AGREEMENT AND PLAN OF MERGER

                                 By and Among

                           DANIEL INDUSTRIES, INC.,

                             BLUE ACQUISITION INC.

                                      and

                              BETTIS CORPORATION

                              September 17, 1996


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                                   ARTICLE I

                                  THE MERGER...............................  1

SECTION 1.1.  The Merger...................................................  1

SECTION 1.2.  Effective Time...............................................  2

SECTION 1.3.  Effects of the Merger........................................  2

SECTION 1.4.  Certificate of Incorporation and By-laws.....................  2

SECTION 1.5.  Directors....................................................  3

SECTION 1.6.  Officers.....................................................  3

SECTION 1.7.  Vacancies....................................................  3

                                  ARTICLE II

               EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
              CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES...........  3

SECTION 2.1.  Effect on Capital Stock......................................  3
      (a)   Capital Stock of Sub...........................................  3
      (b)   Cancellation of Company and Parent Owned Stock.................  3
      (c)   Conversion of Shares...........................................  3
      (d)   No Fractional Shares...........................................  3

SECTION 2.2.  Exchange of Certificates.....................................  4
      (a)   Exchange Agent.................................................  4
      (b)   Payment of Merger Consideration................................  4
      (c)   Exchange Procedure.............................................  4
      (d)   Distributions with Respect to Unexchanged Shares...............  5
      (e)   No Further Ownership Rights in Shares..........................  5

                                  ARTICLE III

                        REPRESENTATIONS AND WARRANTIES.....................  6

SECTION 3.1.  Representations and Warranties of the Company................  6
      (a)   Organization, Standing and Power...............................  6
      (b)   Subsidiaries...................................................  6
      (c)   Capital Structure..............................................  6
      (d)   Authority; Non-contravention...................................  7
      (e)   SEC Documents..................................................  8
      (f)   Information Supplied...........................................  9


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<PAGE>
      (g)   Absence of Certain Changes or Events...........................  9
      (h)   State Takeover Statutes; Absence of Supermajority Provision.... 10
      (i)   Brokers........................................................ 10
      (j)   Litigation..................................................... 10
      (k)   Accounting Matters............................................. 10
      (l)   Employee Benefit Matters....................................... 11
      (m)   Taxes.......................................................... 13
      (n)   No Excess Parachute Payments................................... 13
      (o)   Environmental Matters.......................................... 13
      (p)   Compliance with Laws........................................... 14
      (q)   Material Contracts and Agreements.............................. 14
      (r)   Title to Properties............................................ 14
      (s)   Intellectual Property.......................................... 15
      (t)   Labor Matters.................................................. 15
      (u)   Undisclosed Liabilities........................................ 15
      (v)   Opinion of Financial Advisor................................... 16
      (w)   Board Recommendation........................................... 16

SECTION 3.2.  Representations and Warranties of Parent and Sub............. 16
      (a)   Organization; Standing and Power............................... 16
      (b)   Subsidiaries................................................... 16
      (c)   Capital Structure.............................................. 17
      (d)   Authority; Non-contravention................................... 17
      (e)   SEC Documents.................................................. 18
      (f)   Information Supplied........................................... 19
      (g)   Absence of Certain Changes or Events........................... 19
      (h)   State Takeover Statutes; Absence of Supermajority Provision.... 19
      (i)   Brokers........................................................ 20
      (j)   Litigation..................................................... 20
      (k)   Accounting Matters............................................. 20
      (l)   Employee Benefit Matters....................................... 20
      (m)   Taxes.......................................................... 22
      (n)   No Excess Parachute Payments................................... 22
      (o)   Environmental Matters.......................................... 23
      (p)   Compliance with Laws........................................... 23
      (q)   Material Contracts and Agreements.............................. 23
      (r)   Title to Properties............................................ 23
      (s)   Intellectual Property.......................................... 24
      (t)   Labor Matters.................................................. 24
      (u)   Undisclosed Liabilities........................................ 25
      (v)   Opinion of Financial Advisor................................... 25
      (w)   Board Recommendation........................................... 25

                                  ARTICLE IV

                   COVENANTS RELATING TO CONDUCT OF BUSINESS............... 25

SECTION 4.1.  Conduct of Business.......................................... 25


                                      -ii-
<PAGE>
      (a)   Ordinary Course................................................ 25
      (b)   Changes in Employment Arrangements............................. 27
      (c)   Severance...................................................... 27
      (d)   Other Actions.................................................. 28

SECTION 4.2.  Conduct of Business of Parent and Sub........................ 28
      (a)   Ordinary Course................................................ 28
      (b)   Other Actions.................................................. 29

                                   ARTICLE V

                             ADDITIONAL AGREEMENTS......................... 29

SECTION 5.1.  Stockholder Approval; Preparation of Proxy Statement; 
              Preparation of Registration Statement........................ 29

SECTION 5.2.  Letter of the Company's Accountants.......................... 30

SECTION 5.3.  Letter of Parent's Accountants............................... 30

SECTION 5.4.  Access to Information........................................ 30

SECTION 5.5.  Reasonable Efforts; Notification............................. 35

SECTION 5.6.  Employee Benefit Matters..................................... 37

SECTION 5.7.  Indemnification.............................................. 39

SECTION 5.8.  Fees and Expenses............................................ 39

SECTION 5.9.  Public Announcements......................................... 39

SECTION 5.10.  Stockholder Litigation...................................... 40

SECTION 5.11.  Accounting Matters.......................................... 40

SECTION 5.12.  Parent's Board of Directors................................. 40

SECTION 5.13.  Appointment of Directors to Committees...................... 40

SECTION 5.14.  Appointment of W. Todd Bratton as Executive Vice President.. 40

SECTION 5.15.  Affirmation of this Agreement............................... 40

                                  ARTICLE VI

                             CONDITIONS PRECEDENT.......................... 41


                                     -iii-
<PAGE>
SECTION 6.1.  Conditions to Each Party's Obligation to Effect the Merger... 41
      (a)   Stockholder Approval........................................... 41
      (b)   NYSE Listing................................................... 41
      (c)   HSR Act........................................................ 41
      (d)   No Injunctions or Restraints................................... 41
      (e)   Registration Statement Effectiveness........................... 41
      (f)   Blue Sky Filings............................................... 41

SECTION 6.2.  Conditions of Parent and Sub................................. 42
      (a)   Compliance..................................................... 42
      (b)   Certifications and Opinion..................................... 42
      (c)   Representations and Warranties True............................ 43
      (d)   Affiliate Letters.............................................. 43
      (e)   Tax Opinion.................................................... 43
      (f)   Pooling Accounting............................................. 43
      (g)   Consents, etc.................................................. 44
      (h)   No Litigation.................................................. 44
      (i)   Fairness Opinion............................................... 44
      (j)   No Material Adverse Change..................................... 44

SECTION 6.3.  Conditions of the Company.................................... 44
      (a)   Compliance..................................................... 44
      (b)   Certifications and Opinion..................................... 45
      (c)   Representations and Warranties True............................ 45
      (d)   Tax Opinion.................................................... 46
      (e)   Fairness Opinion............................................... 46
      (f)   No Material Adverse Change..................................... 46

                                  ARTICLE VII

                       TERMINATION, AMENDMENT AND WAIVER................... 46

SECTION 7.1.  Termination.................................................. 46

SECTION 7.2.  Effect of Termination........................................ 47

SECTION 7.3.  Amendment.................................................... 47

SECTION 7.4.  Extension; Waiver............................................ 48

SECTION 7.5.  Procedure for Termination, Amendment, Extension or Waiver.... 48

                                 ARTICLE VIII

                   SPECIAL PROVISIONS AS TO CERTAIN MATTERS................ 48

SECTION 8.1.  Takeover Defenses of the Company............................. 48


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SECTION 8.2.  No Solicitation.............................................. 48

SECTION 8.3.  Fee and Expense Reimbursements............................... 50

                                  ARTICLE IX

                              GENERAL PROVISIONS........................... 51

SECTION 9.1.  Nonsurvival of Representations and Warranties................ 51

SECTION 9.2.  Notices...................................................... 52

SECTION 9.3.  Definitions.................................................. 53

SECTION 9.4.  Interpretation............................................... 54

SECTION 9.5.  Counterparts................................................. 54

SECTION 9.6.  Entire Agreement; No Third-Party Beneficiaries............... 54

SECTION 9.7.  Governing Law................................................ 54

SECTION 9.8.  Assignment................................................... 54

SECTION 9.9.  Enforcement of the Agreement................................. 54

SECTION 9.10.  Severability................................................ 55


                                      -v-
<PAGE>
          AGREEMENT  AND PLAN OF MERGER dated as of September  17, 1996, by
     and among DANIEL INDUSTRIES,  INC., a Delaware corporation ("Parent"),
     BLUE  ACQUISITION   INC.,  a  Delaware   corporation   ("Sub")  and  a
     wholly-owned subsidiary of Parent, and BETTIS CORPORATION,  a Delaware
     corporation (the "Company").

          WHEREAS,  the  respective  Boards of Directors of Parent,  Sub and the
Company have approved the  acquisition of the Company by Parent on the terms and
subject  to  the   conditions  of  this   Agreement  and  Plan  of  Merger  (the
"Agreement");

          WHEREAS,  the  respective  Boards of Directors of Parent,  Sub and the
Company  have  approved  the  merger  of Sub  with and  into  the  Company  (the
"Merger"),  upon the terms and  subject  to the  conditions  of this  Agreement,
whereby each issued and outstanding  share of the Company's  Common Stock,  $.01
par value, including the related right to purchase one one-thousandth of a share
of Series A Junior Participating Preferred Stock, $.01 par value, of the Company
(collectively,  a  "Share")  not  owned  by  the  Company,  Parent,  Sub  or any
wholly-owned  subsidiary  of the Company,  Parent or Sub will be converted  into
fifty-eight  one-hundredths  (.58) of a share of Common Stock,  $1.25 par value,
including the related right to purchase one one-hundredth interest in a share of
Series A Junior  Participating  Preferred  Stock,  $1.00  par  value,  of Parent
(collectively, a "Parent Share");

          WHEREAS,  for federal  income tax  purposes,  it is intended  that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code");

          WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests; and

          WHEREAS,   Parent,   Sub  and  the  Company  desire  to  make  certain
representations,  warranties  and  agreements in connection  with the Merger and
also to prescribe various conditions to the Merger;

          NOW,   THEREFORE,   in   consideration   of  the   premises   and  the
representations,  warranties and agreements herein contained,  the parties agree
as follows:

                                   ARTICLE I

                                  THE MERGER

          SECTION 1.1. The Merger.  Upon the terms and subject to the conditions
hereof and in accordance with the Delaware General Corporation Law (the "DGCL"),
Sub shall be  merged  with and into the  Company  at the  Effective  Time of the
Merger  (as  hereinafter  defined).  At  the  election  of  Parent,  any  direct
wholly-owned subsidiary (as defined in Section 9.3) of Parent may be substituted
for Sub as a constituent  corporation in the Merger.  In such event, the parties
agree to execute an appropriate



<PAGE>
amendment to this  Agreement in order to reflect the  foregoing.  Following  the
Merger, the separate corporate existence of Sub shall cease and theCompany shall
continue as the surviving  corporation (the "Surviving  Corporation")  and shall
succeed to and assume all the rights and  obligations of Sub in accordance  with
the DGCL.

          SECTION 1.2.  Effective  Time.  As soon as  practicable  following the
satisfaction or, to the extent permitted hereunder, waiver of the conditions set
forth in  Article  VI,  the  Surviving  Corporation  shall  file  the  officer's
certificate  required  by  the  DGCL  with  respect  to  the  Merger  and  other
appropriate  documents (the "Certificate of Merger") executed in accordance with
the relevant  provisions of 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  other  time as Sub and the  Company  shall  agree  should be
specified in the  Certificate of Merger (the time the Merger  becomes  effective
being the  "Effective  Time of the  Merger").  The  closing of the  Merger  (the
"Closing")  shall take place at the offices of Fulbright & Jaworski  L.L.P.,  in
Houston,  Texas, on the date of the meetings of the Company's  stockholders (the
"Company  Stockholders  Meeting")  and of  Parent's  stockholders  (the  "Parent
Stockholders  Meeting"),  in each case, to approve the Merger, or, if any of the
conditions  set forth in  Article  VI have not been  satisfied,  then as soon as
practicable  thereafter,  or at such  other time and place or such other date as
Parent and the Company  shall agree (the "Closing  Date").  If such meetings are
not held or  concluded  on the same date,  then the Closing Date shall be on the
date of the latter of such meetings.

          SECTION 1.3. Effects of the Merger.  The Merger shall have the effects
set forth in Section 259 of the DGCL. If at any time after the Effective Time of
the Merger,  the  Surviving  Corporation  shall  consider or be advised that any
further assignments or assurances in law or otherwise are necessary or desirable
to  vest,  perfect  or  confirm,  of  record  or  otherwise,  in  the  Surviving
Corporation,  all  rights,  title and  interests  in all real  estate  and other
property and all  privileges,  powers and franchises of the Company and Sub, the
Surviving Corporation and its proper officers and directors,  in the name and on
behalf of the Company and Sub,  shall execute and deliver all such proper deeds,
assignments  and  assurances  in law and do all things  necessary  and proper to
vest,  perfect  or confirm  title to such  property  or rights in the  Surviving
Corporation  and otherwise to carry out the purpose of this  Agreement,  and the
proper officers and directors of the Surviving  Corporation are fully authorized
in the name of the Company or otherwise to take any and all such action.

          SECTION  1.4.  Certificate  of  Incorporation  and  By-laws.  (a)  The
Certificate of Incorporation of the Company,  as in effect  immediately prior to
the Effective Time of the Merger shall be the  Certificate of  Incorporation  of
the  Surviving  Corporation  until  thereafter  changed or  amended as  provided
therein or by applicable law.

          (b) The By-laws of Sub as in effect immediately prior to the Effective
Time of the Merger  shall be the  By-laws  of the  Surviving  Corporation  until
thereafter changed or amended as provided therein or by applicable law.


                                      -2-
<PAGE>
          SECTION 1.5. Directors.  The directors of Sub immediately prior to the
Effective Time of the Merger shall be the directors of the Surviving Corporation
and shall hold office in accordance  with the Certificate of  Incorporation  and
By-laws of the Surviving Corporation from the Effective Time of the Merger until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.

          SECTION 1.6. Officers.  The officers of the Company  immediately prior
to the  Effective  Time of the Merger  shall be the  officers  of the  Surviving
Corporation  and  shall  hold  office  in  accordance  with the  Certificate  of
Incorporation  and By-laws of the Surviving  Corporation from the Effective Time
of the Merger until the earlier of their  resignation  or removal or until their
respective successors are duly elected and qualified, as the case may be.

          SECTION  1.7.  Vacancies.  If at the  Effective  Time of the  Merger a
vacancy  shall exist in the Board of  Directors  or in any of the offices of the
Surviving  Corporation,  such  vacancy  may  thereafter  be filled in the manner
provided by the DGCL and the  Certificate  of  Incorporation  and By-laws of the
Surviving Corporation.

                                  ARTICLE II

               EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
              CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

          SECTION 2.1.  Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
of any Shares:

          (a) Capital  Stock of Sub.  Each issued and  outstanding  share of the
capital  stock of Sub shall be  converted  into and  become  one fully  paid and
nonassessable share of Common Stock of the Surviving Corporation.

          (b)  Cancellation  of Company and Parent Owned Stock.  All Shares that
are owned by any wholly-owned  subsidiary of the Company and any Shares owned by
Parent,  Sub or any  other  wholly-owned  subsidiary  of  Parent or Sub shall be
canceled and no consideration shall be delivered in exchange therefor.

          (c)  Conversion  of Shares.  Subject to Section  2.1(d) and (e),  each
issued and outstanding Share shall be converted into the right to receive,  upon
the surrender of the certificate  formerly  representing such Shares pursuant to
Section 2.2, .58 of a Parent Share (the "Merger Consideration").

          (d) No Fractional  Shares. No fractional Parent Shares shall be issued
in the  Merger.  All  fractional  Parent  Shares  that a holder of Shares  would
otherwise be entitled to receive as a result of the Merger  shall be  aggregated
and if a fractional  Parent Share  results  from such  aggregation,  such holder
shall be entitled to receive,  in lieu thereof,  an amount in cash determined by
multiplying  the average of the daily 


                                      -3-
<PAGE>
closing sale price per Parent Share on the New York Stock Exchange  ("NYSE") for
the ten trading  days next  preceding  the  Effective  Time of the Merger by the
fraction  of a Parent  Share to which  such  holder  would  otherwise  have been
entitled. Alternatively, Parent and Sub shall have the option of instructing the
Exchange Agent (as defined in Section 2.2(a)) to aggregate all fractional Parent
Shares,  sell such Parent Shares in the public market and  distribute to holders
of fractional  Parent Shares a pro rata portion of the proceeds of such sale. No
such cash in lieu of  fractional  Parent  Shares  shall be paid to any holder of
fractional  Parent  Shares  until  Certificates  (as defined in Section  2.2(c))
representing such Parent Shares are surrendered and exchanged in accordance with
Section 2.2(c).

          SECTION 2.2.  Exchange of Certificates.  (a) Exchange Agent.  Prior to
the  Effective  Time of the Merger,  Parent shall engage  Wachovia Bank of North
Carolina, N.A., or such other bank or trust company reasonably acceptable to the
Company,  to act as exchange agent (the  "Exchange  Agent") for the issue of the
Merger Consideration upon surrender of certificates representing Shares.

          (b)  Payment  of Merger  Consideration.  Parent  shall  take all steps
necessary  to enable and cause there to be provided to the  Exchange  Agent on a
timely  basis,  as and when  needed  after  the  Effective  Time of the  Merger,
certificates  for the  Parent  Shares to be issued  upon the  conversion  of the
Shares pursuant to Section 2.1. Parent or the Surviving Corporation shall timely
make available to the Exchange Agent any cash necessary to make payments in lieu
of fractional shares.

          (c) Exchange  Procedure.  As soon as  practicable  after the Effective
Time of the Merger,  the Exchange Agent shall mail to each holder of record of a
certificate or certificates  that immediately prior to the Effective Time of the
Merger  represented  outstanding  Shares  (the  "Certificates"),  other than the
Company,  Parent, Sub and any wholly-owned  subsidiary of the Company, Parent or
Sub, (i) a letter of  transmittal  (which shall specify that  delivery  shall be
effected,  and risk of loss and title to the Certificates  shall pass, only upon
delivery of the  Certificates  to the Exchange  Agent and shall be in a form and
have such other  provisions as Parent and Sub may  reasonably  specify) and (ii)
instructions  for use in effecting the surrender of the Certificates in exchange
for the  certificates  representing  the Parent Shares and any cash in lieu of a
fractional  share.  Upon  surrender of a  Certificate  for  cancellation  to the
Exchange  Agent or to such  other  agent or  agents as may be  appointed  by the
Surviving Corporation,  together with such letter of transmittal, duly executed,
and such other  documents as may  reasonably be required by the Exchange  Agent,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate  or  certificates  representing  the number of whole Parent Shares
into which the Shares  theretofore  represented by such  Certificate  shall have
been  converted  pursuant  to  Section  2.1 and any  cash  payable  in lieu of a
fractional  Share,  and  the  Certificate  so  surrendered  shall  forthwith  be
canceled.  If the  Parent  Shares  are to be issued to a person  other  than the
person in whose name the Certificate so surrendered is registered, it shall be a
condition  of  exchange  that such  Certificate  shall be  properly  endorsed or
otherwise  in proper  form for  transfer  and that the  person  requesting  such
exchange  shall  pay any  transfer  or other  taxes  required  by  reason of the
exchange to a person other than the  registered  holder of such  Certificate  or
establish to the 


                                      -4-
<PAGE>
reasonable satisfaction of the Surviving Corporation that such tax has been paid
or is not  applicable.  Until  surrendered as  contemplated by this Section 2.2,
each  Certificate  shall be deemed at any time after the  Effective  Time of the
Merger to represent  only the right to receive upon such surrender the number of
Parent Shares and cash,  if any, in lieu of fractional  Parent Shares into which
the Shares theretofore represented by such Certificate shall have been converted
pursuant to Section  2.1.  The  Exchange  Agent shall not be entitled to vote or
exercise  any rights of ownership  with respect to the Parent  Shares held by it
from time to time hereunder, except that it shall receive and hold all dividends
or other  distributions paid or distributed with respect thereto for the account
of persons entitled thereto.

