<PAGE>

                                                                     EXHIBIT 2.1

                                                                  Execution Copy



                         AGREEMENT AND PLAN OF MERGER

                         DATED AS OF AUGUST 11, 2000,

                                     among

                PREMIER CONSTRUCTION PRODUCTS STATUTORY TRUST,

                PREMIER CONSTRUCTION PRODUCTS ACQUISITION CORP.

                                      and

                          REPUBLIC GROUP INCORPORATED



<PAGE>

                         AGREEMENT AND PLAN OF MERGER

     This AGREEMENT AND PLAN OF MERGER, dated as of August 11, 2000, is among
PREMIER CONSTRUCTION PRODUCTS STATUTORY TRUST, a statutory trust ("the Trust"),
PREMIER CONSTRUCTION PRODUCTS ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of the Trust ("Acquisition Sub"), and REPUBLIC GROUP
INCORPORATED, a Delaware corporation (the "Company").

                                   RECITALS:

     WHEREAS, the trustees of the Trust and the Boards of Directors of
Acquisition Sub and the Company have approved the merger (the "Merger") of
Acquisition Sub with and into the Company upon the terms and subject to the
conditions set forth herein, whereby each issued and outstanding share of common
stock, par value $1.00 per share (other than shares owned by the Company and
other than Dissenting Shares (as defined in Section 2.1(d)) and the associated
Right (as defined herein) ("Company Common Stock"; shares of Company Common
Stock being hereinafter collectively referred to as the "Shares") will be
converted into the right to receive in cash $19.00 per Share, without interest;
and

     WHEREAS, the trustees of the Trust and the respective Boards of Directors
of Acquisition Sub and the Company have each approved and adopted this Agreement
and the Merger upon the terms and subject to the conditions set forth herein;
and

     WHEREAS, the Trust and Acquisition Sub have agreed to cause the Letter of
Credit (as defined below) to be issued on the date hereof as set forth in
Section 7.2(b) and have delivered same to the Company; and

     WHEREAS, the Company's Board of Directors has unanimously determined that
the consideration to be paid for each Share in the Merger is fair to the holders
of such Shares and recommends that the holders of such Shares approve and adopt
this Agreement, the Merger and the other transactions contemplated hereby; and

     WHEREAS, as an inducement to the willingness of each of the Trust and
Acquisition Sub to enter into this Agreement, each of the Company's executive
officers and directors (collectively, the "Officers and Directors") have entered
into an agreement with the Trust and Acquisition Sub (individually, a
"Stockholder Agreement" and collectively, the "Stockholders Agreements")
pursuant to which each such person (and any entity controlled by such person)
has agreed, among other things, (i) to vote their Shares for approval and
adoption of this Agreement and the transactions contemplated hereby at the
Company Stockholder Meeting (as defined below), (ii) to grant a proxy to certain
designated persons to so vote their Shares and (iii) to certain restrictions on
the transfer of their Shares; and

     WHEREAS, the Trust, Acquisition Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
<PAGE>

     NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:

                                   ARTICLE 1

                                  THE MERGER

Section 1.1    The Merger.
               ----------

     Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.3) Acquisition Sub shall be merged with
and into the Company and the separate corporate existence of Acquisition Sub
shall cease.  The Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall possess all the rights, powers, privileges
and franchises, and be subject to all of the obligations, liabilities,
restrictions and disabilities, of the Company and Acquisition Sub in accordance
with the DGCL.

Section 1.2    Closing.
               -------

     Subject to the provisions of this Agreement, the closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which  shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article 6, at
the offices of Andrews & Kurth L.L.P., 4200 Chase Tower, Houston, Texas 77002,
unless another time, date or place is agreed to in writing by the parties
hereto.

Section 1.3    Effective Time.
               --------------

     Subject to the provisions of this Agreement, on the Closing Date, the
Company and Acquisition Sub shall file a certificate of merger (the "Certificate
of Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Delaware Secretary of State, or at such subsequent time as the Trust
and the Company shall agree and as is specified in the Certificate of Merger
(the time the Merger becomes effective being hereinafter referred to as the
"Effective Time").

Section 1.4    Effects of the Merger.
               ---------------------

     The Merger shall have the effects specified in Section 259 of the DGCL.

Section 1.5    Certificate of Incorporation and By-laws.
               ----------------------------------------

     (a)       The certificate of incorporation of Acquisition Sub, as in effect
               immediately prior to the Effective Time, shall be the certificate
               of incorporation of the Surviving Corporation until thereafter
               changed or amended as provided therein or by applicable law,
               except that (i) the name of the Surviving Corporation shall
               continue to be Republic Group Incorporated and (ii) the terms of
               Article TENTH
<PAGE>

               of the Company's Second Restated Certificate of Incorporation
               shall be included in the certificate of incorporation of the
               Surviving Corporation (and shall supersede and replace in its
               entirety any provision in the certificate of incorporation of
               Acquisition Sub with respect to indemnification of directors or
               officers or former directors or officers).

     (b)       The by-laws of Acquisition Sub as in effect immediately prior to
               the Effective Time shall be the by-laws of the Surviving
               Corporation until thereafter changed or amended as provided
               therein or by applicable law, except that at the Effective Time
               Article VI of the Company's by-laws shall replace the
               provision(s), if any, on indemnification included in the by-laws
               of Acquisition Sub.

Section 1.6    Directors.
               ---------

     From and after the Effective Time, the directors of Acquisition Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.  Each
of the members of the Board of Directors of the Company shall tender his
resignation to be effective immediately at the Effective Time.

Section 1.7    Officers.
               --------

     From and after the Effective Time, the officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.

                                   ARTICLE 2

                          EFFECT OF THE MERGER ON THE
                 CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS

Section 2.1    Effect on Capital Stock.
               -----------------------

     As of the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any shares of Company Common Stock:

     (a)       Capital Stock of Acquisition Sub.  Each issued and outstanding
               --------------------------------
               share of capital stock of Acquisition Sub shall be converted into
               and become one fully paid and non-assessable share of Common
               Stock of the Surviving Corporation with the same rights, powers
               and privileges as the share so converted and shall constitute the
               only outstanding shares of capital stock of the Surviving
               Corporation.

     (b)       Cancellation of Treasury Stock.  Each share of Company Common
               ------------------------------
               Stock owned by the Company or any subsidiary of the Company shall
               automatically be canceled and retired and shall cease to exist,
               and no consideration shall be delivered in exchange therefor.
<PAGE>

     (c)       Conversion of Company Common Stock.  Except as otherwise provided
               ----------------------------------
               herein, each share of Company Common Stock outstanding
               immediately prior to the Effective Time (other than shares to be
               cancelled in accordance with Section 2.1(b) and other than
               Dissenting Shares) shall be cancelled and automatically converted
               into the right to receive $19.00 in cash, without interest, from
               the Trust or, in accordance with Section 2.1(f), the Surviving
               Corporation.

     (d)       Shares of Dissenting Stockholders. Notwithstanding anything in
               ---------------------------------
               this Agreement to the contrary but only to the extent required by
               the DGCL, shares of Company Common Stock that are issued and
               outstanding immediately prior to the Effective Time and held by a
               person (a "Dissenting Stockholder") who shall not have voted to
               approve and adopt this Agreement or consented thereto in writing
               and who shall have complied with all of the provisions of the
               DGCL to dissent from the Merger and to demand appraisal for such
               shares in accordance with Section 262 of the DGCL ("Dissenting
               Shares") shall not be converted as described in Section 2.1(c),
               unless such holder fails to perfect or withdraws or otherwise
               loses his right to appraisal, but shall instead become the right
               to receive such consideration as may be determined to be due such
               Dissenting Stockholder pursuant to the DGCL. If, after the
               Effective Time, such Dissenting Stockholder fails to perfect or
               withdraws or otherwise loses his right to appraisal, then such
               Dissenting Stockholder's shares of Company Common Stock shall no
               longer be considered Dissenting Shares for the purposes of this
               Agreement and shall thereupon be deemed to have been converted
               into and to have become exchangeable for, at the Effective Time,
               the right to receive for each such share the amount in cash,
               without interest, that a holder of a share (a "Nondissenting
               Share") of Company Common Stock who had not demanded appraisal
               would have received with respect to such Nondissenting Share. The
               Company shall give Acquisition Sub (i) prompt notice of any
               demands for appraisal of shares of Company Common Stock received
               by the Company and (ii) the opportunity to participate in and
               direct all negotiations and proceedings with respect to any such
               demands. The Company shall not, without the prior written consent
               of Acquisition Sub, make any payment with respect to, or settle,
               offer to settle or otherwise negotiate, any such demands, or
               agree or commit to do any of the foregoing.

     (e)       Cancellation of Company Common Stock.  As of the Effective Time,
               ------------------------------------
               all shares of Company Common Stock outstanding immediately prior
               to the Effective Time shall no longer be outstanding and shall
               automatically be canceled and shall cease to exist, and each
               holder of a certificate that immediately prior to the Effective
               Time represented any such shares of Company Common Stock (a
               "Certificate") shall cease to have any rights with respect
               thereto, except the right to receive the amount per Share
               specified in Section 2.1(c) upon surrender of such Certificate in
               accordance with Section 2.2, without interest, or, in the case of
               Dissenting Stockholders, if any, the rights, if any, accorded
               under Section 262 of the DGCL.
<PAGE>

Section 2.2    Exchange of Certificates.
               ------------------------

     (a)       Prior to the mailing of the Proxy Statement (as defined in
               Section 3.1(d)), the Trust shall enter into an agreement with a
               bank or trust company mutually acceptable to the Company and the
               Trust, to act as Paying Agent (the "Paying Agent") for the
               payment of the amount per share specified in Section 2.1(c).

     (b)       Stock Options.
               -------------

               (i)  At or immediately prior to the Effective Time, each employee
                    or director stock option to purchase Company Common Shares
                    outstanding under any stock option or compensation plan or
                    arrangement of the Company shall be cancelled, and the
                    Company or the Surviving Corporation shall pay each holder
                    of any such option at or promptly after the Effective Time
                    for each such option an amount in cash determined by
                    multiplying (A) the excess, if any, of $19.00 over the
                    applicable exercise price of such option by (B) the number
                    of shares of Company Common Stock such holder could have
                    purchased (assuming full vesting and exercisability of all
                    options) had such holder exercised such option in full
                    immediately prior to the Effective Time.

               (ii) Prior to the Effective Time, the Company shall (A) use its
                    best efforts to obtain any consents from holders of options
                    to purchase Company Common Stock granted under the Company's
                    stock option or compensation plans or arrangements and (B)
                    make any amendments to the terms of such stock option or
                    compensation plans or arrangements that, in the case of
                    either clauses (A) or (B), are necessary to give effect to
                    the transactions contemplated by part (b)(i) of this
                    Section. Notwithstanding any other provision of this
                    Section, payment may be withheld in respect of any employee
                    stock option until such necessary consents are obtained.
                    Except as provided in part (b)(i) of this Section 2.2, the
                    Company shall not make any payment in respect of or in
                    connection with the cancellation of any stock option.

     (c)       Deposit with the Paying Agent. Promptly after the Effective Time,
               -----------------------------
               the Trust shall deposit with the Paying Agent, for the benefit of
               the holders of shares of Company Common Stock, for payment
               through the Paying Agent, cash in such amounts and at times
               necessary for the prompt payment of the per Share amount
               specified in Section 2.1(c) (such cash being hereinafter referred
               to as the "Exchange Fund") pursuant to Section 2.1 in exchange
               for outstanding shares of Company Common Stock upon surrender of
               Certificates therefor.

     (d)       Exchange Procedures.  As soon as reasonably practical after the
               -------------------
               Effective Time, the Paying Agent shall mail to each holder of
               record of a Certificate or Certificates, (i) a letter of
               transmittal (which shall specify that delivery shall be effected,
               and risk of loss and title to such Certificates shall pass, only
               upon delivery of such Certificates to the Paying Agent, and which
               letter shall be in such
<PAGE>

               form and have such other provisions as the Trust and the Company
               may reasonably specify) and (ii) instructions for use in
               effecting the surrender of such Certificates in exchange for the
               amount per Share specified in Section 2.1(c). Upon surrender of
               such a Certificate for cancellation to the Paying Agent or to
               such other agent or agents as may be appointed by the Trust,
               together with such letter of transmittal, duly executed, and such
               other documents as may reasonably be required by the Paying
               Agent, the holder of such Certificate shall be entitled to
               receive in exchange therefor cash which such holder has the right
               to receive pursuant to this Article 2, and the Certificate so
               surrendered shall forthwith be cancelled. Upon a transfer of
               ownership of Company Common Stock that is not registered in the
               transfer records of the Company, cash may be paid to a person
               other than the person in whose name the Certificate so
               surrendered is registered, if such Certificate shall be properly
               endorsed or otherwise be in proper form for transfer and the
               person requesting such cash to be paid shall (i) have paid any
               transfer or other Taxes (as defined in Section 3.1(m)) required
               by reason of the payment of cash to a person other than the
               registered holder of such Certificate or (ii) establish to the
               satisfaction of the Trust that such Tax has been paid or is not
               applicable. Until surrendered as contemplated by this Section
               2.2(d), each Certificate shall be deemed at any time after the
               Effective Time to represent only the right to receive upon such
               surrender the amount per Share specified in Section 2.1(c) which
               the holder thereof has the right to receive in respect of such
               Certificate pursuant to the other provisions of this Article 2.
               No interest will be paid or will accrue on any cash payable to
               holders of Certificates pursuant to the provisions of this
               Article 2. The Trust shall pay the charges and expenses of the
               Paying Agent and of such other agent or agents as it may appoint.

     (e)       No Further Ownership Rights in Company Common Stock.  All
               ---------------------------------------------------
               cash paid shall be deemed to have been paid and issued in full
               satisfaction of all rights pertaining to the shares of Company
               Common Stock theretofore represented by such Certificates,
               subject, however, to the Surviving Corporation's obligation to
               pay any dividends or make any other distributions with a record
               date prior to the Effective Time that may have been declared or
               made by the Company on such shares of Company Common Stock in
               accordance with the terms of this Agreement or prior to the date
               of this Agreement and which remain unpaid at the Effective Time,
               and as of the Effective Time, the stock transfer books of the
               Company shall be closed, and there shall be no further
               registration of transfers of the shares of Company Common Stock.
               If, after the Effective Time, Certificates are presented to the
               Surviving Corporation or the Paying Agent for any reason, then
               they shall be canceled and exchanged as provided in this Article
               2, except as otherwise provided by law.

     (f)       Termination of Exchange Fund.  Any portion of the Exchange Fund
               ----------------------------
               that remains undistributed to the holders of the Certificates for
               nine months after the Effective Time shall be delivered to the
               Surviving Corporation, upon demand, and any holders of the
               Certificates who have not theretofore complied with this Article
               2 shall thereafter look only to the Surviving Corporation for
               payment of the cash amount per Share due pursuant to this Article
               2. Any amounts remaining
<PAGE>

               unclaimed by holders of Company Common Stock three years after
               the Effective Time (or such earlier date immediately prior to
               such time when the amounts would otherwise escheat to or become
               property of any governmental authority) shall become, to the
               extent permitted by applicable law, the property of the Surviving
               Corporation free and clear of any claims or interest of any
               person previously entitled thereto. Any cash amounts made
               available to the Paying Agent pursuant to Section 2.2(c) (or
               otherwise constituting a part of the Exchange Fund) to pay for
               shares of Company Common Stock constituting Dissenting Shares for
               which appraisal rights have been perfected shall be returned to
               the Surviving Corporation upon demand.

     (g)       No Liability.  Notwithstanding any other provision of this
               ------------
               Agreement, none of the Trust, the Company or the Paying Agent
               shall be liable to any person in respect of any amount paid to a
               public official pursuant to any applicable abandoned property,
               escheat or similar law.

     (h)       Investment of Exchange Fund.  The Paying Agent shall invest any
               ---------------------------
               cash included in the Exchange Fund, as directed by the Trust, on
               a daily basis. Any interest and other income resulting from such
               investments shall be paid to the Trust.

