Exhibit 10(ff)

                            STOCK PURCHASE AGREEMENT

                          Dated as of December 13, 1995

                                  By and Among

                         THE BLACK & DECKER CORPORATION
                               ("Seller's Parent")

                              PRC INVESTMENTS INC.
                                   ("Seller")

                                    PRC INC.
                                     ("PRC")

                                       and

                             LITTON INDUSTRIES, INC.
                                    ("Buyer")


 
                            STOCK PURCHASE AGREEMENT


         This STOCK PURCHASE AGREEMENT (together with the Schedules and Exhibits
hereto, this "Agreement") is made as of this 13th day of December,  1995, by and
among PRC Investments Inc., a Delaware  corporation with its principal office at
Drummond  Plaza Office Park,  1423  Kirkwood  Highway,  Newark,  Delaware  19711
("Seller"),  The Black & Decker  Corporation,  a Maryland  corporation  with its
principal  office at 701 East Joppa  Road,  Towson,  Maryland  21286  ("Seller's
Parent"), PRC Inc., a Delaware corporation with its principal office at 1500 PRC
Drive, McLean,  Virginia 22102 ("PRC"), and Litton Industries,  Inc., a Delaware
corporation  with its  principal  office at 21240  Burbank  Boulevard,  Woodland
Hills, California 91367 ("Buyer").
                              W I T N E S S E T H:
         WHEREAS, Seller owns all of the issued and outstanding shares
of capital stock of PRC;
         WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, in accordance with the terms and conditions of this Agreement,  all
of the issued and outstanding shares of capital stock of PRC; and
         WHEREAS,  Seller's  Parent and PRC desire to join in this Agreement for
the  purpose  of  making  certain  representations,  warranties,  covenants  and
agreements;
         NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties hereby agree as follows:
                                    ARTICLE I
                                   DEFINITIONS
         As used in this Agreement, the following terms shall have the following
meanings:

         Section 1.1. Action.  "Action" means any action, complaint, petition, 
investigation, suit or other proceeding, whether civil or criminal, in law or in
equity, or before any arbitrator or Governmental Entity.
         Section 1.2. Affiliate. "Affiliate" shall mean any Person that directly
or indirectly  controls,  is controlled  by, or is under common control with the
Person  in  question.  For  purposes  of  determining  whether  a  Person  is an
Affiliate, the term "control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the  management and policies of
a Person, whether through ownership of securities, contract or otherwise.
         Section 1.3. Affiliated Groups.  "Affiliated Groups" shall have the 
meaning set forth in Section 3.16.
         Section 1.4. Allocation.  "Allocation" shall have the meaning set forth
 in Section 11.2.
         Section 1.5. Benefit Arrangements.  "Benefit Arrangements" shall mean 
all life and health insurance, hospitalization, savings, bonus, deferred 
compensation, incentive compensation, severance pay, disability, and fringe 
benefit plans, individual employment and severance  contracts and other policies
and practices  providing employee or executive compensation or benefits to 
Employees or their dependents,  maintained or  contributed  to by any of the PRC
Companies,  other than  Employee  Benefit Plans.
         Section 1.6.  Bid.  "Bid" shall mean any quotation, bid or proposal 
made by Seller, Seller's Parent or any PRC Company that, if accepted or awarded,
would lead to a contract with the U.S. Government for the design, manufacture 
and sale of products or the provision of services by any PRC Company.
         Section 1.7. Bridge Period.  "Bridge Period" shall have the meaning set
 forth in Section 11.1.
         Section 1.8. Buyer.  "Buyer" shall have the meaning set forth above.
         Section 1.9. Buyer Group.  "Buyer Group" shall have the meaning set 
forth in Section 11.1.
         Section 1.10. Buyer Period.  "Buyer Period" shall have the
meaning set forth in Section 11.1.
         Section 1.11.  Carpal Tunnel  Litigation.  "Carpal  Tunnel  Litigation"
means any pending or threatened  action against any of the PRC Companies arising
out of or relating to (i) carpal  tunnel  syndrome,  or (ii)  cumulative  trauma
disorder,  tendinitis,  nerve entrapment,  repetitive motion or stress injury or
any similar illness or ailment causing injury or damage to an individual's hand,
wrist or arm.
         Section 1.12.  Closing.  "Closing" shall mean the consummation
of the events described in ARTICLE IX.
         Section 1.13.   Closing Date.  "Closing Date" shall mean the
date on which the Closing shall occur.


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     Section 1.14. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
     Section  1.15  Competing  Business.  "Competing  Business"  shall  have the
meaning set forth in Section 5.10.
     Section 1.16. Confidentiality Agreement.  "Confidentiality Agreement" shall
mean the agreement  dated October 24, 1995,  between PRC and Buyer  relating to,
among other things, the confidential nature of certain information in respect of
PRC shared by PRC with Buyer.
     Section 1.17.  Consolidated Returns.  "Consolidated Returns" shall have the
meaning set forth in Section 3.16.
     Section  1.18.  Consolidated  Taxes.  "Consolidated  Taxes"  shall have the
meaning set forth in Section 3.16.
     Section 1.19. Contest.  "Contest" shall mean any administrative or judicial
Tax or foreign Tax audit,  examination,  proceeding or litigation  involving any
Tax Authority.
     Section 1.20. Contract Loss.  "Contract Loss" shall exist with respect to a
contract or Bid (i) if in the case of a Government Contract, after consideration
of existing  reserves,  the sales price therefor is more than $100,000 less than
the sum of the cost  incurred to date and the estimated  cost to complete,  with
all costs  determined in accordance  with GAAP on a basis  consistent with prior
periods,  or (ii) if in the case of a contract  involving  the  business  of PRC
Public  Sector,  Inc.,  the expected  gross margin for the contract for the year
ending December 31, 1995 is less than 20%.
     Section 1.21. DOL. "DOL" shall mean the United States Department of Labor.


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     Section  1.22.  ERISA.  "ERISA" shall mean the Employee  Retirement  Income
Security Act of 1974, as amended.
     Section 1.23. ERISA Affiliate."ERISA  Affiliate," as applied to any Person,
shall  mean  (i) any  corporation  which is a member  of a  controlled  group of
corporations  within the  meaning  of  Section  414(b) of the Code of which that
Person is a member;  (ii) any trade or business  (whether  or not  incorporated)
which is a member of a group of trades or businesses under common control within
the meaning of Section 414(c) of the Code of which that Person is a member;  and
(iii) any member of an  affiliated  service  group within the meaning of Section
414(m) or (o) of the Code of which that  Person,  any  corporation  described in
clause (i) above or any trade or  business  described  in clause (ii) above is a
member.  Any former ERISA  Affiliate of a Person shall continue to be considered
an ERISA  Affiliate  within the meaning of this  definition  with respect to the
period such  entity was an ERISA  Affiliate  of such Person and with  respect to
liabilities  arising  after such  period for which such  Person  could be liable
under the Code or ERISA.
     Section 1.24. Emhart.  "Emhart" shall mean Emhart  Corporation,  a Virginia
corporation with its principal office at 701 East Joppa Road,  Towson,  Maryland
21286.
         Section 1.25. Employee Benefit Plan. "Employee Benefit Plan" shall mean
each "employee benefit plan," as defined in Section 3(3) of ERISA, maintained or
contributed  to by any of the  PRC  Companies,  which  provides  or may  provide
benefits to Employees or their dependents but excluding Multiemployer Plans.


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     Section  1.26.  Employees.  "Employees"  shall mean all current  employees,
former employees and retired employees of the PRC Companies.
     Section 1.27. Environmental Laws.  "Environmental Laws" shall mean all Laws
relating to the protection of human health, safety or the environment including:
(i)  all   requirements   pertaining   to  reporting,   licensing,   permitting,
controlling,  investigating or remediating  emissions,  discharges,  releases or
threatened releases of Hazardous  Substances,  chemical substances,  pollutants,
contaminants or toxic substances,  materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, chemical substances,  pollutants,
contaminants or toxic substances,  materials or wastes, whether solid, liquid or
gaseous in nature; and (ii) all requirements pertaining to the protection of the
health and safety of employees or the public.
     Section 1.28.  Final Net Asset Amount.  "Final Net Asset Amount" shall have
the meaning set forth in Section 2.3.
         Section 1.29. Financial Statements.  "Financial  Statements" shall mean
the unaudited Special Purpose  Statements of Net Assets of PRC, exclusive of PRC
Environmental  Management,  Inc. and PRC Realty Systems,  Inc.,  formerly wholly
owned  subsidiaries  of PRC, as of September 30, 1995 and December 31, 1994, and
the Special Purpose  Statements of Operating Income for the years ended December
31, 1994, 1993 and 1992, and for the nine months ended


<PAGE>



September 30, 1995 and 1994, together with all notes thereto, copies of which is
attached hereto as Exhibit A.
     Section  1.30.  GAAP.  "GAAP"  shall  mean  generally  accepted  accounting
principles.
         Section 1.31.  Government  Contract.  "Government  Contract"  means any
prime contract,  subcontract,  teaming agreement or arrangement,  joint venture,
basic ordering agreement,  letter contract, purchase order, delivery order, Bid,
change order or other  legally  binding  commitment  of any kind relating to any
business  between any PRC Company  and (i) the U.S.  Government,  (ii) any prime
contractor  of the U.S.  Government  to the  extent  it  relates  to such  prime
contract,  or (iii) any subcontractor  with respect to any contract described in
clauses (i) or (ii).
         Section  1.32.  Government  Contract  Novation.   "Government  Contract
Novation" shall mean, with respect to a Prime Government Contract, an instrument
reasonably  satisfactory  in form and substance to Buyer and Seller  pursuant to
which all of PRC's rights,  claims,  benefits and liabilities  thereunder  shall
have been validly conveyed, transferred,  assigned, assumed and novated to Buyer
by all parties thereto.
     Section  1.33.   Governmental  Entity.   "Governmental  Entity"  means  any
government  or  any  agency,  bureau,  board,  commission,   court,  department,
official,  political  subdivision,  tribunal  or  other  instrumentality  of any
government, whether federal, state or local, domestic or foreign.
     Section  1.34.   Guarantees.   "Guarantees"  shall  mean  any  obligations,
contingent or otherwise, of a Person in respect of any indebtedness,  obligation
or liability (including assumed


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indebtedness,  obligations or liabilities) of another Person,  including but not
limited to direct or indirect guarantees, endorsements (except for collection or
deposit in the  ordinary  course of  business),  notes  co-made  or  discounted,
recourse agreements, take-or-pay agreements, keep-well agreements, agreements to
purchase  or  repurchase  such  indebtedness,  obligation  or  liability  or any
security  therefor  or to provide  funds for the payment or  discharge  thereof,
agreements to maintain  solvency,  assets,  level of income,  or other financial
condition,  agreements  to make  payment  other than for value  received and any
other financial accommodations.
         Section 1.35. Hazardous Substances.  "Hazardous  Substances" shall mean
substances that are defined or listed in, or otherwise  classified  pursuant to,
any applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances," or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity,  carcinogenicity,  reproductive toxicity
or "EP toxicity," and petroleum and drilling  fluids,  produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
     Section  1.36.  H-S-R Act.  "H-S-R  Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
     Section 1.37. IRS. "IRS" shall mean the Internal Revenue Service.
     Section 1.38. Incentive Compensation Plans.  "Incentive Compensation Plans"
shall mean any cash bonus or other incentive


<PAGE>



compensation plan or arrangement  maintained or contributed to by any of the PRC
Companies or Seller's  Parent,  and any successor plan or  arrangement  covering
Employees for 1995 or thereafter.
         Section 1.39. Income Taxes. "Income Taxes" shall mean any income, gross
receipts, gains, net worth, surplus,  franchise or with respect to any interest,
dividends or royalties,  withholding  taxes  (including  interest,  penalties or
other  additions to Tax) imposed by a Tax Authority,  payable by any PRC Company
for  federal,  state,  local or foreign  income  Tax  purposes  (as the  context
requires) with respect to any Pre-Closing Period or any Post-Closing Period.
     Section 1.40. Indemnified Party. "Indemnified Party" shall have the meaning
set forth in Section 11.5.
     Section  1.41.  Indemnifying  Party.  "Indemnifying  Party"  shall have the
meaning set forth in Section 11.5
     Section  1.42.  Individual  Returns.  "Individual  Returns"  shall have the
meaning set forth in Section 3.16.
     Section 1.43.  Individual Taxes.  "Individual Taxes" shall have the meaning
set forth in Section 3.16.
         Section 1.44. Intellectual Property. "Intellectual Property" shall mean
all  brand  names,  corporate  names,   copyrights,   patents,   service  marks,
trademarks,  trade names,  know-how,  trade secrets,  and all  registrations  or
applications for registration of any of the foregoing,  that are (a) owned by or
licensed to a PRC Company (other than generally available software licensed from
third parties) and (b) used in the operation of the business of a PRC Company.


<PAGE>



     Section  1.45.  Law.  "Law"  or  "Laws"  means  any  valid   constitutional
provision,  statute,  ordinance  or other  law  (including  common  law),  rule,
regulation or interpretation of any Governmental Entity and any Order, as any of
these may be in effect from time to time.
         Section  1.46.  Loss.  "Loss" means any action,  claim,  cost,  damage,
disbursement,  expense,  liability,  loss, deficiency,  obligation,  sanction or
penalty of any kind or nature,  whether foreseeable or unforeseeable,  including
but not limited to interest,  judgments,  reasonable legal, accounting and other
professional  fees  and  expenses  incurred  in the  investigation,  collection,
prosecution  and defense of claims and amounts paid in  settlement,  that may be
imposed on or otherwise incurred or suffered by the specified Person.
     Section 1.47. Material Adverse Effect.  "Material Adverse Effect" when used
with  reference to a Person or Persons shall mean a material  adverse  effect on
the business, operations or financial condition of the Person or Persons.
         Section 1.48. Material Contract. "Material Contract" shall mean (i) any
contract, agreement,  commitment or other arrangement (oral or written) to which
a PRC  Company  is party and which  reasonably  could be  expected  to result in
revenues  to the  PRC  Companies  over  the  expected  term  of  such  contract,
agreement,  commitment or  arrangement  in excess of  $2,000,000  and (ii) those
contracts defined to be material in Section 3.13.
     Section 1.49.  Multiemployer Plan.  "Multiemployer  Plan" shall mean a plan
described in Sections 3(37) and 4001(a)(3) of ERISA to


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which  any of the  PRC  Companies  has an  obligation  to  contribute  or had an
obligation to contribute within the past five years.
     Section 1.50. Net Assets.  "Net Assets" shall mean total assets minus total
liabilities, calculated in accordance with Section 2.3.
         Section 1.51. OCI Clause. "OCI Clause" means any clause or provision of
any  agreement  providing for  compliance  with the  Organizational  Conflict of
Interest ("OCI") rules of Subpart 9.5 of the Federal Acquisition Regulations, as
they may be amended or modified from time to time,  whether or not the agreement
makes explicit reference to Subpart 9.5 of the Federal Acquisition Regulations.
     Section 1.52. Order. "Order" means any decree, injunction, judgment, order,
ruling, assessment or writ.
     Section  1.53.  PBGC.  "PBGC"  shall  mean  the  Pension  Benefit  Guaranty
Corporation.
     Section 1.54. PRC. "PRC" shall have the meaning set forth above.
     Section 1.55. PRC  Companies.  "PRC  Companies"  shall mean PRC and the PRC
Subsidiaries.
     Section  1.56.  PRC Shares.  "PRC Shares"  shall mean all of the issued and
outstanding shares of common stock, par value $.01 per share, of PRC.
     Section  1.57.  PRC  Subsidiaries.   "PRC  Subsidiaries"   shall  mean  the
Subsidiaries  of PRC listed in  Schedule  3.4 and PRC  Aviation  LLC, a Virginia
limited liability company.


<PAGE>



     Section 1.58.  Pension Plan.  "Pension Plan shall mean any Employee Benefit
Plan that is an "employee  pension  benefit  plan" as defined in Section 3(2) of
ERISA.
     Section 1.59.  Person.  "Person"  shall mean any  individual,  corporation,
unincorporated  association,   business  trust,  estate,  partnership,   limited
liability  company,  limited  liability  partnership,  trust,  state, the United
States or any other entity.
         Section  1.60.  Post-Closing  Claims.  "Post-Closing  Claims" means any
Action or Order, or any third party claim which would  reasonably be expected to
lead to an Action by such third party if not otherwise  resolved or settled with
such party,  relating to the PRC  Companies to the extent  arising from facts or
circumstances that occurred after the Closing.
         Section  1.61.  Pre-Closing  Claims.  "Pre-Closing  Claims"  means  any
pending or  threatened  Action or Order,  or any third  party  claim which would
reasonably be expected to lead to an Action by such third party if not otherwise
resolved or settled with such party, relating to the PRC Companies to the extent
arising from facts or  circumstances  that  occurred on or prior to the Closing,
whether pending or threatened at the Closing or thereafter.
     Section 1.62.  Post-Closing  Period.  "Post-Closing  Period" shall have the
meaning set forth in Section 11.1.
     Section  1.63.  Pre-Closing  Period.  "Pre-Closing  Period"  shall have the
meaning set forth in Section 11.1. 
     Section 1.64. Prime Government Contract.  "Prime Government Contract" shall
mean any  Government  Contract the parties to which  include (i) any PRC Company
and (ii) the U.S. Government.


<PAGE>



     Section 1.65.  Proposed Final Net Asset Amount.  "Proposed  Final Net Asset
Amount" shall have the meaning set forth in Section 2.3.
     Section 1.66.  Purchase Price.  "Purchase Price" shall have the meaning set
forth in Section 2.2.
     Section 1.67. Section 338(h)(10)  Election.  "Section 338(h)(10)  Election"
shall have the meaning set forth in Section 11.2.
     Section 1.68.  Securities Act.  "Securities  Act" shall mean the Securities
Act of 1933, as amended.
     Section 1.69. Seller. "Seller" shall have the meaning set forth above.
     Section 1.70. Seller Group. "Seller Group" shall have the meaning set forth
in Section 11.3.
     Section 1.71.  Seller  Period.  "Seller  Period" shall have the meaning set
forth in Section 11.1.
     Section 1.72. Seller's Parent. "Seller's Parent" shall have the meaning set
forth above.
     Section 1.73. Special Severance Plans. "Special Severance Plans" shall mean
the PRC Inc. Special Severance Plan and the PRC Inc. Senior Management Severance
Plan, copies of which are attached hereto as Exhibit B.
         Section 1.74.  Subsidiary.  "Subsidiary,"  as it relates to any Person,
shall mean any other corporation,  unincorporated  association,  business trust,
partnership,  limited liability company or limited liability  partnership (other
than any such entity  formed as part of a teaming  arrangement  or other venture
for the purpose of pursuing or performing a contract in the ordinary course of


<PAGE>



business)  more than 50% of whose  outstanding  securities  such  Person has the
right, other than as affected by events of default,  directly or indirectly,  to
vote generally.
     Section 1.75. Tax Authority. "Tax Authority" shall mean a foreign or United
States federal, state, or local Governmental Entity having jurisdiction over the
assessment,  determination,  collection or imposition of any Tax, as the context
requires.
     Section 1.76. Tax Returns.  "Tax Returns" shall mean all returns (including
information returns), declarations,  reports, estimates and statements regarding
Taxes, required to be filed with any Tax Authority.
     Section 1.77. Taxes. "Taxes" shall mean all taxes, charges, fees, levies or
other assessments,  including without limitation,  all net income, gross income,
gross receipts, sales, use, ad valorem, transfer,  franchise,  profits, license,
withholding,   payroll,   employment,   excise,  estimated,   severance,  stamp,
occupation,  property or other taxes,  customs,  duties,  fees,  assessments  or
charges of any kind  whatsoever,  together with any interest and any  penalties,
additions to tax or additional amounts imposed by any Tax Authority.
     Section 1.78.  U.S.  Government.  "U.S.  Government"  shall mean the United
States   Government,    including   any   agencies,    commissions,    branches,
instrumentalities and departments thereof.