          (d) Distributions with Respect to Unexchanged  Shares. No dividends or
other distributions declared or made after the Effective Time of the Merger with
respect to the Parent Shares with a record date after the Effective  Time of the
Merger shall be paid to the holder of any unsurrendered Certificate with respect
to the  Parent  Shares  represented  thereby  and no  cash  payment  in  lieu of
fractional  shares shall be paid to any such holder  pursuant to Section  2.1(d)
until the holder of record of such Certificate shall surrender such Certificate.
Subject  to the  effect of  applicable  laws,  following  surrender  of any such
Certificate,  there  shall  be paid to the  record  holder  of the  Certificates
representing the Parent Shares issued in exchange  therefor,  without  interest,
(i) at the time of such  surrender,  the amount of any cash payable in lieu of a
fractional  Parent  Share to which such holder is  entitled  pursuant to Section
2.1(d) and the amount of  dividends  or other  distributions  with a record date
after the  Effective  Time of the Merger  theretofore  paid with respect to such
whole Parent  Shares,  as the case may be, and (ii) at the  appropriate  payment
date,  the amount of dividends or other  distributions  with a record date after
the  Effective  Time of the Merger  but prior to  surrender  and a payment  date
subsequent to surrender payable with respect to such whole Parent Shares.

          (e) No Further  Ownership  Rights in Shares.  All Parent Shares issued
upon the surrender of  Certificates in accordance with the terms of this Article
II, together with any dividends  payable  thereon to the extent  contemplated by
this  Section  2.2,  shall be  deemed to have  been  exchanged  and paid in full
satisfaction of all rights pertaining to the Shares  theretofore  represented by
such Certificates and there shall be no further registration of transfers on the
stock  transfer  books of the  Surviving  Corporation  of the  Shares  that were
outstanding immediately prior to the Effective Time of the Merger. If, after the
Effective  Time of the  Merger,  Certificates  are  presented  to the  Surviving
Corporation for any reason,  they shall be canceled and exchanged as provided in
this Article II.


                                      -5-
<PAGE>
                                  ARTICLE III

                        REPRESENTATIONS AND WARRANTIES

          SECTION  3.1.  Representations  and  Warranties  of the  Company.  The
Company  agrees that it will,  on or before  October 1, 1996,  affirm in writing
(the "Company Affirmation and Disclosure Document") that, as of the date of this
Agreement,  it  represents  and warrants to, and agrees with,  Parent and Sub as
follows,  subject to any  exceptions  specified in the Company  Affirmation  and
Disclosure Document:

          (a)  Organization,  Standing and Power.  The Company is a  corporation
duly  organized,  validly  existing  and in good  standing  under the law 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.  The Company is
duly  qualified 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  necessary,  other than in such jurisdictions where the
failure to be so qualified to do business or in good standing  (individually  or
in the  aggregate)  would not have a  material  adverse  effect  (as  defined in
Section 9.3) on the Company and its subsidiaries, taken as a whole.

          (b) Subsidiaries. The Company's subsidiaries that are corporations are
corporations  duly  organized,  validly  existing and in good standing under the
laws of their respective  jurisdictions of incorporation  and have the requisite
corporate  power and authority to carry on their  respective  businesses as they
are now being  conducted and to own,  operate and lease the assets they now own,
operate or hold under lease. The Company's subsidiaries are duly qualified to do
business and are in good  standing in each  jurisdiction  in which the nature of
their  respective  businesses  or the  ownership or leasing of their  respective
properties makes such qualification necessary,  other than in such jurisdictions
where  the  failure  to be so  qualified  or in good  standing  would not have a
material adverse effect on the Company and its  subsidiaries,  taken as a whole.
All the outstanding  shares of capital stock of the Company's  subsidiaries that
are corporations have been duly authorized and validly issued and are fully paid
and  non-assessable and were not issued in violation of any preemptive rights or
other preferential  rights of subscription or purchase of any person.  Except as
disclosed in the SEC  Documents (as defined in Section  3.1(e)),  all such stock
and ownership  interests are owned of record and  beneficially by the Company or
by a  wholly-owned  subsidiary  of the  Company,  free and  clear of all  liens,
pledges, security interests,  charges, claims and other encumbrances of any kind
or nature ("Liens"). Except for the capital stock of, or ownership interests in,
its subsidiaries,  the Company does not own, directly or indirectly, any capital
stock,   equity  interest  or  other  ownership  interest  in  any  corporation,
partnership,  association,  joint venture,  limited  liability  company or other
entity.

          (c) Capital  Structure.  The  authorized  capital stock of the Company
consists of 30,000,000  shares of common stock,  $.01 par value ("Company Common
Stock"),  and 1,000,000  shares of preferred stock,  $.01 par value  ("Preferred
Stock"),   of  which  250,000  shares  have  been  designated  Series  A  Junior
Participating  Preferred 


                                      -6-
<PAGE>
Stock and reserved for issuance  pursuant to the Rights  Agreement dated October
31, 1995 between the Company and American  Stock  Transfer & Trust  Company,  as
rights  agent (the  "Company  Rights  Agreement").  At the close of  business on
August 31,  1996:  8,483,435  Shares  were  issued and  outstanding;  45,000 and
736,000  shares of Company  Common Stock were reserved for issuance  pursuant to
outstanding  options  granted under the Company's  1994  Nonemployee  Directors'
Stock Option Plan and 1994 Stock  Incentive Plan,  respectively;  and 30,000 and
10,800  shares of Company  Common Stock were  reserved for issuance  pursuant to
awards not yet granted under the Company's  1994  Nonemployee  Directors'  Stock
Option Plan and 1994 Stock  Incentive  Plan,  respectively.  Except as set forth
above,  no shares of capital  stock or other equity or voting  securities of the
Company are reserved  for issuance or  outstanding.  All  outstanding  shares of
capital stock of the Company are, and all such shares issuable upon the exercise
of stock options will be, validly issued,  fully paid and  nonassessable and not
subject to  preemptive  rights.  No capital stock has been issued by the Company
since  August 31, 1996,  other than shares of Common  Stock  issued  pursuant to
options  outstanding on or prior to such date in accordance  with their terms at
such date.  Except for options  outstanding under the Company's 1994 Nonemployee
Directors'  Stock Option Plan and 1994 Stock  Incentive Plan as set forth above,
as of August 31,  1996,  there were no  outstanding  or  authorized  securities,
options,  warrants, calls, rights,  commitments,  preemptive rights, agreements,
arrangements  or  undertakings  of any kind to which the  Company  or any of its
subsidiaries  is a  party,  or by which  any of them is  bound,  obligating  the
Company or any of its  subsidiaries  to issue,  deliver or sell,  or cause to be
issued, delivered or sold, any shares of capital stock or other equity or voting
securities  of, or other  ownership  interests  in, 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.

          (d)  Authority;  Non-contravention.  The  Company  has  the  requisite
corporate  power and  authority  to enter into this  Agreement  and,  subject to
Company  Stockholder  Approval (as defined in Section 3.1(h)), to consummate the
transactions contemplated hereby and to take such actions, if any, as shall have
been taken with  respect  to the  matters  referred  to in Section  3.1(h).  The
execution and delivery of this Agreement by the Company and the  consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary  corporate  action on the part of the Company,  subject to Company
Stockholder  Approval.  This  Agreement  has been duly and validly  executed and
delivered by the Company and  constitutes a valid and binding  obligation of the
Company,  enforceable  against the Company in accordance with its terms,  except
that  (i)  such   enforcement   may  be  subject  to   bankruptcy,   insolvency,
reorganization,  moratorium or other  similar laws or judicial  decisions now or
hereafter in effect relating to creditors'  rights generally and (ii) the remedy
of  specific  performance  and  injunctive  relief may be  subject to  equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.  The execution and delivery of this  Agreement by the Company do
not, and the consummation of the transactions contemplated hereby and compliance
with the provisions  hereof will not,  conflict with, or result in any violation
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 or "put" right
with respect to any obligation or to loss of 


                                      -7-
<PAGE>
a  material  benefit  under,  or result in the  creation  of any lien,  security
interest,  charge or  encumbrance  upon any of the  properties  or assets of the
Company or any of its  subsidiaries  under, any provision of (i) the Certificate
of  Incorporation  or By-laws of the Company or any provision of the  comparable
organizational documents 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
governmental filing and other matters referred to in the following sentence, any
judgment,  order,  decree,  statute,  law,  ordinance,  rule  or  regulation  or
arbitration  award applicable to the Company or any of its subsidiaries or their
respective  properties or assets,  other than,  in the case of clause (ii),  any
such  conflicts,  violations,  defaults,  rights or liens,  security  interests,
charges or encumbrances  that  individually or in the aggregate would not have a
material  adverse  effect on the  Company  and would not  materially  impair the
ability of the  Company to perform  its  obligations  hereunder  or prevent  the
consummation  of  any of  the  transactions  contemplated  hereby.  No  consent,
approval,  order or  authorization  of, or  registration,  declaration or filing
with,  any court,  administrative  agency or  commission  or other  governmental
authority  or agency,  domestic  or  foreign,  including  local  authorities  (a
"Governmental  Entity"), is required by or with respect to the Company or any of
its subsidiaries in connection with the execution and delivery of this Agreement
by  the  Company  or  the  consummation  by  the  Company  of  the  transactions
contemplated hereby,  except for (i) 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"), (ii) the filing with the Securities and
Exchange  Commission (the "SEC") of (A) a joint proxy statement  relating to the
Company  Stockholder  Approval  and Parent  Stockholder  Approval (as defined in
Section  3.2(d) (such proxy  statement as amended or  supplemented  from time to
time, the "Proxy  Statement") and (B) the Registration  Statement (as defined in
Section  5.1(b));  and (C) such reports under  Section  13(a) of the  Securities
Exchange Act of 1934,  as amended (the  "Exchange  Act"),  as may be required in
connection with this Agreement and the  transactions  contemplated  hereby,  and
(iii) the filing of the  Certificate  of Merger with the  Delaware  Secretary of
State  with  respect  to the  Merger  as  provided  in the DGCL and  appropriate
documents with the relevant  authorities of other states in which the Company is
qualified  to  do  business  and  such  other   consents,   approvals,   orders,
authorizations,  registrations, declarations and filings the failure of which to
be obtained or made would not 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 March 7,
1994, including any and all such reports, schedules, forms, statements and other
documents  filed with the SEC in connection  with the  distribution of shares of
Company  Common  Stock  to  shareholders  of  Galveston-Houston   Company  (such
documents,  together  with all  exhibits  and  schedules  thereto and  documents
incorporated by reference therein,  collectively  referred to herein as the "SEC
Documents").  As of their respective  dates,  the SEC Documents  complied 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 none of the SEC Documents  contained  any 


                                      -8-
<PAGE>
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.  The
consolidated  financial  statements of the Company included in the SEC Documents
comply in all material respects with applicable accounting  requirements and the
published  rules and  regulations  of the SEC with  respect  thereto,  have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements,  as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of the
Company  and its  consolidated  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 and other adjustments described therein).

          (f) Information  Supplied.  None of the information  supplied or to be
supplied by the Company for inclusion or  incorporation  by reference in (i) the
Registration  Statement  (as defined in Section  5.1(b))  will,  at the time the
Registration  Statement  is filed with the SEC, and at any time it is amended or
supplemented  or at the time it  becomes  effective  under the  Securities  Act,
contain any untrue  statement  of a material  fact or omit to state any material
fact required to be stated therein or necessary to make the  statements  therein
not  misleading,  and (ii)  the  Proxy  Statement  will,  at the date the  Proxy
Statement is first mailed to the Company's  stockholders  and at the time of the
Company Stockholders Meeting, 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. The Proxy Statement, as it relates to the Company
Stockholders  Meeting,  will comply as to form 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 by Parent or Sub for inclusion or incorporation by reference therein.

          (g) Absence of Certain  Changes or Events.  Except as disclosed in the
SEC  Documents,  since December 31, 1995, the Company has conducted its business
only in the ordinary  course  consistent  with past practice,  and there has not
been (i) any  material  adverse  change with  respect to the  Company,  (ii) any
declaration, setting aside or payment of any dividend (whether in cash, stock or
property)  with respect to any of the  Company's  capital  stock,  (iii) (A) any
granting by the Company or any of its  subsidiaries to any executive  officer of
the Company or any of its subsidiaries of any increase in  compensation,  except
in the  ordinary  course of business  consistent  with prior  practice or as was
required under employment  agreements in effect as of December 31, 1995, (B) any
granting by the Company or any of its subsidiaries to any such executive officer
of any increase in severance or  termination  pay,  except as was required under
employment,  severance or  termination  agreements  in effect as of December 31,
1995,  or (C) any  entry  by the  Company  or any of its  subsidiaries  into any
employment,  severance or termination agreement with any such executive officer,
(iv) any damage,  destruction or loss, whether or not covered by insurance, that
has or  reasonably  could be expected to have a material  adverse  effect on the
Company,  (v) any 


                                      -9-
<PAGE>
change in accounting methods,  principles or practices by the Company materially
affecting its assets,  liabilities or business,  except insofar as may have been
required by a change in generally accepted  accounting  principles,  or (vi) any
event which,  if it had taken place  following the execution of this  Agreement,
would not have been permitted by Section 4.1.

          (h) State Takeover Statutes;  Absence of Supermajority  Provision. The
Company has taken all action to assure that no state takeover statute or similar
statute or regulation,  including,  without limitation ss.203 of the DGCL, shall
apply to the Merger or any of the other transactions contemplated hereby. Except
for the  approval of the Merger by the holders of a majority of the  outstanding
Shares ("Company Stockholder Approval"), no other stockholder action on the part
of the  Company is  required  for  approval  of the Merger and the  transactions
contemplated hereby. No provision of the Company's  Certificate of Incorporation
or By-laws or other  governing  instruments of its  subsidiaries or the terms of
any rights  plan or other  takeover  defense  mechanism  of the  Company  would,
directly or  indirectly,  restrict  or impair the ability of Parent to vote,  or
otherwise to exercise the rights of a stockholder with respect to, securities of
the Company and its subsidiaries that may be acquired or controlled by Parent or
permit any  stockholder  to  acquire  securities  of the  Company on a basis not
available to Parent in the event that Parent were to acquire  securities  of the
Company.

          (i) Brokers. Except for Jefferies & Company, Inc. ("Jefferies"), which
will be rendering the opinion  referred to in Section  6.3(e) and whose fees are
to be paid by the  Company,  no  broker,  investment  banker or other  person is
entitled to receive from the Company or any of its  subsidiaries  any investment
banking,  brokerage or finder's  fees in connection  with this  Agreement or the
transactions  contemplated hereby, including any fee for any opinion rendered by
any investment  banker.  The engagement letter between the Company and Jefferies
provided  to Parent on or prior to the date of this  Agreement  constitutes  the
entire  understanding  of the Company and Jefferies  with respect to the matters
referred  to  therein,  and has not been  amended  or  modified,  nor will it be
amended or modified prior to the Effective Time of the Merger.

          (j) Litigation.  Except as disclosed in the SEC Documents, there is no
suit,  action,  proceeding  or  investigation  pending  or,  to the  best of the
Company's  knowledge,  threatened against or affecting the Company or any of its
subsidiaries that could reasonably be expected to have a material adverse effect
on the Company or prevent, hinder or materially delay the ability of the Company
to consummate the transactions  contemplated by this Agreement, nor is there any
judgment,  decree,  injunction,  rule or order  of any  Governmental  Entity  or
arbitrator outstanding against the Company or any of its subsidiaries having, or
which, insofar as reasonably can be foreseen, in the future could have, any such
effect.

          (k)  Accounting  Matters.  Neither the Company nor, to the best of its
knowledge,  any of its affiliates,  has through the date of this Agreement taken
or agreed to take any action that (without  giving effect to any action taken or
agreed to be taken by Parent or any of its affiliates) would prevent Parent from
accounting  for the  business  combination  to be  effected  by the  Merger as a
pooling of interests.


                                      -10-
<PAGE>
          (l) Employee Benefit Matters. As used in this Section 3.1(l), the term
"Employer"  shall mean the Company as defined in the preamble of this  Agreement
and any member of a controlled group or affiliated  service group, as defined in
Sections  414(b),  (c),  (m) and (o) of the Internal  Revenue  Code of 1986,  as
amended ("Code") of which the Company is a member.

          (i) With  respect to each  employee  welfare  benefit  plan,  employee
     pension benefit plan and employee benefit plan as defined in Sections 3(1),
     3(2), and 3(3) of the Employee  Retirement  Income Security Act of 1974, as
     amended ("ERISA"),  which have been or are sponsored by, participated in or
     contributed  to by or required to be  contributed  to by the Employer,  and
     except for any matter that would not  individually or in the aggregate have
     a material  adverse  effect on the Company:  (A) the plan is in substantial
     compliance with the Code and ERISA,  including all reporting and disclosure
     requirements  of  Part  1 of  Subtitle  B of  Title  I of  ERISA;  (B)  the
     appropriate Form 5500 has been timely filed for each year of its existence;
     (C) there has been no transaction described in Sections 406 or 407 of ERISA
     or Section  4975 of the Code unless  exempt  under  Section 408 of ERISA or
     Section 4975 of the Code, as applicable;  (D) the bonding  requirements  of
     Section 412 of ERISA have been satisfied; (E) there is no issue pending nor
     any issue resolved  adversely to the Employer which may subject the Company
     to the payment of a penalty,  interest,  tax or other amount,  (F) the plan
     can be  unilaterally  terminated  or amended on no more than 90 days notice
     other than  collectively  bargained union plans;  (G) all  contributions or
     other  amounts  payable by the  Employer  as of the  Effective  Time of the
     Merger  with  respect to the plan have  either  been paid or accrued in the
     Employer's most recent financial  statements  included in the SEC Documents
     and (H) no notice has been  received  by the  Employer  of an  increase  or
     proposed  increase  in the  cost of any  such  plan or any  other  employee
     benefit agreement or arrangement,  including deferred  compensation  plans,
     incentive  plans,  bonus plans or arrangements,  stock option plans,  stock
     purchase  plans,  golden  parachute  agreements,  severance  pay  plans  or
     agreements,  dependent care plans,  cafeteria  plans,  employee  assistance
     programs,  scholarship  programs,  employment  contracts  and other similar
     plans,  agreements  and  arrangements  that are currently in effect or were
     maintained  within  three years of the date hereof,  or have been  approved
     before this date but are not yet  effective,  for the benefit of directors,
     officers or employees, or former directors, officers or employees (or their
     beneficiaries) of the Employer (each, a "Company Benefit Plan").  There are
     no pending or, to the Company's knowledge, threatened or anticipated claims
     (other than routine  claims for  benefits)  by, on behalf of or against any
     Company Benefit Plan or their related trusts.