     (i)       Lost Certificates.  If any Certificate shall have been lost,
               -----------------
               stolen or destroyed, then upon the making of an affidavit of that
               fact by the person claiming such Certificate to be lost, stolen
               or destroyed and, if required by the Surviving Corporation, the
               posting by such person of a bond in such reasonable amount as the
               Surviving Corporation may direct as indemnity against any claim
               that may be made against the Surviving Corporation with respect
               to such Certificate, the Paying Agent will pay in exchange for
               such lost, stolen or destroyed Certificate the amount per share
               to be paid pursuant to Section 2.1(c) in respect of the shares of
               Company Common Stock represented by such Certificate, as
               contemplated by this Agreement.

     (j)       Withholding Rights.  Each of the Trust, the Surviving Corporation
               ------------------
               and the Paying Agent shall be entitled to deduct and withhold
               from the consideration otherwise payable pursuant to this
               Agreement to a holder of shares of Company Common Stock such
               amounts as the Trust, the Surviving Corporation or the Paying
               Agent is required to deduct and withhold with respect to such
               consideration under the Internal Revenue Code of 1986, as amended
               (the "Code"), or any provision of Federal, state, local or
               foreign tax law. To the extent that amounts are so withheld and
               paid over to the appropriate taxing authority by the Trust, the
               Surviving Corporation or the Paying Agent, such withheld amounts
               shall be treated for all purposes of this Agreement as having
               been paid to the holder of the shares of Company Common Stock in
               respect of which such deduction and withholding was made by the
               Trust, the Surviving Corporation or the Paying Agent, as the case
               may be.
<PAGE>

                                   ARTICLE 3

                        REPRESENTATIONS AND WARRANTIES

Section 3.1    Representations and Warranties of the Company.
               ---------------------------------------------

     Except as set forth with respect to an identified representation and
warranty on the Disclosure Schedule delivered by the Company to the Trust at the
execution of this Agreement (the "Company Disclosure Schedule"), the Company
represents and warrants to the Trust and Acquisition Sub as follows:

     (a)       Organization, Standing and Corporate Power. The Company is a
               ------------------------------------------
               corporation duly organized, validly existing and in good standing
               under the laws of the State of Delaware and has the requisite
               corporate power and authority to carry on its business as now
               being conducted. The Company is duly qualified or licensed to do
               business and is in good standing in each jurisdiction in which
               the nature of its business or the ownership or leasing of its
               properties makes such qualification or licensing necessary, other
               than in such jurisdictions where the failure to be so qualified
               or licensed or to be in good standing individually or in the
               aggregate would not reasonably be expected to have a material
               adverse effect (as defined in Section 9.3) on the Company. The
               Company has heretofore made available to the Trust true and
               correct copies of the certificate of incorporation and by-laws of
               the Company, as currently in effect.

     (b)       Subsidiaries.  The Company Disclosure Schedule sets forth a true
               ------------
               and complete list of each subsidiary of the Company and its
               respective jurisdiction of incorporation. Each such subsidiary is
               a corporation duly organized, validly existing and in good
               standing under the laws of the jurisdiction in which it is
               incorporated and has the requisite corporate power and authority
               to carry on its business as now being conducted. Each such
               subsidiary is duly qualified or licensed to do business and is in
               good standing in each jurisdiction in which the nature of its
               business or the ownership or leasing of its properties makes such
               qualification or licensing necessary, other than in such
               jurisdictions where the failure to be so qualified or licensed or
               to be in good standing individually or in the aggregate would not
               reasonably be expected to have a material adverse effect on the
               Company. All the outstanding shares of capital stock of each such
               subsidiary have been validly issued and are fully paid and non-
               assessable and are owned directly or indirectly by the Company,
               free and clear of all pledges, claims, mortgages, liens, charges,
               encumbrances, adverse claims and security interests of any kind
               or nature whatsoever (collectively, "Liens"). Except for the
               capital stock of its subsidiaries, the Company does not own,
               directly or indirectly, any capital stock or other ownership
               interest in any corporation, limited liability company,
               partnership, joint venture or other entity.

     (c)       Capital Structure.  The authorized capital stock of the Company
               -----------------
               consists of 35,000,000 shares of Company Common Stock, par value
               $1.00 per share, and 487,410 shares of Preferred Stock, without
               par value. At the close of business on
<PAGE>

               August 9, 2000, (i) 11,846,837 shares of Company Common Stock
               were issued and outstanding, (ii) no shares of Company Common
               Stock were held by the Company in its treasury, (iii) 1,811,307
               shares of Company Common Stock were reserved for issuance
               pursuant to the Company's 1989 Long-Term Incentive Plan (as
               amended effective August 16, 1996), the Company's Non-Employee
               Director Stock Option Plan, the Company's Employee Stock Purchase
               Plan and the Company's Dividend Reinvestment Plan (collectively,
               the "Company Stock Plans"), (iv) employee and director stock
               options to purchase an aggregate of 600,843 shares of Company
               Common Stock ("Outstanding Stock Options") were outstanding, (v)
               rights (the "Rights") to purchase shares of Company Common Stock
               (and in certain instances to receive fractional shares of
               Preferred Stock of the Company in lieu of shares of Company
               Common Stock) issuable pursuant to the Amended and Restated
               Rights Agreement dated September 19, 1996 (as amended from time
               to time, the "Rights Agreement") between the Company and UMB
               Bank, N.A., as rights agent, were outstanding and (vi) 47,250
               shares of Series C Junior Participating Preferred Stock,
               constituting a series of Preferred Stock, have been designated
               and authorized for issuance pursuant to the Rights Agreement, but
               no shares of Preferred Stock were outstanding. Except as set
               forth above, and for changes since the close of business on
               August 9, 2000 resulting from the exercise or vesting of employee
               and director stock options outstanding on such date, (i) no
               shares of capital stock or other voting securities, of or
               ownership interests in the Company were issued, reserved for
               issuance or outstanding, (ii) there were no securities of the
               Company convertible into or exchangeable for shares of capital
               stock or voting securities and (iii) there were no outstanding
               stock appreciation rights, stock options or rights to receive
               shares of Company Common Stock on a deferred basis granted under
               the Company Stock Plans or otherwise. All outstanding shares of
               capital stock of the Company are, and all shares issuable upon
               exercise of outstanding employee or director stock options will
               be, when issued, duly authorized, validly issued, fully paid and
               non-assessable and not subject to preemptive rights. There are no
               notes, bonds, debentures or other indebtedness of the Company
               having the right to vote (or convertible into, or exchangeable
               for, securities having the right to vote) on any matters on which
               stockholders of the Company may vote. Except as set forth above
               and except for the Company's Dividend Reinstatement Plan and
               Employee Stock Purchase Plan, as to which purchases of Shares
               shall have been suspended pursuant to Section 4.1(d) hereof,
               there are no outstanding securities, options, warrants, calls,
               rights, commitments, agreements, arrangements or undertakings to
               which the Company or any of its subsidiaries was a party or by
               which any of them was bound obligating the Company or any of its
               subsidiaries to issue, deliver or sell, or cause to be issued,
               delivered or sold, additional shares of capital stock or other
               voting securities of the Company or of any of its subsidiaries or
               obligating the Company or any of its subsidiaries to issue,
               grant, extend or enter into any such security, option, warrant,
               call, right, commitment, agreement, arrangement or undertaking.
               There are no outstanding contractual obligations of the Company
               or any of its subsidiaries to repurchase, redeem or otherwise
               acquire any shares of capital stock of the Company or any of its
               subsidiaries. There are no outstanding
<PAGE>

               contractual obligations of the Company to vote or to dispose of
               any shares of the capital stock of any of its subsidiaries.

     (d)       Authority;  Noncontravention.  The Company has all requisite
               ----------------------------
               corporate power and authority to enter into this Agreement and,
               subject to the Company Stockholder Approval (as defined in
               Section 3.1(n)), to consummate the transactions contemplated by
               this Agreement. The execution, delivery and performance of this
               Agreement by the Company and the consummation by the Company of
               the transactions contemplated by this Agreement have been duly
               authorized by all necessary corporate action on the part of the
               Company, subject, in the case of the approval and adoption of
               this Agreement, to the Company Stockholder Approval. This
               Agreement has been duly executed and delivered by the Company and
               constitutes the legal, valid and binding obligation of the
               Company, enforceable against the Company in accordance with its
               terms. The execution, delivery and performance of this Agreement
               and the Stockholders Agreements do not, and the consummation of
               the transactions contemplated by this Agreement and compliance
               with the provisions of this Agreement and the Stockholders
               Agreements will not, conflict with, or result in any violation
               of, breach of or default (with or without notice or lapse of
               time, or both) under, or give rise to a right of termination,
               cancellation or acceleration of any obligation or to loss of a
               material benefit under, or result in the creation or imposition
               of any Lien upon any of the properties or assets of the Company
               or any of its subsidiaries under, (i) the certificate of
               incorporation or by-laws of the Company or the comparable
               organizational documents of any of its subsidiaries, (ii) any
               loan or credit agreement, note, bond, mortgage, indenture, lease
               or other agreement, instrument, permit, concession, franchise or
               license applicable to the Company or any of its subsidiaries or
               their respective properties or assets or (iii) subject to the
               governmental filings and other matters referred to in the
               following sentence, any judgment, order, decree, statute, law,
               ordinance, rule or regulation applicable to the Company or any of
               its subsidiaries or their respective properties or assets, other
               than, in the case of clauses (ii) and (iii), any such conflicts,
               violations, defaults, rights, losses or Liens that individually
               or in the aggregate would not have a material adverse effect on
               the Company. No consent, approval, order or authorization of, or
               registration, declaration or filing with, any Federal, state or
               local government or any court, administrative or regulatory
               agency or commission or other governmental authority or agency,
               domestic or foreign (a "Governmental Entity"), is required by or
               with respect to the Company or any of its subsidiaries in
               connection with the execution, delivery and performance of the
               Stockholders Agreements by the Officers and Directors or of this
               Agreement by the Company or the consummation by the Company of
               the transactions contemplated by this Agreement, except for (1)
               the filing of a premerger notification and report form by the
               Company under the Hart-Scott-Rodino Antitrust Improvements Act of
               1976, as amended (the "HSR Act"); (2) the filing with the
               Securities and Exchange Commission (the "SEC") of (A) a proxy
               statement relating to the Company Stockholders Meeting (such
               proxy statement (as provided for in Section 5.1(a)), as amended
               or supplemented from time to time, being the "Proxy
<PAGE>

               Statement"), and (B) such reports under Section 13(a), 13(d) or
               15(d) of the Securities Exchange Act of 1934, as amended (the
               "Exchange Act"), as may be required in connection with the
               Stockholders Agreements and this Agreement and the transactions
               contemplated by this Agreement; (3) the filing of the Certificate
               of Merger with the Delaware Secretary of State and appropriate
               documents with the relevant authorities of other states in which
               the Company is qualified to do business; (4) such filings as are
               listed on Schedule 3.1(d) of the Company Disclosure Schedule; and
               (5) such consents, approvals, orders, authorizations,
               registrations, declarations and filings the failure to make or
               obtain which would not reasonably be expected to have a material
               adverse effect on the Company.

     (e)       SEC Documents.  The Company has filed all required reports,
               -------------
               schedules, forms, statements and other documents with the SEC
               since July 1, 1997 (the "SEC Documents"). As of their respective
               dates, the SEC Documents complied or will comply in all material
               respects with the requirements of the Securities Act of 1933, as
               amended (the "Securities Act"), or the Exchange Act, as the case
               may be, and the rules and regulations of the SEC promulgated
               thereunder applicable to such SEC Documents, and, as of their
               respective dates, none of the SEC Documents contained any untrue
               statement of a material fact or omitted to state a material fact
               required to be stated therein or necessary in order to make the
               statements therein, in light of the circumstances under which
               they were made, not misleading. Except to the extent that
               information contained in any SEC Document has been revised or
               superseded by a later Filed SEC Document, none of the SEC
               Documents contains, and no SEC Documents filed after the date of
               this Agreement and prior to the Effective Time will contain, any
               untrue statement of a material fact or omits to state any
               material fact required to be stated therein or necessary in order
               to make the statements therein, in light of the circumstances
               under which they were made, not misleading. The financial
               statements of the Company included in the SEC Documents
               (including, in each case, any notes thereto) comply or will
               comply as to form in all material respects with applicable
               accounting requirements of the SEC with respect thereto, have
               been prepared or will be prepared in accordance with generally
               accepted accounting principles as in effect at the time of
               application thereof ("GAAP") (except, in the case of unaudited
               statements, as permitted by Form 10-Q of the SEC and other SEC
               rules and regulations) applied on a consistent basis during the
               periods involved (except as may be indicated in the notes
               thereto) and fairly present in all material respects, or will
               fairly present in all material respects, the consolidated
               financial position of the Company and its subsidiaries as of the
               dates thereof and the consolidated results of their operations
               and cash flows for the periods then ended (subject, in the case
               of unaudited statements, to normal year-end audit adjustments).

     (f)       Other Financial Statements.  The consolidated financial
               --------------------------
               statements as of and for the year ended June 30, 2000 furnished
               by the Company to the Trust and Acquisition Sub, which consist of
               a balance sheet as of such date (the "Company Balance Sheet") and
               a statement of operations and a statement of cash flows for the
               year then ended (including the notes thereto), and the report of
               Arthur Andersen LLP with respect thereto, was prepared in
               accordance with GAAP
<PAGE>

               applied on a consistent basis during the periods involved and
               fairly presents in all material respects the consolidated
               financial position of the Company and its subsidiaries as of the
               dates thereof and the consolidated results of their operations
               and cash flows for the period then ended.

     (g)       No Undisclosed Material Liabilities.  At the date of this
               -----------------------------------
               Agreement, there are no liabilities or obligations of the Company
               or any of its subsidiaries of any kind whatsoever, whether
               accrued, contingent, absolute, determined, determinable or
               otherwise, other than (i) liabilities or obligations disclosed in
               or reserved against in the Company Balance Sheet, (ii)
               liabilities and obligations of a type not required to be
               disclosed in or reserved against in the Company Balance Sheet
               that are (A) referred to in the Company's Annual Report on Form
               10-K for the year ended June 30, 1999 or any SEC Documents filed
               thereafter (including obligations under agreements, plans and
               other documents filed therewith or incorporated by reference
               therein) or (B) contained in the Disclosure Schedule, and (iii)
               liabilities or obligations incurred in the ordinary course of
               business consistent with past practice that would not reasonably
               be expected to have, individually or in the aggregate, a material
               adverse effect on the Company.

     (h)       Information Supplied.  None of the information included or
               --------------------
               incorporated by reference in any documents filed or to be filed
               with the Commission or any other Governmental Entity in
               connection with the transactions contemplated hereby, including
               in the Proxy Statement will, the respective times such documents
               are filed or are first published, sent or given to stockholders,
               and also, in the case of the Proxy Statement, at the date such
               document is first mailed to the Company's stockholders or at the
               time of the Company Stockholders Meeting or at the Effective
               Time, contain any untrue statement of a material fact or omit to
               state any material fact required to be stated therein or
               necessary in order to make the statements therein, in light of
               the circumstances under which they are made, not misleading, and
               the Proxy Statement and any such information statement will
               comply at all relevant times in all material respects with the
               requirements of the Exchange Act and the rules and regulations
               thereunder, except that no representation or warranty is made by
               the Company with respect to statements made or incorporated by
               reference therein based on information supplied to the Company by
               the Trust or Acquisition Sub in writing specifically for
               inclusion or incorporation by reference in the Proxy Statement.

