income from this Escrow Fund shall be
     subject to  withholding  regulations  then in force with  respect to United
     States taxes. The parties hereto will provide Escrow Agent with appropriate
     Internal   Revenue  Service  Forms  W-9  for  tax   identification   number
     certification, or non-resident alien certifications.  This Section 5(e) and
     Section 5(b) hereof shall survive  notwithstanding  any termination of this
     Agreement or the resignation of Escrow Agent.

           (f) Escrow Agent makes no representation  as to the validity,  value,
     genuineness,  or the  collectability  of any security or other  document or
     instrument held by or delivered to it.

           (g) Escrow  Agent  shall not be called upon to advise any party as to
     the wisdom in selling or retaining or taking or refraining  from any action
     with respect to any securities or other property deposited hereunder.

           (h) Escrow Agent (and any  successor to the Escrow  Agent) may at any
     time resign as such by delivering  the Escrow Fund to any successor  Escrow
     Agent jointly designated by the other parties hereto in writing,  or to any
     court of competent jurisdiction, whereupon Escrow Agent shall be discharged
     of and from any and all further obligations arising in

                                    C - 4

<PAGE>



     connection with this  Agreement.  The resignation of Escrow Agent will take
     effect on the earlier of (a) the  appointment  of a successor  escrow agent
     (including  a court of competent  jurisdiction)  or (b) the day which is 30
     days after the date of delivery of its written notice of resignation to the
     other  parties  hereto.  If at that time  Escrow  Agent has not  received a
     designation of a successor Escrow Agent, Escrow Agent's sole responsibility
     after  that time  shall be to retain and  safeguard  the Escrow  Fund until
     receipt of a  designation  of  successor  Escrow  Agent or a joint  written
     disposition   instruction   by  the  other   parties   hereto  or  a  final
     non-appealable order of a court of competent jurisdiction.

           (i) In the event of any disagreement between the other parties hereto
     resulting in adverse  claims or demands being made in  connection  with the
     Escrow Fund or in the event that Escrow Agent is in doubt as to what action
     it should  take  hereunder,  Escrow  Agent  shall be entitled to retain the
     Escrow  Fund  until   Escrow   Agent  shall  have   received  (i)  a  final
     non-appealable  order  of  a  court  of  competent  jurisdiction  directing
     delivery  of the Escrow  Fund or (ii) a written  agreement  executed by the
     other parties hereto directing  delivery of the Escrow Fund, in which event
     Escrow Agent shall  disburse the Escrow Fund in accordance  with such order
     or agreement.  Any court order shall be  accompanied  by a legal opinion by
     counsel for the presenting party satisfactory to Escrow Agent to the effect
     that the order is final and non-appealable.  Escrow Agent shall act on such
     court order and legal opinion without further question.

           (j) Buyer and Seller shall pay Escrow Agent  compensation (as payment
     in full) for the services to be rendered by Escrow  Agent  hereunder in the
     amount  of  $_________  at the  time of  execution  of this  Agreement  and
     $_____________  annually thereafter and agree to reimburse Escrow Agent for
     all reasonable  expenses,  disbursements  and advances  incurred or made by
     Escrow Agent in performance of its duties hereunder  (including  reasonable
     fees, expenses and disbursements of its counsel). Any such compensation and
     reimbursement  to which Escrow  Agent is entitled  shall be evenly split by
     Buyer and Seller.

           (k) No printed or other  matter in any language  (including,  without
     limitation,  prospectuses,  notices, reports and promotional material) that
     mentions  Escrow  Agent's name or the rights,  powers,  or duties of Escrow
     Agent  shall be  issued  by the other  parties  hereto or on such  parties'
     behalf  unless  Escrow  Agent shall first have given its  specific  written
     consent thereto.

           (l)  The  other  parties  hereto  authorize  Escrow  Agent,  for  any
     securities held hereunder, to use the services of any United States central
     securities depository it reasonably deems appropriate,  including,  without
     limitation, the Depositary Trust Company and the Federal Reserve Book Entry
     System.

6.   LIMITED RESPONSIBILITY


                                    C - 5

<PAGE>



     This  Agreement  expressly  sets forth all the duties of Escrow  Agent with
respect  to  any  and  all  matters  pertinent  hereto.  No  implied  duties  or
obligations shall be read into this Agreement against Escrow Agent. Escrow Agent
shall not be bound by the  provisions of any  agreement  among the other parties
hereto except this Agreement.

7.   OWNERSHIP FOR TAX PURPOSES

     Seller  agrees  that,  for  purposes  of federal  and other  taxes based on
income,  Seller will be treated as the owner of the Escrow Fund, and that Seller
will report all income,  if any, that is earned on, or derived from,  the Escrow
Fund as its income in the taxable year or years in which such income is properly
includible and pay any taxes attributable thereto.