          (ii) Neither the Company nor any entity (whether or not  incorporated)
     that was at any time during the six years before the date of this Agreement
     treated as a single employer together with the Company under Section 414 of
     the  Code has ever  maintained,  had any  obligation  to  contribute  to or
     incurred  any  liability  with  respect  to a  pension  plan that is or was
     subject to the  provisions of Title IV of ERISA or Section 412 of the Code.
     Neither the Company nor any entity (whether or not  incorporated)  that was
     at any time during the six years 


                                      -11-
<PAGE>
     before the date of this  Agreement  treated as a single  employer  together
     with the Company under Section 414 of the Code has ever maintained,  had an
     obligation  to contribute  to, or incurred any liability  with respect to a
     multiemployer pension plan as defined in Section 3(37) of ERISA. During the
     last six years,  the  Company  has not  maintained,  had an  obligation  to
     contribute  to or  incurred  any  liability  with  respect  to a  voluntary
     employees  beneficiary  association  that is or was intended to satisfy the
     requirements  of Section  501(c)(9) of the Code.  No plan,  arrangement  or
     agreement  with any one or more  employees  will cause the Employer to have
     liability for severance pay as a result of the Merger,  except as otherwise
     set forth in the  severance  agreements  between the Company and each of W.
     Todd  Bratton,  Wilfred  M.  Krenek  and  Norman D.  Quam  (the  "Severance
     Agreements").  The Employer does not provide employee  benefits,  including
     without  limitation,  death,  post-retirement  medical  or health  coverage
     (whether or not insured) or contribute to or maintain any employee  benefit
     plan  which  provides  for  benefit  coverage   following   termination  of
     employment  except (A) as is  required  by Section  4980B(f) of the Code or
     other applicable  statute,  (B) death benefits or retirement benefits under
     any employee  pension benefit plan as defined in Section 3(2) of ERISA, (C)
     benefits the full cost of which is borne by the current or former  employee
     (or  his  beneficiary)  nor has it made  any  representations,  agreements,
     covenants  or   commitments  to  provide  that  coverage  or  (D)  deferred
     compensation  benefits  which have been accrued as liabilities on the books
     of the Employer and disclosed on its financial  statements  included in the
     SEC Documents.  All group health plans maintained by the Employer have been
     operated in material compliance with Section 4980B(f) of the Code.

          (iii) All Company  Benefit  Plans as defined in Section  3(2) of ERISA
     which are intended to qualify  under  Section  401(a) of the Code have been
     submitted to and approved as qualifying under Section 401(a) of the Code by
     the Internal  Revenue Service or the applicable  remedial  amendment period
     will not have ended prior to the  Effective  Time of the  Merger.  No facts
     have  occurred  which if known by the IRS could cause  disqualification  of
     those plans.

          (iv) Except as expressly  provided in this  Agreement or the Severance
     Agreements  and  except  for  options  granted  under  the  Company's  1994
     Nonemployee Directors' Stock Option Plan, the transactions  contemplated by
     this  Agreement  will not  accelerate  the time of payment or  vesting,  or
     increase the amount, of compensation due any director,  officer or employee
     or former director,  officer or employee  (including any beneficiary)  from
     the Company.

          (v) With respect to any entity (whether or not  incorporated)  that is
     both treated as a single  employer  together with the Company under Section
     414 of the Code and located outside of the United States, any benefit plans
     maintained by it for the benefit of its directors,  officers,  employees or
     former  employees (or any of their  beneficiaries)  are in compliance  with
     applicable  laws  pertaining  to such  plans  in the  jurisdiction  of such
     entity,  except where such failure to be in  compliance  would not,  either
     individually  or in the  aggregate,  have a material  adverse effect on the
     Company and its subsidiaries, taken as a whole.


                                      -12-
<PAGE>
          (m) Taxes. Each of the Company and each of its  subsidiaries,  and any
consolidated,  combined,  unitary or aggregate  group for Tax (as defined below)
purposes  of  which  the  Company  or any of its  subsidiaries  is or has been a
member, has timely filed all Tax Returns (as defined below) required to be filed
by it on or before the  Effective  Time of the  Merger  and has  timely  paid or
deposited  (or the Company has paid or  deposited on its behalf) all Taxes which
are  required to be paid or  deposited  on or before the  Effective  Time of the
Merger.  Each of the Tax Returns filed by the Company or any of its subsidiaries
is accurate and complete in all material respects.  The most recent consolidated
financial statements of the Company contained in the filed SEC Documents reflect
an adequate  reserve for all Taxes  payable by the Company and its  subsidiaries
for all taxable periods and portions  thereof through the date of such financial
statements  whether or not shown as being due on any Tax  Returns.  No  material
deficiencies for any Taxes have been proposed,  asserted or assessed against the
Company  or any of its  subsidiaries,  no  requests  for  waivers of the time to
assess  any such Taxes have been  granted or are  pending,  and there are no tax
liens upon any assets of the  Company or any of its  subsidiaries.  The  Federal
income Tax Returns of the Company and its subsidiaries  consolidated in such Tax
Returns have never been examined by the IRS.  There are no current  examinations
of any Tax Return of the Company or any of its subsidiaries  being conducted and
there are no settlements  or any prior  examinations  which could  reasonably be
expected  to  adversely  affect  any  taxable  period  for which the  statute of
limitations  has not run. As used herein,  "Tax" or "Taxes" shall mean all taxes
of any kind, including,  without limitation, those on or measured by or referred
to as income,  gross  receipts,  sales,  use,  ad valorem,  franchise,  profits,
license, withholding,  payroll, employment, estimated, excise, severance, stamp,
occupation,  premium,  value added, property or windfall profits taxes, customs,
duties or similar fees, assessments or charges of any kind whatsoever,  together
with any interest and any  penalties,  additions  to tax or  additional  amounts
imposed by any Governmental  Entity,  domestic or foreign.  As used herein, "Tax
Return" shall mean any return,  report,  statement or information required to be
filed with any governmental authority with respect to Taxes.

          (n) No Excess  Parachute  Payments.  Any amount that could be received
(whether in cash or property or the vesting of  property)  as a result of any of
the  transactions  contemplated  by this  Agreement by any employee,  officer or
director  of  the  Company  or  any of  its  affiliates  who is a  "disqualified
individual"  (as such term is defined in proposed  Treasury  Regulation  Section
1.280G-1)  under any  employment,  severance  or  termination  agreement,  other
compensation  arrangement or Company  Benefit Plan currently in effect would not
be  characterized as an "excess  parachute  payment" (as such term is defined in
Section 280G(b)(1) of the Code).

          (o) Environmental Matters. Except as would not have a material adverse
effect on the Company and its  subsidiaries,  taken as a whole, (i) the business
operations of the Company and its subsidiaries are being conducted in compliance
with all limitations, restrictions, standards and requirements established under
environmental  laws,  (ii) no facts or  circumstances  exist that  impose on the
Company or any of its  subsidiaries an obligation  under  environmental  laws to
conduct any removal,  remediation, or similar response action, (iii) there is no
obligation, undertaking or liability arising out of or relating to environmental
laws that the 


                                      -13-
<PAGE>
Company  or any of its  subsidiaries  has agreed to,  assumed  or  retained,  by
contract  or  otherwise,  or that has been  imposed on the Company or any of its
subsidiaries by any writ, injunction,  decree, order or judgment, and (iv) there
are no lawsuits, claims or proceedings pending against the Company or any of its
subsidiaries that arise out of or relate to environmental laws.

          (p) Compliance  with Laws. The Company and its  subsidiaries  hold all
required,  necessary or applicable  permits,  licenses,  variances,  exemptions,
orders,  franchises and approvals of all Governmental Entities, except where the
failure to so hold would not have a material  adverse  effect on the Company and
its subsidiaries,  taken as a whole (the "Company Permits"). The Company and its
subsidiaries  are in  compliance  with the terms of the Company  Permits  except
where the failure to so comply would not have a material  adverse  effect on the
Company and its subsidiaries,  taken as a whole.  Neither the Company nor any of
its  subsidiaries  has  violated  or  failed to comply  with any  statute,  law,
ordinance,  regulation,  rule,  permit or order of any  Federal,  state or local
government,  domestic or foreign,  or any Governmental  Entity,  any arbitration
award  or any  judgment,  decree  or order  of any  court or other  Governmental
Entity, applicable to the Company or any of its subsidiaries or their respective
business,  assets or  operations,  except for  violations and failures to comply
that could not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the Company and its subsidiaries, taken as a whole.

          (q) Material  Contracts and Agreements.  All material contracts of the
Company or its subsidiaries have been included in the SEC Documents,  except for
those  contracts not required to be filed pursuant to the rules and  regulations
of the SEC.

          (r) Title to Properties.

          (i)  Each of the  Company  and each of its  subsidiaries  has good and
     defensible  title to, or valid  leasehold  interests in, all its properties
     and assets  purported  to be owned by it in the SEC  Documents,  except for
     such as are no longer used or useful in the conduct of its businesses or as
     have been  disposed of in the  ordinary  course of business  and except for
     minor  defects  in title,  easements,  restrictive  covenants  and  similar
     encumbrances  or impediments  that, in the  aggregate,  do not and will not
     materially  interfere with its ability to conduct its business as currently
     conducted or as reasonably  expected to be  conducted.  All such assets and
     properties, other than assets and properties in which the Company or any of
     the subsidiaries has leasehold interests,  are free and clear of all Liens,
     other than those set forth in the SEC Documents and except for minor Liens,
     that, in the aggregate,  do not and will not materially  interfere with the
     ability of the Company or any of its  subsidiaries  to conduct  business as
     currently conducted or as reasonably expected to be conducted.

          (ii) Except as would not have a material adverse effect on the Company
     and its subsidiaries, taken as a whole, each of the Company and each of its
     subsidiaries  has complied in all material  respects  with the terms of all
     leases to which it is a party and under which it is in  occupancy,  and all
     such leases are in 


                                      -14-
<PAGE>
     full force and effect.  Each of the  Company  and each of its  subsidiaries
     enjoys peaceful and undisturbed possession under all such leases.

          (s) Intellectual  Property.  The Company and its subsidiaries  own, or
are licensed or otherwise  have the right to use,  all patents,  patent  rights,
trademarks,  trademark rights,  trade names,  trade name rights,  service marks,
service mark  rights,  copyrights,  technology,  know-how,  processes  and other
proprietary  intellectual  property  rights  and  computer  programs  which  are
material to the  condition  (financial  or otherwise) or conduct of the business
and  operations  of the Company and its  subsidiaries  taken as a whole.  To the
Company's  knowledge,  (i) the use of such patents,  patent rights,  trademarks,
trademark rights,  service marks, service mark rights, trade names,  copyrights,
technology,  know-how,  processes and other  proprietary  intellectual  property
rights and  computer  programs  by the  Company  and its  subsidiaries  does not
infringe on the rights of any person,  subject to such claims and  infringements
as do not,  in the  aggregate,  give  rise to any  liability  on the part of the
Company and its  subsidiaries  which could have a material  adverse  effect with
respect  to the  Company  and its  subsidiaries,  taken as a whole,  and (ii) no
person is infringing on any right of the Company or any of its subsidiaries with
respect  to any such  patents,  patent  rights,  trademarks,  trademark  rights,
service  marks,  service  mark  rights,  trade  names,  copyrights,  technology,
know-how,  processes  and other  proprietary  intellectual  property  rights and
computer  programs.  No  claims  are  pending  or, to the  Company's  knowledge,
threatened  that  the  Company  or any  of its  subsidiaries  is  infringing  or
otherwise  adversely  affecting  the  rights of any  person  with  regard to any
patent,  license,  trademark,  trade  name,  service  mark,  copyright  or other
intellectual property right. To the Company's knowledge, no person is infringing
the rights of the Company or any of its subsidiaries with respect to any patent,
license,  trademark,  trade name, service mark,  copyright or other intellectual
property right.

          (t) Labor Matters.  There are no collective  bargaining  agreements or
other labor union  agreements or  understandings  to which the Company or any of
its U.S.  subsidiaries is a party or by which any of them is bound, nor is it or
any of its subsidiaries  the subject of any proceeding  asserting that it or any
subsidiary  has  committed an unfair  labor  practice or seeking to compel it to
bargain with any labor organization as to wages or conditions.  To the Company's
knowledge,  since  December  31,  1993,  neither  the  Company  nor  any  of its
significant subsidiaries has encountered any labor union organizing activity, or
had any actual or threatened  employee  strikes,  work  stoppages,  slowdowns or
lockouts.  As used in this Agreement,  "significant  subsidiary"  shall have the
meaning given it in the regulations promulgated under the Exchange Act.

          (u) Undisclosed Liabilities. Except as set forth in the SEC Documents,
at the date of the most  recent  audited  financial  statements  of the  Company
included in the SEC Documents,  neither the Company nor any of its  subsidiaries
had,  and since such date neither the Company nor any of such  subsidiaries  has
incurred  (except  in the  ordinary  course of  business),  any  liabilities  or
obligations of any nature (whether accrued, absolute,  contingent or otherwise),
required  by  generally  accepted  accounting  principles  to be set  forth on a
financial  statement or in the notes  thereto or which, 


                                      -15-
<PAGE>
individually  or in the  aggregate,  could  reasonably  be  expected  to  have a
material adverse effect on the Company and its subsidiaries, taken as a whole.

          (v) Opinion of  Financial  Advisor.  The  Company has been  advised by
Jefferies & Company,  Inc. that the Merger  Consideration is fair to the holders
of the Shares from a  financial  point of view,  a signed copy of which  opinion
will be delivered  to Parent for  inclusion in the  Registration  Statement  (as
defined in Section 5.1(b)).

          (w) Board Recommendation.  The Board of Directors of the Company, at a
meeting  duly  called  and  held,  has by vote of those  directors  present  (i)
determined  that  this  Agreement  and  the  transactions  contemplated  hereby,
including the Merger and the transactions  contemplated thereby, are fair to and
in the best interests of the  stockholders of the Company,  and (ii) resolved to
recommend that the holders of the Shares approve the Merger and the transactions
contemplated thereby.

          SECTION 3.2.  Representations and Warranties of Parent and Sub. Parent
and Sub agree that they will,  on or before  October 1, 1996,  affirm in writing
(the "Parent Affirmation and Disclosure  Document") that, as of the date of this
Agreement,  they  represent  and  warrant  to, and agree  with,  the  Company as
follows,  subject to any  exceptions  specified  in the Parent  Affirmation  and
Disclosure Document:

          (a)  Organization;  Standing and Power.  Parent 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.  Parent is duly qualified to do business and in
good  standing in each  jurisdiction  in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such  jurisdictions  where the failure to be so qualified to do business
(individually  or in the aggregate)  would not have a material adverse effect on
Parent and its subsidiaries, taken as a whole.

          (b)  Subsidiaries.  Parent's  subsidiaries  that are  corporations are
corporations  duly  organized,  validly  existing and in good standing under the
laws of their respective  jurisdictions of incorporation  and have the requisite
corporate  power and authority to carry on their  respective  businesses as they
are now being  conducted and to own,  operate and lease the assets they now own,
operate or hold under  lease.  Parent's  subsidiaries  are duly  qualified to do
business and are in good  standing in each  jurisdiction  in which the nature of
their  respective  businesses  or the  ownership or leasing of their  respective
properties makes such qualification necessary, other than in jurisdictions where
the failure to be so  qualified  or in good  standing  would not have a material
adverse  effect  on  Parent  and its  subsidiaries,  taken as a  whole.  All the
outstanding   shares  of  capital  stock  of  Parent's   subsidiaries  that  are
corporations have been duly authorized and validly issued and are fully paid and
non-assessable  and were not issued in  violation  of any  preemptive  rights or
other preferential  rights of subscription or purchase of any person.  Except as
disclosed in the Parent SEC Documents (as defined in Section  3.2(e)),  all such
stock and ownership  interests are owned of record and beneficially by Parent or
by a wholly-owned  subsidiary of Parent, free and clear of all Liens. Except for
the capital stock of, or ownership  interests in, its subsidiaries,  Parent does
not own,  directly or indirectly,  any capital stock, equity  


                                      -16-
<PAGE>
interest  or  other  ownership   interest  in  any   corporation,   partnership,
association, joint venture, limited liability company or other entity.

          (c) Capital Structure. The authorized capital stock of Parent consists
of 20,000,000  shares of common stock,  $1.25 par value, and 1,000,000 shares of
preferred  stock,  $1.00 par value, of which 150,000 shares have been designated
Series A Junior Participating Preferred Stock and reserved for issuance pursuant
to the Rights Agreement dated May 31, 1990, between Parent and Wachovia Bank and
Trust  Company,  N.A., as rights  agent.  At the close of business on August 31,
1996,  12,136,813  Parent  Shares were issued and  outstanding,  (ii) 35,000 and
295,876  shares of Parent  common stock were  reserved for issuance  pursuant to
options not yet granted under Parent's 1995 Non-Employee Directors' Stock Option
Plan and 1977 Stock Option  Plan,  respectively,  (iii) 79,979  shares of Parent
common stock were reserved for issuance under  Parent's  Stock Award Plan,  (iv)
135,000 and 785,579  shares of Parent  common  stock were  reserved for issuance
pursuant  to  outstanding  options  granted  under  Parent's  1995  Non-Employee
Director  Stock Option Plan and 1977 Stock Option Plan and (v) 60,000  shares of
Parent common stock were reserved for issuance pursuant to stock options granted
in certain  continuation  of service  agreements.  Except as set forth above, no
shares of  capital  stock or other  equity or voting  securities  of Parent  are
reserved for issuance or outstanding. All outstanding shares of capital stock of
Parent are, and all such shares  issuable  upon the exercise of options will be,
validly  issued,  fully paid and  nonassessable  and not  subject to  preemptive
rights.  No capital stock has been issued by Parent since August 31, 1996, other
than Parent Shares issued  pursuant to options  outstanding  on or prior to such
date in accordance  with their terms at such date.  Except for the stock options
described  above, as of August 31, 1996, there were no outstanding or authorized
securities,  options, warrants, calls, rights,  commitments,  preemptive rights,
agreements,  arrangements  or undertakings of any kind to which Parent or any of
its subsidiaries is a party, or by which any of them is bound, obligating Parent
or any of its  subsidiaries  to issue,  deliver or sell,  or cause to be issued,
delivered  or sold,  any  shares  of  capital  stock or other  equity  or voting
securities  of,  or  other  ownership  interests  in,  Parent  or of  any of its
subsidiaries or obligating  Parent or any of its  subsidiaries to issue,  grant,
extend  or  enter  into  any  such  security,   option,  warrant,  call,  right,
commitment,  agreement,  arrangement or undertaking. Prior to the Effective Time
of the  Merger,  Parent  shall have taken all  necessary  action to permit it to
issue the number of Parent  Shares  required  to be issued  pursuant to terms of
this Agreement. The Parent Shares issued pursuant to the terms of this Agreement
will,  when issued,  be validly  issued,  fully paid and  nonassessable  and not
subject  to  preemptive  rights.  Such  Parent  Shares  will,  when  issued,  be
registered  under the Securities Act and the Exchange Act and will, when issued,
be listed on the NYSE, subject to notice of official issuance.