     (i)       Absence of Certain Changes or Events.  Except as disclosed in the
               ------------------------------------
               Company Disclosure Schedule and the SEC Documents filed and
               publicly available after the date of the Company Balance Sheet,
               since the date of the Company Balance Sheet, the Company has
               conducted its business only in the ordinary course, consistent
               with past practice and there has not been (i) any event,
               occurrence, development or state of circumstances or facts that
               has had or is reasonably likely to have a material adverse effect
               on the Company, except for any such event, occurrence,
               development or state of facts or circumstances attributable to
               conditions affecting the paperboard or wallboard industries or
               the U.S. economy as a whole, (ii) any declaration, setting aside
               or payment of any dividend or other
<PAGE>

               distribution (whether in cash, stock or property) with respect to
               any of the Company's capital stock, (iii) any granting by the
               Company or any of its subsidiaries to any director, officer or
               other employee of the Company or any of its subsidiaries of (x)
               any options or rights to acquire equity securities of the
               Company, (y) any increase in compensation, bonuses or other
               benefits, except the vesting of benefits and for normal awards,
               increases and other payments in the ordinary course of business
               consistent with past practice or as was required under employment
               agreements and Company Plans in effect as of the date of the most
               recent audited financial statements included in the Filed SEC
               Documents or (z) severance or termination pay or increase
               thereof, (iv) any incurrence, assumption or guarantee by the
               Company or any of its subsidiaries of any indebtedness for
               borrowed money other than in the ordinary course of business and
               in amounts and on terms consistent with past practice (it being
               agreed that the aggregate indebtedness for borrowed money of the
               Company and its subsidiaries at any time will be no more than
               $215 million), (v) any creation or other incurrence by the
               Company or any of its subsidiaries of any Lien on any material
               asset other than in the ordinary course of business consistent
               with past practice, (vi) any damage, destruction or other
               casualty loss (whether or not covered by insurance) affecting the
               business or the assets of the Company or any of its subsidiaries
               that has had or would reasonably be expected to have a material
               adverse effect on the Company, (vii) any material labor dispute
               involving the employees of the Company or any of its
               subsidiaries, (viii) any transaction or commitment made, or any
               contract or arrangement entered into, by the Company or any of
               its subsidiaries (including the acquisition or disposition of any
               assets) other than in the ordinary course of business consistent
               with past practice except for the disposition of certain assets
               of the Company as set forth on the Company Disclosure Schedule,
               or (ix) any amendment of any term of any outstanding security of
               the Company or any of its subsidiaries.

     (j)       Litigation.  There is no suit, action, investigation or
               ----------
               proceeding pending or, to the knowledge of the Company,
               threatened against or affecting the Company or any of its
               subsidiaries or any of their respective properties before any
               court or arbitrator or before any foreign or domestic
               Governmental Entity that individually or in the aggregate would
               reasonably be expected to have a material adverse effect on the
               Company, nor is there any judgment, order or decree of any
               Governmental Entity outstanding against the Company or any of its
               subsidiaries having, or which would reasonably be expected to
               have, such a material adverse effect on the Company.

     (k)       Absence of Changes in Benefit Plans.  Except as disclosed in the
               -----------------------------------
               Company Disclosure Schedule, since the date of the Company
               Balance Sheet there has not been any adoption or amendment in any
               material respect (except as required by applicable law), or any
               agreement to adopt or amend in any material respect, by the
               Company or any of its subsidiaries of any collective bargaining
               agreement or employment contract or any bonus, pension, profit
               sharing, deferred compensation, incentive compensation, stock
               ownership, stock purchase, stock option, phantom stock,
               retirement, vacation, severance, disability, death benefit,
<PAGE>

               hospitalization, medical or other plan, arrangement or
               understanding (whether or not legally binding) providing benefits
               to any current or former director, officer or employee of the
               Company or any of its subsidiaries (the "Company Plans"). Without
               limiting the foregoing, except as disclosed in the Company
               Disclosure Schedule, since the date of the Company Balance Sheet,
               there has not been any change in any actuarial or other
               assumption used to calculate funding obligations with respect to
               any Pension Plan (as defined in Section 3.1(l)) of the Company,
               or in the manner in which contributions to any Pension Plan of
               the Company are made or the basis on which such contributions are
               determined. Except as disclosed in the Company Disclosure
               Schedule, there exist no employment, consulting, severance,
               termination or indemnification agreements, arrangements or
               understandings between the Company or any of its subsidiaries and
               any current or former director, officer or employee of the
               Company or any of its subsidiaries.

     (l)       ERISA Compliance.
               ----------------

               (i)  The Company Disclosure Schedule contains a list of each
                    "employee pension benefit plan" (as defined in Section 3(2)
                    of the Employee Retirement Income Security Act of 1974, as
                    amended ("ERISA")) (sometimes referred to herein as a
                    "Pension Plan"), each "employee welfare benefit plan" (as
                    defined in Section 3(1) of ERISA) (sometimes referred to
                    herein as a "Welfare Plan"), each employment contract, stock
                    option, stock purchase, deferred compensation plan or
                    arrangement and each other employee fringe benefit plan or
                    arrangement maintained, contributed to or required to be
                    maintained or contributed to by the Company, any of its
                    subsidiaries or any other person or entity that, together
                    with the Company, is or was treated as a single employer
                    under Section 414(b), (c), (m) or (o) of the Code (each, a
                    "Commonly Controlled Entity") for the benefit of any current
                    or former directors, officers, employees or independent
                    contractors of the Company or any of its subsidiaries
                    (collectively, "Company Benefit Plans"). The Company has
                    delivered or made available to the Trust true, complete and
                    correct copies of (w) each Company Benefit Plan, (x) the two
                    most recent annual reports on Form 5500 filed with the
                    Internal Revenue Service with respect to each Company
                    Benefit Plan (if any such report was required), (y) the most
                    recent summary plan description for each Company Benefit
                    Plan for which such summary plan description is required,
                    and (z) each currently effective trust agreement, insurance
                    or group annuity contract and each other funding or
                    financing arrangement relating to any Company Benefit Plan.

               (ii) Except as disclosed on the Company Disclosure Schedule, (1)
                    each Company Benefit Plan has been administered in
                    accordance with its terms and the Company, its subsidiaries
                    and all the Company Benefit Plans are in compliance with the
                    applicable provisions of ERISA, the Code and all other
                    applicable laws and the terms of all applicable collective
                    bargaining agreements, except for any failure to so
                    administer or any non-compliance
<PAGE>

                      that has not and, if continued, would not, individually or
                      in the aggregate, have a material adverse effect on the
                      Company, (2) there are no pending or, to the Company's
                      knowledge, threatened, (A) investigations by any
                      Governmental Entity, (B) termination proceedings or other
                      claims (except routine claims for benefits payable under
                      the Company Benefit Plans), (C) suits or (D) proceedings
                      against or involving any Company Benefit Plan or asserting
                      any rights or claims to benefits under any Company Benefit
                      Plan, and (3) all reports, returns and similar documents
                      with respect to the Company Benefit Plans required to be
                      filed with any governmental agency or distributed to any
                      Company Benefit Plan Participant have been duly, timely,
                      and accurately filed or distributed.

               (iii)  Except as described on Schedule 3.1(l) of the Company
                      Disclosure Schedule, (1) all contributions to, and
                      payments from, the Company Benefit Plans that may have
                      been required to be made in accordance with the terms of
                      the Company Benefit Plans, any applicable collective
                      bargaining agreement and, when applicable, Section 302 of
                      ERISA or Section 412 of the Code, have been timely made,
                      except for any such untimely payment that has not and, if
                      continued, would not, individually or in the aggregate,
                      have a material adverse effect on the Company, (2) there
                      has been no application for waiver or waiver of the
                      minimum funding standards imposed by Section 412 of the
                      Code with respect to any Pension Plan of the Company, (3)
                      no Pension Plan of the Company has or had at any time
                      during the current plan year an "accumulated funding
                      deficiency" within the meaning of Section 412(a) of the
                      Code and (4) there is no liability under Title IV of ERISA
                      with respect to any Company Benefit Plan (except for
                      insurance premiums payable to the Pension Benefit Guaranty
                      Corporation which are not yet due) that has not been
                      satisfied as of the date hereof.

               (iv)   Each Pension Plan of the Company that is intended to be a
                      tax-qualified plan has been the subject of a determination
                      letter from the Internal Revenue Service to the effect
                      that such Pension Plan and related trust is qualified and
                      exempt from U.S. Federal income Taxes under Sections
                      401(a) and 501(a), respectively, of the Code; no such
                      determination letter has been revoked; and, to the
                      knowledge of the Company, no such revocation has been
                      threatened. No such Pension Plan has been amended since
                      the effective date of its most recent determination letter
                      in any respect that would adversely affect its
                      qualification, materially increase its costs or require
                      security under Section 307 of ERISA. Furthermore, each
                      Pension Plan of the Company that is intended to be tax
                      qualified has been timely and properly amended since each
                      respective Pension Plan's effective date to comport with
                      any changes in the Code, ERISA, or other applicable
                      federal or state law which might otherwise effect such
                      Pension Plan's tax qualified status. The Company has
                      delivered or made available to the Trust a copy of the
                      most recent determination letter received with respect to
                      each Pension Plan of the Company.
<PAGE>

               (v)    Each Welfare Plan of the Company may be amended or
                      terminated without material liability to the Surviving
                      Corporation at any time after the Effective Time.

               (vi)   Except as disclosed in Schedule 3.1(l) of the Company
                      Disclosure Schedule, no director, independent contractor
                      or employee of the Company will be entitled to any
                      additional benefits or any acceleration of the time of
                      payment or vesting of any benefits under any Company
                      Benefit Plan as a result of the transactions contemplated
                      by this Agreement.

               (vii)  Schedule 3.1(l) of the Company Disclosure Schedule
                      contains a list of all Company Benefit Plans which provide
                      for accelerated vesting or payment of any benefits as a
                      result of a change in control.

     (m)       Taxes.
               -----

               (i)    Each of the Company and its subsidiaries has filed all
                      Federal and all material state and local Tax returns and
                      reports required to be filed by it or requests for
                      extensions to file such returns or reports have been
                      timely filed, granted and have not expired. All Federal
                      and all material state and local Tax returns and reports
                      filed by the Company and each of its subsidiaries are
                      complete and accurate in all material respects. The
                      Company and each of its subsidiaries has paid (or the
                      Company has paid on its behalf) all Taxes shown as due on
                      such returns and reports and all material Taxes otherwise
                      due, and the Company Balance Sheet adequately provides for
                      Taxes payable by the Company and its subsidiaries for
                      taxable periods and portions thereof accrued through the
                      date of such financial statements.

               (ii)   No deficiencies for any Taxes have been proposed, asserted
                      or assessed against the Company or any of its subsidiaries
                      that are not adequately provided for on the financial
                      statements, and no requests for waivers of the time to
                      assess any such Taxes have been granted or are pending.
                      There is no audit, examination, deficiency or refund
                      litigation pending with respect to Taxes and during the
                      past three years no taxing authority has given written
                      notice of the intent to commence any such examination,
                      audit deficiency or refund litigation. None of the assets
                      or properties of the Company or any of its subsidiaries is
                      subject to any material Tax lien, other than any such
                      liens for Taxes which are not due and payable, which may
                      thereafter be paid without penalty or the validity of
                      which are being contested in good faith by appropriate
                      proceedings and for which adequate provisions are being
                      maintained in accordance with generally accepted
                      accounting principles ("Permitted Tax Liens").

               (iii)  Schedule 3.1(m) of the Company Disclosure Schedule lists
                      all federal, state, local, and foreign income Tax returns
                      for which an extension to file has filed and for which the
                      related Tax return has not been filed.
<PAGE>

               (iv)   None of the payments or benefits which may be triggered
                      under any Company Benefit Plan or other agreement or
                      arrangement by the Merger or the other transactions
                      contemplated hereby (either alone or in combination with a
                      second event following the Merger such as termination of
                      employment) will not be deductible under Code (S)280G.

               (v)    As used in this Agreement, "Taxes" shall include all
                      Federal, state and local income, franchise, use, property,
                      sales, excise and other taxes, tariffs or governmental
                      charges of any nature whatsoever, domestic or foreign,
                      including any interest, penalties or additions with
                      respect thereto.

     (n)       Inapplicability of DGCL Section 203 and Article THIRTEENTH of the
               -----------------------------------------------------------------
               Company Charter; Voting Requirements.  The Company's Board of
               ------------------------------------
               Directors (including, without limitation the requisite approval
               of "Continuing Directors" to the extent necessary under Article
               THIRTEENTH of the Company's Second Restated Certificate of
               Incorporation) has taken all actions necessary and appropriate to
               render the limitations on business combinations contained in
               Section 203 of the DGCL and the 66 2/3% voting provisions in
               Article THIRTEENTH of the Company's Second Restated Certificate
               of Incorporation inapplicable to this Agreement, the Stockholders
               Agreements and the consummation of the Merger and the other
               transactions contemplated hereby and thereby. The affirmative
               vote of the holders of a majority of the outstanding shares of
               the Company Common Stock (the "Company Stockholder Approval") is
               the only vote of the holders of any class or series of the
               Company's capital stock necessary to approve and adopt this
               Agreement, the Merger and the other transactions contemplated by
               this Agreement, and the Stockholders Agreements.

     (o)       Rights Agreement.  The Rights Agreement has been amended as of
               ----------------
               the date hereof (the "Rights Amendment") to the extent necessary
               (i) to render the Rights Agreement inapplicable to this
               Agreement, the Stockholders Agreements, the Merger, and the other
               transactions contemplated by this Agreement and the Stockholders
               Agreements (ii) to ensure that (y) neither the Trust nor any of
               its subsidiaries (including Acquisition Sub) is an Acquiring
               Person (as defined in the Rights Agreement) pursuant to the
               Rights Agreement and (z) a Stock Acquisition Date or Distribution
               Date (in each case as defined in the Rights Agreement) does not
               occur solely by reason of the execution of this Agreement or the
               Stockholders Agreements or the consummation of the Merger or the
               other transactions contemplated by this Agreement and the
               Stockholders Agreements and (iii) to terminate the Rights
               Agreement effective as of the Effective Time.

     (p)       Brokers.  No broker, investment banker, financial advisor or
               -------
               other person, other than J.P. Morgan & Co., Incorporated (copies
               of whose engagement agreement have been provided to the Trust),
               is entitled to any broker's, finder's, financial advisor's or
               other similar fee or commission in connection with the
               transactions contemplated by this Agreement based upon
               arrangements made by or on behalf of the Company.
<PAGE>

     (q)  Opinion of Financial Advisor; Board Findings and Recommendation.  The
          ---------------------------------------------------------------
          Company has received the opinion of J.P.  Morgan & Co.  Incorporated,
          dated as of the date of this Agreement, to the effect that, as of such
          date, the cash amount per Share specified in Section 2.1(c) to be paid
          in accordance with Article 2 is fair to the holders of the Company's
          Common Stock from a financial point of view.  A copy of such opinion
          has heretofore been delivered to the Trust.  The Company has been
          authorized by J. P. Morgan & Co. Incorporated to permit the inclusion
          of such opinion in its entirety in the Proxy Statement, so long as
          such inclusion is in form and substance reasonably satisfactory to J.
          P. Morgan & Co. Incorporated and its counsel.  The Company's Board of
          Directors (i) has unanimously approved and adopted the Stockholders
          Agreements, this Agreement and the transactions contemplated hereby,
          including the Merger, and thereby, (ii) has unanimously determined
          that this Agreement and the transactions contemplated hereby,
          including the Merger, are advisable, fair to and in the best interests
          of the stockholders of the Company and (iii) unanimously recommends
          (subject to Section 4.2(b)) that the stockholders of the Company
          approve and adopt this Agreement and the transactions contemplated
          hereby, including the Merger.

     (r)  Compliance with Applicable Laws.  Each of the Company and its
          -------------------------------
          subsidiaries holds all Federal, state and local governmental
          approvals, authorizations, certificates, permits, filings, franchises,
          licenses, notices and rights, domestic or foreign ("Permits")
          necessary for it to own, lease or operate its properties and assets
          and to carry on its business as now conducted, and all such Permits
          are valid and in full force and effect, except where the failure to
          have, or the suppression or cancellation of, or the failure of any
          such Permits to be valid and in full force and effect individually or
          in the aggregate would not have a material adverse effect on the
          Company.  The Company and each of its subsidiaries are in compliance
          with all applicable judgments, orders, decrees, statutes, laws,
          ordinances, rules and regulations of any Governmental Entity, except
          for possible noncompliance which individually or in the aggregate
          would not have a material adverse effect on the Company.  As of the
          date hereof, no investigation or review by any Governmental Entity
          with respect to the Company or any of its subsidiaries is pending, or
          to the Company's knowledge threatened, other than those which
          individually or in the aggregate would not have a material adverse
          effect on the Company.