                                   ARTICLE II
                         PURCHASE AND SALE OF PRC SHARES
     Section 2.1. Sale of PRC Shares. On the terms and subject to the conditions
set forth in this Agreement, Seller hereby agrees


<PAGE>



to sell,  transfer,  assign and  deliver to Buyer,  and Buyer  hereby  agrees to
purchase from Seller, the PRC Shares on the Closing Date.
     Section 2.2.  Purchase Price and Payment for PRC Shares.  The consideration
to be paid by Buyer to Seller in exchange for the sale, transfer, assignment and
delivery  to  Buyer  of the PRC  Shares  shall be  $425,000,000  (the  "Purchase
Price"),  which  shall be paid by Buyer to Seller at the time of Closing by wire
transfer of immediately available funds into an account designated in writing by
Seller to Buyer at least two days prior to the Closing Date.  The Purchase Price
shall be subject to adjustment as provided in Section 2.3.
         Section 2.3. Adjustment of Purchase Price.
                  (a)      As promptly as practicable following the Closing
Date,  but in no event later than 90 days after the Closing  Date,  Seller shall
prepare and submit to Buyer an audited  schedule  setting  forth,  in reasonable
detail,  Seller's  calculation of the Net Assets of PRC immediately prior to the
Closing (the "Proposed Final Net Asset Amount")  certified by Ernst & Young LLP.
Buyer shall cause  personnel of the PRC Companies to be reasonably  available to
assist  Ernst & Young LLP in its  preparation  of the  Proposed  Final Net Asset
Amount.  In the event Buyer  disputes the  correctness of the Proposed Final Net
Asset Amount,  Buyer shall notify Seller of its objections  within six months of
the Closing  Date and shall set forth,  in  reasonable  detail,  the reasons for
Buyer's  objections.  If Buyer fails to deliver  such  notice  within such time,
Buyer shall be deemed to have accepted  Seller's  calculation.  Buyer and Seller
shall  endeavor in good faith to resolve any disputed items within 20 days after
Seller's receipt of


<PAGE>



Buyer's notice of objections.  If they are unable to do so,  Seller's Parent and
Buyer shall select a nationally known independent accounting firm to resolve the
dispute,  and the  determination  of such firm in respect of the  correctness of
each item  remaining  in dispute  shall be  conclusive  and binding on Buyer and
Seller.  The amount of Net Assets  immediately prior to the Closing,  as finally
determined  pursuant  to this  Section  2.3(a)  (whether  by failure of Buyer to
deliver notice of objection,  by agreement of the parties or by determination of
the  accountants  selected  as set forth  above),  is  referred to herein as the
"Final Net Asset Amount."
                  (b) The  Proposed  Final  Net Asset  Amount  and the Final Net
Asset Amount shall be determined  in  accordance  with GAAP (except as otherwise
set forth in the Financial Statements),  in a manner consistent with the Special
Purpose Statement of Net Assets as of September 30, 1995, and as provided in the
Financial Statements.  The accounting firm selected to resolve any disputes will
be instructed to determine the Final Net Asset Amount in the same manner.
                  (c)  If  the   Final  Net  Asset   Amount  is   greater   than
$205,333,000,  the  difference  shall be paid to Seller by Buyer  with  interest
thereon  from the Closing  Date to the date of payment at a rate per annum equal
to the per annum interest rate announced from time to time by Citibank,  N.A. as
its  prime  rate  in  effect.  If the  Final  Net  Asset  Amount  is  less  than
$205,333,000,  the  difference  shall be paid to Buyer by Seller  with  interest
thereon  from the Closing  Date to the date of payment at a rate per annum equal
to the per annum interest rate announced from time to time by


<PAGE>



Citibank,  N.A.  as its prime  rate in  effect.  Such  payment  shall be made in
immediately  available  funds  not  later  than  two  business  days  after  the
determination  of the Final Net Asset Amount by wire  transfer to a bank account
designated by the party entitled to receive the payment.
                  (d) The fees and  expenses,  if any,  of the  accounting  firm
selected to resolve any disputes  between  Buyer and Seller in  accordance  with
Section 2.3(a) shall be paid one-half by Seller and one-half by Buyer.

                                   ARTICLE III
          REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S PARENT
     Seller and Seller's  Parent jointly and severally  represent and warrant to
and for the benefit of Buyer as follows:
     Section  3.1.Organization  and Good  Standing.  Each of Seller and Seller's
Parent,  and each of the PRC  Companies,  is a corporation  or other entity duly
organized,  validly  existing  and  in  good  standing  under  the  Laws  of its
jurisdiction  of  incorporation  and has full  corporate  power and authority to
carry on its business as it is now being conducted.  Schedule 3.1 sets forth the
jurisdiction  in which each PRC Company was organized and each  jurisdiction  in
which each PRC  Company is  qualified  or  licensed  to do business as a foreign
Person. Each of the PRC Companies is qualified as a foreign corporation or other
entity and is in good standing under the laws of each  jurisdiction in which the
conduct  of its  business  or the  ownership  of its  properties  requires  such
qualification,  except as set forth in Schedule 3.1 and except where the failure
to be so qualified would not have a Material Adverse Effect on the PRC Companies
taken as a whole. Schedule 3.1


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correctly lists the current directors and executive officers of each PRC Company
as of the date  hereof.  True,  correct and  complete  copies of the  respective
charter  documents of each of the PRC  Companies as in effect on the date hereof
have been delivered or otherwise made available to Buyer.
         Section  3.2.  Capitalization.  The  authorized  capital  stock  of PRC
consists of 1,000 shares of common stock, par value $.01 per share, all of which
are outstanding.  Each of the PRC Shares has been validly issued,  is fully paid
and  nonassessable  and was issued in conformity with applicable Laws. No shares
of capital  stock of PRC are held in treasury,  and there are no other issued or
outstanding  equity  securities  of  PRC  and no  other  issued  or  outstanding
securities of PRC convertible or exercisable at any time into equity  securities
of PRC. PRC is subject to no  commitment  or  obligation  that would require the
issuance or sale of additional  shares of capital stock of PRC at any time under
options, subscriptions, warrants, rights or any other obligations.
         Section  3.3.  Ownership  of  PRC  Shares.  Seller  is the  record  and
beneficial  owner  of the PRC  Shares,  which  are  free of any  lien,  security
interest,  charge,  encumbrance or claim whatsoever.  At the Closing, Buyer will
acquire good and marketable  title to and complete  ownership of the PRC Shares,
free of any lien, security interest, charge, encumbrance or claim whatsoever.
         Section 3.4. PRC  Subsidiaries.  Schedule 3.4 sets forth the authorized
capital  stock and the record  ownership  of the  outstanding  shares of capital
stock  of  each of the  PRC  Subsidiaries,  and a  brief  summary  of  each  PRC
Subsidiary's business. PRC's ownership of shares of the capital stock of the


<PAGE>



PRC  Subsidiaries  as  shown  on  Schedule  3.4 is  free of any  lien,  security
interest,  charge,  encumbrance  or  claim  whatsoever.  PRC  does  not have any
Subsidiaries  other than the PRC Subsidiaries.  All of the outstanding shares of
capital stock of each of the PRC  Subsidiaries  have been validly issued and are
fully paid and nonassessable and were issued in conformity with applicable Laws.
Other  than  as set  forth  in  Schedule  3.4,  there  are no  other  issued  or
outstanding  equity  securities of any of the PRC  Subsidiaries and there are no
other  issued  or  outstanding   securities  of  any  of  the  PRC  Subsidiaries
convertible or exercisable at any time into equity  securities of any of the PRC
Subsidiaries.  None of the PRC  Subsidiaries  is  subject to any  commitment  or
obligation  that would require the issuance or sale of additional  shares of its
capital stock at any time under options, subscriptions,  warrants, rights or any
other  obligations.  Except as described  in Schedule  3.4, PRC does not own any
equity securities of any Person that is not a Subsidiary.
     Section 3.5.Execution and Effect of Agreement.  Each of Seller and Seller's
Parent has all necessary  corporate power and authority to execute,  deliver and
perform this  Agreement and any related  agreements to which it is a party.  The
execution  and  delivery  of  this  Agreement  and  the   consummation   of  the
transactions  contemplated  hereby  have been duly  authorized  by the Boards of
Directors of Seller and  Seller's  Parent and by all other  necessary  corporate
action of Seller and Seller's Parent.  This Agreement has been duly executed and
delivered  by Seller and  Seller's  Parent and  constitutes  a legal,  valid and
binding obligation of Seller and Seller's Parent, enforceable against Seller and
Seller's Parent in

<PAGE>



accordance  with  its  terms,  subject  to  applicable  bankruptcy,  insolvency,
reorganization,  moratorium, fraudulent conveyance, and other Laws affecting the
rights of creditors generally.
         Section 3.6. Restrictions. Except as set forth in Schedule 3.6, neither
the  execution  and  delivery  of this  Agreement  nor the  consummation  of the
transactions  contemplated  hereby will (a) violate any of the provisions of the
charter or by-laws of Seller,  Seller's  Parent or any PRC Company,  (b) violate
any Law, (c) result in the imposition of any lien,  security  interest,  charge,
encumbrance  or  claim  whatsoever  against  any  asset or  property  of any PRC
Company,  or (d) conflict with or result in a breach of, or give rise to a right
of termination  of, or accelerate the  performance  required by the terms of any
judgment, court order or consent decree, or any agreement,  indenture,  mortgage
or instrument to which Seller,  Seller's Parent or any PRC Company is a party or
to which it or its  property  is subject,  or  constitute  a default  thereunder
(whether or not any such conflict, breach, right of termination, acceleration or
default will occur only upon lapse of time and/or the  occurrence  of any act or
event or otherwise),  except where such conflict,  breach, right of termination,
acceleration  or default  (i)  arises out of any OCI  Clauses as a result of the
consummation of the transactions contemplated by this Agreement and the business
of the Buyer and its  Affiliates  on the one hand and the PRC  Companies  on the
other hand or (ii)  except  with  respect to clause (a) above,  would not have a
Material Adverse Effect on Seller's Parent and its Subsidiaries taken as a whole
or the PRC Companies taken as a whole, as the case may be.


<PAGE>



         Section 3.7. Consents. Except (a) for filings, consents,  approvals and
authorizations  that the  failure  to obtain or make  would not have a  Material
Adverse  Effect  on the PRC  Companies  taken  as a whole,  (b) as set  forth in
Schedule  3.6 or Schedule 3.7 or referred to in Section 3.6, or (c) for filings,
consents,  waivers,  approvals or  authorizations  pursuant to the H-S-R Act, no
filing, consent, waiver, approval or authorization of any Governmental Entity or
of any  third  party on the part of  Seller,  Seller's  Parent or any of the PRC
Companies is required in  connection  with the execution and delivery by Seller,
Seller's Parent and PRC of this Agreement or any instrument  contemplated hereby
or the consummation of any of the transactions contemplated hereby.
         Section 3.8. Financial Statements.  Except as set forth in the Notes to
the  Financial  Statements,  the  Financial  Statements  have been  prepared  in
conformity  with GAAP  applied  on a  consistent  basis and  present  fairly the
financial  position  of the PRC  Companies  at the dates and for the periods set
forth  therein.  The  Financial  Statements  have  been  certified  by the chief
financial  officer of PRC.  Seller has made  available  to Buyer  copies of each
management  letter or other letter  delivered to Seller,  Seller's Parent or any
PRC Company by such  accountants in connection with the Financial  Statements or
relating to any review by such  accountants of the internal  controls of any PRC
Company  for the  periods  covered  by the  Financial  Statements,  and has made
available for  inspection,  or will make available for inspection  upon request,
all reports and working  papers  produced or  developed  by Ernst & Young LLP or
management in connection with their review of such Financial Statements, as well
as all such reports and working


<PAGE>



papers for prior  periods for which any tax liability of any PRC Company has not
been finally  determined or barred by applicable  statutes of limitation.  Since
January 1, 1992,  there has been no change in any of the significant  accounting
policies,  practices or  procedures of any PRC Company that would be required by
GAAP to be disclosed in the Financial Statements.
         Section  3.9. No  Undisclosed  Liabilities.  Except as (a) set forth or
reserved against in the Financial Statements, (b) set forth in Schedule 3.9, (c)
incurred since  September 30, 1995 in compliance  with Section 5.2 hereof (as if
such Section was in effect since  September 30, 1995), or (d) arising under this
Agreement,  the PRC  Companies do not have as of the date  hereof,  and will not
have as of the Closing Date, any liabilities whatsoever of a type required to be
accrued for in accordance with GAAP.
         Section 3.10.  Litigation.  Except as set forth in Schedule 3.10, there
is no Order or Action pending, or to the knowledge of Seller, Seller's Parent or
any of the PRC Companies threatened,  against Seller,  Seller's Parent or any of
the PRC  Companies  in  respect  of this  Agreement  or any of the  transactions
contemplated   hereby  that  could   reasonably   be  expected  to  prevent  the
consummation of any of the transactions contemplated hereby. Except as set forth
in Schedule 3.10,  there is no Order or Action  pending,  or to the knowledge of
Seller,  Seller's  Parent or any of the PRC  Companies  threatened,  against  or
involving any of the businesses,  properties, rights or assets of any of the PRC
Companies  which (i)  reasonably  could be expected  to have a Material  Adverse
Effect  on the PRC  Companies  taken  as a whole  or (ii) as of the date of this
Agreement, involves a claim or potential claim


<PAGE>



that  reasonably  could  be  expected  to have  aggregate  liability  to the PRC
Companies in excess of  $100,000,  or that enjoins or compels or seeks to enjoin
or to compel any  activity by any PRC  Company.  Except as set forth in Schedule
3.10,  there is no matter as to which any PRC Company has  received  any notice,
claim or assertion,  or, to the knowledge of Seller, Seller's Parent and the PRC
Companies,  which  otherwise  has  been  threatened  against  or  affecting  any
director,  officer,  employee, agent or representative of any PRC Company or any
other  Person,  nor to the  knowledge  of  Seller,  Seller's  Parent and the PRC
Companies is there any reasonable  basis therefor,  in connection with which any
such  Person  has  or may  reasonably  be  expected  to  have  any  right  to be
indemnified  by any PRC Company,  except as could not  reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole.
         Section 3.11. Real and Personal Property.
                  (a)      None of the PRC Companies owns any real property.
Schedule 3.11 sets forth a complete list of all real property  leased by the PRC
Companies as of the date of this Agreement.  All leasehold  properties listed on
Schedule 3.11 are held by PRC  Companies  under valid,  binding and  enforceable
leases.  None of the PRC Companies is in default, or has received written notice
of default, under any lease of real property,  which default reasonably could be
expected  to have a  Material  Adverse  Effect on the PRC  Companies  taken as a
whole.  There is no Action  pending  or, to the  knowledge  of Seller,  Seller's
Parent and the PRC Companies,  threatened  that could  reasonably be expected to
materially interfere with the quiet enjoyment of any of the leasehold properties
listed on Schedule 3.11.


<PAGE>



                  (b)  Except  as could not  reasonably  be  expected  to have a
Material Adverse Effect on the PRC Companies taken as a whole, the PRC Companies
have good and marketable  title to all owned assets and properties used in their
business, including but not limited to all assets that they respectively purport
to own as of September 30, 1995, as reflected in the Financial  Statements.  All
owned assets and property as are material to the business of the PRC  Companies,
including but not limited to all assets that they respectively purport to own as
of September 30, 1995 as reflected in the Financial Statements, are held free of
any liens, security interests, charges, encumbrances or claims, except for liens
for  Taxes  not yet due and  except  for  liens,  security  interests,  charges,
encumbrances  or claims that could not reasonably be expected to have a Material
Adverse  Effect on the PRC  Companies  taken as a whole.  All material  tangible
properties of the PRC Companies  are in a good state of  maintenance  and repair
(except for ordinary wear and tear).
                  (c)      The assets of the PRC Companies are sufficient for
the conduct of their business and operations.
         Section 3.12.  Intellectual  Property.  Schedule 3.12 sets forth, as of
the date of this Agreement, a complete list of all Intellectual Property (except
for brand names, know-how, unregistered copyrights,  unregistered service marks,
unregistered  trademarks,  unregistered  tradenames and trade secrets and except
for licensed Intellectual  Property).  Except as otherwise indicated in Schedule
3.12 and except as could not  reasonably be expected to have a Material  Adverse
Effect  on the PRC  Companies  taken as a whole,  (x) the PRC  Companies  own or
license the Intellectual


<PAGE>



Property free and clear of any royalty,  lien, encumbrance or charge, subject in
the case of  licensed  Intellectual  Property  to the  terms  of the  respective
license  agreements,  and  (y) all  such  Intellectual  Property  is  valid  and
enforceable.  Except  as set  forth in  Schedule  3.12 and  except  as could not
reasonably  be expected to have a Material  Adverse  Effect on the PRC Companies
taken as a whole,  none of the PRC  Companies  has  received any notice or claim
that  any  Intellectual  Property  is  not  valid  or  enforceable,  or  of  any
infringement  upon  or  conflict  with  any  patent,  trademark,  service  mark,
copyright,  trade name,  trade  secret or other  proprietary  right of any third
party by the PRC Companies or of any claim by any third party  alleging any such
infringement  or  conflict.  Except as set forth in Schedule  3.12 and except as
could not  reasonably be expected to have a Material  Adverse  Effect on the PRC
Companies taken as a whole, no PRC Company has any knowledge of any infringement
by any third  party upon any of the  Intellectual  Property  listed in  Schedule
3.12. Except as set forth in Schedule 3.12 and except as could not reasonably be
expected  to have a  Material  Adverse  Effect on the PRC  Companies  taken as a
whole, as of the Closing Date the PRC Companies will not be infringing any third
party's patent, copyright,  trademark, service mark, trade name, know-how, trade
secret or other intellectual property rights.
         Section 3.13. Material  Contracts.  Schedule 3.13 sets forth, as of the
date of this Agreement, a list of or brief description of all Material Contracts
(other than Material  Contracts that the PRC Companies are limited by applicable
Laws or Orders or by contract from  disclosing to Buyer and other than leases of
real property).