          (d)  Authority;  Non-contravention.  Parent and Sub have the requisite
corporate  power and  authority  to enter into this  Agreement  and,  subject to
approval  of the Merger and this  Agreement  by the holders of a majority of the
Parent  Shares  present  in  person  or  represented  by  proxy  at  the  Parent
Stockholder  Meeting  ("Parent   Stockholder   Approval"),   to  consummate  the
transactions  contemplated  hereby. The execution and delivery of this Agreement
by Parent and Sub and the  consummation  by Parent  and Sub of the  transactions
contemplated  hereby have been duly authorized by 


                                      -17-
<PAGE>
all necessary corporate action on the part of Parent and Sub. This Agreement has
been duly executed and  delivered by Parent and Sub and  constitutes a valid and
binding  obligation  of Parent and Sub,  enforceable  against  Parent and Sub in
accordance  with its terms,  except that (i) such  enforcement may be subject to
bankruptcy,  insolvency,  reorganization,  moratorium  or other  similar laws or
judicial  decisions  now or hereafter in effect  relating to  creditors'  rights
generally and (ii) the remedy of specific  performance and injunctive relief may
be subject to equitable defenses and to the discretion of the court before which
any  proceeding  therefor  may be brought.  The  execution  and delivery of this
Agreement by Parent and Sub do not,  and the  consummation  of the  transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, or result in any violation 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 or "put" right with respect to any  obligation  or to loss of a
material  benefit  under,  or  result  in the  creation  of any  lien,  security
interest,  charge or encumbrance  upon any of the properties or assets of Parent
or Sub or any of their subsidiaries  under, any provision of (i) the Certificate
of Incorporation or By-laws of Sub or of Parent or any comparable organizational
documents of their subsidiaries,  (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement,  instrument,  permit, concession,
franchise or license applicable to Parent or Sub or any of their 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  or  arbitration
account  applicable  to  Parent  or Sub or any of  their  subsidiaries  or their
respective  properties or assets,  other than,  in the case of clause (ii),  any
such  conflicts,  violations or defaults that  individually  or in the aggregate
would not  materially  impair the  ability  of Parent  and Sub to perform  their
respective  obligations  hereunder  or prevent  the  consummation  of any of the
transactions  contemplated hereby. No consent,  approval, order or authorization
of, or  registration,  declaration  or filing with, any  Governmental  Entity is
required  by or with  respect to Parent or Sub or any of their  subsidiaries  in
connection  with the execution and delivery of this  Agreement by Parent and Sub
or the consummation by Parent and Sub of the transactions  contemplated  hereby,
except for (i) the filing by Parent of a premerger  notification and report form
under the HSR Act, (ii) the filing with the SEC of (A) the Proxy  Statement with
respect to Parent Stockholder  Approval and (B) such reports under Section 13(a)
of the Exchange Act as may be required in connection with this Agreement and the
transactions  contemplated  hereby,  (iii) the filing and  effectiveness  of the
Registration  Statement  under  the  Securities  Act,  and (iv)  such  consents,
approvals, orders,  authorizations,  registrations,  declarations and filings as
may be required  under the  "takeover" or "blue sky" laws of various  states and
such  other  consents,   approvals,   orders,   authorizations,   registrations,
declarations  and  filings the failure of which to be obtained or made would not
have a material  adverse effect on Parent.  

          (e) SEC Documents.  Parent has filed all required reports,  schedules,
forms,  statements and other  documents with the SEC since October 1, 1994 (such
documents,  together  with all  exhibits  and  schedules  thereto and  documents
incorporated  by  reference  therein,  collectively  referred  to  herein as the
"Parent SEC Documents").  As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as 


                                      -18-
<PAGE>
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable  to such Parent SEC  Documents,  and none of the Parent 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.  The  consolidated  financial  statements of Parent  included in the
Parent SEC Documents comply in all material respects with applicable  accounting
requirements  and the published  rules and  regulations  of the SEC with respect
thereto,  have been prepared in accordance  with generally  accepted  accounting
principles  (except, in the case of unaudited  statements,  as permitted by Form
10-Q of the SEC)  applied on a  consistent  basis  during the  periods  involved
(except  as may be  indicated  in the notes  thereto)  and  fairly  present  the
consolidated  financial position of Parent and its consolidated  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 and other adjustments described therein).

          (f) Information  Supplied.  None of the information  supplied or to be
supplied  by Parent for  inclusion  or  incorporation  by  reference  in (i) the
Registration  Statement  will, at the time the  Registration  Statement is filed
with the SEC,  and at any time it is amended or  supplemented  or at the time it
becomes  effective under the Securities Act,  contain any untrue  statement of a
material fact or omit to state any material  fact required to be stated  therein
or necessary to make the statements  therein not misleading,  and (ii) the Proxy
Statement  will, at the date the Proxy Statement is first mailed to the Parent's
stockholders  and at the time of the Parent  Stockholders  Meeting,  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.  The Proxy
Statement,  as it relates to the Parent Stockholder  Meeting,  will comply as to
form 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  Parent  or Sub with  respect  to  statements  made or  incorporated  by
reference therein based on information  supplied by the Company for inclusion or
incorporation by reference therein.

          (g) Absence of Certain  Changes or Events.  Except as disclosed in the
Parent SEC Documents, since December 31, 1995, Parent has conducted its business
only in the ordinary  course  consistent  with past practice,  and there has not
been  (i)  any  material  adverse  change  with  respect  to  Parent,  (ii)  any
declaration, setting aside or payment of any dividend (whether in cash, stock or
property)  with  respect to any of  Parent's  capital  stock,  (iii) any damage,
destruction or loss, whether or not covered by insurance, that has or reasonably
could be expected to have a material adverse effect on Parent or (iv) any change
in accounting  methods,  principles or practices by Parent materially  affecting
its assets, liabilities or business, except insofar as may have been required by
a change in generally accepted accounting principles.

          (h) State  Takeover  Statutes;  Absence  of  Supermajority  Provision.
Parent has taken all action to assure that no state takeover  statute or similar
statute or regulation,  including,  without limitation ss.203 of the DGCL, shall
apply to the 


                                      -19-
<PAGE>
Merger or any of the other  transactions  contemplated  hereby.  Except  for the
Parent Stockholder  Approval,  no other stockholder action on the part of Parent
is required for approval of the Merger and the transactions contemplated hereby.

          (i) Brokers.  Except for Simmons & Company  International,  whose fees
are to be paid by  Parent,  no broker,  investment  banker or other  person,  is
entitled  to any  broker's,  finder'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 Parent or Sub,  including  any fee for any
opinion rendered by any investment banker.

          (j) Litigation. Except as disclosed in the Parent SEC Documents, there
is no suit, action,  proceeding or investigation pending or, to the knowledge of
Parent,  threatened  against or affecting Parent or any of its subsidiaries that
could  reasonably  be  expected to have a material  adverse  effect on Parent or
prevent,  hinder or  materially  delay the ability of Parent to  consummate  the
transactions contemplated by this Agreement, nor is there any judgment,  decree,
injunction,  rule or order of any Governmental Entity or arbitrator  outstanding
against  Parent  or  any  of its  subsidiaries  having,  or  which,  insofar  as
reasonably can be foreseen, in the future could have, any such effect.

          (k)  Accounting  Matters.  Neither  Parent  nor,  to the  best  of its
knowledge,  any of its affiliates,  has through the date of this Agreement taken
or agreed to take any action that (without  giving effect to any action taken or
agreed to be taken by Parent or any of its affiliates) would prevent Parent from
accounting  for the  business  combination  to be  effected  by the  Merger as a
pooling of interests.

          (l) Employee Benefit Matters. As used in this Section 3.2(l), the term
"Parent Employer" shall mean Parent as defined in the preamble of this Agreement
and any member of a controlled group or affiliated  service group, as defined in
Sections 414(b), (c), (m) and (o) of the Code of which Parent is a member.

          (i) With  respect to each  employee  welfare  benefit  plan,  employee
     pension benefit plan and employee benefit plan as defined in Sections 3(1),
     3(2), and 3(3) of ERISA, which have been or are sponsored by,  participated
     in or  contributed  to by  or  required  to  be  contributed  to by  Parent
     Employer,  and except for any matter that would not  individually or in the
     aggregate  have a material  adverse  effect on  Parent:  (A) the plan is in
     substantial compliance with the Code and ERISA, including all reporting and
     disclosure  requirements  of Part 1 of Subtitle B of Title I of ERISA;  (B)
     the  appropriate  Form  5500 has been  timely  filed  for each  year of its
     existence;  (C) there has been no transaction  described in Sections 406 or
     407 of ERISA or Section 4975 of the Code unless exempt under Section 408 of
     ERISA  or  Section  4975  of the  Code,  as  applicable;  (D)  the  bonding
     requirements of Section 412 of ERISA have been  satisfied;  (E) there is no
     issue pending nor any issue resolved adversely to Parent Employer which may
     subject Parent to the payment of a penalty,  interest, tax or other amount;
     (F) the plan can be  unilaterally  terminated or amended on no more than 90
     days  notice  other  than  collectively  bargained  union  plans;  (G)  all


                                      -20-
<PAGE>
     contributions  or  other  amounts  payable  by  Parent  Employer  as of the
     Effective Time of the Merger with respect to the plan have either been paid
     or accrued in Parent Employer's most recent financial  statements  included
     in the Parent SEC Documents;  and (H) no notice has been received by Parent
     Employer of an  increase or proposed  increase in the cost of any such plan
     or any other employee benefit agreement or arrangement,  including deferred
     compensation  plans,  incentive plans,  bonus plans or arrangements,  stock
     option plans, stock purchase plans, golden parachute agreements,  severance
     pay plans or agreements,  dependent care plans,  cafeteria plans,  employee
     assistance programs,  scholarship programs,  employment contracts and other
     similar plans,  agreements and arrangements that are currently in effect or
     were  maintained  within  three  years of the  date  hereof,  or have  been
     approved  before this date but are) not yet  effective,  for the benefit of
     directors,   officers  or  employees,  or  former  directors,  officers  or
     employees (or their  beneficiaries) of the Parent Employer (each, a "Parent
     Benefit Plan"). There are no pending or, to Parent's knowledge,  threatened
     or  anticipated  claims (other than routine  claims for benefits) by, or on
     behalf of or against any Parent Benefit Plan or their related trusts.

          (ii) Neither Parent nor any entity (whether or not incorporated)  that
     was at any time  during  the six years  before  the date of this  Agreement
     treated as a single employer  together with Parent under Section 414 of the
     Code has ever  maintained,  had any obligation to contribute to or incurred
     any liability  with respect to a pension plan that is or was subject to the
     provisions of Title IV of ERISA or Section 412 of the Code.  Neither Parent
     nor any entity  (whether or not  incorporated)  that was at any time during
     the six  years  before  the  date of this  Agreement  treated  as a  single
     employer  together  with  Parent  under  Section  414 of the  Code has ever
     maintained,  had an obligation to contribute  to, or incurred any liability
     with respect to a multiemployer pension plan as defined in Section 3(37) of
     ERISA.  During  the last  six  years,  Parent  has not  maintained,  had an
     obligation to  contribute  to or incurred any  liability  with respect to a
     voluntary  employees  beneficiary  association  that is or was  intended to
     satisfy the requirements of Section  501(c)(9) of the Code. Parent Employer
     does not provide employee benefits,  including without  limitation,  death,
     post-retirement  medical or health  coverage  (whether  or not  insured) or
     contribute  to or maintain  any employee  benefit  plan which  provides for
     benefit  coverage  following  termination  of  employment  except (A) as is
     required by Section 4980B(f) of the Code or other applicable  statute,  (B)
     death benefits or retirement  benefits under any employee  pension  benefit
     plan as defined in Section  3(2) of ERISA,  (C)  benefits  the full cost of
     which is borne by the current or former employee (or his  beneficiary)  nor
     has it made any  representations,  agreements,  covenants or commitments to
     provide that coverage or (D) deferred compensation benefits which have been
     accrued as liabilities on the books of Parent Employer and disclosed on its
     financial statements included in the Parent SEC Documents. All group health
     plans  maintained  by  Parent  Employer  have  been  operated  in  material
     compliance with Section 4980B(f) of the Code.

          (iii) All Parent  Benefit  Plans as  defined in Section  3(2) of ERISA
     which are intended to qualify  under  Section  401(a) of the Code have been
     submitted to


                                      -21-
<PAGE>
     and approved as qualifying  under Section  401(a) of the Code by the IRS or
     the applicable  remedial  amendment period will not have ended prior to the
     Effective Time of the Merger.  No facts have occurred which if known by the
     IRS could cause disqualification of those plans.

          (iv)  The  transactions   contemplated  by  this  Agreement  will  not
     accelerate  the time of payment or  vesting,  or increase  the  amount,  of
     compensation  due any  director,  officer or employee  or former  director,
     officer or employee (including any beneficiary) from Parent.

          (v) With respect to any entity (whether or not  incorporated)  that is
     both treated as a single employer together with Parent under Section 414 of
     the Code and  located  outside  of the United  States,  any  benefit  plans
     maintained by it for the benefit of its directors,  officers,  employees or
     former  employees (or any of their  beneficiaries)  are in compliance  with
     applicable  laws  pertaining  to such  plans  in the  jurisdiction  of such
     entity,  except where such failure to be in  compliance  would not,  either
     individually or in the aggregate,  have a material adverse effect on Parent
     and its subsidiaries, taken as a whole.

          (m)  Taxes.  Each of  Parent  and  each of its  subsidiaries,  and any
consolidated,  combined,  unitary or  aggregate  group for Tax purposes of which
Parent or any of its subsidiaries is or has been a member,  has timely filed all
Tax Returns  required to be filed by it on or before the  Effective  Time of the
Merger and has timely paid or deposited  (or Parent has paid of deposited on its
behalf) all Taxes which are  required to be paid or  deposited  on or before the
Effective Time of the Merger.  Each of the Tax Returns filed by Parent or any of
its  subsidiaries  is accurate and complete in all material  respects.  The most
recent consolidated financial statements of Parent contained in the filed Parent
SEC  Documents  reflect an adequate  reserve for all Taxes payable by Parent and
its  subsidiaries  for all taxable periods and portions thereof through the date
of such  financial  statements  whether  or not  shown as  being  due on any Tax
Returns. No material deficiencies for any Taxes have been proposed,  asserted or
assessed against Parent or any of its  subsidiaries,  no requests for waivers of
the time to assess any such Taxes have been  granted or are  pending,  and there
are no tax liens  upon any  assets of  Parent  or any of its  subsidiaries.  The
Federal income Tax Returns of Parent and its  subsidiaries  consolidated in such
Tax Returns have been  examined by the IRS through the year ended  September 30,
1990.  There are no current  examinations  of any Tax Return of Parent or any of
its  subsidiaries  being  conducted  and there are no  settlements  or any prior
examinations  which could reasonably be expected to adversely affect any taxable
period for which the statute of limitations has not run.

          (n) No Excess  Parachute  Payments.  Any amount that could be received
(whether in cash or property or the vesting of  property)  as a result of any of
the  transactions  contemplated  by this  Agreement by any employee,  officer or
director of Parent or any of its affiliates who is a  "disqualified  individual"
(as such term is defined in proposed Treasury Regulation Section 1.280G-1) under
any  employment,   severance  or  termination   agreement,   other  compensation
arrangement   or  Parent   Benefit  Plan  


                                      -22-
<PAGE>
currently in effect would not be characterized as an "excess parachute  payment"
(as such term is defined in Section 280G(b)(1) of the Code).

        (o) Environmental Matters. Except as would not have a material adverse
effect  on  Parent  and its  subsidiaries,  taken as a whole,  (i) the  business
operations of Parent and its subsidiaries are being conducted in compliance with
all  limitations,  restrictions,  standards and requirements  established  under
environmental  laws, (ii) no facts or circumstances  exist that impose on Parent
or any of its subsidiaries an obligation under environmental laws to conduct any
removal,  remediation, or similar response action, (iii) there is no obligation,
undertaking or liability  arising out of or relating to environmental  laws that
Parent or any of its  subsidiaries  has  agreed  to,  assumed  or  retained,  by
contract  or  otherwise,  or that  has  been  imposed  on  Parent  or any of its
subsidiaries by any writ, injunction,  decree, order or judgment, and (iv) there
are no lawsuits,  claims or  proceedings  pending  against  Parent or any of its
subsidiaries that arise out of or relate to environmental laws.

          (p)  Compliance  with  Laws.  Parent  and its  subsidiaries  hold  all
required,  necessary or applicable  permits,  licenses,  variances,  exemptions,
orders,  franchises and approvals of all Governmental Entities, except where the
failure to so hold would not have a  material  adverse  effect on Parent and its
subsidiaries  taken  as  a  whole  (the  "Parent   Permits").   Parent  and  its
subsidiaries are in compliance with the terms of Parent Permits except where the
failure to so comply would not have a material  adverse effect on Parent and its
subsidiaries,  taken a whole.  Neither  Parent nor any of its  subsidiaries  has
violated or failed to comply with any statute, law, ordinance, regulation, rule,
permit or order of any Federal, state or local government,  domestic or foreign,
or any Governmental  Entity,  any arbitration  award or any judgment,  decree or
order of any court or other Governmental Entity,  applicable to Parent or any of
its subsidiaries or their respective business, assets or operations,  except for
violations  and  failures  to comply  that  could  not,  individually  or in the
aggregate,  reasonably be expected to have a material  adverse  effect on Parent
and its subsidiaries, taken as a whole.

          (q) Material  Contracts  and  Agreements.  All  material  contracts of
Parent or its subsidiaries  have been included in the SEC Documents,  except for
those  contracts not required to be filed pursuant to the rules and  regulations
of the SEC.

          (r) Title to Properties.

          (i)  Each  of  Parent  and  each  of its  subsidiaries  has  good  and
     defensible  title to, or valid  leasehold  interests in, all its properties
     and assets purported to be owned by it in the Parent SEC Documents,  except
     for such as are no longer used or useful in the  conduct of its  businesses
     or as have been  disposed of in the ordinary  course of business and except
     for minor defects in title,  easements,  restrictive  covenants and similar
     encumbrances  or impediments  that, in the  aggregate,  do not and will not
     materially  interfere with its ability to conduct its business as currently
     conducted or as reasonably  expected to be  conducted.  All such assets and
     properties,  other than assets and properties in which Parent or any of the
     subsidiaries  has  leasehold  interests,  are free and clear of all  Liens,


                                      -23-
<PAGE>
     other than those set forth in the Parent SEC Documents and except for minor
     Liens,  that, in the aggregate,  do not and will not  materially  interfere
     with the ability of Parent or any of its  subsidiaries to conduct  business
     as currently conducted or as reasonably expected to be conducted.

          (ii) Except as would not have a material  adverse effect on Parent and
     its  subsidiaries,  taken  as a  whole,  each  of  Parent  and  each of its
     subsidiaries  has complied in all material  respects  with the terms of all
     leases to which it is a party and under which it is in  occupancy,  and all
     such  leases are in full force and  effect.  Each of Parent and each of its
     subsidiaries  enjoys  peaceful and  undisturbed  possession  under all such
     leases.