     (s)  No Default.  Neither the Company nor any of its subsidiaries is in
          ----------
          breach, default or violation (and no event has occurred, which, with
          notice or the lapse of time or both, would constitute a breach,
          default or violation) of any term, condition or provision of (i) the
          certificate of incorporation or by-laws of the Company or the
          comparable organizational documents of any of its subsidiaries, (ii)
          any loan or credit agreement, note, bond, mortgage, indenture, lease
          or other agreement, instrument, permit, concession, franchise or
          license applicable to the Company or any of its subsidiaries or their
          respective properties or assets, or (iii) any judgment, order, decree,
          statute, law, ordinance, rule or regulation applicable to the Company
          or any of its subsidiaries or their respective properties or assets,
          except in the case of clauses (ii) and (iii) for breaches, defaults or
          violations

AGREEMENT AND PLAN OF MERGER - Page 18
<PAGE>

          which individually or in the aggregate would not have a material
          adverse effect on the Company.

     (t)  Environmental Laws and Regulations.  Except as described in Schedule
          ----------------------------------
          3.1(t) of the Company Disclosure Schedule, the Company and each of its
          subsidiaries are in compliance with all applicable Federal, state and
          local laws and regulations (including common law) relating to
          pollution or protection of human health or the environment (including
          ambient air, surface water, ground water, land surface or subsurface
          strata) (collectively, "Environmental Laws"), which, except for any
          such non-compliance as has not and, if continued, would not,
          individually or in the aggregate, have a material adverse effect on
          the Company.  For purposes of the immediately preceding sentence,
          compliance with Environmental Laws includes, but is not limited to,
          the possession by the Company and each of its subsidiaries of all
          permits and other governmental authorizations required under
          applicable Environmental Laws.  The Company is in material compliance
          with the terms and conditions thereof.  Except as described in
          Schedule 3.1(t) of the Company Disclosure Schedule, neither the
          Company nor any of its subsidiaries has received written notice of, or
          is the subject of any facts, circumstances or conditions that could
          reasonably be expected to result in, any actions, causes of action,
          claims, investigations, demands or notices by any person alleging
          liability under or non-compliance with any Environmental Law
          ("Environmental Claims") that has had or, if continued, would have,
          individually or in the aggregate, a material adverse effect on the
          Company.

     (u)  Contracts; Indebtedness.  (a) Except as disclosed in Schedule 3.1(u)
          -----------------------
          of the Company Disclosure Schedule, there are no contracts, agreements
          that are material to the business, properties, assets, financial
          condition or results of operations of the Company and its subsidiaries
          taken as a whole.  All of such disclosed contracts are valid and
          legally binding obligations of the Company or its subsidiaries, as the
          case may be, and, to the knowledge of the Company, of each of the
          other parties thereto, and are enforceable in accordance with the
          terms thereof.  No such contract contains any provision which
          prohibits or restricts, or provides that the other party thereto may
          terminate such contract in the event or by reason of, the Merger or
          the other transactions contemplated by this Agreement, or contains any
          other provision that would be altered or otherwise become applicable
          by reason of such transaction.  The Company has provided true and
          correct copies of all such contracts to the Trust.  Schedule 3.1(u) of
          the Company Disclosure Schedule sets forth (i) a list of each
          agreement, instruments and other obligation pursuant to which any
          indebtedness of the Company or any of its subsidiaries in a principal
          amount in excess of $1,000,000 is outstanding or may be incurred other
          than any that may be entered into after the date of this Agreement in
          compliance with Sections 4.1(a) and (ii) the respective principal
          amounts outstanding thereunder as of  June 30, 2000.

     (v)  Intellectual Property.  The Company and its subsidiaries (i) own, or
          ---------------------
          are validly licensed or otherwise have the right to use, all patents,
          patent rights, trademarks, trade names, service marks, copyrights,
          know how and other proprietary

AGREEMENT AND PLAN OF MERGER - Page 19
<PAGE>

          intellectual property rights and computer programs (collectively,
          "Intellectual Property Rights") that are material to the conduct of
          the business of the Company and its subsidiaries taken as a whole, and
          (ii) has taken such steps to preserve such Intellectual Property
          Rights as the Company has determined to be appropriate. Schedule
          3.1(v) of the Company Disclosure Schedule sets forth a description of
          all Intellectual Property Rights that are material to the conduct of
          the business of the Company and its subsidiaries taken as a whole,
          and, to the Company's knowledge, all such Intellectual Property Rights
          are valid and enforceable. No claims are pending or, to the knowledge
          of the Company, threatened that the Company or any of its subsidiaries
          is infringing or otherwise adversely affecting the intellectual
          property rights of any person, and the Company is not aware of any
          basis for any such claims. To the knowledge of the Company, no person
          is infringing the rights of the Company or any of its subsidiaries
          with respect to any Intellectual Property Right. None of the Company's
          Intellectual Property Rights are licensed to any third party. Except
          as disclosed in the Company Disclosure Schedule, no material
          Intellectual Property Right is subject to any outstanding judgment,
          injunction, order, decree, or agreement restricting the use thereof by
          the Company or any of its subsidiaries or restricting the licensing
          thereof by the Company or any of its subsidiaries.

     (w)  Labor Matters.  Except as disclosed in Section 3.1(w) of the Company
          -------------
          Disclosure Schedule, neither the Company nor any of its subsidiaries
          is party to any collective bargaining agreement, memorandum of
          understanding, settlement or other labor agreement with any union or
          labor organization and no union or labor organization has been
          recognized by the Company or any of its subsidiaries as an exclusive
          bargaining representative for employees of the Company or any of its
          subsidiaries.  Except as disclosed in Section 3.1(w) of the Company
          Disclosure Schedule, to the Company's knowledge, there is no current
          union representation question involving employees of the Company or
          any of its subsidiaries, nor does the Company have knowledge of any
          significant activity or proceeding of any labor organization (or
          representative thereof) or employee group to organize any such
          employees.  Except as disclosed in Section 3.1(w) of the Company
          Disclosure Schedule, neither the Company nor any of its subsidiaries
          has made any commitment that would require the application of the
          terms of any collective bargaining agreements entered into by the
          Company or any of its subsidiaries to the Trust, to any joint venture
          of the Trust, or to any subsidiary of the Trust.

               Except as disclosed in Section 3.1(w) of the Company Disclosure
          Schedule there is no material labor dispute, strike, picketing or work
          stoppage, or any lockout, involving employees of the Company or any of
          its subsidiaries pending or, to the Company's knowledge, threatened
          against or involving the Company or any of its subsidiaries.

               Except as disclosed in Section 3.1(w) of the Company Disclosure
          Schedule, (i) there is no grievance, arbitration, unfair labor
          practice, investigation, employment discrimination or other labor or
          employment related charge, complaint or claim against the Company or
          any of its subsidiaries pending before

AGREEMENT AND PLAN OF MERGER - Page 20
<PAGE>

          any court, arbitrator, mediator or governmental agency or tribunal,
          or, to the Company's knowledge, threatened, and (ii) there has been no
          adjudication by any court, arbitrator, mediator or governmental agency
          or tribunal that, in the case of either (i) or (ii), has or that would
          reasonably be expected to have a material adverse effect on the
          Company or otherwise limit or affect the business operations of the
          Company.

               To the knowledge of the Company, none of the Company, any of its
          subsidiaries or any of their respective representatives or employees
          has committed any unfair labor practice in connection with the
          operation of the respective businesses of the Company or any of its
          subsidiaries that has not been resolved, and there is no charge or
          complaint against the Company or any of its subsidiaries.

               As of the date of this Agreement, (i) the Company is in
          compliance with all applicable laws relating to the employment of
          labor, including those related to wages, hours, collective bargaining
          worker classification and the payment and withholding of taxes and
          other sums as required by the appropriate governmental authority and
          has withheld and paid to the appropriate governmental authority or is
          holding for payment not yet due to such governmental authority all
          amounts required to be withheld from employees of the Company and is
          not liable for any arrears of wages, taxes, penalties or other sums
          for failure to comply with any of the foregoing; (ii) the Company has
          paid in full to all employees, or adequately accrued for in accordance
          with GAAP, consistently applied, all wages, salaries, commissions,
          bonuses, benefits and other compensation due to or on behalf of such
          employees; (iii) there is no claim with respect to payment of wages,
          salary or overtime pay that has been asserted or is now pending or
          threatened before any governmental authority with respect to any
          persons currently or formerly employed by the Company; (iv) the
          Company is not a party to, or otherwise bound by, any consent decree
          with, or citation by, any governmental authority relating to employees
          or employment practices; and (v) there is no charge of discrimination
          in employment or employment practices, for any reason, including,
          without limitation, age, gender, race, religion or other legally
          protected category, which has been asserted or is now pending or
          threatened before the United States Equal Employment Opportunity
          Commission, or any other governmental authority in any jurisdiction in
          which the Company has employees except in the case of clauses (i),
          (iii) and (v) above, where the same would not, individually or in the
          aggregate, have a material adverse effect on the Company.

     (x)  Assets Other than Real Property Interests.  The Company or a
          -----------------------------------------
          subsidiary of the Company has good and valid title to all material
          assets owned by them, in each case free and clear of all pledges,
          claims, charges, mortgages, liens, security interests or encumbrances
          of any kind except (i) mechanics', carriers', workmen's, repairmen's
          or other like liens arising or incurred in the ordinary course of
          business, liens arising under original purchase price conditional
          sales contracts and equipment leases with third parties entered into
          in the ordinary course of business if the underlying obligations are
          not overdue for a period of

AGREEMENT AND PLAN OF MERGER - Page 21
<PAGE>

          more than 90 days, and liens for Taxes which are not yet due and
          payable, (ii) mortgages, liens, security interests and encumbrances
          which secure debt that is reflected as a liability on the Balance
          Sheet and the existence of which is indicated in the notes thereto and
          (iii) other imperfections of title or encumbrances, if any, which do
          not, individually or in the aggregate, materially impair the continued
          use and operation or the marketability of the assets to which they
          relate in the business of the Company and its subsidiaries as
          presently conducted (the mortgages, liens, security interests,
          encumbrances and imperfections of title described in clauses (i), (ii)
          and (iii) above are hereinafter referred to collectively as "Permitted
          Liens").

               All the material tangible personal property of the Company and
          its subsidiaries has been maintained in all material respects in
          accordance with the past practice of the Company and its subsidiaries
          and generally accepted industry practice.  Each item of material
          tangible personal property of the Company and its subsidiaries is in
          all material respects in good working order and is adequate and
          sufficient for the Company's intended purposes, ordinary wear and tear
          excepted.

               This Section 3.1(x) does not relate to real property or interests
          in real property, such items being the subject of Section 3.1(y).

     (y)  Title to Real Property.  Schedule 3.1(y) sets forth a complete list of
          ----------------------
          all real property owned in fee by the Company and its subsidiaries
          other than any real property disposed of after the date of this
          Agreement in compliance with Section 4.1(a) (individually, an "Owned
          Property").  Schedule 3.1(y) sets forth a complete list of all real
          property and interests in real property leased by the Company and its
          subsidiaries (other than any real property disposed of after the date
          of this Agreement in compliance with Section 4.1(a) (individually, a
          "Leased Property") and identifies any material leases relating
          thereto.  The Company or a subsidiary has (i) good and marketable fee
          title to all Owned Property insurable at regular rates and (ii) good
          and valid title to the leasehold estates in all Leased Property (an
          Owned Property or Leased Property being sometimes referred to herein,
          individually, as a "Company Property" and, collectively, as "Company
          Properties"), in each case free and clear of all mortgages, liens,
          security interests, encumbrances, leases, assignments, subleases,
          easements, covenants, rights-of-way and other similar restrictions of
          any nature whatsoever, except (A) leases, subleases and similar
          agreements set forth in Schedule 3.1(y), (B) Permitted Liens, (C)
          easements, covenants, rights-of-way and other similar restrictions of
          record, (D) any conditions that would be shown by a current, accurate
          survey or physical inspection of any Company Property made prior to
          Closing and (E) (I) zoning, building and other similar restrictions,
          (II) mortgages, liens, security interests, encumbrances, easements,
          covenants, rights-of-way and other similar restrictions that have been
          placed by any developer, landlord or other third party on property
          over which the Company or any subsidiary thereof has easement rights
          or on any Leased Property and subordination or similar agreements
          relating thereto, and (III) unrecorded easements, covenants, rights-
          of-way and other similar restrictions, none of which items set forth
          in clauses (C), (D) and (E),

AGREEMENT AND PLAN OF MERGER - Page 22
<PAGE>

          individually or in the aggregate, materially impair the value or the
          continued use and operation of the property to which they relate in
          the business of the Company and its subsidiaries as presently
          conducted. No local zoning or similar land use or government
          regulations materially impairs the current use by the Company and its
          subsidiaries of the plants, offices and other facilities located on
          Company Property.

     (z)  Insurance.  The Company and its subsidiaries maintain policies of
          ---------
          directors' and officers' liability insurance, fire and casualty,
          liability and other forms of insurance (including self-insurance) in
          such amounts, with such deductibles and against such risks and losses
          as are reasonable for the operation of the business and ownership of
          assets of the Company and its subsidiaries.  The insurance policies
          owned and maintained by the Company and its subsidiaries are listed in
          Schedule 3.1(z).  All such policies are in full force and effect, all
          premiums due and payable thereon have been paid (other than
          retroactive or retrospective premium adjustments that are not yet, but
          may be, required to be paid with respect to any period ending prior to
          the Closing Date under comprehensive general liability and workmen's
          compensation insurance policies), and no notice of cancellation or
          termination has been received with respect to any such policy which
          has not been replaced on substantially similar terms prior to the date
          of such cancellation.  To the knowledge of the Company, the activities
          and operations of the Company and its subsidiaries have been conducted
          in a manner so as to conform in all material respects to all
          applicable provisions of such insurance policies.  The coverages
          provided by such policies of insurance with respect to events
          occurring prior to the Effective Time will not be affected in any
          manner by, and will not terminate or lapse by reason of, any of the
          Merger or any other transaction contemplated by this Agreement.

     (aa) Transactions with Affiliates.  Except as set forth in Sections 3.1(k),
          ----------------------------
          3.1(l), 3.1(u) and 3.1(aa) of the Company Disclosure Schedule, there
          is no material agreement, contract or other arrangement between the
          Company or any subsidiary, on the one hand, and any officer, director
          or affiliate (other than the Company or a subsidiary), on the other
          hand.  Officer, director or affiliate of the Company or any subsidiary
          (other than the Company or any subsidiary) has any material interest
          in any property (real or personal, tangible or intangible) or contract
          used in or pertaining to the business of the Company or a subsidiary.
          No affiliate of the Company or any subsidiary (other than the Company
          or any subsidiary) has any direct or indirect ownership interest in
          any person in which the Company or a subsidiary has any direct or
          indirect ownership interest or with which the Company or a subsidiary
          competes or has a business relationship.

     (bb) State Takeover Statutes.  Except for Section 203 of the DGCL (which,
          -----------------------
          as described in Section 3.1(n), the Board of Directors of the Company
          has taken all actions to render the limitations on business
          combinations therein inapplicable to this Agreement, the Stockholders
          Agreements and the consummation of the Merger and the other
          transactions contemplated hereby and thereby), no other state takeover
          statute or similar statute or regulation applies or purports to apply

AGREEMENT AND PLAN OF MERGER - Page 23
<PAGE>

             to this Agreement, the Stockholders Agreements, the Merger or the
             other transactions contemplated hereby or thereby.

Section 3.2  Representations and Warranties of the Trust.__
             -------------------------------------------

     Except as set forth with respect to an identified representation and
warranty on the Disclosure Schedule delivered by the Trust to the Company upon
the execution of this Agreement (the "Trust Disclosure Schedule"), the Trust
represents and warrants to the Company as follows:

     (a)     Organization, Standing and Corporate Power.  The Trust is a
             ------------------------------------------
             statutory trust duly formed and validly existing under the laws of
             Connecticut and has the requisite power and authority to carry on
             its business as now being conducted. Acquisition Sub is a
             corporation duly organized, validly existing and in good standing
             under the laws of Delaware and has the requisite corporate power
             and authority to carry on its business as now being conducted. Each
             of the Trust and Acquisition Sub is duly qualified or licensed to
             do business and is in good standing (with respect to jurisdictions
             which recognize such concept) in each jurisdiction in which the
             nature of its business or the ownership or leasing of its
             properties makes such qualification or licensing necessary, other
             than in such jurisdictions where the failure to be so qualified or
             licensed or to be in good standing individually or in the aggregate
             would not have a material adverse effect on the Trust.