<PAGE>



Each contract,  agreement,  commitment or other arrangement (oral or written) to
which any of the PRC  Companies is a party or by which any of the PRC  Companies
is obligated, embodying or evidencing any of the following transactions shall be
deemed to be a  Material  Contract  and is  identified  on  Schedule  3.13:  (a)
guarantees by any of the PRC Companies of any obligations  other than guarantees
of  obligations  of other  PRC  Companies;  (b)  indentures,  notes,  mortgages,
installment  obligations,  capital leases or other  instruments  relating to the
borrowing  of money in excess of $250,000;  (c)  agreements  or  contracts  that
involved the receipt of monies by any of the PRC Companies and  constituted  the
(i) 20 largest  contracts  or  agreements  by revenue of the PRC  Companies as a
whole for the year  ended  December  31,  1994,  and for the nine  months  ended
September  30, 1995,  (ii) 10 largest  contracts or agreements by revenue of the
Information  Technologies Group of the PRC Companies for the year ended December
31, 1994,  and for the nine months ended  September  30, 1995,  (iii) 10 largest
contracts or agreements by revenue of the  Information  Systems Group of the PRC
Companies  for the year ended  December 31, 1994,  and for the nine months ended
September  30, 1995,  (iv) 10 largest  contracts or agreements by revenue of the
Systems  Integration  Group of the PRC Companies for the year ended December 31,
1994,  and for the nine  months  ended  September  30,  1995 and (v) 10  largest
contracts or agreements by revenue of the Applied  Engineering  Group of the PRC
Companies  for the year ending  December  31, 1994 and for the nine months ended
September 30, 1995; (d) contracts or agreements  (including  subcontracts)  that
involved the payment of at least $250,000 by any of the PRC Companies during the
nine months ended


<PAGE>



September  30, 1995;  (e) contracts or agreements  limiting or  restricting  the
ability of any PRC Company to compete or  otherwise  to conduct any  business in
any manner or place other than those  relating to OCI Clauses and  provisions of
teaming and other similar agreements relating to the pursuit or performance of a
contract;  (f)  grants of power of  attorney,  agency or  similar  authority  to
another Person (other than to a PRC Company or any director, officer or employee
of a PRC  Company);  (g)  contracts  or  agreements  containing a right of first
refusal;  (h) any  contract  or  agreement  to which any  Affiliate,  officer or
director of Seller,  Seller's  Parent,  or any PRC Company is party  (other than
those  constituting an Employee  Benefit Plan or Benefit  Arrangement);  (i) any
sales,  marketing or  international  consulting or similar contract or agreement
and any lobbying agreement; (j) any material distributor or sales representative
contract or agreement (other than those where the PRC Company is the distributor
or sales  representative);  and (k) any  contract or  agreement  not made in the
ordinary  course of business  that was entered  into by a PRC Company in 1995 or
that  involves an executory  obligation on the part of a PRC Company on the date
of this  Agreement or  hereafter.  Except as set forth on Schedule  3.13, to the
knowledge  of Seller,  Seller's  Parent  and the PRC  Companies,  each  Material
Contract is valid and  subsisting,  and none of the PRC  Companies is in default
under any Material  Contract,  has waived any material rights under any Material
Contract  (other than  releases  executed in the ordinary  course of business in
connection  with closing  contracts  or task orders) or has  knowledge or notice
that any party with whom it has a Material  Contract is in default in a material
respect under the Material


<PAGE>



Contract. Unless otherwise so noted on Schedule 3.13, each Material Contract was
entered  into in the ordinary  course of  business.  True copies of the Material
Contracts,  including all  amendments  and  supplements,  have been delivered or
otherwise will be made available to Buyer.
         Section 3.14. Employee Benefit Matters.
                  (a)      Schedule 3.14 sets forth, as of the date of this
Agreement, a list of all Employee Benefit Plans, all Multiemployer Plans and all
collective bargaining agreements of the PRC Companies,  and all material Benefit
Arrangements. Except as set forth in Schedule 3.14, with respect to each of such
Employee Benefit Plans,  Multiemployer Plans,  collective  bargaining agreements
and Benefit  Arrangements,  Seller has delivered or made available to Buyer,  as
applicable,  copies  of (i) the  text  of the  formal  plan  document  or  other
agreements,  written  policies or  guidelines  actually  maintained  by Seller's
Parent,  Seller,  PRC or any of their  Affiliates  evidencing  the terms of such
Employee Benefit Plans and Benefit  Arrangements,  including  amendments and, if
applicable,  the  summary  plan  description,  (ii) in the case of a  collective
bargaining agreement, the text of the collective bargaining agreement,  (iii) in
the case of a Pension Plan that is intended to qualify  under Section 401 of the
Code, the most recent IRS  determination  letter  relating to the Pension Plan's
qualification   under   Section  401  of  the  Code  and  the  related   trust's
qualification  under  Section  501 of  the  Code,  (iv)  the  trust  agreements,
insurance  contracts or other  documents  that  constitute  all or a part of the
funding  vehicle,  and (v) the most  recent  annual  reports  (IRS Form  5500s),
including the schedules thereto.


<PAGE>



                  (b) Except as set forth in Schedule 3.14, all Employee Benefit
Plans  comply  in all  material  respects  with  ERISA,  the Code and any  other
applicable  Law,  each  Benefit  Arrangement  has been  maintained  in  material
compliance  with its terms and all  applicable  Laws, and the PRC Companies have
performed in all material respects their obligations under each Employee Benefit
Plan and Benefit Arrangement.
                  (c) Except as set forth in Schedule 3.14, there are no Actions
or Orders  pending,  or to the  knowledge  of  Seller,  Seller's  Parent or PRC,
threatened,  including  proceedings before the IRS, the DOL or the PBGC, against
any Employee Benefit Plan, Benefit Arrangement or any administrator or fiduciary
thereof,  and, to the best  knowledge  of Seller and Seller's  Parent,  no facts
exist which could give rise to any such  Actions or Orders,  other than  benefit
claims arising in the normal course of operation of such Employee  Benefit Plans
or Benefit Arrangements.
                  (d) Except as set forth in Schedule  3.14,  no PRC Company has
any current or projected liability for any unfunded  post-retirement  medical or
life  insurance  benefits  in  connection  with any  Employee  of any of the PRC
Companies.
                  (e)  Except as set  forth in  Schedule  3.14,  none of the PRC
Companies  and,  to the  knowledge  of  Seller,  Seller's  Parent  and  the  PRC
Companies,   no  other  Person  has  engaged  in  any   non-exempt   "Prohibited
Transaction,"  as defined in Section  406 of ERISA or Section  4975 of the Code,
with respect to any Employee Benefit Plan.
                  (f)      Except as set forth in Schedule 3.14, none of the
PRC Companies has incurred an outstanding "Accumulated Funding


<PAGE>



Deficiency,"  as  defined in  Section  302(a) of ERISA or Section  412(a) of the
Code, with respect to any Pension Plan, nor is any Pension Plan subject to Title
IV of ERISA.
                  (g)  Except as set  forth in  Schedule  3.14,  none of the PRC
Companies nor their ERISA  Affiliates  has incurred a  "withdrawal"  or "partial
withdrawal,"   as  defined  in  Section  4203  and  4205  of  ERISA,   from  any
Multiemployer  Plan,  which  has  resulted  in  an  unpaid  liability  or  could
reasonably be expected to result in a liability of any of the PRC Companies.
         Section 3.15. Guarantees by Others. Schedule 3.15 sets forth a complete
list of all Guarantees of Seller's Parent (or any of its Affiliates  (other than
a PRC Company))  for the benefit of Persons  doing  business with any of the PRC
Companies.
         Section 3.16. Tax Matters.
                  (a) Each of the affiliated  groups (as that term is defined in
Section  1504(a) of the Code) of  corporations  of which the PRC Companies  were
members prior to and subsequent to April 28, 1989 (the "Affiliated Groups"), has
filed consolidated federal Income Tax Returns and state Income Tax Returns filed
on a consolidated or combined basis (the "Consolidated Returns") for all taxable
years (other than years  beginning on or after January 1, 1995) during which the
PRC Companies were members of the Affiliated  Groups. The Affiliated Groups have
paid or  adequately  provided for (or will  adequately  provide for) all federal
Income  Taxes,  state  Income  Taxes  with  respect  to Tax  Returns  filed on a
consolidated  or  combined  basis,  additions  to tax,  penalties  and  interest
(collectively,  the "Consolidated Taxes") applicable to the Affiliated Groups or
to any members thereof, and the affiliated


<PAGE>



group of  corporations  of which the PRC Companies are members as of the date of
this Agreement has adequately  provided (or will adequately provide for) for all
Consolidated  Taxes that  would be due if the  current  tax period  ended at the
close of business on the Closing Date. Other than the PRC Companies'  membership
in the  Affiliated  Groups,  the PRC  Companies  have  not been  members  of any
affiliated group for any period not barred by the statute of limitations.
                  (b)  Except as set  forth in  Schedule  3.16,  each of the PRC
Companies has filed all federal,  state, local and other Tax Returns (other than
Consolidated  Returns)  (the  "Individual  Returns")  required to be filed by it
under applicable Laws,  including estimated tax returns and reports, and each of
the PRC Companies has paid all required  federal,  state and local income (other
than  Consolidated  Taxes) and other taxes,  additions to taxes,  penalties  and
interest (the  "Individual  Taxes") due and payable on or before the date hereof
(and will duly and timely pay all such  amounts  required to be paid  between he
date  hereof  and the  Closing  Date),  except  where  such  failure to file the
Individual Returns or pay the Individual taxes would not have a Material Adverse
Effect on the PRC  Companies  taken as a whole.  Each of the PRC  Companies  has
paid,  withheld or adequately  provided for (or will adequately provide for) any
and all  Individual  Taxes in respect  of the  conduct  of its  business  or the
ownership of its property and in respect of any transaction for which such taxes
are due or would be due if the current tax period ended at the close of business
on the Closing Date.


<PAGE>



                  (c) The federal Income Tax Returns of Seller,  Seller's Parent
and the PRC  Companies  have been audited by the IRS (or the time for the IRS to
make an  assessment  for  additional  federal  Income Taxes has expired) for the
taxable years ended on or before September 30, 1990, but no taxable years ending
thereafter. Except as set forth in Schedule 3.16, all deficiencies asserted as a
result of such  examinations  have been paid or finally settled and no issue has
been raised by the IRS on audit or otherwise that, by application of the same or
similar principles,  might result in a proposed deficiency  affecting any of the
PRC Companies for any other period not so examined.
                  (d) Except as set forth in Schedule 3.16, no material proposed
Taxes,  addition to tax,  interest,  or penalties have been asserted against the
Affiliated  Groups or any member of the Affiliated  Groups  including any of the
PRC Companies, except those that have been paid in full and those that would not
have a Material Adverse Effect on the PRC Companies taken as a whole.  Except as
set forth in Schedule 3.16, there are no material agreements,  waivers, or other
arrangements  providing for  extensions of time in respect of the  assessment or
collection  of any  material  unpaid Tax  against the  Affiliated  Groups or any
member of the Affiliated Groups affecting any of the PRC Companies, except those
that would not have a Material  Adverse  Effect on the PRC Companies  taken as a
whole.
                  (e) No election or consent  under  Section  341(f) of the Code
has been made or shall be made on or prior to the  Closing  Date by or on behalf
of any of the PRC Companies. None of the PRC Companies has made any payments, is
obligated to make any payments,


<PAGE>



or is a party to any agreement that under certain  circumstances  could obligate
it to make any payments  that will not be  deductible  under Section 280G of the
Code.  None of the PRC Companies has been a United States real property  holding
corporation  within  the  meaning of Section  897(c)(2)  of the Code  during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Each of the
PRC  Companies  has  disclosed on its federal  Income Tax Returns all  positions
taken  therein that could give rise to a substantial  understatement  of federal
Income Tax within the meaning of Section  6662 of the Code.  Except as set forth
on Schedule 3.16,  none of the PRC Companies is a party to any Tax allocation or
sharing agreement.  None of the PRC Companies has any liability for the Taxes of
any Person (other than any of the PRC Companies or the Affiliated  Groups) under
Treas. Reg.  ss.1.1502-6 (or any similar  provision of state,  local, or foreign
Law), as a transferee or successor, by contract, or otherwise.
         Section 3.17. Environmental Matters.
                  (a)      Except as set forth in Schedule 3.17 and except as
would not have a Material  Adverse Effect on the PRC Companies taken as a whole,
each of the PRC Companies is in  compliance  with all  applicable  environmental
Laws.  Except as set forth in Schedule 3.17, the PRC Companies have obtained all
permits,  licenses and other  authorizations  that are required under applicable
Laws relating to the protection of the environment,  except where the failure to
obtain such permits,  licenses and other  authorizations could not reasonably be
expected  to have a  Material  Adverse  Effect on the PRC  Companies  taken as a
whole. Except as set forth in Schedule 3.17, the PRC Companies are in compliance


<PAGE>



with the terms  and  conditions  under  which the  permits,  licenses  and other
authorizations  referenced  in the  preceding  sentence  were issued or granted,
except where the failure to be in compliance could not reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole.
                  (b) Except as set forth on  Schedule  3.17 and except as would
not have a Material  Adverse Effect on the PRC Companies  taken as a whole,  (i)
none of the PRC Companies has generated,  used,  transported,  treated,  stored,
released or disposed of, or has  suffered or permitted  anyone else to generate,
use, transport,  treat, store,  release or dispose of any Hazardous Substance in
violation  of  any  Laws;  (ii)  there  has  not  been  any   generation,   use,
transportation,  treatment,  storage,  release  or  disposal  of  any  Hazardous
Substance in  connection  with the conduct of the business of any PRC Company or
in  connection  with  the  conduct  of the  business  of any PRC  Company  or in
connection with the use of any current or former property or facility of any PRC
Company,  which has  created  or might  reasonably  be  expected  to create  any
condition or liability under any Laws or which would require  investigation  by,
reporting to or notification of any  Governmental  Entity;  (iii) no asbestos or
polychlorinated biphenyl or underground storage tank is or has been contained in
or located at any facility of any PRC Company;  and (iv) any Hazardous Substance
handled or dealt with in any way in  connection  with the  businesses of the PRC
Companies,  whether before or during Seller's ownership thereof, has been and is
being handled or dealt with in all respects in compliance with applicable Laws.


<PAGE>



         Section 3.18. Insurance. The PRC Companies are, and at all times during
the past five years have been, insured with reputable insurers against all risks
normally  insured against by companies in similar lines of business of a similar
size, except for professional  liability  insurance.  Schedule 3.18 sets forth a
list  of the  material  insurance  coverage  in  effect  as of the  date of this
Agreement. None of the insurance carriers listed on Schedule 3.18 are related to
or affiliated  with Seller,  Seller's  Parent or the PRC  Companies  (other than
Shenandoah  Insurance,  Inc.). None of the PRC Companies is in default under any
of its insurance  policies.  None of Seller,  Seller's Parent or any PRC Company
has received notice or other  indication from any insurer or agent of any intent
to  cancel  or  not  so  renew  any  of  such  insurance  policies,  except  for
cancellations  deemed to occur as a result of the  Closing  of the  transactions
contemplated by this Agreement.  Each of the PRC Companies has complied with and
implemented  all  outstanding (i)  requirements  of and  recommendations  of any
insurance  company  that has  issued a policy  to it and (ii)  requirements  and
recommendations  of the Board of Fire  Underwriters or any other body exercising
similar functions or any Governmental  Entity with respect to any such insurance
policy.
         Section 3.19.  Banks.  Schedule 3.19 sets forth, as of the date of this
Agreement,  the names and locations of all banks,  trust companies,  savings and
loan  associations  and other financial  institutions at which the PRC Companies
maintain  safe  deposit  boxes or accounts  of any nature,  and the names of all
Persons  authorized to draw thereon,  make withdrawals  therefrom or have access
thereto.