          (s) Intellectual  Property.  Parent and its  subsidiaries  own, or are
licensed  or  otherwise  have the  right to use,  all  patents,  patent  rights,
trademarks,  trademark rights,  trade names,  trade name rights,  service marks,
service mark  rights,  copyrights,  technology,  know-how,  processes  and other
proprietary  intellectual  property  rights  and  computer  programs  which  are
material to the  condition  (financial  or otherwise) or conduct of the business
and  operations of Parent and its  subsidiaries,  taken as a whole.  To Parent's
knowledge,  (i) the use of such patents,  patent rights,  trademarks,  trademark
rights, service marks, service mark rights, trade names, copyrights, technology,
know-how,  processes  and other  proprietary  intellectual  property  rights and
computer programs by Parent and its subsidiaries does not infringe on the rights
of any  person,  subject to such  claims  and  infringements  as do not,  in the
aggregate, give rise to any liability on the part of Parent and its subsidiaries
which  could  have a  material  adverse  effect  with  respect to Parent and its
subsidiaries, taken as a whole, and (ii) no person is infringing on any right of
Parent or any of its  subsidiaries  with  respect  to any such  patents,  patent
rights, trademarks,  trademark rights, service marks, service mark rights, trade
names,  copyrights,   technology,  know-how,  processes  and  other  proprietary
intellectual property rights and computer programs. No claims are pending or, to
Parent's  knowledge,  threatened  that  Parent  or any of  its  subsidiaries  is
infringing or otherwise adversely affecting the rights of any person with regard
to any patent, license,  trademark, trade name, service mark, copyright or other
intellectual property right. To Parent's knowledge,  no person is infringing the
rights of Parent or any of its subsidiaries with respect to any patent, license,
trademark,  trade name, service mark,  copyright or other intellectual  property
right.

          (t) Labor Matters.  There are no collective  bargaining  agreements or
other labor union  agreements  or  understandings  to which Parent or any of its
U.S.  subsidiaries is a party or by which any of them is bound, nor is it or any
of its  subsidiaries  the  subject of any  proceeding  asserting  that it or any
subsidiary  has  committed an unfair  labor  practice or seeking to compel it to
bargain  with any labor  organization  as to wages or  conditions.  To  Parent's
knowledge,  since December 31, 1993,  neither Parent nor any of its  significant
subsidiaries  has encountered any labor union  organizing  activity,  or had any
actual or threatened employee strikes, work stoppages, slowdowns or lockouts.


                                      -24-

<PAGE>
          (u)  Undisclosed  Liabilities.  Except as set forth in the  Parent SEC
Documents, at the date of the most recent audited financial statements of Parent
included in the Parent SEC Documents, neither Parent nor any of its subsidiaries
had,  and since  such  date  neither  Parent  nor any of such  subsidiaries  has
incurred  (except  in the  ordinary  course of  business),  any  liabilities  or
obligations of any nature (whether accrued, absolute,  contingent or otherwise),
required  by  generally  accepted  accounting  principles  to be set  forth on a
financial  statement or in the notes  thereto or which,  individually  or in the
aggregate,  could  reasonably be expected to have a material  adverse  effect on
Parent and its subsidiaries, taken as a whole.

          (v) Opinion of Financial Advisor. Parent has been advised by Simmons &
Company  International  that the Merger  Consideration is fair to the holders of
the Parent Shares from a financial point of view, a signed copy of which opinion
will be delivered to the Company for inclusion in the Registration Statement.

          (w) Board  Recommendation.  The Board of  Directors  of  Parent,  at a
meeting  duly  called  and  held,  has by vote of those  directors  present  (i)
determined  that  this  Agreement  and  the  transactions  contemplated  hereby,
including the Merger and the transactions  contemplated thereby, are fair to and
in the best  interests  of the  stockholders  of Parent,  and (ii)  resolved  to
recommend  that the  holders of the  Parent  Shares  approve  the Merger and the
transactions contemplated thereby.

                                  ARTICLE IV

                   COVENANTS RELATING TO CONDUCT OF BUSINESS

          SECTION 4.1. Conduct of Business of the Company.

          (a) Ordinary Course. During the period from the date of this Agreement
to  the  Effective  Time  of  the  Merger  (except  as  otherwise   specifically
contemplated by the terms of this Agreement),  the Company shall and shall cause
its  significant  subsidiaries  to carry on their  respective  businesses in the
usual,  regular  and  ordinary  course  in  substantially  the  same  manner  as
heretofore conducted and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations,  keep available
the  services  of their  current  officers  and  employees  and  preserve  their
relationships with customers, suppliers, licensors, licensees,  distributors and
others having  business  dealings with them, in each case  consistent  with past
practice,  to the end  that  their  goodwill  and  ongoing  businesses  shall be
unimpaired to the fullest  extent  possible at the Effective Time of the Merger.
Without  limiting  the  generality  of the  foregoing,  and except as  otherwise
expressly  contemplated by this Agreement,  the Company shall not, and shall not
permit any of its subsidiaries to:

          (i) (A) 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 any direct or indirect wholly-owned  subsidiary of the
     Company to the Company or a  wholly-owned  subsidiary  of the Company,  (B)
     split, combine 


                                      -25-
<PAGE>
     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 (C) 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;

          (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, in the
     case of the Company,  the  issuance of shares of Company  Common Stock upon
     the exercise of Stock Options  outstanding on the date of this Agreement in
     accordance with their current terms);

          (iii)  amend  its  Certificate  of  Incorporation,  By-laws  or  other
     comparable charter or organizational document;

          (iv) acquire or agree to acquire (A) by merging or consolidating with,
     or by purchasing a substantial portion of the stock or assets of, or by any
     other manner,  any business or any corporation,  partnership,  association,
     joint  venture,  limited  liability  company  or other  entity or  division
     thereof or (B) any assets that would be  material,  individually  or in the
     aggregate,  to the Company and its  subsidiaries  taken as a whole,  except
     purchases  of supplies and  inventory  in the  ordinary  course of business
     consistent with past practice;

          (v)  sell,  lease,  mortgage,  pledge,  grant a Lien  on or  otherwise
     encumber or dispose of any of its properties or assets, except (A) sales of
     inventory in the ordinary course of business consistent with past practice,
     (B) the sale of buildings in Orville,  Ohio and Glenrothes,  Scotland,  and
     (C)  other  immaterial  transactions  not  in  excess  of  $250,000  in the
     aggregate;

          (vi) (A) incur any  indebtedness  for borrowed  money 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 under currently existing revolving credit facilities incurred in
     the ordinary course of business, or (B) make any loans, advances or capital
     contributions  to, or investments  in, any other person,  other than to the
     Company or any direct or indirect wholly-owned subsidiary of the Company;

          (vii) make or incur any new capital  expenditure,  which, singly or in
     the aggregate with all other expenditures, would exceed $500,000;

          (viii)  make any  material  election  relating  to Taxes or  settle or
     compromise any material Tax liability;


                                      -26-

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

          (x) waive the  benefits  of,  or agree to  modify in any  manner,  any
     confidentiality,  standstill  or similar  agreement to which the Company or
     any of its subsidiaries is a party;

          (xi) adopt a plan of complete or partial  liquidation  or  resolutions
     providing for or authorizing  such a liquidation or a dissolution,  merger,
     consolidation, restructuring, recapitalization or reorganization;

          (xii) except as expressly permitted by this Agreement,  enter into any
     new collective bargaining agreement;

          (xiii) change any material accounting  principle used by it, except as
     required by regulations promulgated by the SEC;

          (xiv) settle or compromise  any  litigation  (whether or not commenced
     prior to the date of this Agreement) other than settlements or compromises:
     (A) of litigation  where the amount paid in  settlement or compromise  does
     not exceed  $100,000,  or (B) in consultation  and cooperation with Parent,
     and, with respect to any such settlement, with the prior written consent of
     Parent; or

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

          (b) Changes in Employment Arrangements. Neither the Company nor any of
its subsidiaries shall (except as may be required in order to give effect to the
requirements  of Section 5.6) adopt or amend  (except as may be required by law)
any bonus,  profit sharing,  compensation,  stock option,  pension,  retirement,
deferred  compensation,  employment or other employee  benefit plan,  agreement,
trust,  fund or other  arrangement  (including any Company Benefit Plan) for the
benefit or welfare of any  employee,  director or former  director or  employee,
increase the  compensation  or fringe  benefits of any officer of the Company or
any of its  subsidiaries,  or, except as provided in an existing Company Benefit
Plan or in the  ordinary  course of  business  consistent  with  past  practice,
increase the  compensation or fringe benefits of any employee or former employee
or pay any benefit not required by any existing plan, arrangement or agreement.

          (c) Severance.  Neither the Company nor any of its subsidiaries  shall
grant any new or modified  severance or  termination  arrangement or increase or


                                      -27-

<PAGE>
accelerate any benefits  payable under its severance or termination pay policies
in effect on the date hereof.

          (d) Other Actions.  The Company shall not, and shall not permit any of
its  subsidiaries  to, take any action that would,  or that could  reasonably be
expected to, result in any of the  representations and warranties of the Company
set forth in this Agreement becoming untrue.

          SECTION 4.2. Conduct of Business of Parent and Sub.

          (a) Ordinary Course. During the period from the date of this Agreement
to  the  Effective  Time  of  the  Merger  (except  as  otherwise   specifically
contemplated by the terms of this Agreement),  Parent shall and shall cause each
of its significant  subsidiaries to carry on their respective  businesses in the
usual,  regular  and  ordinary  course  in  substantially  the  same  manner  as
heretofore  conducted.  Without  limiting the generality of the  foregoing,  and
except as otherwise expressly contemplated by this Agreement,  Parent shall not,
and shall not permit any of its significant subsidiaries to:

          (i) (A) declare,  set aside or pay any dividends on, or make any other
     distributions  in respect  of,  any of its  capital  stock,  other than (I)
     dividends  and  distributions  by  any  direct  or  indirect   wholly-owned
     subsidiary  of Parent to Parent or a  wholly-owned  subsidiary of Parent or
     (II) regular quarterly cash dividends declared or paid by Parent consistent
     with past  practice,  (B) 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 (C)
     purchase, redeem or otherwise acquire any shares of capital stock of Parent
     or any of its subsidiaries or any other  securities  thereof or any rights,
     warrants or options to acquire any such shares or other securities;

          (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, in the case
     of Parent,  (A) the  issuance of Parent  Shares upon the  exercise of Stock
     Options  outstanding on the date of this Agreement in accordance with their
     current  terms,  or (B) the issuance of a number of Parent  Shares,  not to
     exceed 5% of the Parent Shares  currently  outstanding,  in connection with
     the  acquisition  of assets  or  equity  securities  of other  entities  or
     businesses;

          (iii)  amend  its  Certificate  of  Incorporation,  By-laws,  or other
     comparable charter or organizational document;

          (iv) adopt a plan of complete or partial  liquidation  or  resolutions
     providing for or authorizing  such a liquidation or a dissolution,  merger,
     consolidation, restructuring, recapitalization or reorganization;


                                      -28-

<PAGE>
          (v) change any material  accounting  principle  used by it,  except as
     required by regulations promulgated by the SEC; or

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

          (b) Other  Actions.  Parent shall not, and shall not permit any of its
subsidiaries  to,  take any  action  that  would,  or that could  reasonably  be
expected to, result in any of the  representations  and  warranties of Parent or
Sub set forth in this Agreement becoming untrue.

                                   ARTICLE V

                             ADDITIONAL AGREEMENTS

          SECTION 5.1.  Stockholder  Approval;  Preparation of Proxy  Statement;
Preparation of Registration Statement. (a) Each of the Company and Parent shall,
as soon as practicable following the execution and delivery of this Agreement on
dates to be agreed upon between Parent and the Company, which dates shall be set
taking into account the status of pending  regulatory  matters pertaining to the
transactions  contemplated  hereby,  duly call, give notice of, convene and hold
the  Company   Stockholders   Meeting  and  the  Parent  Stockholders   Meeting,
respectively,  for the purpose of approving the Merger,  this  Agreement and the
transactions  contemplated hereby.  Subject to the provisions of Sections 8.2(b)
and 8.3(b), each of the Company and Parent will, through its Board of Directors,
recommend to its stockholders the approval and adoption of the Merger.

          (b) Promptly  following  the date of this  Agreement,  the Company and
Parent shall prepare and file with the SEC the Proxy Statement, and Parent shall
prepare  and  file  with  the SEC a  registration  statement  on Form  S-4  (the
"Registration  Statement"),  in which the Proxy  Statement will be included as a
prospectus.  Each of the Company and Parent shall use its reasonable  efforts as
promptly  as  practicable,  subject to the  setting of the date for the  Company
Stockholders  Meeting  and Parent  Stockholder  Meeting as  provided  in Section
5.1(a),  to  have  the  Registration  Statement  declared  effective  under  the
Securities Act as promptly as practicable after such filing. Each of the Company
and Parent will use its  reasonable  efforts to cause the Proxy  Statement to be
mailed to the Company's stockholders and Parent's stockholders, respectively, as
promptly as practicable after the Registration  Statement is declared  effective
under the Securities Act. Parent shall also take such reasonable  actions (other
than  qualifying  to do business in any  jurisdiction  in which it is not now so
qualified) as may be required to be taken under any applicable  state securities
laws in  connection  with the issuance of Parent  Shares in the Merger,  and the
Company shall furnish all information  concerning the Company and the holders of
the Shares and rights to acquire  Shares  pursuant  to the Stock Plans as may be
reasonably  requested in connection with any such action. The Company and Parent
will notify each other  promptly of the receipt of any written or oral  comments
from  the  SEC or its  staff  and of any  request  by the SEC or its  staff  for
amendments or supplements to the Proxy  


                                      -29-
<PAGE>
Statement or for additional  information  and will supply each other with copies
of all correspondence between the Company or Parent, respectively, or any of its
representatives,  on the one hand, and the SEC or its staff,  on the other hand,
with respect to the Proxy Statement or the Merger.

          (c) Parent agrees to use its best efforts to effect the listing on the
NYSE  prior  to the  Effective  Time of the  Merger,  upon  official  notice  of
issuance, Parent Shares to be issued pursuant to the Merger.

          (d) Parent agrees to cause all Shares,  if any,  owned by it or by Sub
or any  other  subsidiary  of Parent  to be voted in favor of the  approval  and
adoption of this  Agreement.  The Company agrees to cause all Parent Shares,  if
any, owned by it or any of its subsidiaries to be voted in favor of the approval
and adoption of this Agreement.

          (e) The Company will cause its transfer  agent to make stock  transfer
records relating to the Company available to the extent reasonably  necessary to
effectuate the intent of this Agreement.

          SECTION 5.2.  Letter of the Company's  Accountants.  The Company shall
use its best  efforts to cause to be  delivered  to Parent a letter of Coopers &
Lybrand  L.L.P.,  the Company's  independent  public  accountants,  dated a date
within two  business  days before the date on which the  Registration  Statement
shall  become  effective  and  addressed  to Parent and  customary  in scope and
substance for letters delivered by independent  public accountants in connection
with  registration   statements  similar  to  the  Registration   Statement.  In
connection  with the  Company's  efforts to obtain such letter,  if requested by
Coopers & Lybrand  L.L.P.,  Parent  shall  provide  a  representation  letter to
Coopers & Lybrand L.L.P. complying with SAS 72, if then required.

          SECTION 5.3. Letter of Parent's Accountants. Parent shall use its best
efforts to cause to be  delivered  to the  Company a letter of Price  Waterhouse
LLP, Parent's  independent public accountants,  dated a date within two business
days before the date on which the Registration  Statement shall become effective
and  addressed to the Company and  customary in scope and  substance for letters
delivered by  independent  public  accountants in connection  with  registration
statements  similar to the Registration  Statement.  In connection with Parent's
efforts to obtain such letter, if requested by Price Waterhouse LLP, the Company
shall provide a representation letter to Price Waterhouse LLP complying with SAS
72, if then required.

          SECTION 5.4. Access to Information.

          (a) During the period  from the date hereof to the  Effective  Time of
the Merger,  except to the extent otherwise required by United States regulatory
considerations,

          (i) the  Company  shall,  and shall  cause  each of its  subsidiaries,
     officers,  employees, counsel, financial advisors and other representatives
     to,  afford to Parent,  and to  Parent's  accountants,  counsel,  financial
     advisors and other


                                      -30-
<PAGE>
     representatives,  reasonable  access to the Company's and its subsidiaries'
     respective  properties,  books,  contracts,  commitments  and records  and,
     during  such  period,  the  Company  shall,  and  shall  cause  each of its
     subsidiaries,  officers,  employees,  counsel, financial advisors and other
     representatives to, furnish promptly to Parent:

               (A) a copy of each report,  schedule,  registration statement and
          other document filed by the Company during such period pursuant to the
          requirements of Federal or state securities laws and

               (B) all other  information  concerning its business,  properties,
          financial condition,  operations and personnel as Parent may from time
          to  time  reasonably  request  so as to  afford  Parent  a  reasonable
          opportunity  to  make  at its  sole  cost  and  expense  such  review,
          examination and  investigation  of the Company and its subsidiaries as
          Parent may  reasonably  desire to make.  The Company  agrees to advise
          Parent of all material developments with respect to the Company, its
          subsidiaries  and their  respective  assets and  liabilities.  Without
          limiting  the  information  required to be  provided  pursuant to this
          Section  5.4(a)(i),  the Company will,  on or before  October 1, 1996,
          provide to Parent the following  information,  in each case, as of the
          date hereof,  each of which upon delivery shall be deemed to have been
          represented  and  warranted  as true and  correct as if so done on the
          date hereof and shall thereafter be deemed  incorporated  herein as if
          made as a representation or warranty in Article III hereof:

                    (1) a schedule showing the subsidiaries of the Company,  the
               states of  incorporation  or organization of each thereof and the
               authorized and outstanding  capital stock or ownership  interests
               of each  thereof,  as well as such shares or ownership  interests
               owned by either the Company or another  identified  subsidiary of
               the Company;

                    (2) a schedule listing all loan or credit agreements, notes,
               bonds,  security  agreements,   mortgages,  indentures,  material
               leases,   tax   sharing  or   allocation   agreements,   permits,
               concessions,  franchises  or licenses to which any of the Company
               or its  subsidiaries is a party, by which any of their respective
               property is subject or under which it enjoys any benefit;

                    (3) a schedule  listing all other  agreements or instruments
               to which any of the Company or its  subsidiaries is a party or by
               which any of their respective property is subject, which involved
               any  obligation  on the part of the Company or any  subsidiary to
               pay more than $500,000;

                    (4)   a   schedule    listing   all   suits,    proceedings,
               investigations,    or   governmental   audits,   inspections   or
               assessments   pending  or,  to  


                                      -31-
<PAGE>
               the Company's best knowledge, threatened against or affecting the
               Company or any of its subsidiaries or to which the Company or any
               of its  subsidiaries  is a party  or,  in the case of  threatened
               matters, a possible party;

                    (5) a schedule listing all Company Benefit Plans;

                    (6)  a  schedule  listing  all  reports,  proxy  statements,
               registration statements and any other filings made by the Company
               with the SEC since March 7, 1994;

                    (7) a schedule  listing all  intellectual  property owned by
               the Company or any of its subsidiaries or as to which the Company
               or any such  subsidiary is a  beneficiary  as to which any formal
               action has been taken to protect the same; and

                    (8) complete and accurate copies of (I) any document,  plan,
               arrangement, instrument, agreement or report listed in any of the
               foregoing  schedules  upon request by Parent,  (II) the Company's
               Certificate  of  Incorporation  and By-laws  and the  articles or
               certificates   of   incorporation,   by-laws  or  other   similar
               organizational and governing  documents of its subsidiaries,  and
               (III) with respect to each Company  Benefit Plan, as  applicable,
               (t) the trust,  group annuity  contract or other  document  which
               provides the funding for the plan, agreement or arrangement,  (u)
               the three most recent annual Form 5500, 990 and 1041 reports, (v)
               the most recent actuarial report or valuation statement,  (x) the
               most  current  summary  plan  description,   booklet,   or  other
               descriptive  written  materials,  and each  summary  of  material
               modifications  prepared after the last summary plan  description,
               (y) the most recent IRS determination letter and all requests for
               rulings or determinations  from the IRS subsequent to the date of
               that   determination   letter   and   (z)  all   other   material
               correspondence  from the IRS or the  Department of Labor received
               which  relates  to  one  or  more  of the  plans,  agreements  or
               arrangements.