     (b)     Authority; Noncontravention.  Each of the Trust and Acquisition Sub
             ----------------------------
             has all requisite trust or corporate power and authority to enter
             into this Agreement and to consummate the transactions contemplated
             by this Agreement. The execution, delivery and performance of this
             Agreement by the Trust and Acquisition Sub and the consummation by
             the Trust and Acquisition Sub of the transactions contemplated by
             this Agreement have been duly authorized by all necessary trust or
             corporate action (as the case may be) on the part of such person.
             This Agreement has been duly executed and delivered by each of the
             Trust and Acquisition Sub and constitutes the legal, valid and
             binding obligation of such persons, enforceable against each such
             person in accordance with its terms. The execution, delivery and
             performance of this Agreement and the Stockholders Agreements do
             not, and the consummation of the transactions contemplated by this
             Agreement and compliance with the provisions of this Agreement and
             the Stockholders Agreements by the Trust and Acquisition Sub will
             not, conflict with, or result in any violation of, breach of, or
             default (with or without notice or lapse of time, or both) under,
             or give rise to a right of termination, cancellation or
             acceleration of any obligation or to loss of a material benefit
             under (i) trust agreement of the Trust or the certificate of
             incorporation or by-laws of Acquisition Sub, (ii) any loan or
             credit agreement, note, bond, mortgage, indenture, lease or other
             agreement, instrument, permit, concession, franchise or license
             applicable to the Trust or Acquisition Sub or their respective

AGREEMENT AND PLAN OF MERGER - Page 24
<PAGE>

             properties or assets or (iii) subject to the governmental filings
             and other matters referred to in the following sentence, any
             judgment, order, decree, statute, law, ordinance, rule or
             regulation applicable to the Trust or Acquisition Sub or their
             respective properties or assets, other than, in the case of clauses
             (ii) and (iii), any such conflicts, violations, defaults, rights,
             losses or Liens that individually or in the aggregate would not
             have a material adverse effect on the Trust. No consent, approval,
             order or authorization of, or registration, declaration or filing
             with, any Governmental Entity is required by or with respect to the
             Trust or Acquisition Sub in connection with the execution, delivery
             and performance of this Agreement or the Stockholders Agreements by
             the Trust or Acquisition Sub or the consummation by the Trust and
             Acquisition Sub of the transactions contemplated by this Agreement
             or the Stockholders Agreements, except for (1) the filing of a
             premerger notification and report form by the Trust or Acquisition
             Sub under the HSR Act, to the extent required thereby; (2) the
             filing of the Certificate of Merger with the Delaware Secretary of
             State and appropriate documents with the relevant authorities of
             other states in which the Trust is qualified to do business; and
             (3) such consents, approvals, orders, authorizations,
             registrations, declarations and filings the failure to make or
             obtain which would not reasonably be expected to have a material
             adverse effect on the Trust.

     (c)     Information Supplied.  None of the information supplied or to be
             --------------------
             supplied by the Trust or Acquisition Sub in writing specifically
             for inclusion or incorporation by reference in any documents filed
             or to be filed with the SEC or any other governmental entity in
             connection with the transactions contemplated hereby, including the
             Proxy Statement will, at the respective times such document is
             filed, and also, in the case of the Proxy Statement, at the date
             the Proxy Statement is first mailed to the Company's stockholders
             or at the time of the meeting of the Company's stockholders held to
             vote upon the approval and adoption of this Agreement, contain any
             untrue statement of a material fact or omit to state any material
             fact required to be stated therein or necessary in order to make
             the statements therein, in light of the circumstances under which
             they are made, not misleading (or necessary to correct any
             statement in any earlier communication).

     (d)     Brokers.  No broker, investment banker, financial advisor or other
             -------
             person, other than Salomon Smith Barney, the fees and expenses of
             which will be paid by the Trust, is entitled to any broker's,
             finder's, financial advisor's or other similar fee or commission in
             connection with the transactions contemplated by this Agreement
             based upon arrangements made by or on behalf of the Trust.

     (e)     Financing Commitment.  The Trust has received an executed letter,
             --------------------
             dated as of August 8, 2000 (the "Lender Letter"), from Cooperative
             Centrale Raiffeisen - Boeremleembank B.A., "Rabobank - Nederland",
             New York (the "Lender"), a true and correct copy of which has been
             furnished to the Company, indicating that the Lender, subject to
             obtaining internal credit approval, is confident that it can
             provide the funds necessary to fund in full the payment of the
             merger consideration payable by the Trust in accordance with
             Article 2. The Trust agrees that within 30 days after the execution
             of this Agreement it will furnish to the Company an executed
             commitment (the "Commitment") from the Lender or from another
             financial institution(s) reasonably acceptable to the Company in a
             form customary for a financial buyer under similar circumstances
             with respect to the

AGREEMENT AND PLAN OF MERGER - Page 25
<PAGE>

             funds required by the Trust to consummate the transactions
             contemplated hereby, subject to customary conditions precedent for
             such a commitment, including, without limitation, the negotiation
             and execution of definitive documentation for such funding and
             final Lender approvals. Concurrently with the execution of this
             Agreement, the Trust has caused the Lender to issue an irrevocable
             direct draw letter of credit in the form attached hereto as Annex I
             (the "Letter of Credit"), pursuant to which the Company shall have
             the right, on the terms and subject to the conditions set forth
             therein, to draw in full to receive payment of $12,000,000 in
             accordance with Section 7.2(b).

     (f)     No Prior Activities of the Trust and Acquisition Sub.  Each of the
             ----------------------------------------------------
             Trust and Acquisition Sub was formed solely for the purpose of
             engaging in the transactions contemplated hereby, and has engaged
             in no other business activities and has conducted its operations
             only as contemplated hereby.

                                   ARTICLE 4

                   COVENANTS RELATING TO CONDUCT OF BUSINESS

Section 4.1  Conduct of Business.__
             -------------------

     (a)     Conduct of Business by the Company. Except as set forth in Section
             ----------------------------------
             4.1 of the Company Disclosure Schedule, and except with the written
             consent of the Trust, during the period from the date of this
             Agreement to the Effective Time, the Company shall, and shall cause
             its subsidiaries to, carry on their respective businesses in the
             usual, and ordinary course consistent with past practice and in
             compliance in material respects with all applicable laws and
             regulations and use reasonable best efforts to preserve intact
             their current business organizations, keep available the services
             of their current officers and employees and preserve their
             relationships with those persons having business dealings with
             them. Except as set forth in Section 4.1 of the Company Disclosure
             Schedule, without limiting the generality of the foregoing, during
             the period from the date of this Agreement to the Effective Time,
             the Company shall not, and shall not permit any of its subsidiaries
             to, without the written consent of the Trust:

             (i)   (x) declare, set aside or pay any dividends on, or make any
                   other distributions in respect of, any of its capital stock,
                   other than dividends and distributions by a direct or
                   indirect wholly owned subsidiary of the Company to its
                   parent, (y) split, combine or reclassify any of its capital
                   stock or issue or authorize the issuance of any other
                   securities in respect of, in lieu of or in substitution for
                   shares of its capital stock or (z) purchase, redeem or
                   otherwise acquire any shares of capital stock of the Company
                   or any of its subsidiaries or any other securities thereof or
                   any rights, warrants or options to acquire any such shares or
                   other securities (except for the redemption of the Rights (as
                   defined in the Rights Agreement) as and in the manner
                   provided for in the Rights Agreement);

AGREEMENT AND PLAN OF MERGER - Page 26
<PAGE>

             (ii)  issue, deliver, sell, pledge or otherwise encumber any shares
                   of its capital stock, any other voting securities or any
                   securities convertible into, or any rights, warrants or
                   options to acquire, any such shares, voting securities or
                   convertible securities (other than the issuance of Company
                   Common Stock upon the exercise of stock options outstanding
                   on the date of this Agreement and in accordance with their
                   present terms or in accordance with the present terms of the
                   Stock Plans);

             (iii) amend its certificate of incorporation, by-laws, articles of
                   incorporation, or other comparable organizational documents,
                   as applicable;

             (iv)  merge or consolidate with any other person or acquire any
                   interest in material assets of any other person other than
                   pursuant to existing contract or commitments which have been
                   disclosed to the Trust on the Company Disclosure Schedule;

             (v)   sell, lease, license, mortgage or otherwise encumber or
                   subject to, or permit the creation or other incurrence of,
                   any material Lien or otherwise dispose of any material
                   properties or assets;

             (vi)  (x) incur indebtedness for borrowed money, assume or
                   guarantee any such indebtedness of another person, issue or
                   sell any debt securities or warrants or other rights to
                   acquire any debt securities of the Company or any of its
                   subsidiaries, guarantee any debt securities of another
                   person, enter into any "keep well" or other agreement to
                   maintain any financial statement condition of another person
                   or enter into any arrangement having the economic effect of
                   any of the foregoing, except for working capital borrowings
                   or general corporate purpose borrowings under the Bank Credit
                   Agreement, in either case incurred in the ordinary course of
                   business in an aggregate amount not in excess of $115 million
                   less outstanding borrowings under the Bank Credit Agreement,
                   or (y) make any loans, advances or capital contributions to,
                   or investments in, any other person, other than to the
                   Company or any direct or indirect subsidiary of the Company
                   or to officers and employees of the Company or any of its
                   subsidiaries for travel, business or relocation expenses in
                   the ordinary course of business and for computer loans to
                   employees in the ordinary course of business pursuant to
                   existing programs;

             (vii) make or agree to make any new capital expenditure or capital
                   expenditures other than capital expenditures which (a) are
                   the subject of contractually committed purchase orders as of
                   the date hereof with the Company or any of its subsidiaries,
                   or (b) individually are not in excess of $250,000 and in the
                   aggregate are not in excess of $3,000,000, provided that at
                   any time aggregate capital expenditures exceed $1,000,000 the
                   Company shall give written notice to the Trust at least 14
                   days in advance prior to the commitment for any capital
                   expenditures that individually will exceed $100,000, or (c)
                   constitute reasonable expenditures not to exceed $80,000

AGREEMENT AND PLAN OF MERGER - Page 27
<PAGE>

                     made by the Company or any of its subsidiaries in
                     connection with any emergency or other force majeure events
                     affecting the Company or any of its subsidiaries;

             (viii)  make any Tax election or settle or compromise any material
                     Tax liability or take any action with respect to the
                     computation of Taxes or the preparation of Tax returns or
                     reports that is inconsistent with past practice;

             (ix)    pay, discharge, settle or satisfy material claims,
                     liabilities or obligations (absolute, accrued, asserted or
                     unasserted, contingent or otherwise), other than the
                     payment, discharge, settlement or satisfaction, in the
                     ordinary course of business consistent with past practice
                     or in accordance with their terms, of liabilities (x)
                     reflected or reserved against in, or contemplated by, the
                     most recent consolidated financial statements (or the notes
                     thereto) of the Company included in the Filed SEC Documents
                     or (y) incurred since the date of such financial statements
                     in the ordinary course of business consistent with past
                     practice;

             (x)     (x) enter into or adopt any new Company Benefit Plan or
                     amend (other than as required by applicable law) any
                     Company Benefit Plan in any material respect, (y) increase
                     the compensation or bonus opportunity of any officer or
                     employee of the Company or its subsidiaries, except for
                     increases in the ordinary course of business consistent
                     with past practice and except for benefits required to be
                     paid under Company Benefit Plans as in effect on the date
                     of this Agreement, or (z) grant additional equity-based
                     compensation to any officer or employee of the Company or
                     its subsidiaries;

             (xi)    enter into any contracts or agreements in the ordinary
                     course of business requiring the payment, or receipt of
                     payment, of consideration in excess of $300,000, or modify,
                     amend or terminate any existing material contract that is
                     material to the business of the Company and its
                     subsidiaries, taken as a whole, other than (a)
                     modifications, amendments or terminations in the ordinary
                     course of business consistent with past practice, (b)
                     contracts, agreements or purchase orders for capital
                     expenditures permitted under this Section 4.1(a), and (c)
                     contracts, agreements or purchase orders entered into in
                     the ordinary course of business with customers and
                     suppliers for the sale of the Company's or any of its
                     subsidiary's products or the purchase of raw materials,
                     supplies, fuel, utilities and other goods or services, used
                     or consumed in the ordinary course of business.

             (xii)   settle any material action, suit, investigation or
                     proceeding other than any action, suit, investigation or
                     proceeding which involves only the payment of damages in an
                     immaterial amount and does not involve injunctive or other
                     equitable relief;

AGREEMENT AND PLAN OF MERGER - Page 28
<PAGE>

             (xiii)  fail to maintain with financially responsible insurers
                     insurance in such amounts and against such risks and losses
                     as are customary for companies engaged in their respective
                     businesses;

             (xiv)   fail to maintain in full force and effect all material
                     Permits that are required in connection with the conduct of
                     the businesses of the Company and its subsidiaries or sell,
                     transfer, license or otherwise dispose of any rights or
                     interests under such Permits;

             (xv)    make any change to its accounting methods, tax accounting
                     or accounting principles or practices, except as may be
                     required by GAAP; or

             (xvi)   authorize, or commit or agree to take, any of the foregoing
                     actions.

     (b)     Other Actions.  The Company and the Trust shall not, and shall not
             -------------
             permit any of their respective subsidiaries to, take any action
             that would, or that could reasonably be expected to, result in (i)
             any of the representations and warranties of such party set forth
             in this Agreement that are qualified as to materiality becoming
             untrue, (ii) any of such representations and warranties that are
             not so qualified becoming untrue in any material respect or (iii)
             any of the conditions to the Merger set forth in Article 6 not
             being satisfied.

     (c)     Advice of Changes.  The Company and the Trust shall promptly advise
             -----------------
             the other party orally and in writing of (i) any representation or
             warranty made by it contained in this Agreement becoming untrue or
             inaccurate (ii) the failure by it to comply with or satisfy any
             covenant, condition or agreement to be complied with or satisfied
             by it under this Agreement or (iii) any change or event having, or
             which could reasonably be expected to have, a material adverse
             effect on such party or on the truth of their respective
             representations and warranties or the ability of the conditions set
             forth in Article 6 to be satisfied; provided, however, that no such
                                                 --------  -------
             notification shall affect the representations, warranties,
             covenants, Disclosure Schedules or agreements of the parties or the
             conditions to the obligations of the parties under this Agreement.

     (d)     DRIP; ESPP.  On the date of this Agreement, the Company shall cause
             ----------
             purchases of Company Common Stock under the Dividend Reinvestment
             Plan and its Employee Stock Purchase Plan to be suspended or
             terminated and to continue such suspension or termination while
             this Agreement is in effect. In connection with any such suspension
             or termination, the Company may return any unspent contributed
             funds to the contributing participants in such plans.

