UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  SCHEDULE 13D

                    Under the Securities Exchange Act of 1934

                            DRESSER INDUSTRIES, INC.
- -------------------------------------------------------------------------------
                                (Name of Issuer)

                     Common Stock, par value $.25 per share
- --------------------------------------------------------------------------------
                         (Title of Class of Securities)

                                   261597 10 8
             ------------------------------------------------------

                                 (CUSIP Number)

                                Lester L. Coleman
                  Executive Vice President and General Counsel
                               Halliburton Company
                               3600 Lincoln Plaza
                             500 North Akard Street
                            Dallas, Texas 75201-3391
                                 (214) 978-2600

                                 with a copy to:

                               William E. Joor III
                             Vinson & Elkins L.L.P.
                              2300 First City Tower
                               1001 Fannin Street
                            Houston, Texas 77002-6760
                                 (713) 758-2582
- --------------------------------------------------------------------------------
                 (Name, Address and Telephone Number of Persons
                Authorized to Receive Notices and Communications)

                                February 25, 1998
             ------------------------------------------------------
             (Date of Event which Requires Filing of This Statement)

If the filing person has previously  filed a Statement on Schedule 13G to report
the  acquisition  which is the subject of this  Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box:

The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the  Securities  Exchange  Act of
1934, as amended (the "Exchange  Act"), or otherwise  subject to the liabilities
of that Section of the Exchange Act but shall be subject to all other provisions
of the Exchange Act.

Beneficial  ownership  percentages  set forth herein assume that at February 25,
1998 there were 175,479,962 shares of Dresser Common Stock outstanding.


                         (Continued on following pages)

                                       -1-





CUSIP NO. 261597 10 8                           Page 2 of      Pages
                                                          ----


                                    SCHEDULE

                                       13D

1         NAME OF REPORTING PERSON
          S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

          Halliburton Company              75-2677995
2
          CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

3         SEC USE ONLY

4         SOURCE OF FUNDS
          WC; 00

5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
          ITEMS 2(d) OR 2(e)

6         CITIZENSHIP OR PLACE OF ORGANIZATION
          Delaware
- --------------------------------------------------------------------------------

                       7         SOLE VOTING POWER
      NUMBER OF                  26,322,082(1)
       SHARES
    BENEFICIALLY       8         SHARED VOTING POWER
      OWNED BY
        EACH           9         SOLE DISPOSITIVE POWER
      REPORTING                  26,322,082(1)
       PERSON
        WITH         10         SHARED DISPOSITIVE POWER
        
- ---------------------


- --------------------------------------------------------------------------------

11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
          26,322,082(1)

12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES

13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
          13.0% (approximate)(2)

14        TYPE OF REPORTING PERSON
          CO
- --------------------------------------------------------------------------------

     (1) Pursuant to Rule 13d-4 under the  Exchange  Act, the  Reporting  Person
         disclaims   beneficial  ownership  of  26,321,994   shares listed under
         the  headings  "Sole  Voting  Power,"  "Sole  Dispositive   Power"  and
         "Aggregate  Amount  Beneficially  Owned by Each Reporting  Person." See
         Item 5 of this Schedule 13D.
     (2) Pursuant   to   Rule   13d-3   under    the   Exchange  Act, 26,321,994
         shares deemed to  be  beneficially owned  by the  Reporting Person as a
         result  of  the  Stock  Option  are  also  deemed to be outstanding for
         purposes of computing this percentage. See Item 5 of this Schedule 13D.


                                       -2-




Item 1.  Security and Issuer:

         This Schedule 13D relates to the common stock, par value $.25 per share
("Dresser Common Stock"), of Dresser Industries,  Inc., a corporation  organized
under the laws of the State of Delaware  ("Dresser").  The  principal  executive
offices of Dresser are located at 2001 Ross Avenue, Dallas, Texas 75201.

Item 2.  Identity and Background:

         This Schedule 13D is being filed by Halliburton  Company, a corporation
organized under the laws of the State of Delaware  ("Halliburton").  Halliburton
is one of the world's  largest  diversified  energy services and engineering and
construction services companies.  The principal executive offices of Halliburton
are located at 3600  Lincoln  Plaza,  500 North  Akard  Street,  Dallas,  Texas,
75201-3391.

         Other than executive  officers and  directors,  there are no persons or
corporations controlling or ultimately in control of Halliburton.

         During the last five  years,  to the best of  Halliburton's  knowledge,
neither  Halliburton  nor any of its  executive  officers or directors  has been
convicted in a criminal  proceeding  (excluding  traffic  violations  or similar
misdemeanors)  or has  been a  party  to a civil  proceeding  of a  judicial  or
administrative  body of competent  jurisdiction as a result of which Halliburton
or such person was or is subject to a judgment,  decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws, or finding any violation with respect to such laws.

         With the  exception  of Lord  Clitheroe  who is a citizen of the United
Kingdom,  each executive officer and director of Halliburton is a citizen of the
United States.  The name,  business address and present principal  occupation of
each executive officer and director of Halliburton are set forth in Exhibit A to
this Schedule 13D and are specifically incorporated herein by reference.