          (ii) Parent shall, and shall cause each of its subsidiaries, officers,
     employees, counsel, financial advisors and other representatives to, afford
     to the  Company,  and  to the  Company's  accountants,  counsel,  financial
     advisors and other  representatives,  reasonable access to Parent's and its
     subsidiaries'  respective  properties,  books,  contracts,  commitments and
     records and, during such period,  Parent shall, and shall cause each of its
     subsidiaries,  officers,  employees,  counsel, financial advisors and other
     representatives to, furnish promptly to the Company:

               (A) a copy of each report,  schedule,  registration statement and
          other  document  filed by Parent  during such  period  pursuant to the
          requirements of Federal or state securities laws and


                                      -32-

<PAGE>
               (B) all other  information  concerning its business,  properties,
          financial condition,  operations and personnel as the Company may from
          time  to  time  reasonably  request  so as to  afford  the  Company  a
          reasonable  opportunity  to make at its  sole  cost and  expense  such
          review,  examination and  investigation of Parent and its subsidiaries
          as the Company may reasonably  desire to make. Parent agrees to advise
          the Company of all material  developments with respect to Parent,  its
          subsidiaries  and their  respective  assets and  liabilities.  Without
          limiting  the  information  required to be  provided  pursuant to this
          Section 5.4(a)(ii), Parent will, on or before October 1, 1996, provide
          to the Company the following information, in each case, as of the date
          hereof,  each of which  upon  delivery  shall be  deemed  to have been
          represented  and  warranted  as true and  correct as if so done on the
          date hereof and shall thereafter be deemed  incorporated  herein as if
          made as a representation or warranty in Article III hereof:

                    (1) a schedule  showing  the  subsidiaries  of  Parent,  the
               states of  incorporation  or organization of each thereof and the
               authorized and outstanding  capital stock or ownership  interests
               of each  thereof,  as well s such shares or  ownership  interests
               owned by  either  Parent  or  another  identified  subsidiary  of
               Parent;

                    (2) a schedule listing all loan or credit agreements, notes,
               bonds,  security  agreements,   mortgages,  indentures,  material
               leases,   tax   sharing  or   allocation   agreements,   permits,
               concessions, franchises or licenses to which any of Parent or its
               subsidiaries  is a  party,  by  which  any  of  their  respective
               property is subject or under which it enjoys any benefit;

                    (3) a schedule  listing all other  agreements or instruments
               to which any of Parent or its subsidiaries is a party or by which
               any of their respective  property is subject,  which involved any
               obligation  on the part of Parent or any  subsidiary  to pay more
               than $500,000;

                    (4)   a   schedule    listing   all   suits,    proceedings,
               investigations,    or   governmental   audits,   inspections   or
               assessments  pending or, to Parent's best  knowledge,  threatened
               against  or  affecting  Parent or any of its  subsidiaries  or to
               which  Parent  or any of its  subsidiaries  is a party or, in the
               case of threatened matters, a possible party;

                    (5) a schedule listing all Parent Benefit Plans;

                    (6)  a  schedule  listing  all  reports,  proxy  statements,
               registration statements and any other filings made by Parent with
               the SEC since March 7, 1994;

                    (7) a schedule  listing all  intellectual  property owned by
               Parent or any of its  subsidiaries  or as to which  Parent or any
               such 


                                      -33-

<PAGE>
               subsidiary  is a  beneficiary  as to which any formal  action has
               been taken to protect the same; and

                    (8) complete and accurate copies of (I) any document,  plan,
               arrangement, instrument, agreement or report listed in any of the
               foregoing  schedules  upon request by the Company,  (II) Parent's
               Certificate  of  Incorporation  and By-laws  and the  articles or
               certificates   of   incorporation,   by-laws  or  other   similar
               organizational and governing  documents of its subsidiaries,  and
               (III) with respect to each Company  Benefit Plan, as  applicable,
               (t) the trust,  group annuity  contract or other  document  which
               provides the funding for the plan, agreement or arrangement,  (u)
               the three most recent annual Form 5500, 990 and 1041 reports, (v)
               the most recent actuarial report or valuation statement,  (x) the
               most  current  summary  plan  description,   booklet,   or  other
               descriptive  written  materials,  and each  summary  of  material
               modifications  prepared after the last summary plan  description,
               (y) the most recent IRS determination letter and all requests for
               rulings or determinations  from the IRS subsequent to the date of
               that   determination   letter   and   (z)  all   other   material
               correspondence  from the IRS or the  Department of Labor received
               which  relates  to  one  or  more  of the  plans,  agreements  or
               arrangements.

               (iii)  (A)  The   Company   agrees  to  permit   Parent  and  its
          representatives  to have full  access to all the books and  records of
          the  Company  and its  subsidiaries  and to request  Coopers & Lybrand
          L.L.P. to permit Price  Waterhouse LLP, to review and examine the work
          papers of Coopers & Lybrand L.L.P. with respect to the Company and its
          subsidiaries,  and the  officers of the Company will furnish to Parent
          such financial and operating data and other  information  with respect
          to the business and properties of the Company and its  subsidiaries as
          Parent shall from time to time reasonably request, and

               (B) Parent  agrees to permit the Company and its  representatives
          to have full  access to all the books and  records  of Parent  and its
          subsidiaries  and to request Price  Waterhouse LLP to permit Coopers &
          Lybrand  L.L.P.,  to  review  and  examine  the work  papers  of Price
          Waterhouse  LLP with respect to Parent and its  subsidiaries,  and the
          officers of Parent  will  furnish to the Company  such  financial  and
          operating data and other  information with respect to the business and
          properties  of Parent and its  subsidiaries  as the Company shall from
          time to time reasonably request.

          (iv) The Company shall  promptly  notify Parent of any notices from or
     investigations  by Governmental  Entities that could materially  affect the
     Company's  business or assets.  Parent will promptly  notify the Company of
     any notices from or  investigations  by  Governmental  Entities  that could
     materially affect the consummation of the Merger.


                                      -34-

<PAGE>

          (b) Except as required by law,  each of the Company and Parent  shall,
and shall cause its  respective  directors,  officers,  employees,  accountants,
counsel,  financial advisors and  representatives and affiliates to, (i) hold in
confidence,  unless compelled to disclose by judicial or administrative process,
or, in the opinion of its counsel,  by other  requirements of law, all nonpublic
information  concerning  the  other  party  furnished  in  connection  with  the
transactions  contemplated by this Agreement until such time as such information
becomes  publicly  available  (otherwise  than  through the wrongful act of such
person),  (ii) not release or disclose  such  information  to any other  person,
except in connection with this Agreement to its auditors,  attorneys,  financial
advisors, other consultants and advisors, and (iii) not use such information for
any  competitive  or other purpose other than with respect to its  consideration
and  evaluation  of  the  transactions   contemplated  by  this  Agreement.  Any
investigation by any party of the assets and business of the other party and its
subsidiaries shall not affect any  representations  and warranties  hereunder or
either party's right to terminate this Agreement as provided in Article VII.

          (c) In the event of the  termination  of this  Agreement,  each  party
promptly  will  deliver to the other  party (and  destroy  all  electronic  data
reflecting  the same) all  documents,  work papers and other  material  (and any
reproductions or extracts thereof and any notes or summaries  thereto)  obtained
by such party or on its behalf  from such other party or its  subsidiaries  as a
result of this Agreement or in connection  therewith so obtained before or after
the execution hereof.

          SECTION 5.5. Reasonable Efforts;  Notification. (a) Upon the terms and
subject  to the  conditions  set forth in this  Agreement,  except to the extent
otherwise  required by United  States  regulatory  considerations  and otherwise
provided  in this  Section  5.5,  each of the parties  agrees to use  reasonable
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   practicable,   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,  if any) 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 consents, approvals or waivers 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
hereby,  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 (including any required
supplemental  indentures) necessary to consummate the transactions  contemplated
by this Agreement.  In connection with and without limiting the foregoing,  each
of the Company and Parent and its respective  Board of Directors  shall (i) take
all action necessary to ensure that no state takeover statute or similar statute
or regulation is or becomes applicable to the Merger, (ii) if any state takeover
statute or similar statute or regulation becomes applicable to the Merger,  take
all action necessary to ensure that the Merger may be consummated as promptly as
practicable 


                                      -35-
<PAGE>
on the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on the Merger and (iii)  cooperate with each other
in the  arrangements  for  refinancing  any  indebtedness  of, or obtaining  any
necessary new financing for, the Company and the Surviving Corporation.

          (b) The Company shall give prompt notice to Parent,  and Parent or Sub
shall give prompt notice to the Company,  of (i) any  representation or warranty
made by it contained in this  Agreement  becoming  untrue or  inaccurate  in any
respect  or (ii) the  failure by it to comply  with or  satisfy in any  material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement;  provided,  however,  that no such  notification  shall
affect the  representations  or  warranties  or covenants or  agreements  of the
parties or the conditions to the obligations of the parties hereunder.

          (c)(i) Each of the parties hereto shall file a premerger  notification
     and report form under the HSR Act with respect to the Merger as promptly as
     reasonably  possible  following  execution and delivery of this  Agreement.
     Each of the parties agrees to use reasonable efforts to promptly respond to
     any request for  additional  information  pursuant to Section (e)(1) of the
     HSR Act.

          (ii)  The  Company  will  furnish  to  Parent  and Sub  copies  of all
     correspondence,  filings or communications  (or memoranda setting forth the
     substance  thereof  (collectively,  "Company HSR  Documents"))  between the
     Company, or any of its respective representatives, on the one hand, and any
     Governmental  Entity,  or members of the staff of such agency or authority,
     on the other hand, with respect to this Agreement or the Merger;  provided,
     however, that (x) with respect to documents and other materials filed by or
     on behalf of the Company with the Antitrust  Division of the  Department of
     Justice, the Federal Trade Commission,  or any state attorneys general that
     are available for review by Parent and Sub,  copies will not be required to
     be  provided  to Parent  and Sub and (y) with  respect to any  Company  HSR
     Documents  (1)  that  contain  any  information  which,  in the  reasonable
     judgment of Vinson & Elkins  L.L.P.,  should not be  furnished to Parent or
     Sub because of  antitrust  considerations  or (2) relating to a request for
     additional  information  pursuant  to  Section  (e)(1) of the HSR Act,  the
     obligation  of the Company to furnish any such  Company  HSR  Documents  to
     Parent and Sub shall be  satisfied  by the  delivery  of such  Company  HSR
     Documents on a confidential  basis to Fulbright & Jaworski L.L.P.  pursuant
     to  a   confidentiality   agreement  in  form  and   substance   reasonably
     satisfactory  to Parent.  Except as  otherwise  required  by United  States
     regulatory  considerations,  Parent  and Sub will  furnish  to the  Company
     copies of all  correspondence,  filings  or  communications  (or  memoranda
     setting forth the substance thereof (collectively, "Parent HSR Documents"))
     between Parent, Sub or any of their respective representatives,  on the one
     hand, and any Governmental Entity, or member of the staff of such agency or
     authority, on the other hand, with respect to this Agreement or the Merger;
     provided,  however,  that (x) with respect to documents and other materials
     filed by or on behalf of Parent or Sub with the  Antitrust  Division of the
     Department of Justice, the Federal Trade Commission, or any state attorneys
     general that are  available  for review by the Company, 


                                      -36-
<PAGE>
     copies will not be required  to be  provided to the  Company,  and (y) with
     respect to any Parent HSR Documents (1) that contain  information which, in
     the  reasonable  judgment  of  Fulbright & Jaworski  L.L.P.,  should not be
     furnished  to  the  Company  because  of  antitrust  considerations  or (2)
     relating to a request for additional information pursuant to Section (e)(1)
     of the HSR Act, the obligation of Parent and Sub to furnish any such Parent
     HSR  Documents  to the Company  shall be  satisfied by the delivery of such
     Parent HSR  Documents  on a  confidential  basis to Vinson & Elkins  L.L.P.
     pursuant to a  confidentiality  agreement in form and substance  reasonably
     satisfactory to the Company.

          (iii) At the  election of Parent,  the  Company  and Parent  shall use
     reasonable  efforts to defend  all  litigation  under the  Federal or state
     antitrust laws of the United States which if adversely determined would, in
     the reasonable  opinion of Parent (based on the advice of outside counsel),
     be likely to result in the  failure of the  condition  set forth in Section
     6.2(h) not being  satisfied,  and to appeal any order,  judgment or decree,
     which if not  reversed,  would  result in the  failure  of such  condition.
     Notwithstanding the foregoing, nothing contained in this Agreement shall be
     construed  so as to require  Parent,  Sub or the  Company,  or any of their
     respective  subsidiaries or affiliates,  to sell,  license,  dispose of, or
     hold  separate,  or to  operate  in any  specified  manner,  any  assets or
     businesses of Parent, Sub, the Company or the Surviving  Corporation (or to
     require Parent, Sub, the Company or any of their respective subsidiaries or
     affiliates to agree to any of the foregoing). The obligations of each party
     under Section  5.5(a) to use  reasonable  efforts with respect to antitrust
     matters shall be limited to compliance with the reporting provisions of the
     HSR Act and with its obligations under this Section 5.5(c).

          SECTION 5.6. Employee Benefit Matters.

          (a) At or before the Effective  Time of the Merger,  the Company shall
take such actions as may be necessary to cause each  individual  employed by the
Company and its  subsidiaries  immediately  prior to the  Effective  Time of the
Merger (a "Company Employee") to have a fully vested and nonforfeitable interest
in such  employee's  accrued  benefits  under each Company  Benefit Plan that is
intended to qualify under Section 401(a) of the Code.

          (b) Parent may cause any  Company  Benefit  Plan to be  terminated  or
discontinued at or after the Effective Time of the Merger, provided that, to the
extent Parent or its affiliates  maintain a Parent Benefit Plan of the same type
for employees of Parent or any of its affiliates,  Parent shall take all actions
necessary or appropriate to permit the Company  Employees  participating in such
Company  Benefit  Plan to  immediately  thereafter  participate  in such  Parent
Benefit Plan of the same type  maintained by Parent or any of its affiliates for
their employees generally (a "Replacement Plan"); provided, however, that if the
Company  Benefit Plan that is so  terminated or  discontinued  is a group health
plan, then Parent shall permit each Company Employee participating in such group
health plan and his or her eligible dependents to be covered under a Replacement
Plan under the terms and conditions of the  Replacement  Plan as modified to the
extent necessary to (i) provide medical and 


                                      -37-

<PAGE>
dental  benefits to each such  Company  Employee  and such  eligible  dependents
effective  immediately upon the cessation of coverage of such individuals  under
such group  health  plan,  (ii) credit to such  Company  Employee,  for the year
during  which  such  coverage  under  such  Replacement  Plan  begins,  with any
deductibles  and copayments  already  incurred during such year under such group
health  plan,  and (iii) waive any  preexisting  condition  restrictions  to the
extent that the  preexisting  condition  restrictions  were satisfied under such
group health plan. Parent, the Surviving Corporation,  their affiliates, and the
Parent Benefit Plans  (including,  without  limitation,  the Replacement  Plans)
shall recognize each Company  Employee's years of service and level of seniority
with the Company and its  subsidiaries  for purposes of terms of employment  and
eligibility,  vesting and benefit  determination  under the Parent Benefit Plans
(other than benefit accruals under any defined benefit pension plan). Nothing in
this  Agreement  shall be construed to require  Parent to provide any particular
type or amount of benefits for any person under any Parent Benefit Plan.

          (c) Parent agrees to assume, effective as of the Effective Time of the
Merger, each option to purchase shares of Company Common Stock granted under the
Company's  1994 Stock  Incentive  Plan (an  "Employee  Option")  (whether or not
vested)  and, to the extent  permitted,  under the 1994  Nonemployee  Directors'
Stock Option Plan  ("Director  Option") that is currently  outstanding and which
remains as of such time unexercised in whole or in part and to substitute Parent
Shares as purchasable  under such assumed option ("Assumed  Option"),  with such
assumption and substitution to be effected as follows:

          (i) the Assumed Option shall not give the optionee additional benefits
     which he did not have under the Employee  Option or Director  Option before
     such assumption;

          (ii) the number of Parent Shares  purchasable under any Assumed Option
     shall be equal to the number of whole Parent  Shares that the holder of the
     Employee  Option or Director  Option being assumed would have received upon
     consummation  of the Merger had such Employee Option been exercised in full
     prior to the Merger;

          (iii) the per share option price of the Assumed  Option shall be equal
     to the per share  option price of the  Employee  Option or Director  Option
     divided by .58; and

          (iv) except for adjustment in the number and price of option shares as
     set forth  above,  the Assumed  Option or  Director  Option  shall  contain
     substantially the same terms as the Employee Option before such assumption.

     As soon as practicable after the Effective Time of the Merger, Parent shall
     deliver to such holders of Employee Options or Director Options appropriate
     agreements  evidencing its  assumption of such options.  Promptly after the
     Merger, Parent shall file a registration statement on Form S-8 with the SEC
     with  respect  to the Parent  Shares  issuable  in  respect of the  Assumed
     Options and Parent shall use its best efforts to maintain the effectiveness
     of such  registration 


                                      -38-
<PAGE>
     statement   (and  maintain  the  current   status  of  the   prospectus  or
     prospectuses  contained therein) for so long as such Assumed Options remain
     outstanding.

          SECTION 5.7. Indemnification. (a) Parent and Sub agree that all rights
to indemnification  for acts or omissions  occurring prior to the Effective Time
of the Merger  now  existing  in favor of the  current  or former  directors  or
officers  of the Company and its  subsidiaries  as provided in their  respective
certificates of incorporation or by-laws and Indemnity  Agreements shall survive
the Merger,  and Parent shall cause the Surviving  Corporation  to continue such
indemnification  rights in full force and effect in accordance  with their terms
as an obligation of the Surviving Corporation for a period of not less than five
years from the Effective Time of the Merger. Parent shall cause to be maintained
for a period  of five  years  from the  Effective  Time of the  Merger  (or such
shorter  period of time as shall be agreed to hereafter  by the  Indemnification
Representatives   (or,   upon  the   death  of   either,   the  sole   surviving
Indemnification  Representative) (as hereinafter defined)) the Company's current
directors' and officers' insurance and indemnification policy to the extent that
it provides  coverage for events  occurring at or prior to the Effective Time of
the Merger (the "D&O  Insurance") for all persons who are directors and officers
of the  Company  on the date  hereof or will cause to be  provided a  comparable
arrangement  (which  may  include  self-insurance  by  Parent).   Parent  hereby
guarantees  the payment by the Surviving  Corporation of the full annual premium
for such D&O Insurance or comparable  arrangement regardless of increases in the
amount of such annual  premium.  The Company  represents that the current annual
premium for the  existing D&O  Insurance,  which is in full force and effect and
provides  aggregate coverage of $10,000,000  million,  is $99,000 for the policy
year ending May 20, 1997.  The Company has  furnished  Parent with a copy of the
current D&O Insurance Policy and with copies of all material  correspondence and
other written materials with respect thereto.  "Indemnification Representatives"
shall mean Nathan M. Avery and Sheldon R. Erikson.