Section 4.2  No Solicitation.
             ---------------

     (a)     From the date hereof until the Effective Time, the Company shall
             not, nor shall it permit any of its subsidiaries to, nor shall it
             authorize or permit any of its directors, officers or employees or
             any investment banker, financial advisor, attorney, accountant or
             other representative retained by it or any of its subsidiaries

AGREEMENT AND PLAN OF MERGER - Page 29
<PAGE>

             (the "Representatives") to, directly or indirectly through another
             person, (i) solicit or initiate (including by way of furnishing
             information), or take any other action designed and intended to
             facilitate or encourage, any inquiries or the making of any
             proposal that constitutes any Takeover Proposal (as defined below),
             (ii) participate or engage in any discussions or negotiations
             regarding any Takeover Proposal, or (iii) disclose any nonpublic
             information relating to the Company or any of its subsidiaries to
             any person; provided, however, that if, at any time prior to the
             --- ------
             approval and adoption of this Agreement by the holders of
             outstanding shares of Company Common Stock, the Board of Directors
             of the Company determines in good faith, (i) after consultation
             with outside counsel, that it is necessary to do so in order to
             comply with its fiduciary duties to the Company's stockholders
             under applicable law and (ii) after consultation with the Company's
             financial advisors, that such Takeover Proposal, if consummated,
             would be a Superior Proposal (as defined below), then the Company
             may, in response to a bona fide written Takeover Proposal that was
             not solicited by it, and subject to compliance with Section 4.2(c),
             (x) furnish information with respect to the Company and its
             subsidiaries to any person submitting such Takeover Proposal (which
             person may also be a person who participated in discussions with
             the Company prior to the execution of this Agreement and with whom
             the Company ceased discussions in accordance with Section 4.2(e)),
             provided such information is furnished pursuant to an existing
             confidentiality agreement or a confidentiality agreement with terms
             no less favorable to the Company than those contained in the
             Confidentiality Agreement, dated as of August 3, 2000, between the
             Company and Integrated Capital Associates, Inc., (including,
             without limitation, the standstill provisions thereof) and (y)
             participate in negotiations regarding such Takeover Proposal. For
             purposes of this Agreement, "Takeover Proposal" means any inquiry,
             proposal or offer from any person relating to any direct or
             indirect acquisition or purchase of 15% or more of the assets of
             the Company and its subsidiaries or 15% or more of any class of
             equity securities of the Company or any of its subsidiaries, any
             tender offer or exchange offer that if consummated would result in
             any person beneficially owning 15% or more of any class of equity
             securities of the Company or any of its subsidiaries, or any
             merger, consolidation, business combination, recapitalization,
             liquidation, dissolution or similar transaction involving the
             Company or any of its subsidiaries, in all cases other than the
             transactions contemplated by this Agreement.

     (b)     Except as expressly permitted by this Section 4.2, neither the
             Board of Directors of the Company nor any committee thereof shall
             (i) withdraw or modify, or propose publicly to withdraw or modify,
             in a manner adverse to the Trust, the approval or recommendation by
             such Board of Directors or such committee of this Agreement, the
             Stockholders Agreements, the Merger and the other transactions
             contemplated hereby or thereby, (ii) approve or recommend, or
             propose publicly to approve or recommend, any Takeover Proposal
             or (iii) cause the Company to enter into any letter of intent,
             agreement in principle, acquisition agreement or other similar
             agreement or fee arrangement or other agreement (each, an
             "Acquisition Agreement") related to any Takeover Proposal.

AGREEMENT AND PLAN OF MERGER - Page 30
<PAGE>

             Notwithstanding the foregoing, if prior to the approval and
             adoption of this Agreement by the holders of Company Common Stock,
             the Board of Directors of the Company receives an unsolicited
             Takeover Proposal which the Board of Directors determines in good
             faith (i) after consultation with the Company's financial advisors,
             constitutes a Superior Proposal, and (ii) after consultation with
             outside counsel, that it is necessary to do so in order to comply
             with its fiduciary duties to the Company's stockholders under
             applicable law, the Board of Directors of the Company may (x)
             withdraw or modify its approval or recommendation of this
             Agreement, the Stockholders Agreements, the Merger or the
             transactions contemplated hereby or thereby, (y) approve or
             recommend such Superior Proposal or (z) terminate this Agreement
             and concurrently with or after such termination, if it so chooses,
             cause the Company to enter into any Acquisition Agreement with
             respect to any Superior Proposal subject to payment of the
             Termination Fee prior to or concurrently with the termination
             hereof, but only (i) if the Company has complied with Section
             4.2(a), (ii) if such action is taken at a time that is after the
             third business day following the Trust's receipt of written notice
             from the Company advising the Trust that the Board of Directors of
             the Company has received a Superior Proposal, specifying the
             material terms and conditions of such Superior Proposal and
             identifying the person making such Superior Proposal and (iii) the
             Trust does not make prior to the lapse of such time period a
             definitive, binding offer which provides equal or greater value to
             the stockholders of the Company as the Superior Proposal. For
             purposes of this Agreement, a "Superior Proposal" means any bona
             fide written Takeover Proposal made by a third party on terms that
             the Board of Directors of the Company determines in its good faith
             judgment, after consultation with its financial advisors and after
             taking into account all the terms and conditions of such proposal,
             provides greater value to the Company's stockholders than the
             Merger and for which financing, to the extent required, is then
             committed or which the Board of Directors of the Company has
             reasonably determined can be obtained by such third party.

     (c)     In addition to the obligations of the Company set forth in
             paragraphs (a) and (b) of this Section 4.2, the Company shall
             immediately (within 24 hours) advise the Trust of any Takeover
             Proposal or Superior Proposal, the material terms and conditions
             known to the Company of such Takeover Proposal or Superior
             Proposal, a copy of any offer or other written communications and
             the identity of the person making such request, Takeover Proposal
             or Superior Proposal. The Company shall keep the Trust fully
             informed of the status and details of any such request or proposal
             and the status of any discussions and negotiations in relation
             thereto.

     (d)     Nothing contained in this Section 4.2 shall prohibit the Company
             from taking and disclosing to its stockholders a position
             contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
             from making any disclosure to the Company's stockholders if, in the
             good faith judgment of the Board of Directors of the Company, after
             consultation with outside counsel, failure so to disclose would be
             a breach of its fiduciary duties to the Company's stockholders
             under

AGREEMENT AND PLAN OF MERGER - Page 31
<PAGE>

             applicable law; provided, however, that neither the Company nor its
             Board of Directors nor any committee thereof shall, except as
             permitted by Section 4.2(b), withdraw or modify, or propose
             publicly to withdraw or modify, its position with respect to this
             Agreement, the Merger or approve or recommend, or propose publicly
             to approve or recommend, a Takeover Proposal.

     (e)     Without the prior consent of the Trust, the Company shall not (i)
             except to the extent contemplated by this Agreement, amend or
             modify the Rights Agreement or redeem or terminate the Rights
             Agreement or (ii) modify or release any person from any
             confidentiality or standstill agreement to which the Company is a
             party if such action would have the purpose or effect of permitting
             or facilitating the submission of a Takeover Proposal by such
             person. Immediately upon the execution of this Agreement, the
             Company shall, and the Company shall cause its subsidiaries and
             Representatives to, cease and cause to be terminated all
             activities, discussions and negotiations, if any, with any person
             conducted prior to the date hereof with respect to, or seeking to
             obtain, any Takeover Proposal.

                                   ARTICLE 5

                             ADDITIONAL AGREEMENTS

             Section 5.1  Preparation of the Proxy Statement; Company
                          -------------------------------------------
     Stockholders Meeting. The Company, acting through its Board of Directors,
     --------------------
     shall, in accordance with applicable law, its Second Amended and Restated
     Certificate of Incorporation and its Bylaws:

     (a)     As promptly as practicable following the date of this Agreement,
             the Company shall prepare and file with the SEC the Proxy
             Statement, use its reasonable best efforts to have the Proxy
             Statement cleared by the SEC and thereafter mailed to the Company's
             stockholders at the earliest practical date. The Trust and its
             counsel shall be given the reasonable opportunity to review and
             comment upon the Proxy Statement (and any supplements thereto)
             prior to the time they are filed with the SEC. The Company shall
             provide the Trust and its counsel with a copy of any written
             comments or telephonic notification of any verbal comments that are
             received by the Company from the SEC or its staff with respect to
             the Proxy Statement and shall further provide the Trust and its
             counsel with a copy of any written response and telephonic
             notifications of any verbal responses by the Company. If at any
             time prior to the Closing Date any fact, event or development is
             discovered by the Company which is required under applicable law to
             be set forth in a supplement to the Proxy Statement, the Company
             shall prepare and file with the SEC any such supplement or
             amendment and shall disseminate the same to its stockholders in the
             manner required by applicable law.

     (b)     As promptly as practicable following the date of this Agreement,
             subject to Section 4.2, the Company will, as soon as practicable
             following the date of this Agreement, duly call, give notice of,
             convene and hold a meeting of its

AGREEMENT AND PLAN OF MERGER - Page 32
<PAGE>

             stockholders (the "Company Stockholders Meeting") for the purpose
             of obtaining the Company Stockholder Approval. Subject to Section
             4.2(b), the Company will, through its Board of Directors, recommend
             to its stockholders the approval and adoption of this Agreement,
             the Merger and the consummation of the other transactions
             contemplated hereby and shall use its reasonable best efforts to
             obtain such approval by its stockholders.

     (c)     The Trust shall vote, or cause to be voted, all of the Shares then
             owned by it, Acquisition Sub or any of its other subsidiaries in
             favor of the approval and adoption of this Agreement, the Merger
             and the transactions contemplated hereby.

Section 5.2  Access to Information; Confidentiality
             --------------------------------------

     From the date of this Agreement until the Closing Date, the Company shall,
and shall cause each of its respective subsidiaries (i) to afford to the Trust
and to its officers, employees, financial advisors, attorneys, accountants and
other representatives and to any other person that the Trust or the Acquisition
Sub has advised the Company is or may be interested in purchasing from the
Surviving Corporation after the Merger any of the assets, facilities or
operations of the Company, or any of its subsidiaries, reasonable access during
normal business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records,
(ii) instruct its counsel, financial advisors, auditors and other authorized
representatives of the Company and its subsidiaries to cooperate with the Trust
in its investigation of the Company and its subsidiaries, and (iii) to furnish
promptly to the Trust (a) a copy of each report, schedule, form, statement and
other document filed by it during such period pursuant to the requirements of
U.S. Federal or state securities laws and (b) other information concerning its
business, properties and personnel as such other party may reasonably request.
The Trust will hold, and will cause its officers, employees, financial advisors,
attorneys, accountants and other representatives and affiliates to hold, any
nonpublic information in accordance with the terms of that certain
Confidentiality Agreement dated August 3, 2000 by and between Integrated Capital
Associates, Inc. and the Company (the "Confidentiality Agreement").

Section 5.3  Reasonable Best Efforts.
             -----------------------

     Subject to Section 4.2(b), upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practical, the Merger and the other transactions contemplated
by this Agreement, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, such as those referred to in Sections 4.1(d)(1)-(4) and
4.2(b)(1)-(3)) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary waivers, consents or
approvals from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this

AGREEMENT AND PLAN OF MERGER - Page 33
<PAGE>

Agreement, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement.

     Without limiting the generality of the foregoing, each of the Company and
the Trust shall, to the extent required under the HSR Act, promptly file or
cause to be filed with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division")
notification and report forms pursuant to the HSR Act relating to the merger and
the other transactions contemplated in this Agreement.  The Company and the
Trust shall promptly respond to any request for additional information or
documenting material by the FTC or Antitrust Division and shall cooperate with
each other to effect the expiration of any waiting periods applicable thereto as
promptly as practicable.  The Company and the Trust shall each consult with the
other and use their reasonable best efforts to coordinate any communications or
filings with the FTC and the Antitrust Division.

     In connection with and without limiting the foregoing, the Company and its
Board of Directors shall (i) take all reasonable action necessary to ensure that
no state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement, the Stockholders Agreements, the Merger or any of
the other transactions contemplated hereby or thereby and (ii) if any state
takeover statute or similar statute or regulation becomes applicable to this
Agreement, the Stockholders Agreements, the Merger or any other transaction
contemplated hereby or thereby, take all action necessary to ensure that the
Merger and the other transactions contemplated by this Agreement and the
Stockholders Agreements may be consummated as promptly as practical on the terms
contemplated herein and therein and otherwise to minimize the effect of such
statute or regulation on the Merger and the other transactions contemplated by
this Agreement and the Stockholders Agreements.

     In addition, the Trust undertakes and agrees to use its reasonable best
efforts and to take all reasonable actions necessary to obtain the Commitment
within the 30-day period specified in Section 3.2(e), to finalize the definitive
documentation as promptly as practicable thereafter for the funding in full of
the merger consideration that will become payable at the Effective Time and to
cause the conditions to funding thereunder to be satisfied.

Section 5.4  Employee Matters
             ----------------

     (a)     The Trust agrees that the Company shall honor in accordance with
             their respective terms and, on and after the Effective Time, the
             Trust shall cause the Surviving Corporation to honor all Company
             Benefit Plans and all other written employment, severance,
             termination and retirement agreements to which the Company is a
             party as of the Effective Time, and which are set forth on the
             Company Disclosure Schedule. Subject to the preceding sentence, the
             Trust agrees to cause the Surviving Corporation, after consummation
             of the Merger, to pay all amounts provided under such Company
             Benefit Plans and agreements in accordance with their respective
             terms and to honor, and to cause the Surviving Corporation to
             honor, all rights and privileges to or with respect to any such

AGREEMENT AND PLAN OF MERGER - Page 34
<PAGE>

               Company Benefit Plans or agreements that are vested at the
               Effective Time or vested as a result of the Merger.

     (b)       The Trust agrees that, for a period of no less than one year
               after the Effective Time, it shall, and shall cause the Surviving
               Corporation to, provide employee pension and welfare plans (other
               than stock options, restricted stock units and other equity-based
               or phantom equity-based awards) for the benefit of employees and
               former employees of the Company, that, in the aggregate, are not
               materially less favorable than the Pension Plans and Welfare
               Plans in effect immediately prior to the Effective Time. To the
               extent any benefit plan of the Trust (or any plan of the
               Surviving Corporation) shall be made applicable to any employee
               or former employee of the Company, the Trust shall, or shall
               cause the Surviving Corporation to, grant to employees and former
               employees of the Company credit for service with the Company
               prior to the Effective Time for the purposes of determining
               eligibility to participate and the employee's nonforfeitable
               interest in benefits thereunder. In addition, to the extent any
               benefit plan of the Trust (or any plan of the Surviving
               Corporation) that constitutes a "Welfare Plan," as defined in
               Section 4.1(l) hereof, shall be made applicable to any employee
               or former employee of the Company, the Trust shall, or shall
               cause the Surviving Corporation to, (i) waive all preexisting
               condition exclusions and waiting periods otherwise applicable to
               employees and former employees of the Company, except to the
               extent any such limitations or waiting periods in effect under
               comparable Welfare Plans have not been satisfied as of the date
               such plan is made so applicable and (ii) credit each employee and
               former employee of the Company for any co-payments and
               deductibles paid by such employee or former employee under
               comparable Welfare Plans during the current year. Nothing in this
               Agreement shall be interpreted as limiting the power of the
               Surviving Corporation to amend or terminate any Company Benefit
               Plan or any other employee benefit plan, program, agreement or
               policy or as requiring the Surviving Corporation or the Trust to
               continue (other than as required by its terms) any written
               employment contract.

Section 5.5    Rights Agreement.
               ----------------

     The Board of Directors of the Company shall take all further action (in
addition to that referred to in Section 3.1(o)) necessary (including redeeming
the Rights immediately prior to the Effective Time or amending the Rights
Agreement) in order to render the Rights inapplicable to the execution of this
Agreement and the Stockholders Agreements and the consummation of the Merger and
the other transactions contemplated hereby and thereby.