<PAGE>



         Section 3.20. Extraordinary  Transactions and Material Adverse Effects.
Except as set forth in Schedule 3.20,  since September 30, 1995, (x) none of the
PRC  Companies  has taken any action  which would have  required  the consent of
Buyer under  Section 5.2 had such  Section been in effect  since  September  30,
1995, (y) whether or not in the ordinary course of business, there has not been,
occurred  or arisen any change in or event  affecting  any of the PRC  Companies
that has had or could  reasonably be expected to have a Material  Adverse Effect
on the PRC  Companies  taken as a whole,  and (z) none of the PRC  Companies has
made any management decisions involving any material change in its policies with
regard to the  provision  of  services,  sales,  purchasing  or other  business,
financial,  accounting  (including  reserves and amounts thereof,  but excluding
those required by GAAP) or Tax policies or practices.
         Section 3.21. Licenses;  Permits. Except as set forth in Schedule 3.21,
the PRC Companies have all licenses and permits (except as may be required under
federal or state Tax Laws) of all Governmental Entities necessary to the conduct
of the  business  of the PRC  Companies  on the date  hereof,  except  where the
failure to obtain such licenses or permits  could not  reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole.  Except as
set forth in Schedule  3.21, all such licenses and permits are valid and in full
force and  effect  and will  remain  so upon  consummation  of the  transactions
contemplated by this Agreement. To the best knowledge of Seller, Seller's Parent
and the PRC Companies, no suspension, cancellation or termination of any of such
licenses or permits is threatened or imminent that


<PAGE>



could  reasonably  be  expected  to have a  Material  Adverse  Effect on the PRC
Companies taken as a whole.
         Section 3.22. Brokerage Fees. No broker, finder or investment banker is
entitled to any  brokerage,  finder's or other fee or  commission  in connection
with this  Agreement  or the  transactions  contemplated  hereby  based upon any
agreements,  written or oral, made by or on behalf of Seller or Seller's Parent,
or by or on behalf of any  director,  officer,  employee,  agent or Affiliate of
Seller or Seller's Parent.
         Section 3.23. Government Contracts.
                  (a)      During the past five (5) years no payment has been
made by PRC or by any Person  authorized to act on its behalf,  to any Person in
connection with any Government Contracts, in violation of applicable procurement
Laws or in  violation  of (or  requiring  disclosure  pursuant  to) the  Foreign
Corrupt Practices Act or other Laws.
                  (b)  Except  as  set  forth  in  Schedule  3.23,   PRC's  cost
accounting and procurement  systems with respect to Government  Contracts are in
compliance in all material respects with all applicable Laws.
                  (c) Except as set forth on  Schedule  3.23 and except as would
not have a Material  Adverse Effect on the PRC Companies taken as a whole,  with
respect to each and every  Government  Contract or Bid  (including any exception
taken therein), of the PRC Companies: (i) the PRC Companies have complied in all
respects  with all terms and  conditions  of each  Government  Contract and Bid,
including all clauses,  provisions and requirements  incorporated  expressly, by
reference or by operation of Law therein; (ii) the PRC Companies


<PAGE>



have complied in all respects with all  requirements  of all  applicable  Law or
agreements  pertaining to each Government  Contract or Bid; (iii) all statements
representations  and certifications  executed,  acknowledged or set forth in, or
pertaining to each  Government  Contract or Bid were,  when given,  complete and
correct in all respects as of their  effective  date, and the PRC Companies have
complied  in  all  respects  with  all  such  statements,   representations  and
certifications;  (iv)  neither  the U.S.  Government  nor any prime  contractor,
subcontractor  or other Person has notified the PRC Companies,  either orally or
in writing, that the PRC Companies have breached or violated any applicable Law,
certification,  representation  or  requirement  pertaining  to  any  Government
Contract or Bid; (v) no termination  for  convenience,  termination for default,
cure  notice or show  cause  notice is  currently  in effect  pertaining  to any
Government Contract;  (vi) no Governmental Entity has provided the PRC Companies
with written notice of any cost incurred by the PRC Companies pertaining to such
Government  Contract which has been questioned,  challenged or disallowed or has
been the  subject  of any  investigation;  and  (vii)  no  money  due to the PRC
Companies  under any Government  Contract has been (or has been attempted to be)
withheld or set off, except for amounts withheld under contracts in the ordinary
course of business.
                  (d)  Except as set forth in  Schedule  3.23,  neither  the PRC
Companies nor, to the best knowledge of Seller and Seller's Parent, any of their
directors, officers, employees, consultants or agents engaged in the business of
the  PRC  Companies  is  (or  during  the  last  three  years  has  been)  under
administrative, civil or


<PAGE>



criminal  investigation,   indictment  or  information  or  equivalent  official
governmental charge or allegation by any Governmental Entity with respect to any
alleged irregularity,  misstatement or omission or other matter arising under or
relating to any Government Contract.  Except as previously disclosed to Buyer in
a writing by the PRC Companies specifically referencing this Section, (i) during
the last two years,  the PRC  Companies  have not  conducted  or  initiated  any
internal  investigation or made a voluntary  disclosure to the U.S.  Government,
with respect to any alleged irregularity, misstatement, omission or other matter
arising  under or relating to any  Government  Contract or Bid (other than those
relating  to  employment  and  other  similar  Laws),   and  (ii)  there  is  no
irregularity, misstatement or omission or other matter arising under or relating
to any Government  Contract or Bid that has led or could  reasonably be expected
to lead, either before or after the Closing Date, to any of the consequences set
forth in clause (i) of this sentence or the  immediately  preceding  sentence or
any other damage,  penalty,  assessment recoupment of payment or disallowance of
cost that would have a Material  Adverse Effect on the PRC Companies  taken as a
whole.
                  (e) Except as set forth on  Schedule  3.23 and except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole,  there
exist (i) no  outstanding  claims,  requests for  equitable  adjustment or other
contractual  action for relief  against  the PRC  Companies,  either by the U.S.
Government or by any prime  contractor,  subcontractor,  vendor or other Person,
arising under or relating to any Government Contract or Bid and (ii) no disputes
between the PRC Companies and the U.S. Government under the


<PAGE>



Contract  Disputes Act or any other  federal  statute or between any PRC Company
and any prime contractor, subcontractor, vendor or other Person arising under or
relating to any Government  Contract or Bid. To the best knowledge of Seller and
Seller's  Parent,  except as set forth in Schedule  3.23 and except as would not
have a Material  Adverse  Effect on the PRC Companies  taken as a whole,  no PRC
Company has any  interest in any pending or  potential  claim under the Contract
Disputes Act against the U.S. Government or any prime contractor,  subcontractor
or vendor arising under or relating to any Government Contract or Bid.
                  (f) Except as set forth on Schedule  3.23, no PRC Company nor,
to the best  knowledge of Seller and Seller's  Parent,  any of their  directors,
officers,  employees,  consultants  or agents is (or during the last three years
has been) suspended or debarred from doing business with any Governmental Entity
or is (or during such period was) the subject of a finding of  nonresponsibility
or ineligibility for contracting with any Governmental Entity.
                  (g) The Government Contracts that contain OCI Clauses or other
similar  provisions  that  might  restrict  or  preclude  Buyer  or  any  of its
Affiliates  from supplying  products or services to any  Governmental  Entity or
supplier thereto are set forth on Schedule 3.23.
         Section 3.24.  Certain Labor  Matters.  Except as set forth on Schedule
3.24,  there is no organized  labor strike,  dispute,  slowdown or stoppage,  or
collective  bargaining  or unfair labor  practice  claim  pending or to the best
knowledge of Seller,  Seller's Parent and the PRC Companies,  threatened against
or affecting any PRC Company.


<PAGE>



         Section  3.25.  Minute  Books.  The minute  books of the PRC  Companies
accurately  reflect all actions and proceedings  taken to date by the respective
shareholders, boards of directors and committees of the PRC Companies. The stock
record books of the PRC Companies  reflect  accurately all transactions in their
respective capital stock of all classes.
         Section 3.26. Compliance with Law. Except as disclosed in the Schedules
to this Agreement and except as would not have a Material  Adverse  Effect,  the
PRC Companies  have conducted  their  respective  businesses in accordance  with
applicable Laws in all respects, the forms,  procedures and practices of the PRC
Companies are in compliance with  applicable  Laws in all respects,  and the use
and  operation  of the  assets  of the  PRC  Companies  are in  compliance  with
applicable Laws in all respects.
         Section 3.27. Certain  Interests.  Except as set forth on Schedule 3.14
or 3.27 or  disclosed  in the  Financial  Statements,  no  Affiliate  of Seller,
Seller's Parent or any PRC Company,  nor any officer or director of any thereof,
has any  material  interest in any  property  used in or  pertaining  to the PRC
Companies; no such Person is indebted or otherwise obligated to any PRC Company;
and no PRC Company is indebted or otherwise obligated to any such Person, except
for amounts due under normal arrangements  applicable to all employees generally
as to salary or  reimbursement  of  ordinary  business  expenses  not unusual in
amount or  significance.  Except as set forth on Schedule 3.27, the consummation
of the  transactions  contemplated  by this Agreement will not (either alone, or
upon the  occurrence  of any act or event,  or with the lapse of time,  or both)
result in any benefit or payment (severance or


<PAGE>



other)  arising or becoming due from any PRC Company or the  successor or assign
of any thereof to any Person.
         Section  3.28.  Intercompany  Transactions.  Except  as  set  forth  on
Schedule 3.28 or disclosed in the Financial  Statements,  (x) no PRC Company has
engaged in any transaction  with Seller or Seller's  Parent,  (y) no PRC Company
has any  liabilities or obligations to Seller or Seller's Parent and (z) neither
Seller or Seller's Parent has any obligations to any PRC Company.  Except as set
forth on Schedule 3.27 or as otherwise expressly provided for in this Agreement,
the  consummation  of the  transactions  contemplated by this Agreement will not
(either alone,  or upon the occurrence of any act or event, or with the lapse of
time,  or both)  result in any  payment  arising  or  becoming  due from any PRC
Company or the successor or assign of any thereof to Seller or Seller's Parent.
         Section 3.29. Accuracy of Information. None of the information supplied
or to be supplied by or on behalf of Seller,  Seller's Parent or any PRC Company
to any  Person for  inclusion  in any  document  or  application  filed with any
Governmental   Entity  having  jurisdiction  over  or  in  connection  with  the
transactions  contemplated  by this Agreement did contain,  or at the respective
times such information is or was delivered, will contain any untrue statement of
a material  fact, or omitted or will 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 were made,  not  misleading.  As of the
Closing Date,  Seller shall have  notified  Buyer of any such  information  that
shall have become  untrue or misleading  in any material  respect  subsequent to
delivery, and shall have notified Buyer in writing of the reason


<PAGE>



for such change. All documents required to be filed by Seller,  Seller's Parent,
or any PRC  Company  with  any  Governmental  Entity  in  connection  with  this
Agreement or the transactions  contemplated by this Agreement will comply in all
material respects with the provisions of applicable Law.
         Section 3.30.              Inventories; Receivables; Loss Contracts.
                  (a)      Except as set forth or reserved against in the
Financial  Statements,  all  inventories  of  the  PRC  Companies  are  of  good
merchantable  quality and salable or currently  usable in the ordinary course of
business.
                  (b) All  receivables of the PRC Companies arose from bona fide
transactions in the normal and ordinary course of business  consistent with past
practice  and,  except  as set  forth  or  reserved  against  in  the  Financial
Statements,  are the  valid  and  legally  binding  obligations  of the  Persons
obligated to pay such accounts receivable.
                  (c)  Except as set forth on  Schedule  3.30 or as set forth or
reserved  against in the  Financial  Statements,  no  Contract  Loss exists with
respect to any Government  Contracts or other contracts to which any PRC Company
is a party or with respect to any Bids. Those Government Contracts, contracts or
Bids  for  which  a  Contract  Loss  is  not  deemed  to  exist  because,  after
consideration of existing reserves, the sales price therefor is equal to or less
than  $100,000  less than the sum of the cost  incurred to date and the expected
cost to complete,  with all costs  determined in accordance with GAAP on a basis
consistent  with prior  periods,  could not,  in the  aggregate,  reasonably  be
expected  to have a  Material  Adverse  Effect on the PRC  Companies  taken as a
whole.


<PAGE>



         Section  3.31.  Bids.  Except as  disclosed  in Schedule  3.31,  no PRC
Company has  submitted  any Bid  relating  to its  business  which is  currently
outstanding  and which,  if accepted or awarded,  would  result in a  Government
Contract where the volume of purchases of materials,  supplies, goods, services,
equipment or other assets from such PRC Company in connection  with its business
under any such resulting  Government  Contract  could be reasonably  expected to
exceed  $2,000,000.  Schedule 3.31 identifies each such Bid. All cost or pricing
data  submitted or certified in connection  with Bids are current,  accurate and
complete in accordance with the Truth in Negotiations  Act, as amended,  and the
rules and regulations thereunder.
         Section 3.32. Customer-Furnished Property or Equipment. Except as would
not have a Material  Adverse Effect on the PRC Companies  taken as a whole,  all
personal property,  equipment and fixtures loaned, bailed or otherwise furnished
to a PRC Company by or on behalf of the U.S. Government that are or should be in
the possession of a PRC Company ("Customer-Furnished Items") are in a good state
of  maintenance  and repair  (except  for  ordinary  wear and  tear),  have been
regularly  and  appropriately  maintained  and repaired in  accordance  with all
contractual,  legal and regulatory requirements and, unless returned to the U.S.
Government,  shall be in the  possession  of a PRC Company on the Closing  Date.
Except as would not have a Material Adverse Effect on the PRC Companies taken as
a  whole,  each  PRC  Company  has  complied  in all  respects  with  all of its
obligations  relating  to the  Customer-Furnished  Items,  and upon  the  return
thereof to the U.S.  Government  in the  condition  thereof on the date  hereof,
would have no liability to the U.S.


<PAGE>



Government  with respect  thereto.  Except as would not have a Material  Adverse
Effect on the PRC Companies  taken as a whole,  Buyer will incur no liability to
the U.S.  Government as a result of any PRC  Company's  failure to keep records,
maintain or possess  property  furnished to a PRC Company by or on behalf of the
U.S. Government.
     Section 3.33. Product Warranty;  Product Liability.  Except as set forth on
Schedule  3.33 or provided for in the Financial  Statements,  no PRC Company has
committed any act, and there has been no omission by any PRC Company,  which may
reasonably be expected to result in, and there has been no  occurrence  relating
to any product or service of any PRC Company which may reasonably be expected to
result in product liability or liability for breach of warranty (whether covered
by insurance  or not) on the part of any PRC  Company,  with respect to products
designed, manufactured,  assembled, repaired, maintained, delivered or installed
or services  rendered  prior to or on the Closing  Date,  except where such act,
omission  or  occurrence  would not have a  Material  Adverse  Effect on the PRC
Companies taken as a whole.
         Section 3.34. Backlog.  PRC has provided to Buyer a copy of its written
policies and procedures concerning backlog. Schedule 3.34 sets forth the backlog
of the PRC Companies as of September  30, 1995,  together with the dollar amount
of the  backlog  that is  characterized  as "funded"  in  accordance  with PRC's
policies and procedures.
     Section  3.35.  Clearances.  Each PRC Company and each  officer,  director,
employee,  consultant  or agent  (to the  extent  such  agent or  consultant  is
material to the performance by a PRC Company of


<PAGE>



any contract) has all facility clearances or personnel  clearances,  as the case
may be, that, if transferred to Buyer,  are sufficient to allow Buyer to conduct
each PRC  Company's  business as now  conducted by such PRC  Company.  Except as
disclosed  in  Schedule  3.35,  Seller  has  no  knowledge  of any  proposed  or
threatened  termination of any material personnel or facility security clearance
relating to the  business of any PRC Company  (whether or not such  clearance is
collateral or special access).
         Section 3.36. Government Contracting Audits. Schedule 3.36 sets forth a
list and  description  of each open  audit or  investigation  report,  or in the
absence  thereof,  a  draft  thereof,   received  by  any  PRC  Company  by  any
Governmental  Entity (other than routine  audits by resident  auditors,  none of
which is  material  to the  business  or  prospects  of the  business of the PRC
Companies),  which pertains to any Government Contract and which has resulted in
an  allegation  or a notice of violation  of any  applicable  Law or  Government
Contract or of any violation of or deficiency in company  policies or procedures
by any PRC Company, and which has not been closed or otherwise resolved.
         Section 3.37.  Government  Contracting  Audits  Settlement  Agreements.
Schedule 3.37 sets forth a list and  description  of each  settlement  agreement
between any PRC Company and the U.S. Government which will have a binding effect
on any PRC Company after the Closing  Date,  and under which any PRC Company has
material unperformed obligations.


<PAGE>



                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF BUYER
         Buyer  represents  and  warrants  to and for the  benefit of Seller and
Seller's Parent as follows:
     Section  4.1.Organization  and Good Standing.  Buyer is a corporation  duly
organized,  validly existing and in good standing under the Laws of its state of
incorporation,  and has  full  corporate  power  and  authority  to carry on its
businesses  as it is now  being  conducted.  Buyer  is  qualified  as a  foreign
corporation and is in good standing under the laws of each jurisdiction in which
the conduct of its business or the  ownership of its  properties  requires  such
qualification,  except  where the  failure to be so  qualified  would not have a
Material Adverse Effect on Buyer and its Subsidiaries taken as a whole.
         Section  4.2.  Investment  Representation.  Buyer is aware that the PRC
Shares  are not  registered  under the  Securities  Act.  Buyer  possesses  such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its investments hereunder. Buyer is acquiring
the PRC shares for its own account,  for investment purposes only and not with a
view to the distribution  thereof.  Buyer agrees that the PRC Shares will not be
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed
of without  registration  under the Securities  Act,  except pursuant to a valid
exemption from registration under the Securities Act.
     Section 4.3.  Execution  and Effect of  Agreement.  Buyer has the corporate
power and authority to enter into this Agreement, and the execution and delivery
of this Agreement and the consummation


<PAGE>



of the  transactions  and  contemplated  hereby have been duly authorized by all
necessary  corporate action of Buyer and constitutes a legal,  valid and binding
obligation of Buyer,  enforceable  against  Buyer in accordance  with its terms,
subject  to  applicable  bankruptcy,  insolvency,  reorganization,   moratorium,
fraudulent  conveyance,  and  other  Laws  affecting  the  rights  of  creditors
generally.
         Section 4.4. Restrictions. Except as set forth in Schedule 4.4, neither
the  execution  and  delivery  of this  Agreement  nor the  consummation  of the
transactions  contemplated  hereby will (a) violate any of the provisions of the
charter or by-laws of Buyer,  or (b)  conflict  with or result in a beach of, or
give rise to a right of termination of, or accelerate the  performance  required
by the terms of any judgment,  court order or consent decree,  or any agreement,
indenture,  mortgage or  instrument  to which Buyer is a party or to which it or
its property is subject, or constitute a default  thereunder,  except where such
conflict,  breach,  right of  termination  or default  would not have a Material
Adverse Effect on Buyer.
         Section 4.5. Consents.  Except (a) for filing, consents,  approvals and
authorizations  the failure to obtain or make would not have a Material  Adverse
Effect  on Buyer  and its  Subsidiaries  taken as a whole,  (b) as set  forth in
Schedule  4.4 or Schedule  4.5,  and (c) for filings,  consents,  approvals  and
authorizations  pursuant  to the H-S-R Act,  no  filing,  consent,  approval  or
authorization  of any  Governmental  Entity or of any third party on the part of
Buyer is required in connection with the execution and


<PAGE>



delivery  of  this  Agreement  or  any  instrument  contemplated  hereby  or the
consummation of any of the transactions contemplated hereby.
         Section 4.6. Litigation.  Except as set forth in Schedule 4.6, there is
no  action  at  law  or in  equity,  arbitration  proceeding  or a  governmental
investigation pending, or to the knowledge of Buyer threatened, against Buyer in
respect of this Agreement or any of the  Transactions  contemplated  hereby that
would prevent the consummation of any of the transactions contemplated hereby.
     Section 4.7. Financing.  Buyer has available to it sufficient  financing to
enable it to consummate the transaction contemplated by this Agreement.
         Section 4.8. Brokerage Fees. No broker,  finder or investment banker is
entitled to any  brokerage,  finder's or other fee or  commission  in connection
with this  Agreement  or the  transactions  contemplated  hereby  based upon any
agreements, written or oral, made by or on behalf of Buyer or by or on behalf of
any director, officer, employee, agent or Affiliate of Buyer.
                                    ARTICLE V
             COVENANTS AND AGREEMENTS OF SELLER AND SELLER'S PARENT
         Seller and Seller's Parent jointly and severally covenant and agree for
the benefit of Buyer as follows:
         Section 5.1. Access to Information.  Except as prohibited or limited by
Law,  Seller and Seller's  Parent shall cause the PRC Companies,  from and after
the date of this  Agreement  and until the Closing  Date,  to give Buyer and its
employees, counsel and advisors, full and complete access upon reasonable notice
during normal business hours, to all properties, agreements, books,