          (b) If the Surviving  Corporation  or any of its successors or assigns
(i)  consolidates  with or  merges  into any other  person  and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii)  transfers all or  substantially  all of its  properties  and assets to any
person,  then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation,  which shall be financially
responsible  persons  or  entities,  assume  the  obligations  set forth in this
Section 5.7.

          (c) The  provisions  of this  Section  5.7 are  intended to be for the
benefit of, and shall be enforceable by, the parties hereto and each indemnified
party, his heirs and representatives.

          SECTION 5.8.  Fees and  Expenses.  Except as provided in Article VIII,
all fees and expenses incurred in connection with the Merger, this Agreement and
the transactions  contemplated  hereby shall be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated.

          SECTION 5.9.  Public  Announcements.  Parent and Sub, on the one hand,
and the Company,  on the other hand, will consult with each other before issuing
any 


                                      -39-

<PAGE>
press  release or  otherwise  making any public  statements  with respect to the
transactions  contemplated  by this Agreement and shall not issue any such press
release or make any such public  statement  prior to such  consultation,  except
that each  party may  respond  to  questions  from  stockholders  and Parent may
respond to inquiries  from  financial  analysts and media  representatives  in a
manner consistent with its past practice and each party may make such disclosure
as may be required by applicable law or by  obligations  pursuant to any listing
agreement with any national  securities  exchange without prior  consultation to
the extent such  consultation is not reasonably  practicable.  The parties agree
that the initial press  release or releases to be issued in connection  with the
execution of this Agreement  shall be mutually agreed upon prior to the issuance
thereof.

          SECTION 5.10.  Stockholder  Litigation.  The Company shall give Parent
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  until the  Effective  Time of the Merger,  and
thereafter,  shall give  Parent the  opportunity  to direct the  defense of such
litigation  and, if Parent so chooses to direct such  litigation,  Parent  shall
give the  Company  and its  directors  an  opportunity  to  participate  in such
litigation;  provided, however, that no settlement of litigation shall be agreed
to without the consent of Parent,  the Company and its directors,  which consent
shall not be unreasonably withheld.

          SECTION 5.11. Accounting Matters. Neither the Company nor Parent shall
take or agree to take, nor shall they permit any of their respective  affiliates
to take or agree to take, any action that would prevent  Parent from  accounting
for the  business  combination  to be  effected  by the  Merger as a pooling  of
interests.

          SECTION 5.12.  Parent's  Board of Directors.  At the Effective Time of
the Merger,  the directors of Parent shall elect two persons  mutually agreed to
by the  Chairman  of the Board of Parent  and the  Chairman  of the Board of the
Company to replace two of the existing  directors of Parent, for a total of nine
directors.

          SECTION 5.13.  Appointment of Directors to Committees.  Parent's Board
of Directors shall take the requisite action to appoint at the Effective Time of
the Merger the two  Directors  designated by the Chairman of the Board of Parent
and the  Chairman  of the Board of the  Company  to  committees  of the Board of
Directors of Parent,  one being  appointed to the  Executive  Committee  and the
other being appointed to the Compensation Committee.

          SECTION  5.14.  Appointment  of W.  Todd  Bratton  as  Executive  Vice
President.  Parent's Board of Directors shall take the requisite action to elect
W. Todd Bratton as an Executive  Vice  President of Parent at the Effective Time
of the Merger, understanding that Mr. Bratton will become an employee-at-will of
Parent but will be entitled to all rights under his existing employment contract
with the Company.

          SECTION 5.15. Affirmation of this Agreement. If this Agreement has not
been  terminated  pursuant  to Sections  7.1(f) or (g) on or before  October 14,
1996, the parties hereto agree that, on such date, they will execute and deliver
to each other a 


                                      -40-

<PAGE>
document  whereby they reaffirm each and every  agreement  (other than the first
sentence in each of Sections 3.1 and 3.2), representation and warranty contained
or deemed to be  contained  herein,  including  those  contained  in the Company
Affirmation  and Disclosure  Document and the Parent  Affirmation and Disclosure
Document, and, upon such reaffirmation, each such agreement,  representation and
warranty shall,  for all purposes,  be deemed  agreements,  representations  and
warranties contained in this Agreement and made on and as of the date hereof.

                                  ARTICLE VI

                             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 Approval.  The Company Stockholder Approval and Parent
Stockholder Approval shall have been obtained.

          (b) NYSE Listing. Parent Shares issuable to the Company's stockholders
pursuant to the Merger shall have been approved for listing on the NYSE, subject
to official notice of issuance.

          (c) 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.

          (d) No  Injunctions  or Restraints.  No temporary  restraining  order,
preliminary  or  permanent  injunction  or other  order  issued  by any court of
competent  jurisdiction or other legal  restraint or prohibition  preventing the
consummation  of the Merger  shall be in  effect;  provided,  however,  that the
parties hereto shall, subject to Section 5.5, use reasonable efforts to have any
such injunction, order, restraint or prohibition vacated.

          (e) Registration Statement  Effectiveness.  The Registration Statement
shall be  effective  under  the  Securities  Act on the  Closing  Date,  and all
post-effective amendments filed shall have been declared effective or shall have
been withdrawn;  and no stop-order  suspending the  effectiveness  thereof shall
have been issued and no  proceedings  for that purpose shall have been initiated
or, to the knowledge of the parties, threatened by the SEC.

          (f) Blue Sky  Filings.  There  shall  have been  obtained  any and all
material permits, approvals and consents of securities or "blue sky" authorities
of any  jurisdiction  that are necessary so that the  consummation of the Merger
and the transactions  contemplated thereby will be in compliance with applicable
laws,  the failure to comply with which would have a material  adverse effect on
Parent.


                                      -41-
<PAGE>
          SECTION 6.2.  Conditions  of Parent and Sub. The  obligation of Parent
and Sub to consummate the Merger are further subject to the  satisfaction at the
Effective Time of the Merger, of the following conditions:

          (a)  Compliance.  The  agreements  and  covenants of the Company to be
complied  with or performed on or before the Closing Date  pursuant to the terms
hereof shall have been duly complied with or performed in all material  respects
and Parent shall have received a certificate dated the Closing Date and executed
on behalf of the Company by the chief executive  officer and the chief financial
officer of the Company to such effect.

          (b)  Certifications  and  Opinion.  The Company  shall have  furnished
Parent with:

          (i) a certified  copy of a resolution or  resolutions  duly adopted by
     the  Board  of  Directors  of the  Company  approving  this  Agreement  and
     consummation  of the Merger and the  transactions  contemplated  hereby and
     directing the submission of the Merger to a vote of the stockholders of the
     Company;

          (ii) a certified copy of a resolution or  resolutions  duly adopted by
     the holders of a majority of the  outstanding  Shares  approving the Merger
     and the transactions contemplated hereby;

          (iii) a favorable  opinion dated the Closing  Date, in customary  form
     and substance,  of Vinson & Elkins L.L.P.,  counsel for the Company,  dated
     the Closing Date to the effect that:

               (A) The  Company  is a  corporation  duly  incorporated,  validly
          existing and in good standing  under the laws of the State of Delaware
          and has corporate  power to own its properties and assets and to carry
          on  its  business  as  presently  conducted  and as  described  in the
          Registration Statement;

               (B) The Company has the requisite  corporate  power to effect the
          Merger as contemplated  by this Agreement;  the execution and delivery
          of this  Agreement  did not, and the  consummation  of the Merger will
          not,   violate  any   provision  of  the  Company's   Certificate   of
          Incorporation  or  By-Laws;  and  upon  the  filing  by the  Surviving
          Corporation  of the  Certificate  of Merger,  the Merger  shall become
          effective;

               (C)  Each  of  the  U.S.   subsidiaries  is  a  corporation  duly
          incorporated,  validly existing and in good standing under the laws of
          its jurisdiction of incorporation,  and has corporate power to own its
          properties  and  assets  and to carry  on its  business  as  presently
          conducted; and

               (D) The Board of  Directors  of the  Company has taken all action
          required  by the  DGCL and its  Certificate  of  Incorporation  or its
          By-Laws


                                      -42-

<PAGE>
          to approve the Merger and to authorize  the  execution and delivery of
          this Agreement and the transactions  contemplated hereby; the Board of
          Directors  and the  stockholders  of the Company have taken all action
          required by the DGCL and its Certificate of Incorporation  and By-Laws
          to  authorize  the  Merger  in  accordance  with  the  terms  of  this
          Agreement;  and this Agreement is a valid and binding Agreement of the
          Company  enforceable  in  accordance  with its  terms,  except as such
          enforceability    may   be   limited   by   bankruptcy,    insolvency,
          reorganization, moratorium or other similar laws or judicial decisions
          now or hereafter in effect relating to creditor's  rights generally or
          governing the availability of equitable relief.

          (c)  Representations  and  Warranties  True. The  representations  and
warranties  of  the  Company   contained  in  this  Agreement  (other  than  any
representations  and warranties made as of a specific date) shall be true in all
material  respects  (except to the  extent the  representation  or  warranty  is
already  qualified  by  materiality,  in  which  case  it  shall  be true in all
respects)  on and as of the  Closing  Date with the same  effect as though  such
representations  and warranties had been made on and as of such date,  except as
contemplated  or permitted by this  Agreement,  and Parent shall have received a
certificate  to that effect dated the Closing Date and executed on behalf of the
Company by the chief executive  officer and the chief  financial  officer of the
Company.

          (d) Affiliate  Letters.  Parent shall have received from the Company a
list  of  such  persons,  if any,  as  counsel  for  the  Company  state  may be
"affiliates"  of the Company,  within the meaning of Rules 144 and 145(c) of the
Commission  pursuant to the  Securities  Act, and shall have  received from such
persons  undertakings in writing to the effect that no disposition  will be made
by such persons of any Parent Shares received or to be received  pursuant to the
Merger except in compliance with the applicable provisions of the Securities Act
and the rules and  regulations  thereunder.  Parent  shall  not be  required  to
maintain the  effectiveness  of the  Registration  Statement  for the purpose of
resale by stockholders  of the Company who may be "affiliates"  pursuant to Rule
145 under the Securities Act.

          (e) Tax Opinion.  Parent shall have received an opinion of Fulbright &
Jaworski  L.L.P.,  in form and substance  satisfactory to Parent,  to the effect
that  for  federal   income  tax   purposes   and   conditioned   upon   certain
representations of managements of the Company and Parent as to certain customary
facts and circumstances  regarding the Merger:  (i) the Merger will qualify as a
"reorganization"  within the  meaning of Section  368(a) of the Code and (ii) no
gain or loss will be recognized by the Company, Sub or Parent as a result of the
Merger.

          (f)  Pooling  Accounting.  Parent and  Company  shall have  received a
letter from Price  Waterhouse LLP, in form and substance  satisfactory to Parent
and Company,  to the effect that the Merger should be accounted for as a pooling
of interests  under  generally  accepted  accounting  principles  and applicable
regulations of the SEC.


                                      -43-

<PAGE>
          (g) Consents,  etc. Parent shall have received  evidence,  in form and
substance reasonably satisfactory to it, that such licenses,  permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third  parties as are necessary in  connection  with the  transactions
contemplated hereby have been obtained, except such licenses, permits, consents,
approvals, authorizations, qualifications and orders which are not, individually
or in the  aggregate,  material to Parent or the Company or the failure of which
to have received  would not (as compared to the situation in which such license,
permit,  consent,  approval,  authorization,  qualification  or  order  had been
obtained)  materially  detract  from the  aggregate  benefits  to  Parent of the
transactions reasonably contemplated hereby.

          (h) No  Litigation.  There shall not be pending or  threatened  by any
Governmental  Entity any suit,  action or proceeding (or by any other person any
suit,  action or proceeding which has a reasonable  likelihood of success),  (i)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other  transactions  contemplated  by this  Agreement  or  seeking to
obtain from Parent or any of its  subsidiaries  any damages that are material in
relation  to Parent  and its  subsidiaries  taken as a whole,  (ii)  seeking  to
prohibit or limit the  ownership or  operation by the Company,  Parent or any of
their respective  subsidiaries of any material portion of the business or assets
of the Company, Parent or any of their respective subsidiaries, to dispose of or
hold  separate  any  material  portion of the business or assets of the Company,
Parent or any of their respective 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 Parent or Sub to  acquire  or hold,  or
exercise  full  rights of  ownership  as to any  shares  of Common  Stock of the
Surviving  Corporation,  including,  without  limitation,  the right to vote the
Common Stock of the Surviving  Corporation on all matters properly  presented to
the stockholders of the Surviving Corporation or (iv) seeking to prohibit Parent
or any of its subsidiaries from effectively  controlling in any material respect
the business or operations of the Company or its subsidiaries.

          (i)  Fairness  Opinion.  Parent  shall have  received an opinion  from
Simmons & Company  International  to the effect that the terms of the Merger are
fair to the holders of Parent Shares from a financial point of view.

          (j) No Material  Adverse  Change.  There shall not have  occurred  any
material adverse change with respect to the Company since the date hereof.

          SECTION 6.3. Conditions of the Company. The obligations of the Company
to  consummate  the  Merger  are  further  subject  to the  satisfaction  at the
Effective Time of the Merger of the following conditions:

          (a) Compliance.  The agreements and covenants of Parent to be complied
with or  performed  on or before the Closing  Date  pursuant to the terms hereof
shall have been duly complied with or performed in all material respects and the
Company shall have  received a  certificate  dated the Closing Date on behalf of
Parent by the chief executive  officer and the chief financial officer of Parent
to such effect.


                                      -44-

<PAGE>
          (b)  Certifications  and  Opinion.  Parent  shall have  furnished  the
Company with:

          (i) a certified  copy of a resolution or  resolutions  duly adopted by
     the Board of Directors  or a duly  authorized  committee  thereof of Parent
     approving   this  Agreement  and   consummation   of  the  Merger  and  the
     transactions  contemplated  hereby,  including  the  issuance,  listing and
     delivery of the Parent Shares pursuant hereto;

          (ii) a certified copy of a resolution or  resolutions  duly adopted by
     the holders of a majority of the Parent Shares  present or  represented  by
     proxy and entitled to vote at the Parent Stockholder Meeting, approving the
     Merger and the transactions contemplated hereby;

          (iii) a favorable  opinion,  dated the Closing Date, in customary form
     and substance,  of Fulbright & Jaworski  L.L.P.,  counsel for Parent to the
     effect that:

               (A)  Parent  and  the  Sub are  corporations  duly  incorporated,
          validly  existing and in good standing  under the laws of the State of
          Delaware and have corporate  power to own their  properties and assets
          and to carry on their business as presently conducted and as described
          in the Proxy Statement. Sub has the requisite corporate power to merge
          with the Company as  contemplated by this Agreement and Parent has the
          requisite  corporate  power to carry out its  obligations  under  this
          Agreement.  The execution and delivery of this  Agreement did not, and
          the  consummation  of the Merger will not,  violate any  provision  of
          Parent's or Sub's Certificate of Incorporation or By-Laws;

               (B) Parent and Sub have taken all action required under the DGCL,
          their Certificates of Incorporation or their By-Laws to authorize such
          execution  and  delivery  and the  transactions  contemplated  by this
          Agreement,  including the Merger, in accordance with the terms of this
          Agreement;  and this  Agreement  is a valid and binding  agreement  of
          Parent and Sub  enforceable  in accordance  with its terms,  except as
          such   enforceability  may  be  limited  by  bankruptcy,   insolvency,
          reorganization, moratorium or other similar laws or judicial decisions
          now or hereafter in effect relating to creditor's  rights generally or
          governing the availability of equitable relief; and

               (C) The Parent  Shares to be issued  pursuant  to the Merger have
          been duly  authorized  and, when issued and delivered as  contemplated
          hereby,  will have been  legally and validly  issued and will be fully
          paid and  non-assessable  and no  stockholder  of Parent will have any
          preemptive  right of subscription or purchase in respect thereof under
          Delaware law or Parent's Certificate of Incorporation or By-laws.

          (c)  Representations  and  Warranties  True. The  representations  and
warranties of Parent contained in this Agreement (other than any representations
and 


                                      -45-

<PAGE>
warranties  made as of a specific  date) shall be true in all material  respects
(except to the extent the  representation  or warranty is already  qualified  by
materiality,  in which case it shall be true in all  respects)  on and as of the
Closing Date with the same effect as though such  representations and warranties
had been made on and as of such date,  except as  contemplated  or  permitted by
this Agreement, and the Company shall have received a certificate to that effect
dated the Closing Date and  executed on behalf of Parent by the chief  executive
officer and the chief financial officer of Parent.

          (d) Tax Opinion.  The Company shall have received an opinion of Vinson
& Elkins  L.L.P.,  in form and  substance  satisfactory  to the Company,  to the
effect  that for  federal  income tax  purposes  and  conditioned  upon  certain
representations of managements of the Company and Parent as to certain customary
facts and circumstances  regarding the Merger:  (i) the Merger will qualify as a
"reorganization"  within the meaning of Section 368(a) of the Code; (ii) each of
the Company, Parent and Sub are parties to the reorganization within the meaning
of Section  368(b) of the Code;  and (iii) no gain or loss will be recognized by
the  stockholders  of the Company  upon the receipt by them of Parent  Shares in
exchange for their Shares pursuant to the Merger.

          (e)  Fairness  Opinion.  As of the  date of the  Company  Stockholders
Meeting,  Jefferies shall not have revoked,  modified or materially  changed its
opinion  referred to in Section  3.1(v) in any manner  adverse to the holders of
the Shares.

          (f) No Material  Adverse  Change.  There shall not have  occurred  any
material adverse change with respect to Parent since the date hereof.

                                  ARTICLE VII

                       TERMINATION, AMENDMENT AND WAIVER

          SECTION 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective  Time of the Merger,  whether before or after approval of
matters  presented  in  connection  with the Merger by the  stockholders  of the
Company:

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

          (b) by either Parent or the Company:

          (i) if the  stockholders  of the  Company  fail to give  any  required
     approval of the Merger and the transactions contemplated hereby upon a vote
     at a duly held meeting of stockholders of the Company or at any adjournment
     thereof;

          (ii) if the stockholders of Parent fail to give any required  approval
     of the Merger and the  transactions  contemplated  hereby  upon a vote at a
     duly held meeting of stockholders of Parent or at any adjournment thereof;


                                      -46-

<PAGE>
          (iii) if any  court of  competent  jurisdiction  or any  governmental,
     administrative or regulatory authority, agency or body shall have issued an
     order,  decree or ruling or taken any other action  permanently  enjoining,
     restraining  or otherwise  prohibiting  the Merger and such order,  decree,
     ruling or other action shall have become final and nonappealable; or

          (iv) if the  Merger  shall  not have  been  consummated  on or  before
     January 31, 1997, unless the failure to consummate the Merger is the result
     of a material  breach of this  Agreement by the party  seeking to terminate
     this Agreement.