Section 5.6    Continuance of Existing Indemnification Rights.
               ----------------------------------------------

     (a)       For six years after the Effective Time, and during the pendency
               thereafter of any Claim (as defined below) asserted or made
               within such six year period, the Surviving Corporation shall
               indemnify, defend and hold harmless any person who is now, or has
               been at any time prior to the date hereof, or who becomes prior
               to the Effective Time, a director or officer (an "Indemnified
               Person") of the

AGREEMENT AND PLAN OF MERGER - Page 35
<PAGE>

          Company or any of its subsidiaries against all losses, claims,
          damages, liabilities, costs and expenses (including attorneys' fees
          and expenses), judgments, fines, losses and amounts paid in settlement
          in connection with any actual or threatened action, suit, claim,
          proceeding or investigation (each a "Claim") to the extent that any
          such Claim directly or indirectly is based on, or arises out of the
          fact that: such Indemnified Person is or was a director or officer of
          the Company or any of its subsidiaries, including any claim based in
          whole or in part on this Agreement or any of the transactions
          contemplated hereby, in each case, to the extent that any such Claim
          pertains to any matter or fact arising, existing or occurring prior to
          or at the Effective Time, regardless of whether such Claim is asserted
          or claimed prior to, at or after the Effective Time, to the fullest
          extent permitted under the DGCL, the Company's Second Restated
          Certificate of Incorporation and by-laws and any indemnification
          agreement to which the Company and an Indemnified Party are parties,
          including provisions relating to advancement of expenses incurred in
          the defense of any such Claim; provided, however, that the Surviving
          Corporation shall not be required to indemnify any Indemnified Person
          in connection with any proceeding (or portion thereof) involving any
          Claim initiated by such Indemnified Person unless the initiation of
          such proceeding (or portion thereof) was authorized by the Board of
          Directors of the Surviving Corporation or unless such proceeding is
          brought by an Indemnified Person to enforce rights under this Section
          5.6 and provided, further, that the Surviving Corporation shall not be
          liable for any settlement effected without its prior written consent
          (which consent shall not be unreasonably withheld). Any Indemnified
          Party wishing to claim indemnification under this Section 5.6 upon
          learning of any such Claim shall notify the Company (or after the
          Effective Time, the Surviving Corporation), but the failure to so
          notify shall not relieve a party from any liability that it may have
          under this Section 5.6, except to the extent that such failure
          prejudices such party. The Indemnified Parties as a group may retain
          only one law firm to represent them with respect to each such matter
          unless there is, under applicable standards of professional conduct, a
          conflict or a potential conflict on any significant issue between the
          positions of any two or more Indemnified Parties. Without limiting the
          generality of the foregoing, if any Indemnified Person becomes
          involved in any Claim, after the Effective Time, then the Surviving
          Corporation shall periodically advance to such Indemnified Person its
          legal and other expenses (including the cost of any investigation and
          preparation incurred in connection therewith), subject to such
          Indemnified Person providing an undertaking to reimburse all amounts
          so advanced in the case of a final nonappealable determination by a
          court of competent jurisdiction that such Indemnified Person is not
          entitled to be indemnified therefor.

     (b)  The Trust and the Company agree that all rights to indemnification, to
          defense, and being held harmless (including rights to advancement of
          expenses), existing in favor of any Indemnified Person, as provided in
          the Company's Second Restated Certificate of Incorporation or by-laws
          and any indemnification agreement in effect at the date hereof, shall
          survive the Merger and shall continue in full force and effect,
          without any amendment thereto that would be adverse to

AGREEMENT AND PLAN OF MERGER - Page 36
<PAGE>

               any Indemnified Person unless, as to any such Indemnified Person,
               such Indemnified person consents thereto. The obligations of the
               Surviving Corporation pursuant to Section 5.6(a) and this Section
               5.6(B) shall be assigned in accordance with Section 8.10.

     (c)       The Surviving Corporation shall maintain the Company's existing
               directors' and officers' liability insurance policy (the "D&O
               Insurance") for a period of not less than six years after the
               Effective Time; provided, however, that (i) upon the sale by the
               Surviving Corporation of all or substantially all of its assets
               to an unaffiliated person, which person provides a substitute
               policy of similar coverage and amounts containing terms no less
               advantageous to such former directors or officers than the D&O
               Insurance and agrees to maintain such coverage for a period of
               not less than six years after the Effective Time, the Surviving
               Corporation's obligation hereunder shall cease, (ii) the Company
               or such unaffiliated person, as the case may be, may substitute
               therefor policies of similar coverage and amounts containing
               terms no less advantageous to such former directors or officers
               and (iii) if the existing D&O Insurance expires or is canceled
               during such period, then the Surviving Corporation or such
               unaffiliated person, as the case may be, shall use its reasonable
               best efforts to obtain a directors' and officers' liability
               insurance policy substantially similar to the D&O Insurance;
               provided, further, that if the aggregate annual premiums for such
               insurance pursuant to this Section 5.6(c) at any time during such
               period shall exceed 100% of the per annum rate of premium paid by
               the Company and its subsidiaries as of the date hereof for such
               insurance, the Surviving Corporation shall provide only such
               coverage as shall then be available for such amount.

Section 5.7    Fees and Expenses.
               -----------------

     (a)       Except as set forth in this Section 5.7, all fees and expenses
               incurred in connection with the Merger, this Agreement and the
               other transactions contemplated by this Agreement shall be paid
               by the party incurring such fees or expenses, whether or not the
               Merger is consummated.

     (b)       If this Agreement is terminated by (i) either the Trust or the
               Company pursuant to Section 7.1(b)(i) or Section 7.1(b)(ii) and
               prior to the termination hereof a Takeover Proposal has been made
               by any person or any person publicly announces its intent to make
               a Takeover Proposal, unless, in the case of a termination by the
               Company, the failure to consummate the Merger is the result of a
               material breach of this Agreement by the Trust or Acquisition Sub
               or a material failure by the Trust or Acquisition Sub to fulfill
               any obligation under this Agreement, (ii) the Trust pursuant to
               Section 7.1(b)(iv), 7.1(d), 7.1(e) or 7.1(h), or (iii) the
               Company pursuant to Section 7.1(c), then the Company shall
               promptly pay the Trust a fee equal to $10,000,000 (the
               "Termination Fee"), which Termination Fee shall be payable by
               wire transfer of same day funds not later than the date of
               termination of this Agreement.

AGREEMENT AND PLAN OF MERGER - Page 37
<PAGE>

Section 5.8    Public Announcements.
               --------------------

     The Trust and the Company will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, stock exchange requirements or court process. If
either the Company or the Trust determines that a public announcement is
required by applicable law, stock exchange requirement or court process, prior
to making such announcement, it will consult and coordinate with the other party
regarding the substance thereof. The parties agree that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed upon by the parties.

Section 5.9    Stockholder Litigation.
               ----------------------

     The Company shall give the Trust the opportunity to participate in the
defense or settlement of any stockholder litigation against the Company and its
directors relating to the transactions contemplated by this Agreement; provided,
however, that no such settlement shall be agreed to without the Trust's consent,
which consent shall not be unreasonably withheld.

Section 5.10   Bank Credit Agreement and Indenture.
               -----------------------------------

     The Surviving Corporation shall honor, on and after the Effective Time, the
obligations of the Company under the Bank Credit Agreement and the Indenture.
The Trust acknowledges that (a) under the Bank Credit Agreement the change in
beneficial ownership of the Company resulting from the Merger will constitute an
Event of Default (as defined in the Bank Credit Agreement) and (b) for purposes
of the Indenture, the Merger will constitute a Change of Control (as such term
is defined in Section 3.17 of the Indenture). The Surviving Corporation shall,
after consummation of the Merger, pay, as and when due, all amounts provided for
under the Bank Credit Agreement and the Senior Subordinated Note Indenture in
accordance with their respective terms (including by making a Change of Control
Offer (as defined in Section 3.17 of the Indenture) under the Indenture, to the
extent such offer is required by the Indenture).

Section 5.11   Amendment of Disclosure Schedules.
               ---------------------------------

     Each party agrees that, with respect to the representations and warranties
of such party contained in this Agreement, such party shall have the continuing
obligation until the Effective Time to supplement or amend promptly the
Schedules to such party's Disclosure Schedule with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in such party's
Disclosure Schedule. For all purposes of this Agreement, including for purposes
of determining whether the conditions set forth in Article 6 have been
fulfilled, the Schedules to a party's Disclosure Schedule shall be deemed to
include only that information contained therein on the date of this Agreement
and shall be deemed to exclude all information contained in any supplement or
amendment thereto, but if the Effective Time shall occur, then all matters
disclosed pursuant to any such supplement or amendment at or prior to the
Effective Time shall be waived and no party shall be entitled to make a claim
thereon pursuant to the terms of this Agreement.

AGREEMENT AND PLAN OF MERGER - Page 38
<PAGE>

                                   ARTICLE 6

                             CONDITIONS PRECEDENT

Section 6.1    Conditions to Each Party's Obligation To Effect the Merger.
               ----------------------------------------------------------

     The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:

     (a)       Stockholder Approvals. The Company Stockholder Approval shall
               ---------------------
               have been obtained to the extent required by the DGCL, the
               Company's Second Restated Certificate of Incorporation and the
               Company's by-laws.

     (b)       HSR Act.  The waiting period (and any extension thereof)
               -------
               applicable to the Merger under the HSR Act shall have been
               terminated or shall have expired.

     (c)       No Injunctions or Restraints.  No judgment, decree, statute, law,
               ----------------------------
               ordinance, rule, regulation, temporary restraining order,
               preliminary or permanent injunction or other order enacted,
               entered, promulgated, enforced or issued by any court of
               competent jurisdiction or other Governmental Entity or other
               legal restraint or prohibition (collectively, "Restraints")
               preventing the consummation of the Merger shall be in effect;
               provided, however, that each of the parties shall have used all
               reasonable best efforts to prevent the enactment, promulgation,
               entry, issuance or enforcement of any such Restraints and to
               appeal as promptly as possible any such Restraints that may be
               entered or issued.

Section 6.2    Conditions to Obligations of the Trust and Acquisition Sub.
               ----------------------------------------------------------

     The obligations of the Trust and Acquisition Sub to effect the Merger are
further subject to satisfaction or waiver (by the Trust) on or prior to the
Closing Date of the following conditions:

     (a)       Representations and Warranties.  The representations and
               ------------------------------
               warranties of the Company set forth in this Agreement shall be
               true and correct (without regard to any materiality
               qualifications or references to material adverse effect contained
               in any specific representation or warranty) as of the date of
               this Agreement and as of the Closing Date as though made on and
               as of the Closing Date, except to the extent such representations
               and warranties expressly relate to an earlier date (in which case
               as of such date); provided, however, that this paragraph (a)
               shall be deemed satisfied so long as the failure of all such
               representations and warranties to be true and correct would,
               collectively, not result in a material adverse effect on the
               Company, and the Trust shall have received a certificate signed
               on behalf of the Company by its chief executive officer and chief
               financial officer to such effect.

     (b)       Performance of Obligations of the Company.  The Company shall
               -----------------------------------------
               have performed in all material respects all obligations required
               to be performed by it under this Agreement at or prior to the
               Closing Date, and the Trust shall have received a

AGREEMENT AND PLAN OF MERGER - Page 39
<PAGE>

               certificate signed on behalf of the Company by its chief
               executive officer and chief financial officer to such effect.

     (c)       No Litigation. There shall not be pending or threatened by any
               -------------
               Governmental Entity any suit, action or proceeding (i)
               challenging the acquisition by the Trust or Acquisition Sub of
               any shares of capital stock of the Company or the Surviving
               Corporation, seeking to restrain or prohibit the consummation of
               the Merger or any of the other transactions contemplated by this
               Agreement, (ii) seeking to prohibit or limit the ownership or
               operation by the Trust or any of its subsidiaries of any material
               portion of the business or assets of the Company, or any of its
               subsidiaries, or to compel the Trust or any of its subsidiaries
               to dispose of or hold separate any material portion of the
               business or assets of the Company or any of its subsidiaries, as
               a result of the Merger or any of the other transactions
               contemplated by this Agreement, (iii) seeking to impose
               limitations on the ability of the Trust to acquire or hold, or
               exercise full rights of ownership of, any shares of capital stock
               of the Company or the Surviving Corporation, or (iv) seeking to
               prohibit the Trust or any of its subsidiaries from effectively
               controlling in any material respect the business or operations of
               the Company or its subsidiaries. In addition there shall not be
               any judgment, order, decrees, statute, law, ordinance, rule or
               regulation, enacted, entered, promulgated or enforced that is
               reasonably likely to result, directly or indirectly, in any of
               the consequences referred to in clauses (ii) through (iv) of the
               immediately preceding sentence.

Section 6.3    Conditions to Obligation of the Company.
               ---------------------------------------

     The obligation of the Company to effect the Merger is further subject to
satisfaction or waiver (by the Company) on or prior to the Closing Date of the
following conditions:

     (a)       Representations and Warranties.  The representations and
               ------------------------------
               warranties of the Trust set forth in this Agreement shall be true
               and correct (without regard to any materiality qualifications or
               references to material adverse effect contained in any specific
               representation or warranty) as of the Closing Date as though made
               on and as of the Closing Date, except to the extent such
               representations and warranties expressly relate to an earlier
               date (in which case as of such date); provided, however, that
               this paragraph (a) shall be deemed satisfied so long as the
               failure of all such representations and warranties to be true and
               correct would, collectively, not result in a material adverse
               effect on the Trust, and the Company shall have received a
               certificate signed on behalf of the Trust by its trustee to such
               effect.

     (b)       Performance of Obligations of the Trust.  The Trust shall have
               ---------------------------------------
               performed in all material respects all obligations required to be
               performed by it under this Agreement at or prior to the Closing
               Date, and the Company shall have received a certificate signed on
               behalf of the Trust by its trustee to such effect.

     (c)       Commercial Production at Lawton Mill. On or before October 1,
               ------------------------------------
               2000, the Company or its subsidiary Republic Paperboard Company
               ("RPC") shall have delivered to James Hardie Gypsum, Inc.
               ("Hardie"), the "Commencement Notice"

AGREEMENT AND PLAN OF MERGER - Page 40
<PAGE>

               (as such term is defined in Section 3(b) of the Paperboard Supply
               Agreement dated as of May 14, 1998, among RPC, the Company and
               Hardie (the "Hardie Contract")).

                                   ARTICLE 7

                       TERMINATION, AMENDMENT AND WAIVER

Section 7.1    Termination.
               -----------

     This Agreement may be terminated at any time prior to the Effective Time,
whether before or after the Company Stockholder Approval:

     (a)       by mutual written consent of the Trust and the Company; or

     (b)       by either the Trust or the Company if:

               (i)    the Merger shall not have been consummated on or before
                      January 31, 2001, unless the failure to consummate the
                      Merger is the result of a material breach of this
                      Agreement or a material failure to fulfill any obligation
                      under the Agreement by the party seeking to terminate this
                      Agreement; provided, however, that the passage of such
                      period shall be tolled for any part thereof (but not
                      exceeding 20 calendar days in the aggregate) during which
                      any party shall be subject to a nonfinal order, decree,
                      ruling, injunction or action restraining, enjoining or
                      otherwise prohibiting the consummation of the Merger or
                      the calling or holding of the Company Stockholder Meeting;

               (ii)   the Company Stockholder Meeting has been duly convened but
                      the Company Stockholder Approval shall not have been
                      obtained at such Company Stockholder Meeting (or any
                      adjournment thereof);

               (iii)  any Governmental Entity shall have issued an order,
                      decree, ruling or injunction or taken any other action
                      permanently enjoining, restraining or otherwise
                      prohibiting the Merger and such order, decree, ruling,
                      injunction or other action shall have become final and
                      nonappealable;

               (iv)   the other party breaches any covenant or other agreement
                      contained in this Agreement that (A) would give rise to
                      the failure of such party to satisfy any condition set
                      forth in Section 6.2(a) or (b) or Section 6.3(a) or (b),
                      as applicable, and (B) cannot be or has not been cured
                      within 45 days after the giving of written notice to the
                      breaching party of such breach (a "Material Breach")
                      (provided that the terminating party is not then in breach
                      in any material respect of any obligation, covenant or
                      other agreement contained in this Agreement or in Material
                      Breach of any representation or warranty contained in this
                      Agreement); or

AGREEMENT AND PLAN OF MERGER - Page 41
<PAGE>

     (c)  by the Company in accordance with Section 4.2(b), provided that it has
          complied with all provisions thereof and that it complies with the
          requirements, if then applicable, of Section 5.7; or

     (d)  by the Trust if (i) the Board of Directors of the Company or any
          committee thereof shall have failed to recommend, withdrawn, or
          modified in a manner adverse to the Trust, its approval or
          recommendation of this Agreement, the Merger and the other
          transactions contemplated hereby or approved or recommended any
          Superior Proposal, (ii) the Board of Directors of the Company or any
          committee thereof shall have resolved to take any of the foregoing
          actions or (iii) failed to affirm its recommendation of this
          Agreement, the Merger or the other transactions contemplated hereby
          within three Business Days of a request to do so by the Trust; or