Item 3.  Source and Amount of Funds or Other Consideration:

         The Option (as defined below) was granted in  consideration of entering
into the  Merger  Agreement  (as  defined  below)  and  Halliburton  granting  a
reciprocal option to Dresser.  Halliburton did not pay any cash consideration in
respect of the Option and has not purchased  any shares of Dresser  Common Stock
thereunder.

         The  exercise  of  an   irrevocable   option  (the  "Option")  held  by
Halliburton pursuant to a Stock Option Agreement,  dated as of February 25, 1998
(the  "Stock  Option  Agreement"),  by and  between  Dresser  (as  Grantor)  and
Halliburton (as Grantee),  for the full number of shares of Dresser Common Stock
currently  covered  thereby  would  require  (based  on an  Exercise  Price  (as
described  below)  of $44.00  per  share)  the  payment  of a maximum  aggregate
Exercise  Price of  approximately  $1.158  billion.  Should  the  Option  become
exercisable and should  Halliburton  decide to exercise the Option,  Halliburton
anticipates  that it would  obtain the funds  necessary  for the  purchase  from
working  capital  and  borrowings.   The  Stock  Option  Agreement  also  grants
Halliburton the right to require Dresser to repurchase all or any portion of the
Option, subject to certain limitations.

         A subsidiary of Halliburton has owned 88 shares of Dresser Common Stock
for over three years.

Item 4.  Purpose of Transaction:

         The  Option  was  granted  by  Dresser  as  a   condition   of  and  in
consideration for Halliburton's  entering into the Agreement and Plan of Merger,
dated  as  of  February  25,  1998  (the  "Merger  Agreement"),   by  and  among
Halliburton,  Halliburton N.C., Inc., a corporation  organized under the laws of
the State of Delaware  and a wholly owned  subsidiary  of  Halliburton  ("Merger
Sub"), and Dresser. Pursuant to the Stock Option Agreement,  Halliburton has the
right to purchase up to  26,321,994  shares of Dresser  Common Stock (15% of the
number  of  shares  outstanding  on  February  25,  1998),  subject  to  certain
adjustments, at a price equal to the lesser of (i) $44.00 per share and (ii) the
closing  price of Grantor  Common  Stock on the date of  exercise of the Option,
subject to certain adjustments (the "Exercise Price").

     Notwithstanding  the  foregoing,  if  between  February  25,  1998  and the
Effective  Time (as defined  below),  the  outstanding  shares of Dresser Common
Stock are changed by reason of any stock dividend,


                                       -3-




recapitalization, split, combination, exchange of shares or similar transaction,
the type and  number of shares  subject to the  Option  and the  Exercise  Price
therefor will be correspondingly  adjusted so that Halliburton will receive upon
exercise  the same  class and  number  of  outstanding  shares as it would  have
received upon exercise prior to such event. If any additional  shares of Dresser
Common Stock are issued after February 25, 1998, the number of shares subject to
the Option  shall be adjusted so as to equal 15% of Dresser  Common Stock issued
and outstanding.

         Simultaneously  with  the  execution  of the  Stock  Option  Agreement,
Halliburton,  Merger Sub and Dresser entered into the Merger Agreement, pursuant
to which Merger Sub would merge with and into Dresser (the "Merger").  Under the
terms of the Merger  Agreement,  each share of Dresser  Common  Stock issued and
outstanding  immediately  prior  to  the  effective  time  of  the  Merger  (the
"Effective Time") would be converted into one share of Halliburton common stock,
par value $2.50  ("Halliburton  Common Stock"),  and all outstanding  options to
purchase  shares of Dresser  Common  Stock will be  assumed by  Halliburton  and
converted  into  options  to  purchase  shares  of  Halliburton   Common  Stock.
Consequently,  Dresser will become a wholly owned subsidiary of Halliburton, and
the Dresser  Common Stock will cease to be traded on the New York Stock Exchange
or any other  exchange and will cease to be registered  pursuant to the Exchange
Act of 1934, as amended.

         Pursuant to the Merger Agreement, Halliburton's Board of Directors will
consist  of 14  members  at the  Effective  Time,  nine of whom shall be current
members of the Board of Directors of Halliburton,  including  Richard B. Cheney,
and five of whom shall be current  members of the Board of Directors of Dresser,
including  William E.  Bradford.  A committee  consisting  of Richard B. Cheney,
William E. Bradford and the current chairman of the Nominating Committee of each
of Halliburton and Dresser will appoint the additional  members of Halliburton's
Board of Directors.