          (c) by Parent or the Company to the extent permitted under Section 8.2
or 8.3;

          (d) by Parent, if the Company breaches any of its  representations  or
warranties  herein  or fails  to  perform  in any  material  respect  any of its
covenants, agreements or obligations under this Agreement;

          (e)  by  the   Company,   if  Parent  or  Sub   breaches  any  of  its
representations or warranties herein or fails to perform in any material respect
any of its covenants, agreements or obligations under this Agreement;

          (f) by Parent  within  four weeks of date  hereof,  if the  results of
Parent's due diligence review of the Company and its subsidiaries referred to in
Section  5.4(a)(i)  hereof or any matter referred to in the Company  Affirmation
and Disclosure Document shall not be satisfactory to Parent;

          (g) by the  Company  within  four  weeks  of the date  hereof,  if the
results of the  Company's due  diligence  review of Parent and its  subsidiaries
referred to in Section 5.4(a)(ii) hereof or any matter referred to in the Parent
Affirmation and Disclosure Document shall not be satisfactory to the Company.

          SECTION 7.2.  Effect of  Termination.  In the event of  termination of
this  Agreement by either the Company or Parent 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  Parent,  Sub or the  Company,  other  than  the
confidentiality  provisions  of Sections  5.4(b) and (c) and the  provisions  of
Sections 5.8, 8.2, 8.3 and Article IX.

          SECTION 7.3.  Amendment.  This Agreement may be amended by the parties
at any time  before or after any  required  approval  of  matters  presented  in
connection  with the  Merger  by the  stockholders  of the  Company  or  Parent;
provided,  however,  that  after  any  such  approval,  there  shall  be made no
amendment that by law requires further approval by such stockholders 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.


                                      -47-

<PAGE>
          SECTION 7.4.  Extension;  Waiver.  At any time prior to the  Effective
Time of the Merger,  the parties may, to the extent legally allowed,  (a) extend
the time for the  performance of any of the obligations or the other acts of the
other parties,  (b) waive any inaccuracies in the representations and warranties
contained herein or in any document  delivered pursuant hereto or (c) subject to
the proviso of Section  7.3,  waive  compliance  with any of the  agreements  or
conditions  contained  herein.  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.

          SECTION  7.5.  Procedure  for  Termination,  Amendment,  Extension  or
Waiver. A termination of this Agreement pursuant to Section 7.1, an amendment of
this  Agreement  pursuant to Section 7.3 or an extension  or waiver  pursuant to
Section 7.4 shall, in order to be effective,  require in the case of Parent, Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors.

                                 ARTICLE VIII

                   SPECIAL PROVISIONS AS TO CERTAIN MATTERS

          SECTION  8.1.  Takeover  Defenses  of  the  Company.  As  promptly  as
practicable after the date of this Agreement, but in no event later than 10 days
following  announcement  of the  execution of this  Agreement,  the Company will
amend the Company Rights Agreement, as necessary,  (i) to prevent this Agreement
or the  consummation of the transactions  contemplated  hereby from resulting in
the  distribution  of  separate  rights  certificates  or  the  occurrence  of a
Distribution  Date (as defined  therein) or being deemed a Triggering  Event (as
defined therein) and (ii) to provide that neither Parent nor Sub shall be deemed
to be an  Acquiring  Person (as defined  therein) by reason of the  transactions
contemplated by this Agreement.  The Company shall take such action with respect
to any other  anti-takeover  provisions in its charter or afforded it by statute
to the extent  necessary to consummate  the Merger on the terms set forth in the
Agreement.

          SECTION 8.2. No Solicitation.  (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of or any  investment  banker,  attorney or other  advisor,
agent or  representative  of the Company or any of its subsidiaries to, directly
or indirectly, (i) solicit, initiate or encourage the submission of any takeover
proposal,  (ii)  enter  into  any  agreement  (other  than  confidentiality  and
standstill agreements in accordance with the immediately following proviso) with
respect to any takeover  proposal,  or (iii)  participate in any  discussions or
negotiations  regarding,  or furnish to any person any information  with respect
to, or take any other action to  facilitate  any  inquiries or the making of any
proposal  that  constitutes,  or may  reasonably  be  expected  to lead to,  any
takeover  proposal;  provided,  however,  in the case of this clause (iii), that
prior to the vote of stockholders of the Company for approval of the Merger (and
not thereafter if the Merger is approved  thereby) to the extent required by the
fiduciary obligations


                                      -48-

<PAGE>
of the Board of Directors of the Company, determined in good faith by a majority
of the disinterested members thereof based on the advice of outside counsel, the
Company may, in response to an unsolicited request therefor, furnish information
to any person or "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) pursuant to a confidentiality  agreement on substantially the same terms as
provided  in Section  5.4(b)  hereof.  Without  limiting  the  foregoing,  it is
understood  that any  violation of the  restrictions  set forth in the preceding
sentence  by any  officer,  director  or  employee  of the Company or any of its
subsidiaries  or any  investment  banker,  attorney or other  advisor,  agent or
representative  of the Company,  whether or not such person is purporting to act
on behalf of the Company or otherwise,  shall be deemed to be a material  breach
of this  Agreement by the Company.  For  purposes of this  Agreement,  "takeover
proposal" means (i) any proposal,  other than a proposal by Parent or any of its
affiliates,  for a merger or other business  combination  involving the Company,
(ii) any  proposal or offer,  other than a proposal or offer by Parent or any of
its  affiliates,  to acquire  from the Company or any of its  affiliates  in any
manner,  directly  or  indirectly,  an equity  interest  in the  Company  or any
subsidiary, any voting securities of the Company or any subsidiary or a material
amount of the assets of the Company and its  subsidiaries,  taken as a whole, or
(iii) any proposal or offer,  other than a proposal or offer by Parent or any of
its affiliates, to acquire from the stockholders of the Company by tender offer,
exchange offer or otherwise more than 20% of the outstanding Shares.

          (b) Neither the Board of  Directors  of the Company nor any  committee
thereof  shall,  except in connection  with the  termination  of this  Agreement
pursuant to Sections 7.1 (a), (b) or (g), (i) withdraw or modify,  or propose to
withdraw  or  modify,  in a manner  adverse  to  Parent or Sub the  approval  or
recommendation by the Board of Directors of the Company or any such committee of
this  Agreement  or the Merger or take any  action  having  such  effect or (ii)
approve or recommend, or propose to approve or recommend, any takeover proposal.
Notwithstanding  the  foregoing,  in the  event the  Board of  Directors  of the
Company  receives a takeover  proposal  that,  in the exercise of its  fiduciary
obligations  (as  determined  in good faith by a majority  of the  disinterested
members thereof based on the advice of outside  counsel),  it determines to be a
superior proposal, the Board of Directors may withdraw or modify its approval or
recommendation of this Agreement or the Merger and may (subject to the following
sentence)  terminate this Agreement,  in each case at any time after midnight on
the next business day following Parent's receipt of written notice (a "Notice of
Superior  Proposal")  advising Parent that the Board of Directors has received a
takeover proposal which it has determined to be a superior proposal,  specifying
the material  terms and  conditions of such  superior  proposal  (including  the
proposed financing for such proposal and a copy of any documents  conveying such
proposal) and identifying the person making such superior proposal.  The Company
may terminate  this  Agreement  pursuant to the  preceding  sentence only if the
stockholders  of the  Company  shall not yet have  voted upon the Merger and the
Company  shall have paid to Parent the  Termination  Fee (as  defined in Section
8.3).  Any of the  foregoing  to the contrary  notwithstanding,  the Company may
engage in  discussions  with any  person or group  that has made an  unsolicited
takeover  proposal for the limited purpose of determining  whether such proposal
is a superior proposal. Nothing contained herein shall prohibit the Company


                                      -49-

<PAGE>
from taking and disclosing to its  stockholders a position  contemplated by Rule
14e-2(a) following Parent's receipt of a Notice of Superior Proposal.

          (c) In the event  that the Board of  Directors  of the  Company or any
committee  thereof  shall (i)  withdraw  or modify,  or propose to  withdraw  or
modify,  in a manner adverse to Parent or Sub the approval or  recommendation by
the Board of Directors of the Company or any such committee of this Agreement or
the Merger or take any action  having such effect or (ii) approve or  recommend,
or propose to approve or recommend, any takeover proposal,  Parent may terminate
this Agreement.

          (d) For purposes of this  Agreement,  a "superior  proposal" means any
bona  fide  takeover   proposal  to  acquire,   directly  or   indirectly,   for
consideration  consisting of cash,  securities or a combination  thereof, all of
the  Shares  then  outstanding  or all or  substantially  all the  assets of the
Company, and otherwise on terms which a majority of the disinterested members of
the Board of Directors of the Company  determines  in its good faith  reasonable
judgment  (based on the  written  advice of a  financial  advisor of  nationally
recognized  reputation,  a copy of which shall be provided to Parent) to be more
favorable to the Company's stockholders than the Merger.

          (e) In  addition  to the  obligations  of the  Company  set  forth  in
paragraph (b), the Company shall promptly advise Parent orally and in writing of
any takeover  proposal or any inquiry with respect to or which could lead to any
takeover proposal, the material terms and conditions of such inquiry or takeover
proposal (including the financing for such proposal and a copy of such documents
conveying  such  proposal),  and the  identity  of the  person  making  any such
takeover proposal or inquiry. The Company will keep Parent fully informed of the
status and details of any such takeover proposal or inquiry.

          SECTION 8.3. Fee and Expense Reimbursements.

          (a) The Company  agrees to pay Parent a fee in  immediately  available
funds of $2,000,000 (the "Termination Fee") promptly upon the termination of the
Agreement in the event this  Agreement is terminated by Parent or the Company as
permitted by Section 8.2. Further,  in the event the stockholders of the Company
do not approve the Merger and this Agreement is  terminated,  the Company agrees
to pay to Parent the  Termination  Fee if,  after the date hereof and before the
termination  of this  Agreement  or  within  six  months  following  the date of
termination  of this  Agreement,  a  takeover  proposal  shall  have been  made;
provided that such takeover is ultimately consummated. The Termination Fee shall
be payable  promptly upon  termination of this Agreement if the foregoing events
shall have occurred prior to termination.  Otherwise,  the Termination Fee shall
be payable promptly upon the consummation of such takeover following termination
of this Agreement.

          (b) In the event the Board of Directors of Parent  receives a takeover
proposal  involving  Parent  because of which,  in the exercise of its fiduciary
obligations  (as  determined  in good faith by a majority  of the  disinterested
members  thereof  based on advice  of  outside  counsel),  it  determines  it is
necessary to withdraw or modify its 



                                      -50-
<PAGE>
approval or recommendation of this Agreement or the Merger, Parent may terminate
this  Agreement at any time after  midnight on the next  business day  following
such  determination  by advising  the Company  that the Board of  Directors  has
received a takeover  proposal  which it has  determined  requires  such  action,
specifying  the material  terms and  conditions of such proposal  (including the
proposed financing for such proposal and a copy of any documents  conveying such
proposal) and identifying the person making such proposal.  Parent may terminate
this Agreement  pursuant to the preceding  sentence only if the  stockholders of
Parent  shall not yet have voted  upon the Merger and Parent  shall have paid to
the Company the Parent Termination Fee (as hereinafter  defined).  Parent agrees
to pay the  Company a fee in  immediately  available  funds of  $2,000,000  (the
"Parent  Termination  Fee") promptly upon (i) the  termination of this Agreement
pursuant to the first sentence of this Section  8.3(b) or (ii) the  stockholders
of Parent  not  approving  the Merger as a result of a hostile  takeover  of the
Parent  after the date of this  Agreement.  For  purposes  hereof,  a  "takeover
proposal  involving  Parent"  shall mean (i) any  proposal for a merger or other
business combination involving the Parent, (ii) any proposal or offer to acquire
from the Parent or any of its affiliates in any manner,  directly or indirectly,
an equity interest in the Parent or any subsidiary, any voting securities of the
Parent or any  subsidiary  or a material  amount of the assets of the Parent and
its  subsidiaries  taken as a whole,  or (iii) any  proposal or offer to acquire
from the  stockholders  of Parent by tender offer,  exchange offer or otherwise,
more than 20% of the Parent common stock.

          (c) In the event this Agreement is terminated by Parent or the Company
pursuant to Sections  7.1(b)(i)  or (d),  the Company  shall  assume and pay, or
reimburse Parent for, all reasonable fees and expenses incurred by Parent or Sub
(including  the fees and  expenses of its  counsel,  accountants  and  financial
advisors) through the date of termination and which are specifically  related to
the Merger, this Agreement and the matters  contemplated by this Agreement,  but
not to exceed  $300,000 in the aggregate,  promptly,  but in no event later than
two business days after submission of a request for payment of the same.

          (d) In the event this Agreement is terminated by the Company or Parent
pursuant to Section 7.1(b)(ii) or (e), Parent shall assume and pay, or reimburse
the  Company  for,  all  reasonable  fees and  expenses  incurred by the Company
(including  the fees and  expenses of its  counsel,  accountants  and  financial
advisors) through the date of termination and which are specifically  related to
the Merger, this Agreement and the matters  contemplated by this Agreement,  but
not to exceed  $300,000 in the aggregate,  promptly,  but in no event later than
two business days after the submission of a request for payment of the same.

                                  ARTICLE IX

                              GENERAL PROVISIONS

          SECTION 9.1.  Nonsurvival of Representations  and Warranties.  None of
the representations, warranties, covenants or agreements in this Agreement or in
any instrument delivered by the Company pursuant to this Agreement shall survive
the 


                                      -51-
<PAGE>
Effective  Time of the Merger,  except any  covenant or agreement of the parties
which by its terms  contemplates  performance  after the  Effective  Time of the
Merger.

          SECTION 9.2. Notices. All notices and other  communications  hereunder
shall be in writing  and shall be deemed  given if  delivered  personally  or by
facsimile or sent by overnight courier 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 Parent or Sub, to

                       Daniel Industries, Inc.
                       9753 Pine Lake Drive
                       Houston, Texas  77055
                       Telephone:  (713) 467-6000
                       Facsimile:  (713 827-4805
                       Confirmation:  (713) 827-4870
                       Attention:   W. A. Griffin, III
                                    President and Chief Executive Officer

                       with a copy to:

                       Daniel Industries, Inc.
                       9753 Pine Lake Drive
                       Houston, Texas  77055
                       Telephone:  (713) 467-6000
                       Facsimile:  (713 827-4805
                       Confirmation:  (713) 827-4870
                       Attention:   Thomas L. Sivak
                                    General Counsel

                       with a copy to:

                       Fulbright & Jaworski L.L.P.
                       1301 McKinney, Suite 5100
                       Houston, Texas  77010-3095
                       Telephone:  (713) 651-5151
                       Facsimile:  (713) 651-5246
                       Confirm:    (713) 651-5496
                       Attention:  Charles H. Still, Esq.


                                      -52-
<PAGE>
                 (b)   if to the Company, to

                       Bettis Corporation
                       18703 GH Circle
                       P.O. Box 508
                       Waller, Texas  77484
                       Telephone:  (713) 463-5100
                       Facsimile:  (713) 463-5189
                       Confirm:    (713) 463-5100
                       Attention:   W. Todd Bratton
                                    President and Chief Executive Officer

                       with a copy to:

                       Vinson & Elkins L.L.P.
                       2500 First City Tower
                       1001 Fannin
                       Houston, Texas  77002-6760
                       Telephone:  (713) 758-4592
                       Facsimile:  (713) 615-5531
                       Confirm:    (713) 758-4592
                       Attention:   T. Mark Kelly, Esq.

          SECTION 9.3. Definitions. For purposes of this Agreement:

          (a) an "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;

          (b) "knowledge"  means, with respect to any matter stated herein to be
"to the Company's  knowledge," or similar language,  the actual knowledge of the
Chairman  of the  Board,  the  Chief  Executive  Officer,  President,  any  Vice
President or Chief  Financial  Officer of the  Company,  and with respect to any
matter stated herein to be "to Parent's  knowledge,"  or similar  language,  the
actual  knowledge of the  Chairman of the Board,  the Chief  Executive  Officer,
President,  any Vice President,  Chief  Financial  Officer or General Counsel of
Parent.

          (c) "material adverse effect" or "material adverse change" means, when
used in  connection  with any person,  any change or effect (or any  development
that,  insofar as can reasonably be foreseen,  is likely to result in any change
or effect)  that is  materially  adverse to the  business,  properties,  assets,
condition  (financial  or otherwise) or results of operations of that person and
its subsidiaries, taken as a whole.

          (d)   "person"   means  an   individual,   corporation,   partnership,
association, trust, unincorporated organization or other entity; and


                                      -53-
<PAGE>
          (e) a "subsidiary" of any person means any  corporation,  partnership,
association,  joint venture,  limited liability company or other entity in which
such person owns over 50% of the stock or other equity interests, the holders of
which are  generally  entitled to vote for the  election of  directors  or other
governing body of such other legal entity.

          SECTION  9.4.  Interpretation.  When  a  reference  is  made  in  this
Agreement  to a  Section,  Exhibit or  Schedule,  such  reference  shall be to a
Section  of, or an Exhibit or  Schedule  to,  this  Agreement  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 used in this  Agreement,  they shall be deemed to be followed by
the words "without limitation".

          SECTION 9.5.  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 to the other parties.

          SECTION 9.6.  Entire  Agreement;  No Third-Party  Beneficiaries.  This
Agreement  (including the documents and instruments  referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement and supersedes all
prior  agreements and  understandings,  both written and oral, among the parties
with respect to the subject  matter hereof and (b) except for the  provisions of
Sections  5.6 and 5.7, are not intended to confer upon any person other than the
parties any rights or remedies hereunder.

          SECTION 9.7.  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 9.8. Assignment. Neither this Agreement nor any of the rights,
interests  or  obligations  hereunder  shall be  assigned  by any of the parties
without  the prior  written  consent of the other  parties,  except that Sub may
assign,  in its  sole  discretion,  any  of or all  its  rights,  interests  and
obligations  under  this  Agreement  to  Parent  or to any  direct  or  indirect
wholly-owned  subsidiary of Parent, and such assignment shall relieve Sub of all
of its obligations hereunder.  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 9.9.  Enforcement  of the  Agreement.  The parties  agree that
irreparable  damage would occur in the event that 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 shall be entitled
to an injunction or  injunctions  to prevent  breaches of this  Agreement and to
enforce  specifically the terms and provisions hereof in any court of the United
States  located in the State of Texas or in any other  Texas state  court,  this
being in  addition to any


                                      -54-
<PAGE>
other remedy to which they are entitled at law or in equity.  In addition,  each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any Federal or state court  sitting in the Southern  District of Texas in the
event any dispute between the parties hereto arises out of this Agreement solely
in connection with such a suit between the parties,  (b) agrees that it will not
attempt to deny or defeat such personal  jurisdiction by motion or other request
for leave from any such  court and (c) agrees  that it will not bring any action
relating  to this  Agreement  in any court  other than a Federal or state  court
sitting in the State of Texas or in the Southern District of Texas.

          SECTION  9.10.  Severability.  In the  event  any  one or  more of the
provisions  contained  in this  Agreement  should be held  invalid,  illegal  or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining  provisions  contained  herein  shall  not in any way be  affected  or
impaired  thereby.  The parties  shall  endeavor in good-faith  negotiations  to
replace the invalid,  illegal or unenforceable provisions with valid provisions,
the economic  effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.


                                      -55-
<PAGE>
          IN WITNESS  WHEREOF,  Parent,  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.

                             DANIEL INDUSTRIES, INC.

                             By         /s/ James M. Tidwell

                                            James M. Tidwell
                                            Vice President - Finance

                             BLUE ACQUISITION, INC.

                             By         /s/ James M. Tidwell

                                            James M. Tidwell
                                            Vice President

                             BETTIS CORPORATION

                             By          /s/ W. Todd Bratton

                                             W. Todd Bratton
                                             President


                                      -56-
<PAGE>