     (e)  by the Trust, if the Company shall have entered into, or publicly
          announced its intention to enter into, a definitive agreement or an
          agreement in principle with respect to a Takeover Proposal or a
          Superior Proposal; or

     (f)  by the Company if (i) the Trust fails to deliver a copy of the
          Commitment to the Company during the 30-day period specified in
          Section 3.2(e) (provided that as of the time of such termination
          pursuant to this clause (f)(i) such failure is continuing); or (ii) as
          of the date of the Company Stockholder Meeting, (A) the Trust has not
          finalized the definitive loan agreements pursuant to which the Trust
          will obtain the funds for the payment in full of the merger
          consideration in accordance with Article 2 (and such loan documents
          are not finalized as of the time of such termination pursuant to this
          clause (f)(ii)), and (B) the Company is not then in breach of any of
          its obligations, covenants or agreements hereunder, which breach has
          had or, if continued, is likely to have a material adverse effect on
          the Company; or (iii) not later than 48 hours after the Company's
          stockholders have approved and adopted this Agreement, the Merger and
          the consummation of the other transactions contemplated hereby at the
          Company Stockholder Meeting, all conditions (other than consummation
          of the Closing) to the Trust obtaining the funds necessary to pay in
          full the merger consideration in accordance with Article 2 have not
          been satisfied, provided that as of the time of such termination (A)
          such conditions to obtaining the funds remain unsatisfied, (B) all of
          the conditions to Closing set forth in Sections 6.1 and 6.2 have been
          satisfied (and the officers of the Company specified in Section 6.2(a)
          and (b) are prepared to deliver the certificates required thereby) and
          (C) the Company is not then in breach of any of its obligations,
          covenants or agreements hereunder, which breach has had or, if
          continued, is likely to have a material adverse effect on the Company;
          or

     (g)  by the Company if the Trust fails to close after the second business
          day after (1) all of the conditions set forth in Sections 6.1 and 6.2
          have been satisfied (and the officers of the Company specified in
          Sections 6.2(a) and (b) are prepared to deliver the certificates
          required thereby), (2) the Company is not then in breach in any
          material respect of any of its obligations, covenants or agreements
          hereunder and (3) the Company gives 2 business days' prior written
          notice of its satisfaction

AGREEMENT OF PLAN MERGER - Page 42
<PAGE>

               of all obligations under Sections 6.1 and 6.2 and the waiver by
               the Company of any obligations of the Trust not satisfied under
               Section 6.3; or

     (h)       by the Trust if the Company fails to close after the second
               business day after (1) all of the conditions set forth in
               Sections 6.1 and 6.3 have been satisfied (and the officers of the
               Trust specified in Sections 6.3(a) and (b) are prepared to
               deliver the certificates required thereby), (2) the Trust is not
               then in breach in any material respect of any of its obligations,
               covenants or agreements hereunder and (3) the Trust gives 2
               business days' prior written notice of its satisfaction of all
               obligations under Sections 6.1 and 6.3 and the waiver by the
               Trust of any obligations of the Company not satisfied under
               Section 6.2; or

     (i)       by the Trust at any time after October 1, 2000 if the
               "Commencement Notice" (as such term is defined in Section 3(b) of
               Hardie Contract) was not given in accordance with the Hardie
               Contract on or before October 1, 2000.

Section 7.2    Effect of Termination.
               ---------------------

     (a)       Upon termination of this Agreement by either the Company or the
               Trust as provided in Section 7.1, this Agreement shall forthwith
               become void and have no effect, without any liability or
               obligation on the part of the Trust, Acquisition Sub or the
               Company, other than the provisions of Section 3.1(p), Section
               3.2(d), the last sentence of Section 5.2, Section 5.7, this
               Section 7.2 and Article 8.

     (b)       The Trust and Acquisition Sub agree that if this Agreement is
               terminated by the Company in accordance with the terms of Section
               7.1(b)(iv), Section 7.1(f) or Section 7.1(g), the Trust shall be
               obligated to pay to the Company $12,000,000 as liquidated
               damages, which payment (i) shall be funded by the Company drawing
               such amount under the Letter of Credit, (ii) shall constitute the
               exclusive remedy available to the Company at law or in equity in
               respect of any such termination by the Company or any breach of
               this Agreement by the Trust or Acquisition Sub, and (iii) shall
               constitute payment for all claims, damages, out-of-pocket
               expenses and fees arising out of or incurred by the Company in
               connection with this transaction. The Letter of Credit furnished
               to the Company by the Trust concurrently with the execution of
               this Agreement shall constitute the source for funding the
               $12,000,000 payment required from the Trust pursuant to this
               Section 7.2(b).

Section 7.3    Amendment.
               ---------

     This Agreement may be amended by the parties at any time before or after
the Company Stockholder Approval; provided, however, that after any such
approval, there shall not be made any amendment which by law requires further
approval by the stockholders of the Company without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.

AGREEMENT AND PLAN OF MERGER - Page 43
<PAGE>

Section 7.4    Extension; Waiver.
               -----------------

     At any time prior to the Effective Time, a party may (a) extend the time
for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties of the
other parties contained in this Agreement or in any document delivered pursuant
to this Agreement or (c) subject to the proviso of Section 7.3, waive compliance
by the other parties with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.


                                   ARTICLE 8

                               GENERAL PROVISIONS

Section 8.1    Nonsurvival of Representations and Warranties.
               ---------------------------------------------

     None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
that by its terms contemplates performance after the Effective Time.

Section 8.2    Notices.
               -------

     All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):

     (a)       if to the Trust or Acquisition Sub, to

                    Premier Construction Products Statutory Trust
                    c/o First Union National Bank, as trustee
                    10 State House Square
                    Hartford, CT 06103
                    Fax: (860) 247-1356
                    Attention: W. Jeffrey Kramer

AGREEMENT AND PLAN OF MERGER - Page 44
<PAGE>

                    with a copy to:

                    Premier Construction Products Acquisition Corp.
                    220 Jackson Street
                    San Francisco, California 94111
                    Fax: 415-986-5511
                    Attention: General Counsel

                    and

                    Andrews & Kurth L.L.P.
                    4200 Chase Tower
                    Houston, Texas 77002
                    Fax:  (713) 220-4285
                    Attention: G. Michael O'Leary

                    if to the Company, to

                    Republic Group Incorporated
                    811 East 30th Avenue
                    Hutchinson, Kansas 67502
                    Fax: (316) 727-2727
                    Attention: Doyle R. Ramsey

                    with a copy to:

                    Locke Liddell & Sapp LLP
                    2200 Ross Avenue, Suite 2200
                    Dallas, Texas 75201
                    Attention: Bryan E. Bishop
                    Fax: 214-740-8800

Except as provided below, all such notices, requests and other communications
shall be deemed received on the date of receipt by the recipient thereof if
actually received prior to 5 p.m. in the place of receipt and such day is a
business day in the place or receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding business day in the place of receipt. Any notice given exclusively by
registered or certified mail as provided above shall be deemed received on the
fifth business day.

Section 8.3    Definitions.
               -----------

     For purposes of this Agreement:

     (a)       "affiliate" of any person means another person that directly or
               indirectly, through one or more intermediaries, controls, is
               controlled by, or is under common control with, such first
               person;

AGREEMENT AND PLAN OF MERGER - Page 45
<PAGE>

     (b)       "Bank Credit Agreement" means that certain Credit Agreement dated
               as of July 15, 1998 among the Company, the banks party thereto,
               and Bank of America, N.A., as Administrative Agent, as amended;

     (c)       "Filed SEC Documents" means SEC Documents filed by the Company
               pursuant to the Securities Exchange Act of 1934, as amended;

     (d)       "Indenture" means that certain Indenture dated as of July 15,
               1998 between the Company and UMB Bank, N.A., as Trustee;

     (e)       "material adverse effect" means, when used in connection with a
               party to this Agreement, any change, effect, event or occurrence
               that (i) is or would reasonably be expected to be materially
               adverse to the assets, business, condition (financial or
               otherwise) or results of operations of such party and its
               subsidiaries taken as a whole; (ii) impairs, or would reasonably
               be expected to impair, the ability of such party to perform its
               obligations under this Agreement in any material respect or (iii)
               prevents or materially delays, or would reasonably be expected to
               prevent or materially delay the consummation of any of the
               transactions contemplated by this Agreement.

     (f)       "person" means an individual, corporation, limited liability
               company, partnership, joint venture, association, trust,
               unincorporated organization or other entity;

     (g)       "subsidiary" of any person means another person, an amount of the
               voting securities, other voting ownership or voting partnership
               interests of which is sufficient to elect at least a majority of
               its Board of Directors or other governing body (or, if there are
               no such voting interests, 50% or more of the equity interests,
               the holders of which are generally entitled to vote for the
               election of the board of directors or other governing body) is
               owned directly or indirectly by such first person;

     (h)       "significant subsidiary" of any person means any subsidiary of
               such person that constitutes a significant subsidiary within the
               meaning of Rule 1-02 of Regulation S-X promulgated by the SEC;

     (i)       "Takeover Proposal" has the meaning assigned thereto in Section
               4.2(a);

     (j)       "Superior Proposal" has the meaning assigned thereto in Section
               4.2(b); and

     (k)       "Taxes" has the meaning assigned thereto in Section 3.1(m)(iii).

Section 8.4    Interpretation.
               --------------

     When a reference is made in this Agreement to an Article, Section, Exhibit
or Schedule, such reference shall be to an Article or Section of, or an Exhibit
or Schedule to, this Agreement, respectively, unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are

AGREEMENT AND PLAN OF MERGER - Page 46
<PAGE>

used in this Agreement, they shall be deemed to be followed by the words
"without limitation." The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. All terms defined
in this Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto unless otherwise defined
herein. All monetary sums herein are in United States of America dollars. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.

Section 8.5    Counterparts.
               ------------

     This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
(including by facsimile transmission) to the other parties.

Section 8.6    Entire Agreement;  No Third-Party Beneficiaries.
               -----------------------------------------------

     This Agreement (including the documents and instruments referred to
herein), the Stockholders Agreements and the Confidentiality Agreement (a)
constitute the entire agreement, and supersede all prior written or oral and all
contemporaneous oral agreements and understandings, among the parties with
respect to the subject matter of this Agreement and (b) except for the
provisions of Article 2 and Section 5.6, are not intended to confer upon any
person other than the parties any rights or remedies.

Section 8.7    Governing Law.
               -------------

     This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.

Section 8.8    Jurisdiction.
               ------------

     Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in any federal court located
in the State of Delaware or any Delaware state court, and each of the parties
hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding brought in any such court has been brought in an

AGREEMENT AND PLAN OF MERGER - Page 47
<PAGE>

inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 8.2 shall be deemed
effective service of process on such party.

Section 8.9    Waiver of Jury Trial.
               --------------------

     EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 8.10   Assignment.
               ----------

     Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of law
or otherwise by a party without the prior written consent of each other party,
except that either the Trust or Acquisition Sub may transfer or assign, in whole
or from time to time in part, to one or more of its affiliates, the right to
enter into the transactions contemplated by this Agreement, but no such transfer
or assignment will relieve the Trust or Acquisition Sub of its obligations
hereunder. Notwithstanding the foregoing, the parties hereto agree that (i) the
Surviving Corporation shall, and the Trust shall cause the Surviving Corporation
to, assign the obligations of the Trust or the Surviving Corporation, as the
case may be, under Sections 5.4 and 5.6 to any person who acquires all or
substantially all of the assets of the Surviving Corporation, and the Surviving
Corporation shall cause, and the Trust shall cause the Surviving Corporation to
cause, such person to assume the obligations of the Surviving Corporation, and
any such assignment and assumption shall relieve the Trust and Surviving
Corporation of their obligations under Sections 5.4 and 5.6, or (ii) if the
Surviving Corporation sells or otherwise disposes of substantially all of its
assets in a manner or manners such that no person acquires all or substantially
all of such assets, then the Surviving Corporation shall, and the Trust shall
cause the Surviving Corporation to, make such provisions for the obligations of
the Trust and the Surviving Corporation under Sections 5.4 and 5.6 as the
Surviving Corporation and a majority of the persons presently serving as the
Chief Executive Officer, Chief Financial Officer and Vice President-Finance (or,
if any such person is unavailable due to illness or death, a majority of the
specified persons then available) determine to be appropriate, and upon making
such provisions the Trust and the Surviving shall be relieved of their
obligations under Sections 5.4 and 5.6. Any assignment in violation of the first
sentence of this Section 8.10 shall be void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.

Section 8.11   Disclosure Schedules.
               --------------------

     Matters reflected on the Company Disclosure Schedule and the Trust
Disclosure Schedule are not necessarily limited to matters required by this
Agreement to be reflected therein and the inclusion of such matters shall not be
deemed an admission that such matters were required to be reflected on the
Company Disclosure Schedule or the Trust Disclosure Schedule,

AGREEMENT AND PLAN OF MERGER - Page 48
<PAGE>

as the case may be. Such additional matters are set forth for informational
purposes only and do not necessarily include other matters of a similar nature.

Section 8.12   Severability.
               ------------

     If any provision of this Agreement or the application thereof to any person
or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, shall remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby. Upon
any such determination, the parties shall negotiate in good faith in an effort
to agree upon a mutually acceptable, suitable and equitable substitute provision
to effect the original intent of the parties.

Section 8.13   Payments Constitute Liquidated Damages.
               --------------------------------------

     The parties agree that the dollar amounts provided in Sections 5.7(b) and
7.2(b) payable upon the occurrence of the events specified therein have been
determined by negotiation and reflect their best estimate and judgement of the
monetary value of the losses and damages to be incurred in connection with, and
the time, effort, expense and cost of opportunity associated with, the
transactions contemplated in this Agreement, and the parties agree to accept
payment of such amount as liquidated damages in full and complete satisfaction
of all claims and expenses arising from the occurrence of such events
(including, but not limited to, claims for specific performance).

Section 8.14   Enforcement.
               -----------

     The parties agree that irreparable damage would occur and that the parties
would not have any adequate remedy at law if any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties will be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in Delaware state court, the foregoing
being in addition to any other remedy to which they are entitled at law or in
equity.

AGREEMENT AND PLAN OF MERGER - Page 49
<PAGE>

     IN WITNESS WHEREOF, the Trust, Acquisition Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.

                                   PREMIER CONSTRUCTION PRODUCTS
                                   STATUTORY TRUST

                                   By: First Union National Bank, as Trustee


                                        By: /s/ W. Jeffrey Kramer
                                            ---------------------------
                                                    W. Jeffrey Kramer
                                                      Vice President



                                   PREMIER CONSTRUCTION PRODUCTS
                                   ACQUISITION CORP.


                                   By: /s/ Douglas H. Wolf
                                       --------------------------------
                                               Douglas H. Wolf
                                                  President



                                   REPUBLIC GROUP INCORPORATED


                                   By: /s/ Phil Simpson
                                       --------------------------------
                                                 Phil Simpson
                                           Chairman, President and
                                           Chief Executive Officer

AGREEMENT AND PLAN OF MERGER - Page 50
<PAGE>

                                     INDEX
                                      TO
                             DISCLOSURE SCHEDULES
                                      TO
            AGREEMENT AND PLAN OF MERGER AMONG PREMIER CONSTRUCTION
            PRODUCTS STATUTORY TRUST, PREMIER CONSTRUCTION PRODUCTS
               ACQUISITION CORP. AND REPUBLIC GROUP INCORPORATED


3.1(a)   Organization, Standing, and Corporate Power
3.1(b)   Subsidiaries
3.1(c)   Capital Structure
3.1(d)   Authority; Non-contravention
3.1(g)   Undisclosed Material Liabilities
3.1(i)   Absence of Certain Changes or Events
3.1(j)   Litigation
3.1(k)   Changes in Benefit Plans
3.1(l)   ERISA Compliance
3.1(m)   Taxes
3.1(r)   Licenses and Permits
3.1(s)   Default
3.1(t)   Environmental Laws and Regulations
3.1(u)   Agreements
3.1(v)   Intellectual Property
3.1(w)   Labor Matters
3.1(x)   Assets Other than Real Property Interests
3.1(y)   Real Property
3.1(z)   Insurance
3.1(aa)  Transaction with Affiliates
4.1      Conduct of Business