8.   NOTICES

     All  notices,   consents,  waivers  and  other  communications  under  this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written  confirmation of receipt),  or (c) when received by the addressee,
if  sent  by  a  nationally   recognized  overnight  delivery  service  (receipt
requested), in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other  addresses and  telecopier  numbers as a party may
designate by notice to the other parties):

     Seller:

     Valley Systems, Inc.
     Valley Systems of Ohio, Inc.
     11580 Lafayette Drive, NW
     Canal Fulton, Ohio 44614
     Attention: Chief Executive Officer
     Facsimile No.: (330) 854-3444

     with a copy to:

     Arnall Golden & Gregory, LLP
     2800 One Atlantic Center
     1201 West Peachtree Street
     Atlanta, Georgia 30309
     Attention: Jonathan Golden
     Facsimile No.: (404) 873-8701


                                    C - 6

<PAGE>



     Buyer:

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

     with a copy to:

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


     Escrow Agent:

     Bank One Texas, N.A.
     Attention:
     Facsimile No.:

     with a copy to:

     Attention:
     Facsimile No.:

9.   JURISDICTION; SERVICE OF PROCESS

     Any action or  proceeding  seeking to enforce any provision of, or based on
any right  arising  out of,  this  Agreement  may be brought  against any of the
parties in the courts of the State of Texas,  County of Dallas, or, if it has or
can acquire  jurisdiction,  in the United States District Court for the Northern
District of Texas,  and each of the parties consents to the jurisdiction of such
courts  (and  of the  appropriate  appellate  courts)  in  any  such  action  or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding  referred to in the preceding  sentence may be served on any party
anywhere in the world.

10.  COUNTERPARTS


                                    C - 7

<PAGE>



     This Agreement may be executed in one or more  counterparts,  each of which
will be deemed to be an original and all of which, when taken together,  will be
deemed to constitute one and the same.

11.  SECTION HEADINGS

     The headings of sections in this  Agreement  are  provided for  convenience
only and will not affect its construction or interpretation.

12.  WAIVER

     The rights and remedies of the parties to this Agreement are cumulative and
not  alternative.  Neither the failure nor any delay by any party in  exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right,  power,  or privilege,
and no single or partial  exercise of any such right,  power,  or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise  of any  other  right,  power,  or  privilege.  To the  maximum  extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents  referred to in this  Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing  signed by the other  party;  (b) no waiver that may be given by a party
will be applicable  except in the specific  instance for which it is given;  and
(c) no notice  to or  demand  on one party  will be deemed to be a waiver of any
obligation  of such  party or of the right of the party  giving  such  notice or
demand to take  further  action  without  notice or demand as  provided  in this
Agreement or the documents referred to in this Agreement.

13.  EXCLUSIVE AGREEMENT AND MODIFICATION

     This  Agreement  supersedes  all prior  agreements  among the parties  with
respect to its subject matter and constitutes (along with the documents referred
to in this  Agreement)  a complete and  exclusive  statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended  except by a written  agreement  executed  by the Buyer,  the
Seller and the Escrow Agent.

14.  GOVERNING LAW

     This Agreement shall be governed by the laws of the State of Texas, without
regard to conflicts of law principles.

                        *     *     *     *     *     *

                                    C - 8

<PAGE>



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


HYDROCHEM INDUSTRIAL                     VALLEY SYSTEMS, INC.
SERVICES, INC.


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


     BANK ONE TEXAS, N.A.                VALLEY SYSTEMS OF OHIO, INC.


By:                                      By:                                  
                                               Ed Strickland
Name:                                          President and Chief Executive
                                                Officer
Title:                             

                                    C - 9

<PAGE>



                                 EXHIBIT "D"

                               SELLER'S OPINION


Buyer shall have received an opinion of Arnall  Golden & Gregory,  LLP dated the
Closing Date, in form and substance  satisfactory  to Buyer and its counsel,  to
the effect that:

           (i) VSI is a corporation  validly existing and in good standing under
     the laws of the  State of  Delaware  and  Seller is a  corporation  validly
     existing and in good standing under the laws of the State of Ohio.  Each of
     VSI and Seller has the corporate power to own its properties and assets and
     to carry on its business as now being conducted.  Each of VSI and Seller is
     duly  qualified  as a foreign  corporation  and is in good  standing in all
     jurisdictions  wherein the  ownership of the Assets or the operation of its
     business  prior  to  the  Closing   necessitated  same,  other  than  those
     jurisdictions  wherein the  failure to so qualify  will not have a material
     adverse effect on VSI or Seller, respectively.