<PAGE>



records and all other information  (including any routinely prepared reports and
financial  information)  with  respect to the  business of the PRC  Companies as
Buyer may from time to time request,  and to make copies of such books,  records
and other documents and to discuss their  respective  businesses with such other
Persons  as  Buyer  considers  necessary  or  appropriate  for the  purposes  of
familiarizing  itself with the  business  of the PRC  Companies,  obtaining  any
necessary  approvals  of or permits for the  transactions  contemplated  by this
Agreement and conducting an evaluation of the  organization  and business of the
PRC Companies.
     Section 5.2. Conduct and Preservation of Business Prior to Closing.
                  (a)  Except as  contemplated  by this  Agreement,  Seller  and
Seller's Parent shall use their best efforts to preserve the business of each of
the PRC  Companies  and to preserve the  goodwill of  customers,  suppliers  and
others having  business  relations with the PRC  Companies.  Seller will consult
with Buyer concerning, and Seller will cooperate to keep available to Buyer, the
services of the officers and employees of the PRC Companies  that Buyer may wish
to have the PRC Companies  retain.  Nothing in this Section shall obligate Buyer
or the PRC  Companies  after the  Closing to retain or offer  employment  to any
officer or employee of the PRC Companies.
                  (b) Seller agrees that the business of the PRC Companies  will
be conducted in the ordinary course and, except as required by this Agreement or
pursuant  to  the  written   consent  of  Buyer  (which  consent  shall  not  be
unreasonably withheld), the PRC Companies shall not:


<PAGE>



                           (i)  amend their charters or by-laws (or other
similar organizational document);
                           (ii)  except (x) as required by applicable Laws or
existing collective bargaining agreements, Employee Benefit Plans, Multiemployer
Plans or Benefit  Arrangements or (y) as otherwise required by this Agreement or
the Schedules hereto, enter into or amend any collective  bargaining  agreement,
Employee Benefit Plan, Multiemployer Plan or Benefit Arrangements;
                           (iii) sell, mortgage, pledge, or otherwise dispose
of any substantial portion of their assets or properties;
                           (iv)  merge or consolidate with, or agree to merge
or consolidate with, or purchase or agree to purchase all or
substantially all of the assets of, or otherwise acquire, any other
business entity;
                           (v)  authorize for issuance, issue or sell any
additional  shares  of their  capital  stock or any  securities  or  obligations
convertible  into  shares of their  capital  stock or issue or grant any option,
warrant or other right to purchase any shares of its capital stock;
                           (vi)  except for any indebtedness or obligations
that will be eliminated or cancelled in accordance with Section 5.6, incur or 
agree to incur any obligation for borrowed money;
                           (vii)  except as required by their terms, amend in
any material  respect,  terminate,  renew/fail  to renew or  renegotiate  in any
material respect any Material Contract,  or default (or take or omit to take any
action  that,  with or without  the  giving of notice or passage of time,  would
constitute a default) in any of


<PAGE>



its  obligations  under any  Material  Contract  or enter into any new  Material
Contract other than pursuant to a Bid outstanding as the date of this Agreement,
or take any  action  that  would  jeopardize  the  continuance  of its  material
supplier or customer relationships;
                           (viii)  terminate, amend or fail to renew any
existing insurance coverage;
                           (ix)     terminate or fail to renew or preserve any
material permits, except to the extent such permit is no longer
required;
                           (x)    except pursuant to an Employee Benefit Plan or
Benefit  Arrangement  in effect on the date of this Agreement and except for any
indebtedness  or obligations  that will be eliminated or cancelled in accordance
with Section 5.6, make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan,  guaranty or other extension of credit, to
or for the benefit of any director,  officer,  employee,  stockholder  or any of
their respective associates or Affiliates;
                           (xi)     except for cash dividends or distributions,
declare,  issue, make or pay any dividend or other distribution of assets to its
shareholders,  or split, combine, dividend,  distribute or reclassify any shares
of its equity securities;
                           (xii)  make any capital expenditures or commitments
with respect thereto aggregating more than $7,000,000;
                           (xiii)  except in the ordinary course of business in
connection with the performance of a contract,  dispose of, license or permit to
lapse any rights to the use of any Intellectual  Property or dispose of, license
or disclose any Intellectual Property not a matter of public knowledge;


<PAGE>



                           (xiv) make any Tax election or make any change in
any method or period of accounting or in any accounting policy, practice or 
significant procedure; or
                           (xv)  agree to or make any commitment to take any
actions prohibited by this Section 5.2.
         Section 5.3. Public Statements. Neither Seller nor Seller's Parent, nor
any of their Affiliates, shall release any information concerning this Agreement
or the  transactions  contemplated  hereby that is intended for or may result in
general public dissemination  thereof without the prior consent of Buyer, unless
(a) in the opinion of counsel to Seller and Seller's Parent, the release of such
information is required by Law, and (b) prior to the release of such information
Seller's Parent shall provide Buyer with a copy of such counsel's opinion.
         Section 5.4. H-S-R Act.  Seller and Seller's Parent shall promptly make
any and all  filings  that are or may be  required  under the H-S-R Act.  Seller
shall  cooperate and use reasonable  efforts to ensure that any  pre-acquisition
waiting period required by the H-S-R Act expires or is otherwise terminated, and
shall cause the PRC Companies to comply promptly with any requests made pursuant
to such act or the regulations thereunder.
         Section  5.5.  Consents.  Seller  and  Seller's  Parent  each shall use
reasonable  efforts to obtain all consents,  waivers and authorizations and make
all  filings  with and give all  notices  that may be  necessary  or  reasonably
required to consummate the transactions  contemplated  hereby. If as a condition
to receiving any such consents, waivers or authorizations money must be paid to


<PAGE>



any third party, Seller and Seller's Parent shall be responsible for one-half of
all such amounts.
         Section 5.6.  Certain  Indebtedness and  Intercompany  Accounts.  On or
before the Closing Date, Seller's Parent shall cause Seller and each of Seller's
Parent's  Subsidiaries  to contribute to the equity of PRC all net  intercompany
amounts due between  Seller's  Parent and its  Subsidiaries  (other than the PRC
Companies) on the one hand,  and the PRC Companies on the other hand  (including
but not limited to amounts  relating to  intercompany  accounts  receivable  and
promissory notes but excluding  amounts  relating to intercompany  accounts that
are of a type  included in the Financial  Statements  as Corporate  Pass Through
Charges and contemplated by Note 2 to the Financial Statements), and shall cause
such  intercompany  amounts to be  eliminated  or  cancelled  on or prior to the
Closing  Date.  The  transactions  contemplated  by this  Section  will  have no
Material Adverse Effect on any PRC Company.
         Section 5.7. Delivery of Information  After Closing.  Within 30 days of
the Closing  Date,  Seller and Seller's  Parent shall deliver to Buyer all books
and records of PRC in Seller's and Seller's Parent's possession.
         Section 5.8. Use of Certain Words, Trademarks and Tradenames. Within 30
calendar  days after the Closing  Date,  Seller and Seller's  Parent shall cause
Seller,  Seller's  Parent and their  Affiliates  not to use the letters  PRC. In
addition, neither Seller nor Seller's Parent, or any of their Affiliates,  shall
use any  trademark,  logo or  tradename  of PRC or any  Affiliate of PRC, or any
trademarks, logos or tradenames that are confusingly similar thereto or that are
a translation or transliteration thereof into


<PAGE>



any language or alphabet on any of its signs, products,  correspondence,  forms,
manuals,   shipping  cartons,   buildings  or  vehicles,  or  any  other  manner
whatsoever.  Within 60 calendar  days after the  Closing,  Seller shall take and
cause to be taken all action  necessary  to change  Seller's  corporate  name to
delete "PRC" therefrom.
     Section 5.9.  Notification of Certain Matters.  Seller will promptly notify
Buyer of any  event of which  Seller  obtains  knowledge  which has had or could
reasonably  be expected to have a Material  Adverse  Effect on the PRC Companies
taken  as a whole or which if  known  as of the  date  hereof  would  have  been
required to be disclosed to Buyer.  Seller will promptly notify Buyer of (i) the
occurrence,  or failure to occur, of any event that would be likely to cause any
representation  or  warranty  contained  in  this  Agreement  to  be  untrue  or
inaccurate in any material  respect at any time from the date of this  Agreement
to the Closing Date and (ii) any failure of Seller 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.  No such notification  shall affect the
representations or warranties of Seller or the conditions to Buyer's obligations
hereunder.
         Section 5.10. Noncompetition.
                  (a) Restrictions on Competitive Activities. Seller agrees that
after the  Closing  Buyer and PRC shall be entitled  to the  goodwill  and going
concern  value of the business of the PRC  Companies and to protect and preserve
the same to the maximum extent permitted by Law. Seller also  acknowledges  that
its management contributions to the business of the PRC Companies have


<PAGE>



been  uniquely  valuable  and  involve  proprietary  information  that  would be
competitively  unfair to make  available to any competitor of the PRC Companies.
For these and other  reasons  and as an  inducement  to Buyer to enter into this
Agreement,  Seller agrees that for a period of three years after the date hereof
neither Seller nor any of Seller's Affiliates will, directly or indirectly,  for
its  own  benefit  or as  agent  for  another  carry  on or  participate  in the
ownership,  management  or control of, or the financing of, or allow its name or
reputation to be used in or by any other present or future  business  enterprise
that  competes with Buyer or the PRC Companies in activities in which any of the
PRC Companies is engaged as of the Closing Date (a "Competing Business").
                  (b) Exceptions. Nothing contained herein shall limit the right
of Seller as an  investor  to hold and make  investments  in  securities  of any
corporation or limited  partnership that is registered on a national  securities
exchange  or  admitted to trading  privileges  thereon or  actively  traded in a
generally recognized  over-the-counter market, provided Seller's equity interest
therein  does not  exceed  5% of the  outstanding  shares or  interests  in such
corporation or partnership.  Notwithstanding any provisions of this Section 5.10
to the contrary, if Seller's Parent or any of its Affiliates acquires any Person
that is engaged in a  Competing  Business,  Seller's  Parent and its  Affiliates
shall not be deemed to be in violation of this  Section 5.10  provided  that (i)
the Competing  Business  represents less than one-third of the gross revenues of
the acquired Person for the acquired  Person's most recent completed fiscal year
and (ii) Seller's  Parent or its Affiliates use reasonable and diligent  efforts
to divest the


<PAGE>



operations of such Competing Business subsequent to such acquisition.
                  (c)  Restrictions  on Soliciting  Employees.  In addition,  to
protect  Buyer  against any efforts by Seller or any of Seller's  Affiliates  to
cause  employees  of the PRC  Companies  as of the  date of  this  Agreement  to
terminate  their  employment,  Seller  agrees  that for a period of three  years
following  the Closing  Date,  neither  Seller nor any of its  Affiliates  will,
directly or  indirectly  (i) induce any employee of the PRC  Companies as of the
date of this  Agreement  with a then current  compensation  of more than $50,000
annually to leave any of the PRC Companies or to accept any other  employment or
position,  or (ii) assist  (other than normal  employment  recommendations)  any
other Person in hiring any such employee.
                  (d) Special  Remedies and Enforcement.  Seller  recognizes and
agrees that a breach by Seller or any of its  Affiliates of any of the covenants
set forth in this  Section  5.10 could  cause  irreparable  harm to Buyer,  that
Buyer's  remedies at law in the event of such breach  would be  inadequate,  and
that, accordingly, in the event of such breach a restraining order or injunction
or both may be issued  against  Seller and its  Affiliates,  in  addition to any
other rights and remedies which are available to Buyer.  If this Section 5.10 is
more  restrictive  than permitted by the Laws of the jurisdiction in which Buyer
seeks  enforcement  hereof,  this  Section  5.10  shall be limited to the extent
required to permit enforcement under such Laws.
         Section 5.11. Nondisclosure of Proprietary Data.  Neither Seller nor 
any of its Affiliates or representatives shall, at any


<PAGE>



time, make use of, divulge or otherwise  disclose,  directly or indirectly,  any
trade  secret or other  proprietary  data  (including,  but not  limited to, any
customer  list,  record or  financial  information)  concerning  the business or
policies of the PRC Companies that Seller or any Affiliate or  representative of
Seller may have learned as a shareholder,  employee,  officer or director of the
PRC Companies.  In addition,  except as required by Law or legal process neither
Seller nor any of its Affiliates or  representatives  shall make use of, divulge
or otherwise disclose,  directly or indirectly, to persons other than Buyer, any
confidential  information  concerning  the  business  or  policies  of  the  PRC
Companies which may have been learned in any such capacity.
         Section 5.12. No  Solicitation.  From the date of this Agreement to the
Closing Date or earlier termination of this Agreement, Seller and its Affiliates
and representatives will not directly or indirectly make, entertain,  solicit or
encourage  inquiries  or  proposals,  enter  into  or  conduct  discussions,  or
negotiate  or enter into an  agreement  with any party  other than Buyer for the
divestiture  of any or all of the PRC  Companies  or  their  respective  assets,
whether by way of an asset or stock sale,  partnership,  joint venture,  merger,
consolidation or other transaction.
         Section 5.13. Novations.  In the event any Governmental Entity requires
Government Contract  Novations,  Seller and Seller's Parent shall cooperate with
the PRC  Companies to promptly  obtain such  Government  Contract  Novations and
shall execute the novation agreements required by any Governmental Entity.


<PAGE>



                                   ARTICLE VI
                        COVENANTS AND AGREEMENTS OF BUYER
         Buyer  covenants  and  agrees for the  benefit  of Seller and  Seller's
Parent as follows:
         Section 6.1. Public Statements. Buyer shall not release any information
concerning  this  Agreement  or the  transactions  contemplated  hereby  that is
intended for or may result in general public  dissemination  thereof without the
prior consent of Seller's Parent, unless (a) in the opinion of counsel to Buyer,
the release of such information is required by Law, and (b) prior to the release
of such  information  Buyer shall  provide  Seller's  Parent with a copy of such
counsel's opinion.
         Section 6.2.  H-S-R Act.  Buyer shall promptly make any and all filings
that are or may be required under the H-S-R Act.  Buyer shall  cooperate and use
reasonable efforts to ensure that any pre-acquisition waiting period required by
the H-S-R Act expires or is otherwise terminated, and shall comply promptly with
any requests made pursuant to the H-S-R Act or the regulations thereunder.
         Section 6.3. Consents. Buyer shall use reasonable efforts to obtain all
consents,  waivers and  authorizations  and make all  filings  with and give all
notices  that  may  be  necessary  or  reasonably  required  to  consummate  the
transactions  contemplated  hereby.  If as a  condition  to  receiving  any such
consents, waivers or authorizations money must be paid to any third party, Buyer
shall be responsible for one-half of all such amounts.
     Section 6.4. Guarantees. Buyer shall take all steps reasonably necessary to
provide  Guarantees for or on all contracts,  documents,  instruments  and other
agreements or obligations for


<PAGE>



which Seller's Parent or any of its Subsidiaries  (other than  Subsidiaries that
are PRC  Companies)  has issued  Guarantees  for the  benefit  of Persons  doing
business with any of the PRC Companies  that are listed in Schedule 3.15 and any
such Guarantees  executed by Seller's Parent or any of its  Subsidiaries  (other
than  Subsidiaries  that  are  PRC  Companies)  subsequent  to the  date of this
Agreement  and prior to Closing  in  compliance  with  Section  5.2.  Buyer will
endeavor to provide  all such  Guarantees  within 60 days of the  Closing  Date.
Buyer  shall  use  reasonable   efforts  to  assist   Seller's  Parent  and  its
Subsidiaries (other than Subsidiaries that are PRC Companies) to obtain full and
complete  releases  on  each  of the  Guarantees  referenced  in  the  preceding
sentence, which reasonable efforts shall include but not be limited to providing
any financial  information  about Buyer reasonably  requested by the Persons for
whose  benefit the  respective  Guarantees  were made.  The  provisions  of this
Section 6.4 shall not apply to any  Guarantees  relating  to payments  under the
"PRC Supplemental Executive Retirement Plan."
         Section 6.5. Certain Employee Benefit Matters.
                  (a)      Buyer shall take all action required or appropriate
to cause each of the PRC Companies to fulfill its obligations  under all Benefit
Arrangements,  Employee Benefit Plans and Multiemployer Plans listed in Schedule
3.14 that are sponsored or maintained by any of the PRC Companies for so long as
any such  Arrangements  and Plans are  sponsored or maintained by any of the PRC
Companies.
                  (b)  Buyer  acknowledges  that  certain  Employees  of the PRC
Companies may be entitled to benefits  under the Incentive  Compensation  Plans,
the Special Severance Plans or other Benefit


<PAGE>



Arrangements  involving  severance or  termination  benefits.  Buyer assumes the
obligations  of  Seller's  Parent  and the PRC  Companies  under  the  Incentive
Compensation   Plans,  the  Special  Severance  Plans  and  such  other  Benefit
Arrangements  in respect of the  Employees  and agree to pay any benefits to the
Employees  that the  Employees  may be entitled to receive  under the  Incentive
Compensation   Plans,  the  Special  Severance  Plans  and  such  other  Benefit
Arrangements. Buyer shall not assume or have any obligations with respect to (x)
the "Black & Decker -- PRC Inc.  Change in Control  Agreements" and (y) the "PRC
Supplemental Executive Retirement Plan."
                  (c) For at least 12 months  following the Closing Date,  Buyer
will ensure that the PRC Companies continue to provide benefits that are, in the
aggregate, substantially comparable to those provided under the Employee Benefit
Plans and Benefit  Arrangements  as in effect  immediately  prior to the Closing
Date for the benefit of all eligible Employees and their dependents.  Nothing in
this Section 6.5 shall  obligate Buyer or any PRC Company to sponsor or maintain
any specific Employee Benefit Plan or Benefit Arrangement for any period of time
after the Closing Date.