           (ii) The  execution,  delivery,  and  performance of the Agreement by
     each of VSI and Seller have been duly authorized by all necessary corporate
     action on the part of each of VSI and Seller.  The  Agreement has been duly
     executed and  delivered by each of VSI and Seller and  constitutes a legal,
     valid and  binding  obligation  of each of VSI and  Seller  enforceable  in
     accordance with its terms, except as limited by bankruptcy, reorganization,
     insolvency,  moratorium  or  similar  laws  affecting  the  enforcement  of
     creditor's  rights  generally and except that the availability of equitable
     remedies is subject to judicial discretion.

           (iii) Consummation of the transactions contemplated by this Agreement
     will not violate or result in a breach of or constitute a default under the
     Articles or  Certificate  of  Incorporation  or the Bylaws of either VSI or
     Seller or under any material  agreement  actually  known to such counsel to
     which VSI or Seller is a party or to which any of the Assets are subject.

           (iv) The bills of sale and other  conveyances  executed and delivered
     by each of VSI and Seller at the Closing are valid in accordance with their
     terms and are  effective  to transfer  and convey to Buyer all of VSI's and
     Seller's respective interests in the Assets.

           (v) Such  counsel does not have actual  knowledge of any  litigation,
     proceeding or governmental investigation pending against or relating to the
     transactions   contemplated  by  this  Agreement  or  of  any  existing  or
     threatened claims against VSI or Seller.

           (vi) Except for such  consents as have been  obtained,  to the actual
     knowledge of such counsel, no authorizations,  consents or approvals of any
     third party or  governmental  authority are necessary in order for the sale
     and conveyance of any of the Assets to Buyer to be valid and effective.

                                    D - 1

<PAGE>



     The letter  containing  the  opinions  set forth  above will  contain  such
assumptions,  qualifications  and  limitations as Arnall Golden & Gregory,  LLP,
deems  necessary or appropriate  and as are  reasonably  acceptable to Buyer and
Buyer's counsel. All of the opinions will be limited to the laws of the State of
Georgia, the General Corporate Law of the State of Delaware.  No opinion will be
given on the laws of the State of Texas.  No  opinion  will be given on title to
the Assets.  Arnall Golden & Gregory, LLP may provide an opinion of Ohio counsel
as to matters involving Ohio General Corporation Law.

                                    D - 2

<PAGE>


                                 EXHIBIT "E"

                               BUYER'S OPINION


Seller  shall have  received  an opinion of Haynes and Boone,  LLP,  in form and
substance satisfactory to Seller and its counsel, to the effect that:

           (i) Buyer is a corporation  validly  existing in good standing  under
     the  laws of the  State  of  Delaware.  Buyer  has the  corporate  power to
     purchase and own the Assets and pay,  perform and discharge the liabilities
     assumed by Buyer pursuant to this  Agreement.  Buyer is duly qualified as a
     foreign  corporation and is in good standing in all  jurisdictions  wherein
     the  ownership of its assets and the conduct of its  business  necessitates
     same, other than those jurisdictions wherein the failure to so qualify will
     not have a material adverse effect on Buyer.

           (ii) The execution,  delivery,  and  performance of this Agreement by
     Buyer have been authorized by all necessary corporate action of Buyer. This
     Agreement  has been and will be at the Closing duly  executed and delivered
     by Buyer and constitutes a legal,  valid,  and binding  obligation of Buyer
     enforceable in accordance with its terms,  except as limited by bankruptcy,
     reorganization,  insolvency,  moratorium,  or similar  laws  affecting  the
     enforcement of creditor's rights generally and except that the availability
     of equitable remedies is subject to judicial discretion.

           (iii) Consummation of the transactions contemplated by this Agreement
     will not violate or result in a breach of or constitute a default under the
     Certificate of  Incorporation  or the Bylaws of Buyer or under any material
     agreement actually known to such counsel to which Buyer is a party.

           (iv) Except for such  consents as have been  obtained,  to the actual
     knowledge of such counsel, no authorizations,  consents or approvals of any
     Governmental  Body or other third party are necessary in order for the sale
     and conveyance of any of the Assets to Buyer to be valid and effective.

     The letter  containing  the  opinions  set forth  above will  contain  such
assumptions,  qualifications  and  limitations  as Haynes and Boone,  LLP, deems
necessary or  appropriate  and as are reasonably  acceptable to Seller,  VSI and
their  counsel.  All of the opinions will be limited to the laws of the State of
Texas and the General Corporate Law of the State of Delaware.

                                    E - 1