         Section 6.6.  Preservation of and Access to Certain  Information  After
Closing.  Except as  prohibited  or limited by Law,  Buyer  shall  cause the PRC
Companies,  until three years  after the  Closing  Date or, with  respect to Tax
matters,   until  the  expiration  of  the  applicable  statute  of  limitations
(including  any extensions  thereof),  to give Seller and Seller's  Parent,  and
Seller's  and  Seller's  Parent's  employees,  counsel  and  advisors,  full and
complete access upon reasonable notice during normal business


<PAGE>



hours, to all properties,  agreements, records and affairs of the PRC Companies,
and will provide copies of such  information  concerning the PRC Companies (with
respect to periods  prior to the  Closing)  as Seller  and  Seller's  Parent may
reasonably  request,  including  but not limited to full and complete  access in
connection  with the  preparation  and  determination  of the Proposed Net Asset
Amount and the Final Net Asset  Amount (and the  resolution  of any  disputes in
respect  thereof),  or the  preparation  of any Tax Returns  for the  Affiliated
Groups,  or in connection  with or in  anticipation of any audit by any federal,
state or local Tax  Authorities  of the  Affiliated  Groups.  From and after the
Closing Date,  Buyer shall preserve all books and records of PRC in Buyer or any
of the PRC Companies' possession for a period of eight years, provided, however,
that Buyer shall not destroy or dispose of such books and records without giving
notice to Seller and Seller's Parent of such pending destruction or disposal and
offering Seller and Seller's Parent the right and opportunity to copy such books
and records.
         Section 6.7. Use of Certain Words,  Trademarks and Tradenames.  Whether
or not Buyer or any of the PRC Companies has obtained,  directly or  indirectly,
any right,  title or  interest in or to the use of the words "The Black & Decker
Corporation" or "Emhart Corporation," or any derivatives thereof, or the letters
B&D, by virtue of Buyer's purchase of the PRC Shares or otherwise, neither Buyer
nor any of the PRC Companies  shall use, and Buyer and each of the PRC Companies
shall cause after the Closing Date the PRC  Companies not to use, the words "The
Black & Decker Corporation" or "Emhart  Corporation," or any derivative thereof,
or the letters B&D. In addition, neither Buyer nor any of the PRC


<PAGE>



Companies  shall use, and Buyer and each of the PRC Companies shall cause within
90  calendar  days after the  Closing  Date the PRC  Companies  not to use,  any
trademark,  logo or tradename of Seller's Parent or Emhart,  or any Affiliate of
Seller's Parent or Emhart (other than those relating exclusively to the business
of the PRC Companies  and  transferred  to Buyer or the PRC Companies  under the
terms  of this  Agreement),  or any  trademarks,  logos or  tradenames  that are
confusingly similar thereto or that are a translation or transliteration thereof
into any  language or alphabet  on any of its signs,  products,  correspondence,
forms, manuals, shipping cartons,  buildings or vehicles, or in any other manner
whatsoever.
         Section 6.8. Intercompany  Accounts.  Buyer shall take, and shall cause
PRC and its successors and Subsidiaries to take, all actions and to do, or cause
to be done, all things  necessary,  proper and appropriate to give effect to the
contribution to the equity of PRC all net intercompany  amounts  contemplated to
be  contributed,  eliminated  or  cancelled  on or prior to the Closing  Date by
Section 5.6.
     Section  6.9.  Notification  of Certain  Matters.  Buyer  shall give prompt
notice to Seller of (i) the  occurrence,  or failure to occur, of any event that
would be  likely to cause  any  representation  or  warranty  contained  in this
Agreement to be untrue or  inaccurate  in any material  respect at any time from
the date of this  Agreement to the Closing Date and (ii) any failure of Buyer 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.  No such
notification shall affect the

<PAGE>



representations or warranties of Buyer or the conditions to Buyer's
obligations hereunder.
                                   ARTICLE VII
                       CONDITIONS OF OBLIGATIONS OF BUYER
         The  obligations  of Buyer to consummate the purchase of the PRC Shares
on the Closing  Date and to perform  their other  covenants  and  agreements  in
accordance  with the terms and  conditions of this Agreement are subject to each
of the conditions set forth below:
         Section 7.1.  Representations  and Warranties True. Except as otherwise
permitted or contemplated by this Agreement and except for  representations  and
warranties  that by their terms speak only as of a specified  date,  each of the
representations  and warranties of Seller and Seller's Parent  contained in this
Agreement  shall be true and correct in all  material  respects on and as of the
Closing Date as though made on and as of the Closing Date.
         Section 7.2. Covenants and Agreements -- No Default. Neither Seller nor
Seller's Parent shall be in material  default in respect of any obligation under
this  Agreement and Seller and Seller's  Parent shall have performed or complied
in all material  respects  with all covenants  and  agreements  required by this
Agreement to be performed or complied with by Seller or Seller's Parent prior to
or as of the Closing Date.
     Section 7.3. No Material Adverse Change.  Since the date of this Agreement,
none of the PRC  Companies  shall  have  suffered  a change in its  business  or
financial  condition  that has had or could  reasonably  be  expected  to have a
Material Adverse Effect on the PRC Companies taken as a whole

<PAGE>



         Section 7.4.  H-S-R Act. All applicable  waiting  periods in respect of
the  transactions  contemplated by this Agreement under the H-S-R Act shall have
expired or otherwise terminated.
     Section 7.5.  Consents.  Seller and Seller's Parent shall have obtained all
third-party  and  governmental  consents  required for the  consummation  of the
transactions contemplated by this Agreement that are set forth in Schedule 7.5.
     Section  7.6.  Closing  Documents.  Seller and  Seller's  Parent shall have
provided Buyer with all of the documents required by Section 9.2 to be delivered
at Closing by Seller.
         Section 7.7. No Orders;  Legal Proceedings.  No Law or Order shall have
been  enacted,  entered,  issued,  promulgated  or enforced by any  Governmental
Entity which  prohibits or restricts  the transfer of the PRC Shares.  No Action
shall be pending or threatened by any  Governmental  Entity (i)  challenging  or
seeking to make illegal or otherwise directly or indirectly restrain or prohibit
or make materially more costly the consummation of the transactions contemplated
hereby,   or  seeking  to  obtain  material  damages  in  connection  with  such
transactions  or (ii)  which  has had or would be  reasonably  likely  to have a
Material  Adverse  Effect on the PRC  Companies  taken as a whole,  and no Order
shall have been issued  which would have the effect of or require  anything  set
forth in clause (i) or clause (ii) above.
         Section  7.8.  Resignation  of  Directors.  Any  directors  of the  PRC
Companies  who are also  employees or officers of Seller's  Parent or any of its
Affiliates   (other  than  the  PRC  Companies)   shall  have  submitted   their
resignations in writing to such PRC Companies.


<PAGE>



Such  resignations  of directors (in such capacity) shall be effective as of the
Closing.
         Section 7.9. Resignation of Officers.  Any officers or employees of the
PRC  Companies who are also  employees or officers of Seller's  Parent or any of
its  Affiliates  (other  than the PRC  Companies)  shall  have  submitted  their
resignations in writing to such PRC Companies. Such resignations of officers and
employees (in such capacity) shall be effective as of the Closing.
         Section  7.10 OCI  Clauses.  The OCI Clauses  contained in contracts or
agreements  to which any of the PRC  Companies is a party or by which any of the
PRC Companies is obligated  could not reasonably be expected in the aggregate to
have a Material  Adverse Effect on either the PRC Companies  taken as a whole or
any  significant  business  division  or  line  of  business  of  Buyer  and its
Subsidiaries.
                                  ARTICLE VIII
             CONDITIONS OF OBLIGATIONS OF SELLER AND SELLER'S PARENT
         The obligation of Seller and Seller's  Parent to consummate the sale of
the PRC  Shares on the  Closing  Date and to  perform  its other  covenants  and
agreements in  accordance  with the terms and  conditions of this  Agreement are
subject to each of the conditions set forth below.
         Section 8.1.  Representations  and Warranties True. Except as otherwise
permitted or contemplated by this Agreement and except for  representations  and
warranties  that by their terms speak only as of a specified  date,  each of the
representations  and warranties of Buyer  contained in this  Agreement  shall be
true and correct in


<PAGE>



all material respects on and as of the Closing Date as though made on and as of 
the Closing Date.
         Section 8.2. Covenants and Agreements -- No Default. Buyer shall not be
in material  default in respect of any obligation under this Agreement and Buyer
shall have performed or complied in all material respects with all covenants and
agreements  required by this Agreement to be performed or complied with by Buyer
prior to or as of the Closing Date.
         Section 8.3.  H-S-R Act. All applicable  waiting  periods in respect of
the  transactions  contemplated by this Agreement under the H-S-R Act shall have
expired or otherwise terminated.
     Section  8.4.  Consents.  Buyer shall have  obtained  all third-party and
governmental   consents  required  for  the  consummation  of  the  transactions
contemplated by this Agreement that are set forth in Schedule 8.4.
     Section 8.5. Closing  Documents.  Buyer shall have provided Seller with all
of the documents required by Section 9.3 to be delivered at Closing by Buyer.
     Section 8.6. No Orders; Legal Proceedings.  No Law or Order shall have been
enacted,  entered,  issued,  promulgated or enforced by any Governmental  Entity
which prohibits or restricts the transfer of the PRC Shares.  No Action shall be
pending or threatened by any Governmental  Entity challenging or seeking to make
illegal or  otherwise  directly  or  indirectly  restrain  or  prohibit  or make
materially more costly the consummation of the transactions contemplated hereby,
or seeking to obtain material  damages in connection with such  transactions and
no Order shall


<PAGE>



have been issued  which would have the effect of or require  anything  set forth
above.
                                   ARTICLE IX
                                     CLOSING
         Section 9.1.  Closing.  The Closing  shall take place at the offices of
O'Melveny & Myers, 555 13th Street, N.W., Washington, D.C. 20004, at 10:00 a.m.,
on January 31,  1996,  or at such other place and at such other time and date as
may be mutually agreed upon by Buyer and Seller, upon fulfillment of (a) all the
conditions set forth in ARTICLE VII that have not been waived by Buyer,  and (b)
all the  conditions  set forth in  ARTICLE  VIII  that  have not been  waived by
Seller.  If such  conditions have not been fulfilled or waived by such date, the
Closing shall take place within five business days after  fulfillment  or waiver
of all such  conditions  but in no event  later  than  March  31,  1996,  unless
otherwise  mutually agreed to in writing by Buyer and Seller. All proceedings to
be taken and all  documents to be executed and  delivered by Seller and Seller's
Parent in connection  with the  consummation  of the  transactions  contemplated
hereby shall be reasonably  satisfactory  in form and substance to Buyer and its
counsel.  All  proceedings  to be taken and all  documents  to be  executed  and
delivered  by Buyer in  connection  with the  consummation  of the  transactions
contemplated  hereby shall be reasonably  satisfactory  in form and substance to
Seller and its  counsel.  All  proceedings  to be taken and all  documents to be
executed  and  delivered  at the Closing  shall be deemed to have been taken and
executed simultaneously, and no proceedings shall be deemed taken


<PAGE>



nor any documents executed or delivered until all have been taken, executed or 
delivered.
     Section 9.2.  Documents to be Delivered by Seller and Seller's  Parent.  At
the Closing,  Seller and Seller's  Parent  shall  deliver,  or shall cause to be
delivered, to Buyer the following:
                  (a)   Certificates   representing   the  PRC   Shares,   which
certificates  shall be duly  endorsed in blank or, in lieu  thereof,  shall have
affixed  thereto stock powers  executed in blank and in proper form for transfer
on the books of PRC;
                  (b) A certificate  of the Secretary or an Assistant  Secretary
of each of Seller and Seller's Parent, dated the Closing Date, setting forth the
resolutions  of  the  Boards  of  Directors  of  Seller  and  Seller's   Parent,
respectively,  authorizing  the execution and delivery of this Agreement and the
consummation of the transactions  contemplated  hereby, and certifying that such
resolutions have not been amended or rescinded and are in full force and effect;
                  (c) A  certificate  of a senior  executive  officer of each of
Seller and Seller's Parent certifying that (i) except as otherwise  permitted or
contemplated  by this  Agreement and except for  representations  and warranties
that by their  terms speak as of a  specified  date other than the Closing  Date
each of the  representations  and  warranties  of  Seller  and  Seller's  Parent
contained in this Agreement are true and correct in all material respects on and
as of the Closing  Date as though  made on and as of the  Closing  Date and (ii)
neither  Seller nor  Seller's  Parent is in  material  default in respect of any
obligation under this Agreement and Seller and Seller's Parent have performed or
complied in all


<PAGE>



material  respects with all covenants and agreements  required by this Agreement
to be performed or complied with by Seller or Seller's  Parent prior to or as of
the Closing Date;
                  (d)      A good standing certificate and certified charter
documents, dated as of a date reasonably close to the Closing Date,
in respect of PRC;
                  (e)  Modifications to Schedules 3.10, 3.12 and 3.13 reflecting
events occurring subsequent to the date hereof, provided that (i) no item may be
added to Schedule 3.10 unless (x) Seller confirms in writing that such item is a
Pre-Closing Claim subject to Section 11.4 hereof and (y) Seller  acknowledges in
writing that Buyer may assert such item,  alone or together with other  matters,
as the basis of a material  adverse  change as  contemplated  by Section 7.3 (it
being  understood that such  acknowledgement  is not a concession by Seller that
such item constitutes a material adverse change as contemplated by Section 7.3),
(ii) no item may be deleted from Schedule 3.12,  and (iii) no Material  Contract
shall be added to or deleted  from  Schedule  3.13 unless a PRC Company  entered
into or terminated such Material  Contract,  or permitted such Material Contract
to expire, in compliance with Section 5.2; and
                  (f)      Such other documents, instruments or agreements as
may be reasonably requested by Buyer to effectuate the transactions
contemplated by this Agreement.
         Section 9.3. Documents to be Delivered by Buyer. At the Closing,  Buyer
shall  deliver,  or cause to be  delivered,  to Seller and  Seller's  Parent the
following:


<PAGE>



                  (a)      A wire transfer of funds to the account designated
by Seller in an amount equal to the Purchase Price, as provided in
Section 2.2;
                  (b) A certificate  of the Secretary or an Assistant  Secretary
of Buyer, dated the Closing Date, setting forth copies of the resolutions of the
Board of  Directors  of Buyer  authorizing  the  execution  and delivery of this
Agreement and the  Consummation of the  transactions  contemplated  hereby,  and
certifying that such  resolutions  have not been amended or rescinded and are in
full force and effect;
                  (c) A  certificate  of a senior  executive  officer of each of
Buyer certifying that (i) except as otherwise  permitted or contemplated by this
Agreement  and except for  representations  and  warranties  that by their terms
speak  as of a  specified  date  other  than  the  Closing  Date,  each  of  the
representations and warranties of Buyer contained in this Agreement are true and
correct in all material respects on and as of the Closing Date as though made on
and as of the Closing Date and (ii) Buyer is not in material  default in respect
of any  obligation  under this  Agreement and Buyer has performed or complied in
all  material  respects  with all  covenants  and  agreements  required  by this
Agreement  to be  performed  or  complied  with by  Buyer  prior to or as of the
Closing Date; and
                  (d) Such other documents,  instruments or agreements as may be
reasonably   requested  by  Seller  and  Seller's   Parent  to  effectuate   the
transactions contemplated by this Agreement.
                                    ARTICLE X
                                   TERMINATION


<PAGE>



     Section  10.1.  Right  to  Terminate  Agreement.   This  Agreement  may  be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to Closing only as follows:
                  (a)      by mutual written consent of Buyer and Seller and
Seller's Parent; and
                  (b) by any of the  parties  to this  Agreement,  upon  written
notice to the other parties,  at any time after March 31, 1996,  except that the
right to terminate this Agreement  pursuant to this Section 10.1(b) shall not be
available to (i) Seller and  Seller's  Parent if the failure to  consummate  the
Closing  on or before  such date was  caused by or  resulted  from  Seller's  or
Seller's Parent's failure to fulfill any of its obligations under this Agreement
or (ii) Buyer if the  failure to  consummate  the Closing on or before such date
was  caused  by or  resulted  from  Buyer's  failure  to  fulfill  any of  their
obligations under this Agreement.
         Section 10.2.Effect of Termination.
                  (a)      In the event this Agreement is terminated pursuant
to Section  10.1(a),  then all further  obligations  of the parties hereto shall
become null and void and no party shall have any liability to any other party.
                  (b) In  the  event  this  Agreement  is  terminated  by  Buyer
pursuant  to  Section  10.1(b)  at a time  when  any of  the  conditions  to its
obligations  set forth in ARTICLE VII shall not have been satisfied or waived in
writing, then Buyer shall be entitled to pursue all legal and equitable remedies
for  breach  of  contract  and  damages,   including  but  not  limited  to  any
out-of-pocket expenses actually incurred by Buyer.


<PAGE>



                  (c) In the event this  Agreement is  terminated  by Seller and
Seller's Parent pursuant to Section 10.1(b) at a time when any of the conditions
to their  obligations set forth in ARTICLE VIII shall not have been satisfied or
waived in writing,  then Seller and Seller's  Parent shall be entitled to pursue
all legal and equitable  remedies for breach of contract and damages,  including
but not limited to any  out-of-pocket  expenses  actually incurred by Seller and
Seller's Parent.
                  (d)  Notwithstanding  the provisions of this Section 10.2, the
obligations  of the parties  hereto under the  Confidentiality  Agreement  shall
survive any termination of this Agreement by either party to this Agreement.
                                   ARTICLE XI
              ADDITIONAL COVENANTS AND AGREEMENTS; INDEMNIFICATION
         Section 11.1.  Taxes.
                  (a) Seller's Parent or Seller (on behalf of the PRC Companies)
shall timely and accurately file or cause to be filed all Tax Returns for Income
Taxes and all  foreign  Taxes  (including  the  filing of any state or local Tax
Returns that include the result of the Section  338(h)(10)  Election) of the PRC
Companies  due after the date  hereof for any  taxable  year or  taxable  period
ending on or before the Closing Date,  including any taxable period that ends at
the end of the Closing  Date as a result of the Section  338(h)(10)  Election (a
"Pre-Closing Period").
                  (b) Subject to the  provisions  of Section  11.1(c),  Seller's
Parent and Seller shall pay and be  responsible  for,  shall  indemnify and hold
harmless Buyer and the PRC Companies (the "Buyer Group")  against,  and shall be
entitled to all refunds and credits


<PAGE>



of, (i) Income Taxes and all foreign Taxes (together with reasonable  attorneys'
fees and any legal or other expenses for  investigating or defending any actions
with  respect  to  such  Taxes)  with  respect  to the  PRC  Companies  for  any
Pre-Closing  Period,  including  any  liability for Income Taxes and all foreign
Taxes  arising  out  of  the  inclusion  of any  of  the  PRC  Companies  in any
Consolidated  Returns,  and further  including  any  liability  for Income Taxes
arising  as a result  of the  Section  338(h)(10)  Election,  and (ii) all Taxes
(together with  reasonable  attorneys'  fees and any legal or other expenses for
investigating  or  defending  any actions with respect to Taxes) with respect to
Seller's  Parent and any member of the  Affiliated  Groups  (other  than the PRC
Companies) for all taxable periods whatsoever.  Buyer shall,  promptly after the
receipt  thereof,  remit to Seller's Parent any Income Tax or foreign Tax refund
received by Buyer, Buyer's Parent or any of the PRC Companies to the extent such
refund  relates  to a  Pre-Closing  Period.  Seller's  Parent  or  Seller  shall
promptly,  after the receipt thereof,  remit to Buyer any Tax refund received by
Seller's  Parent or Seller to the extent such refund  relates to any Tax paid by
or on behalf of the PRC  Companies,  other  than an Income  Tax or  foreign  Tax
refund related to a Pre-Closing  Period.  Notwithstanding  the provision of this
Section 11.1(b),  neither Seller nor Seller's Parent shall be responsible for or
shall  be  required  to  indemnify  or  hold  harmless  Buyer  or any of the PRC
Companies  for any Taxes that are  reimbursed  under any contracts of any of the
PRC Companies;  provided,  however,  that Buyer shall cause the  appropriate PRC
Company to use its reasonable best efforts to seek  reimbursement for such Taxes
under the applicable contract.


<PAGE>



                  (c)  No  member  of the  Buyer  Group  shall  be  entitled  to
indemnification  under  Section  11.1(b) for any Taxes for which a reserve  with
respect to such Taxes is included in or taken into account in the calculation or
determination of the Final Net Asset Amount,  except for the Taxes exceeding the
amount of such reserve.
                  (d) Buyer shall be  responsible  for, and shall  indemnify and
hold harmless  Seller and Seller's  Parent  against,  (i) the Taxes described in
Section 12.3,  (ii) the timely  preparation and filing of all Tax Returns of the
PRC Companies for any taxable year or taxable period beginning after the Closing
Date (the  "Post-Closing  Period"),  and (iii) the preparation and filing of all
Tax Returns  required to be filed by any of the PRC Companies  after the Closing
Date  other than  those Tax  Returns  for  Income  Taxes and all  foreign  Taxes
described in Section 11.1(a).
                  (e) Buyer shall pay and be responsible  for,  shall  indemnify
and hold harmless Seller and Seller's  Parent against,  and shall be entitled to
all refunds and credits of, all Taxes (together with reasonable  attorneys' fees
and any legal or other expenses for  investigating or defending any actions with
respect to Taxes) with respect to the PRC Companies for any Post-Closing Period.
                  (f) Subject to the  provisions  of Section  11.2,  if, for any
federal,  State or local  Income Tax or foreign Tax  purpose,  a taxable year or
taxable period of any of the PRC Companies  which begins before the Closing Date
and ends after the Closing Date (a "Bridge  Period")  does not  terminate on the
Closing Date, and Buyer has the responsibility to pay Taxes for all or a portion
of the Bridge Period, the parties hereto will, to the extent permitted by


<PAGE>



applicable  Law,  elect with the relevant Tax  Authority to treat the portion of
the Bridge  Period on or before the  Closing  Date (a "Seller  Period")  for all
purposes as a short  taxable  period  ending as of the close of the Closing Date
and such short  taxable  period  shall be treated  as a  Pre-Closing  Period for
purposes  of this  Agreement  and the  portion  of the Bridge  Period  after the
Closing Date (the "Buyer Period") shall be treated as a Post-Closing  Period for
purposes of this  Agreement.  In any case where  applicable  Law does not permit
such an election to be made, then, for purposes of this Agreement,  Income Taxes
and all  foreign  Taxes for the Bridge  Period  shall be  allocated  between the
Seller Period and the Buyer Period using an interim-closing-of-the-books  method
assuming that such taxable  period ended at the close of business on the Closing
Date, except that exemptions, allowances or deductions that are calculated on an
annual basis (such as the deduction for depreciation)  shall be apportioned on a
per diem basis.
                  (g) Buyer  shall cause the PRC  Companies  to prepare and file
all Tax Returns and pay all Taxes due, if any, with respect to the PRC Companies
for any Bridge Period that does not terminate on the Closing Date,  for which it
is responsible to pay Taxes in whole or in part,  provided that Seller satisfies
its  obligations  as set forth in this Section  11.1(g).  Seller shall  promptly
deliver  to Buyer  work  papers  relating  to Taxes due for the  Seller  Period,
certified by a duly  authorized  officer of Seller,  setting forth in detail all
information  required to complete the applicable  Tax Returns.  Upon notice from
Buyer,  Seller shall pay to Buyer the Income Taxes and all foreign Taxes for the
Seller Period on or before the second business day prior to the due date for the


<PAGE>



payment  of such  Income  Taxes  and all  foreign  Taxes,  by wire  transfer  of
immediately  available  funds to the account  designated by Buyer.  In the event
that Seller fails to make the payments required by this Section 11.1(g) to Buyer
prior to the  date  any  payment  for  Income  Taxes  and all  foreign  Taxes as
described in this  Section  11.1(g) is due,  such  required  payment  shall bear
interest  from such due date until paid,  at the  underpayment  rate of interest
determined under Section 6621 of the Code.
                  (h) Buyer shall have exclusive control over and responsibility
to conduct any Contest for a Post-Closing  Period and for a Bridge Period if the
Contest for a Bridge Period relates solely to the Buyer; provided, however, that
Buyer shall not enter into any  agreement in  compromise  or  settlement of such
Contest which could affect a Pre-Closing  Period or a Seller Period  without the
written consent of Seller.
                  (i)  Unless  Buyer  agrees in  writing  to waive any claim for
indemnification under Section 11.1(b) with respect thereto,  Seller and Seller's
Parent  shall have  exclusive  control  over and  responsibility  to conduct any
Contest for a  Pre-Closing  Period and for a Bridge  Period if the Contest for a
Bridge Period  relates  solely to the Seller  Period;  provided,  however,  that
neither Seller not Seller's  Parent shall enter into any agreement in compromise
or  settlement  of such Contest  which could affect a  Post-Closing  Period or a
Buyer Period without the written consent of Buyer.
                  (j) Buyer shall  notify  Seller's  Parent in writing  promptly
upon receipt by any PRC Company of notice of any Contest or assessment  relating
thereto for Pre-Closing Period or a Bridge Period. Failure of Buyer to so notify
Seller's Parent shall not


<PAGE>



relieve  Seller's  Parent or Seller from any liability  under this Section 11.1,
except to the extent it is proven that Seller's Parent or Seller suffered actual
prejudice  in  connection  with or in  defending  against a  Contest.  Seller or
Seller's Parent shall notify Buyer in writing promptly upon receipt by Seller or
Seller's Parent of notice of any Contest or assessment relating to a 
Post-Closing Period or a Bridge Period.
                  (k) Buyer and Seller agree to jointly  control and conduct any
Contest for a Bridge Period that relates to both the Seller Period and the Buyer
Period.  Seller,  Seller's  Parent and Buyer agree to cooperate  fully with each
other with respect to  defending  or  answering  any such Contest and to provide
each other with all materials, information and documents as reasonably requested
by the other. Neither Buyer, Seller, nor Seller's Parent shall be liable for any
portion of any  settlement  of any Contest for a Bridge  Period that  relates to
both the  Seller  Period  and the Buyer  Period  effected  without  its  written
consent, provided such consent was not unreasonably withheld.
                  (l) Except as otherwise provided in this Agreement and subject
to the allocation of liabilities  for Taxes,  Seller,  Seller's Parent and Buyer
agree to cooperate  fully with each other with respect to the preparation of all
Tax Returns and with respect to all matters  relating to Taxes, and to keep each
other  advised as to any issue  relating  to Taxes which could have a bearing on
such other party's responsibilities hereunder.
                  (m) In any Contest controlled by Seller,  Buyer will take, and
will cause each PRC Company to take, such action as Seller may by written notice
reasonably request in connection with


<PAGE>



such Contest  (including the payment of a Tax  preparatory to filing a claim for
refund of such Tax;  provided that Seller shall first pay the amount of such Tax
to Buyer).
         Section 11.2. Section 338(h)(10) Election.
                  (a)      Seller, Seller's Parent, and each of the PRC
Companies  agree,  if so directed by the Buyer,  to join with Buyer in making an
election under Section  338(h)(10) of the Code (and any corresponding  elections
under  state,  local or foreign tax law)  (collectively,  a "Section  338(h)(10)
Election")  with  respect  to the  purchase  and  sale of the  stock  of the PRC
Companies hereunder.  Seller will pay any Income Tax, including any liability of
the PRC Companies for Income Tax resulting from the  application to it of Treas.
Reg.  ss.  1.338(h)(10)-1(f)(5),  attributable  to the  making  of  the  Section
338(h)(10)  Election (but only to the extent that application causes an increase
in taxable gain resulting from the deemed purchase of assets pursuant to Section
338 of the Code) and will indemnify the Buyer and the PRC Companies  against any
Material  Adverse  Effect  arising out of any failure to pay such Income Tax. If
the Section  338(h)(10)  Election is made,  Seller and Seller's Parent will also
pay any state,  local or foreign  Income  Tax (and  indemnify  Buyer and the PRC
Companies  against any Material Adverse Effect arising out of any failure to pay
such Income Tax) attributable to an election under state,  local, or foreign law
similar to the election  available  under  Section  338(g) of the Code (or which
results from the making of an election  under  Section  338(g) of the Code) with
respect to the purchase and sale of the stock of the PRC Companies hereunder.


<PAGE>



                  (b) Except as provided below, on or before the date that is 60
days after the  Closing  Date,  Buyer shall  prepare a schedule,  in the form of
Exhibit C, which reflects an allocation (the  "Allocation") of Buyer's "adjusted
grossed-up  basis" and Seller's "deemed sale price" among the Class I, Class II,
Class III and Class IV Assets (as such terms are  defined in Section  338 of the
Code and the  Department  of  Treasury  regulations  thereunder).  Provided  the
Allocation is reasonable, Seller's Parent agrees to accept the Allocation. Buyer
shall be under no obligation to have the  Allocation  prepared or approved by an
independent  appraiser.  Buyer shall be responsible  for the  preparation of all
forms and  filings  required  to be filed  with any Tax  Authority  to claim the
Section  338(h)(10)  Election  and Buyer and Seller's  Parent shall  reflect the
Allocation in all Income Tax returns in which the Section 338(h)(10) Election is
relevant,  the effect of which is to treat the  purchase of the shares of PRC by
Buyer as the  purchase  of the  assets of PRC by  Buyer.  If the Final Net Asset
Amount is not  determined  within 60 days of the Closing  Date,  then  Exhibit C
shall be prepared promptly after the Final Net Asset Amount is determined.
         Section  11.3.  Indemnification  by Buyer.  Buyer agrees to  indemnify,
defend and hold harmless Seller, Seller's Parent and their respective directors,
officers, employees, Affiliates, agents, successors and assigns from and against
any and all Losses suffered or incurred by an Indemnified  Party resulting from,
related to or arising out of:


<PAGE>



                  (a)      any inaccuracy in any of the representations and
warranties made by Buyer in this Agreement or in any agreement or
certificate delivered pursuant hereto or in connection herewith;
                  (b) any breach or  nonperformance  of any of the  covenants of
Buyer or its Affiliates contained in this Agreement (including those in Sections
8.1 and 8.2) or in any  agreement or document  delivered  pursuant  hereto or in
connection herewith;
                  (c) any  Post-Closing  Claim,  but only to the extent that the
Losses  suffered or incurred result from facts and  circumstances  that occurred
after the Closing Date  (excluding  Losses  suffered or incurred  resulting from
facts or  circumstances  that occur after the Closing  Date but which  relate to
Hazardous Substances present at properties or facilities of the PRC Companies on
the Closing Date); and
                  (d) any  Guarantees  (other  than those  relating  to payments
under the "PRC Supplemental  Executive  Retirement Plan") of Seller's Parent (or
any of its Affiliates) to the extent they were issued for the benefit of Persons
doing  business with any of the PRC  Companies.  To the extent,  but only to the
extent,  that any Loss for which  Buyer has  indemnification  obligations  under
Section  11.3(c) arises as a result of any fact,  circumstance or condition that
also causes the inaccuracy of any representation or warranty of Seller, Seller's
Parent or PRC  contained in this  Agreement or in any  agreement or  certificate
delivered pursuant hereto or in connection  herewith,  or otherwise is the basis
for an  indemnification  claim by Buyer under Section 11.4, Buyer shall not have
liability under Section 11.3(c).


<PAGE>



         Section 11.4. Indemnification by Seller and Seller's Parent. Seller and
Seller's  Parent agree,  jointly and  severally,  to indemnify,  defend and hold
harmless  Buyer,  the PRC Companies and their  respective  directors,  officers,
employees,  Affiliates,  agents, successors and assigns from and against any and
all Losses suffered or incurred by an Indemnified Party resulting from, relating
to, or arising out of:
                  (a)  any  inaccuracy  in  any  of  the   representations   and
warranties  made  by  Seller,  Seller's  Parent  or the  PRC  Companies  in this
Agreement or in any agreement or  certificate  delivered  pursuant  hereto or in
connection herewith;
                  (b) any breach or  nonperformance  of any of the  covenants of
Seller,  Seller's Parent or the PRC Companies or their  Affiliates  contained in
this Agreement  (including those in Sections 8.1 and 8.2) or in any agreement or
document delivered pursuant hereto or in connection herewith;
                  (c) any Pre-Closing Claim (including Pre-Closing Claims listed
on, or arising from matters listed on, Schedules to this Agreement), but only to
the  extent  that  the  Losses  suffered  or  incurred  result  from  facts  and
circumstances that occurred on or prior to the Closing Date;
                  (d) any divestitures,  sales or other  dispositions by any PRC
Company of divisions,  product lines, businesses,  real property or intellectual
property  (other than  dispositions  of  Intellectual  Property in the  ordinary
course of business in  connection  with the provision of products or services to
customers of the PRC  Companies),  Subsidiaries  and  interests in other Persons
effected prior to the Closing Date, whether as a result of breaches of


<PAGE>



purchase or sales agreements, under indemnification provisions, under guarantees
by a PRC Company not yet assumed by the purchaser in such divestitures, sales or
dispositions, or otherwise;
                  (e)  actions  taken by Buyer and the PRC  Companies  after the
Closing Date to bring into  compliance with  Environmental  Laws as in effect at
the Closing Date any violation or noncompliance existing as of the Closing Date,
and from Losses arising from the operations of any PRC Company subsequent to the
Closing Date and prior to the  correction  of such items of  noncompliance  as a
result of such violation or  noncompliance;  provided that, as to Losses arising
from the operations of any PRC Company  subsequent to the Closing Date action is
taken to correct such noncompliance  reasonably  promptly upon discovery of such
noncompliance by Buyer or any of the PRC Companies;
                  (f) the following employee benefit matters:  (x) the
maintenance of or contribution to a Pension Plan subject to Title IV of ERISA,
or obligation to contribute to a Multiemployer Plan, by an ERISA Affiliate of 
any of the PRC Companies (which ERISA Affiliate is not itself one of the PRC 
Companies), (y) any post-retirement medical or life insurance benefits and (z) 
any "change of control" or similar payments to be made to Employees of PRC
Companies as a result of the transactions contemplated hereby (other than any 
such payments made under plans or Benefit Arrangements assumed by Buyer pursuant
to Section 6.5);
                  (g)      the "PRC Supplemental Executive Retirement Plan"
referred to in Schedule 3.14 and the Financial Statements; and
                  (h)      the conduct of the business of Seller, Seller's
Parent and any of its Affiliates other than the PRC Companies.


<PAGE>



For purposes of Section 11.4(a),  all such  representations and warranties shall
be read as if references  therein to the materiality to the PRC Companies or any
of them of any  condition,  fact,  statement,  event or act  (including  without
limitation  all  references to "Material  Adverse  Effects" and "in all material
respects")  were deleted and the effect of any such  references  were eliminated
altogether.  Thus, for example:  (i) any representation that a statement is true
and correct in all material respects shall be read as a representation  that the
statement is true and correct;  (ii) any representation  that a condition exists
except to the extent that its failure to exist would not have a Material Adverse
Effect  on the  PRC  Companies  shall  be  read as a  representation  that  such
condition exists; and (iii) any  representation  that no incidents of a specific
nature  have  occurred  that  would have a  Material  Adverse  Effect on the PRC
Companies  shall be read as a  representation  that no  incidents of such nature
have occurred.
         Section 11.5. Procedure.
                  (a) Promptly after acquiring knowledge of any claim in respect
of which a party (the  "Indemnified  Party") may seek  indemnification  from the
other party (the "Indemnifying  Party")  hereunder,  the Indemnified Party shall
give written notice thereof to the Indemnifying  Party describing such claim and
demanding indemnification hereunder.  Notwithstanding the foregoing,  failure to
provide the aforementioned notice will not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party under this Agreement, except
to the extent that (i) such failure to provide notice causes the amounts paid by
the Indemnifying Party to be greater than they would have been had such


<PAGE>



notice  been  given on a  reasonably  timely  basis or (ii)  such  notice is not
delivered to the  Indemnifying  Party prior to the  expiration of any applicable
survival period under Section 11.6. The  Indemnifying  Party will be entitled to
assume  control of the defense of any claim,  and to settle or  compromise  such
claim in its  discretion,  subject to the  provisions  of  Sections  11.5(b) and
11.5(c). After written notice by the Indemnifying Party to the Indemnified Party
of its  election  to assume  control  of the  defense  of any such  action,  the
Indemnifying  Party shall not be liable to such Indemnified  Party hereunder for
any legal expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof.  Notwithstanding  anything in this Section 11.5 to the
contrary,  if the  Indemnifying  Party does not promptly  assume  control of the
defense of such action as provided in this Section 11.5, the  Indemnified  Party
shall  have the  right to  defend  such  action  in such  manner  as it may deem
appropriate  at  the  cost  and  expense  of  the  Indemnifying  Party  and  the
Indemnifying  Party will  promptly  reimburse  the  Indemnified  Party  therefor
(subject,  if applicable,  to the  limitations  contained in Section  11.7).  An
Indemnifying Party may, at its option and expense, participate in the defense of
any indemnifiable claim.
                  (b) To the extent that any of the Losses by any of the Persons
entitled to  indemnification  under Section 11.3 or Section 11.4 relate to facts
and circumstances  that occur both prior to and after the Closing,  or relate to
both a Pre-Closing Claim and a Post-Closing  Claim, then the Indemnifying  Party
and the Indemnified  Party shall jointly  determine at all times  thereafter the
actions


<PAGE>



to be  taken  with  respect  to  such  claims  and the  control,  investigation,
prosecution, defense and settlement thereof.
                  (c) Neither the Indemnifying  Party nor the Indemnified  Party
shall,  without the written consent of the other party, settle or compromise any
indemnifiable claim or permit a default or consent to entry of any judgment.  If
a settlement  offer  solely for money  damages is made by the  applicable  third
party claimant,  and the  Indemnifying  Party notifies the Indemnified  Party in
writing of the Indemnifying  Party's  willingness to accept the settlement offer
and pay the amount called for by such offer without reservation of any rights or
defenses against the Indemnified  Party, the Indemnified  Party may withhold its
consent and continue to contest  such claim,  free of any  participation  by the
Indemnifying  Party,  and the amount of any ultimate  liability  with respect to
such indemnifiable claim that the Indemnifying Party shall have an obligation to
pay thereunder  (regardless  of the ultimate Loss  sustained by the  Indemnified
Party) shall be equal to the amount of the settlement offer that the Indemnified
Party  declined to accept plus the previously  unpaid Losses of the  Indemnified
Party relating to such indemnifiable  claim through the date of its rejection of
the  settlement  offer.  If the  Indemnifying  Party  makes any  payment  on any
indemnifiable  claim, the Indemnifying Party shall be subrogated,  to the extent
of such  payment,  to all rights and  remedies of the  Indemnified  Party to any
insurance benefits or other claims of the Indemnified Party with respect to such
claim.
                  (d) With  respect  to any claim for which  Seller or  Seller's
Parent  is the  Indemnifying  Party and for  which  the  Indemnifying  Party has
assumed control of the defense, Buyer shall


<PAGE>



make  employees  of  the  PRC  Companies  reasonably  available  to  assist  the
Indemnifying Party in defending such claim, provided that the costs of providing
such assistance are paid by the  Indemnifying  Party or, if paid by Buyer or any
PRC Company,  reimbursed  to Buyer or the PRC Company,  as  appropriate,  by the
Indemnifying Party.
                  (e) Any  amounts  to which an  Indemnified  Party is  entitled
under  this  Article  shall  be paid by the  Indemnifying  Party  promptly  upon
request.
         Section 11.6.  Survival.
                  (a) The  representations  and warranties  contained in or made
pursuant to this  Agreement  (other than those set forth in Section  3.30) shall
survive the Closing as provided in this Section 11.6(a). The representations and
warranties  contained  in or made  pursuant to Section  3.30 shall expire on the
Closing Date. The representations and warranties  contained (w) in Sections 3.1,
3.2 and 3.3,  shall  survive  indefinitely,  (x) in Sections 3.12 and 3.26 shall
expire on the third  anniversary  of the Closing Date, (y) in Section 3.16 shall
expire at the end of the  applicable  statute of limitations  period  (including
extensions)  for the Tax matters  referenced  therein,  and (z) in Section  3.17
shall expire on the fifth  anniversary of the Closing Date.  Except as otherwise
provided in this Section 11.6,  all other  representations  and  warranties  set
forth in this  Agreement or in any agreement or certificate  delivered  pursuant
hereto or in connection  herewith shall expire on the second  anniversary of the
Closing  Date.  The  indemnifications  set forth in Sections 11.1 and 11.2 shall
survive until the end of the applicable statute of limitations period (including
extensions) for the Tax matters referenced therein. The


<PAGE>



indemnification  set forth in Sections  11.3(a) and 11.4(a) shall survive for as
long as the pertinent  representation and warranty survives. The indemnification
set forth in Sections 11.3(c), 11.4(c) and 11.4(f) shall survive until the third
anniversary  of the  Closing  Date.  The  indemnification  set forth in  Section
11.4(e)  shall  survive until the fifth  anniversary  of the Closing  Date.  The
indemnification  set  forth in  Sections  11.3(b),  11.3(d),  11.4(b),  11.4(d),
11.4(g) and 11.4(h) shall survive indefinitely.
         (b) Except as set forth in this Section 11.6(b), any matter as to which
a claim  has been  asserted  by notice to the other  party  that is  pending  or
unresolved at the end of any applicable limitation or survival period, including
any matter  disclosed in this  Agreement,  shall  continue to be covered by this
Article  XI  notwithstanding  any  applicable  statute  of  limitations  or  the
expiration  of any survival  period until such matter is finally  terminated  or
resolved. Notwithstanding the previous sentence, the indemnification obligations
of Seller and Seller's Parent under Section 11.4(c) shall not survive beyond the
third anniversary of the Closing Date unless an Action shall have been commenced
as  of  the  third   anniversary   of  the  Closing   Date.   Notice   demanding
indemnification  for the items set forth on  Schedule  3.10 (as  modified  under
Section  9.2(e))  is  acknowledged  by the  parties to have been given as of the
Closing Date.
         Section 11.7. Limitations on Indemnification.
                  (a) Buyer shall not be required to indemnify Seller,
Seller's  Parent or any of their  Affiliates  under Section  11.3(a)  unless the
aggregate  of all  amounts  for  which  indemnity  would  otherwise  be  payable
thereunder exceeds $1,500,000, and, in such


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event,  Buyer  shall be  responsible  for  only the  amount  in  excess  of such
$1,500,000.  The total  indemnification  that Buyer may be required to pay under
Section 11.3(a) shall not exceed $100,000,000.
                  (b)  Seller  and  Seller's  Parent  shall not be  required  to
indemnify  Buyer or any of its  Affiliates  under  Sections  11.4(a) and 11.4(e)
unless the  aggregate  of all amounts for which  indemnity  would  otherwise  be
payable thereunder exceeds $1,500,000 (for both such Sections in the aggregate),
and, in such event, Seller and Seller's Parent shall be responsible for only the
amount in excess of such $1,500,000.  The total  indemnification that Seller and
Seller's  Parent may be required to pay under  Sections  11.4(a) and 11.4(e) (in
the aggregate) shall not exceed $100,000,000.
                  (c)  Seller  and  Seller's  Parent  shall not be  required  to
indemnify Buyer or any of its Affiliates under Section 11.4(c) (other than those
items set forth on  Schedule  3.10 (or which  otherwise  were  pending as of the
Closing  Date) and any Carpal  Tunnel  Litigation)  unless the  aggregate of all
amounts  for which  indemnity  would  otherwise  be payable  thereunder  exceeds
$1,500,000,  and, in such event, Seller and Seller's Parent shall be responsible
for only the  amount in excess of such  $1,500,000.  No credit  will be given to
Seller and  Seller's  Parent for any reserves  for  litigation  set forth on the
Financial  Statements  or  included  in the  calculation  of the Final Net Asset
Amount.  Those items set forth on Schedule 3.10 and all Carpal Tunnel Litigation
are  indemnifiable  from  the  first  dollar  of  Loss  by  Buyer  or any of its
Affiliates.
                  (d)      For purposes of Section 11.4(g), no credit will be
given to Seller and Seller's Parent for any reserves for the "PRC


<PAGE>



Supplemental Executive Retirement Plan" set forth on the Financial Statements or
included in the calculation of the Final Net Asset Amount.
                  (e)  For   purposes   of   Section   11.3,   any   claim   for
indemnification  that might be brought  under more than one provision of Section
11.3 may be brought under any applicable provision at Seller's  discretion.  For
purposes of Section 11.4,  any claim for  indemnification  that might be brought
under  more  than one  provision  of  Section  11.4  may be  brought  under  any
applicable provision at Buyer's discretion.
                  (f) Losses for which an Indemnified Party shall be indemnified
hereunder  shall be net of any insurance  proceeds  received by the  Indemnified
Party from insurance companies, including affiliated insurance companies.
                                   ARTICLE XII
                                  MISCELLANEOUS
         Section 12.1. Limitation of Representations and Warranties.
                  (a)      The parties hereto acknowledge and agree that
neither Seller nor Seller's Parent makes, and neither Seller nor Seller's Parent
has made, any representations or warranties relating to Seller,  Seller's Parent
or any of the PRC Companies,  or any of the  transactions  contemplated  by this
Agreement,  other than the representations and warranties expressly set forth in
this Agreement or in any agreement or certificate  delivered  pursuant hereto or
in connection  herewith.  Without  limiting the generality of the disclaimer set
forth in the preceding  sentence,  other than the representations and warranties
expressly  set  forth  in this  Agreement  or in any  agreement  or  certificate
delivered pursuant


<PAGE>



hereto or in connection herewith,  neither Seller nor Seller's Parent makes, has
made or shall be deemed to have made any  representations or warranties,  in any
presentation or written  information  relating to the business of any of the PRC
Companies given or to be given in connection with the transactions  contemplated
by this  Agreement,  in any filing  made or to be made by or on behalf of any of
the PRC Companies with any Governmental  Entity,  and no statement,  made in any
such presentation or written materials,  made in any such filing or contained in
any  such  other  information  shall  be  deemed a  representation  or  warranty
hereunder or otherwise. No Person has been authorized by Seller, Seller's Parent
or any of the PRC Companies to make any representation or warranty in respect of
Seller,  Seller's Parent or any of the PRC Companies,  or in connection with the
transactions contemplated by this Agreement, unless contained in this Agreement.
                  (b)      Whenever any statement herein or in any schedule,
exhibit, certificate or other document delivered to any party pursuant to this 
Agreement is made "to [its] knowledge" or "to [its] best knowledge" or words of 
similar intent or effect of any party or its representative, such statement 
shall be deemed to be made to the best knowledge of (x) with respect to the PRC
Companies, Senior Vice Presidents or higher ranking officials of PRC, (y) with 
respect to Seller and Seller's Parent, the President, Vice President and Chief 
Financial Officer and Vice President and General Counsel of Seller's Parent, and
shall be deemed to include a representation that a reasonable investigation of 
the subject matter thereof has been conducted, and (z) with respect to Buyer,
Senior Vice Presidents or higher ranking officials of Buyer.  With


<PAGE>



respect to Seller and Seller's  Parent,  a reasonable  investigation  shall mean
that senior management of the pertinent corporation have shown the Employees set
forth on Schedule 12.1(b) hereto the relevant  statement and have consulted with
such  individuals as to whether they have knowledge of any fact or  circumstance
that would make such statement untrue.
         Section  12.2.  Disclosure.   Certain  information  set  forth  in  the
Schedules has been included and disclosed solely for informational  purposes and
may not be required to be disclosed pursuant to the terms and conditions of this
Agreement.  The  disclosure  of any such  information  shall  not be  deemed  to
constitute an  acknowledgement  or agreement that the information is required to
be disclosed in connection with the  representations and warranties made in this
Agreement or that the  information  is material,  nor shall any  information  so
included  and  disclosed  be deemed to  establish a standard of  materiality  or
otherwise used to determine whether any other information is material.
         Section 12.3. Expenses; Certain Taxes. Except as otherwise contemplated
by Section  10.2,  all legal,  accounting  and other costs and fees  incurred by
Seller or Seller's  Parent in connection with the  transactions  contemplated by
this Agreement shall be borne and paid for by Seller or Seller's Parent.  Except
as otherwise contemplated by Section 10.2, all legal, accounting and other costs
and fees incurred by Buyer in connection with the  transactions  contemplated by
this Agreement shall be borne and paid for by Buyer. All Taxes (other than taxes
on,  relating  to or  measured  by income or  gains),  stamp  duties,  notarial,
registration  and recording fees and similar Taxes resulting from or relating to
the


<PAGE>



transfer  of the PRC  Shares  to  Buyer  shall be borne  one-half  by Buyer  and
one-half by Seller  (including any Taxes (other than Income Taxes) on the deemed
sale of assets under the Section 338(h)(10) Election). Buyer and Seller agree to
treat  the  transactions  contemplated  by this  Agreement  as a sale of the PRC
Shares for purposes of such Taxes.
         Section 12.4. Entire Agreement.  This Agreement  constitutes the entire
agreement and understanding between the parties hereto in respect of the matters
set  forth  herein,  and all prior  negotiations,  writings  and  understandings
relating to the subject matter of this Agreement, other than the Confidentiality
Agreement, are merged herein and are superseded and cancelled by this Agreement.
Other  than as set  forth in this  Agreement,  no  representations,  warranties,
covenants,  agreements or conditions,  express or implied, whether by statute or
otherwise, have been made by the parties hereto.
         Section  12.5.  Amendment  and Waiver.  This  Agreement may be amended,
modified,  supplemented  or changed in whole or in part only by an  agreement in
writing making specific  reference to this Agreement and executed by each of the
parties hereto.  Any of the terms and conditions of this Agreement may be waived
in  whole or in  part,  but only by an  agreement  in  writing  making  specific
reference  to this  Agreement  and executed by the party that is entitled to the
benefit thereof.
     Section 12.6.  Binding  Agreement and  Successors.  This Agreement shall be
binding  upon and shall  inure to the  benefit of the  parties  hereto and their
respective  successors  and  permitted  assigns;  provided,  however,  that this
Agreement and the rights of


<PAGE>



the parties  hereunder may not be assigned,  and the  obligations of the parties
hereunder may not be delegated,  in whole or in part,  without the prior written
consent  of the other  party  hereto,  except  that  Buyer may assign its rights
hereunder  to any  wholly-owned  Subsidiary  of  Buyer  so long as  Buyer is not
released from its obligations  hereunder.  If Seller's Parent in one or a series
of transactions  sells,  disposes of or otherwise transfers all or substantially
all of its assets, prior to any such sales, dispositions or transfers,  Seller's
Parent shall, without being released from its obligations  hereunder,  cause the
transferee to assume the obligations of Seller's Parent under this Agreement.
         Section 12.7. No Third Party Beneficiaries.  Other than as specifically
provided in Sections  11.3 and 11.4,  nothing in this  Agreement  is intended or
shall be construed  to confer upon any Person other than the parties  hereto and
their Subsidiaries and Affiliates any rights or remedies.
         Section  12.8.  Notices.  Any  notice,  request,  instruction  or other
document or communication required or permitted to be given under this Agreement
shall be in writing  and shall be deemed to be given upon  delivery in person or
by telecopier,  three business days after being  deposited in the mail,  postage
prepaid,  for mailing by certified or registered mail, or one business day after
being deposited with an overnight courier, charges prepaid, as follows:
                  If to Seller or Seller's Parent, delivered or mailed to:
                           c/o The Black & Decker Corporation
                           701 East Joppa Road
                           Towson, Maryland  21286
                           Attention:  Charles E. Fenton, Esquire
                                       Vice President and General Counsel
                           Telecopier No.:  (410) 716-2660



<PAGE>



                           with a copy delivered or mailed to:

                                    Glenn C. Campbell, Esquire
                                    Miles & Stockbridge,
                                      a Professional Corporation
                                    10 Light Street
                                    Baltimore, Maryland  21202
                                    Telecopier No.:  (410) 385-3700

                  If to Buyer (or, after the Closing, any of the PRC Companies),
                  delivered or mailed to:

                           Litton Industries, Inc.
                           21240 Burbank Boulevard
                           Woodland Hills, California  91367
                           Attention:  John E. Preston, Esquire
                                       Senior Vice President and
                                       General Counsel
                           Telecopier No.:  (818) 598-2025

                           With a copy delivered or mailed to:

                                    David G. Pommerening, Esquire
                                    O'Melveny & Myers
                                    555 13th Street, N.W.
                                    Washington, D.C  20004
                                    Telecopier No.:  (202) 383-5414

or to such other address or addresses as may be specified in writing at any time
or from time to time by either party to the other party hereto.
         Section  12.9.  Further  Assurances.  The parties  hereto each agree to
execute, make, acknowledge,  and deliver such instruments,  agreements and other
documents  as may be  reasonably  required to  effectuate  the  purposes of this
Agreement and to consummate the transactions contemplated hereby.
         Section 12.10.  Article and Section  Headings.  The Article and Section
headings  contained in this Agreement are for  convenience of reference only and
shall not limit or  otherwise  affect  the  meaning  or  interpretation  of this
Agreement or any of its terms and conditions.


<PAGE>



     Section  12.11.  Governing  Law.  This  Agreement  shall be  construed  and
enforced  in  accordance  with and shall be governed by the Laws of the State of
Delaware, without regard to the conflict of laws and principles thereof.
         Section 12.12.  Construction.  As used in this Agreement, any reference
to the  masculine,  feminine or neuter  gender shall  include all  genders,  the
plural shall  include the singular,  and the singular  shall include the plural.
With regard to each and every term and  condition of this  Agreement and any and
all agreements and instruments  subject to the terms hereof,  the parties hereto
understand  and  agree  that the  same  have or has  been  mutually  negotiated,
prepared and drafted,  and that if at any time the parties  hereto desire or are
required to interpret or construe any such term or condition or any agreement or
instrument subject hereto, no consideration shall be given to the issue of which
party hereto  actually  prepared,  drafted or requested any term or condition of
this Agreement or any agreement or instrument subject hereto.
     Section   12.13.   Counterparts.   This   Agreement   may  be  executed  in
counterparts,  each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
         Section 12.14.  Reference of Disputes to Senior  Officers.  Any dispute
between Seller and Seller's  Parent,  on the one hand,  and Buyer,  on the other
hand,  arising out of or in connection with this Agreement or any alleged breach
hereof may, at the option of either Seller or Buyer, be submitted for discussion
and possible resolution by senior officers of Seller's Parent and Buyer, as


<PAGE>



designated by their respective chief executive officers, for a period of 30 days
(or such longer period as the parties may in particular  cases so decide) before
initiating any arbitration pursuant to Section 12.15.
         Section  12.15.  Arbitration.   Except  as  specifically  provided  for
elsewhere in this Agreement,  all claims and controversies  arising out of or in
connection  with this  Agreement  shall be  subject to  binding  arbitration  in
Virginia by a single  arbitrator in accordance  with the commercial  arbitration
rules of the American  Arbitration  Association ("AAA") or the existing Rules of
Practice and Procedures of the Judicial Arbitration and Mediation Services, Inc.
("JAMS"), and judgment on the award rendered by the arbitrator may be entered in
any court having  jurisdiction  thereof.  The party filing the arbitration shall
have the right to select  either AAA or JAMS.  The parties  shall be entitled to
discovery in accordance  with the  provisions  of Virginia  law. The  prevailing
party in any arbitration proceeding hereunder as determined by the arbitrator or
in any legal  proceedings  or actions  arising from or in  connection  with this
Agreement  shall be entitled to recover  reasonable  attorneys'  fees and costs.
Nothing herein shall prohibit a party from seeking  equitable  relief in a court
of law to maintain the status quo while an arbitration is pending hereunder. The
parties  agree that the  arbitrator  shall not have the right to award  punitive
damages.




<PAGE>


         IN  WITNESS  WHEREOF,  Seller,  Seller's  Parent,  PRC and  Buyer  have
executed this Agreement as of the day and year first above written.

                                    THE BLACK & DECKER CORPORATION


                                    By: /s/ Charles E. Fenton
                                    Title:  Vice President and General
                                              Counsel



                                     PRC INVESTMENTS INC.


                                     By: /s/ Charles E. Fenton
                                     Title:  Vice President



                                     PRC INC.


                                     By: /s/ Charles E. Fenton
                                     Title:  Vice President



                                     LITTON INDUSTRIES, INC.


                                     By: /s/ H. Thomas Hicks
                                     Title:  Vice President


Schedules and Exhibits omitted.










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