         Consummation of the  transactions  contemplated by the Merger Agreement
is  subject  to the terms and  conditions  contained  in the  Merger  Agreement,
including the receipt of certain  approvals by the  respective  stockholders  of
Halliburton  and  Dresser,  the  receipt of certain  regulatory  approvals,  the
receipt of legal  opinions  that the Merger  will be tax-free  and  accountants'
confirmation  that the Merger will be accounted  for as a pooling of  interests.
The Merger Agreement and the transactions contemplated thereby will be submitted
for approval at a Special Meeting of Dresser  stockholders to be held in lieu of
its Annual Meeting.  The issuance (the "Share  Issuance") of Halliburton  Common
Stock pursuant to the Merger Agreement and an amendment (the "Charter Amendment)
to  Halliburton's   Restated   Certificate  of  Incorporation  to  increase  the
authorized  number of shares of Halliburton  Common Stock will be submitted at a
Special  Meeting of  Halliburton  stockholders  to be held in lieu of its Annual
Meeting.

         The foregoing summary of the Stock Option Agreement does not purport to
be  complete  and is  subject  to all of the terms and  provisions  of the Stock
Option Agreement, a copy of which is filed as Exhibit B to this Schedule 13D and
incorporated by reference herein.

         Except as set forth  herein,  Halliburton  presently  does not have any
plans  or  proposals  that  relate  to or  would  result  in any of the  actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D.

         The Merger  Agreement  is  included  as  Exhibit C and is  specifically
incorporated by reference herein.

Item 5.  Interest in Securities of Issuer:

         Although  the Stock  Option  Agreement  does not allow  Halliburton  to
purchase  any  shares of  Dresser  Common  Stock  pursuant  thereto  unless  the
specified conditions allowing exercise occur, assuming for purposes of this Item
5 that such conditions occur and Halliburton is  entitled to  purchase  and does
purchase all shares of  Dresser  Common  Stock that may be purchased pursuant to
the  Option,  Halliburton  would  own  up to 26,322,082 shares of Dresser Common
Stock, which would equal approximately 15.0% of the number of shares outstanding
on  February  25,  1998, or approximately 13.0% of the total number of shares of
Dresser  Common  Stock  outstanding  as  adjusted to reflect the exercise of the
Option in its entirety.

         Under the Stock Option Agreement,  Halliburton  currently does not have
the right to acquire any shares of Dresser Common Stock unless  specific  events
occur. Accordingly, Halliburton does not currently have sole or shared voting or
dispositive   power   with   respect  to  the  shares of  Dresser  Common  Stock
subject to the Option,  and Halliburton therefore disclaims beneficial ownership
of such shares of Dresser Common Stock  until the events


                                       -4-




allowing  exercise  occur.  Assuming for purposes of this Item 5, however,  that
events  occur that would  enable  Halliburton  to exercise  the Dresser  Option,
Halliburton would have the right to purchase up to 26,321,994 shares, subject to
adjustment  as  described  above,  of  Dresser  Common  Stock,  as  to which, if
purchased, it would have sole voting power and sole dispositive power.

         A subsidiary of Halliburton has owned 88 shares of Dresser Common Stock
for over three years.

         No other person is known by Halliburton to have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale
of, the securities covered by this Schedule 13D.

         To the  best  of  Halliburton's  knowledge,  no  executive  officer  or
director of Halliburton beneficially owns any Dresser Common Stock.

Item 6.  Contracts, Arrangements, Understandings or Relationships with Respect
         to Securities of the Issuer:

         Contracts,  arrangements,  understandings or relationships with respect
to  securities of Dresser  consist of the Stock Option  Agreement and the Merger
Agreement. The aforementioned documents are attached hereto as Exhibits B and C,
respectively,  and are specifically  incorporated herein by reference.  See also
description of the aforementioned documents in Items 3 and 4 above.

         Except for the Merger Agreement and the Stock Option Agreement, neither
Halliburton nor, to the best of its knowledge,  any other person named in Item 2
has  any  contract,   arrangement,   understanding  or  relationship  (legal  or
otherwise) with any person with respect to any securities of Dresser, including,
but not limited to, transfer or voting of any securities,  finder's fees,  joint
ventures,  loan or option  arrangements,  puts or calls,  guarantees of profits,
division of profits or loss, or the giving or withholding or proxies.

Item 7.  Material to be Filed as Exhibits:

         The following Exhibits are filed as part of this Schedule 13D:

         Exhibit A:        Name, Business Address, and Present Principal
                           Occupation of Each Executive Officer and Director of
                           Halliburton.

         Exhibit B:        Stock Option  Agreement,  dated as of February 25,
                           1998, by and between Halliburton and Dresser.

         Exhibit C:        Agreement and Plan of Merger, dated as of February
                           25, 1998,  by and among  Halliburton,  Merger Sub and
                           Dresser.


                                       -5-



                                    SIGNATURE

     After  reasonable  inquiry  and to the  best of my  knowledge  and  belief,
certify that the information  set forth in this statement is true,  complete and
correct.

Date: March 9, 1998                         HALLIBURTON COMPANY
     -----------------
                                            By:  /s/Susan S. Keith
                                                 -----------------------------
                                                    Susan S. Keith
                                                    Vice President and Secretary



                                       -6-


                                    EXHIBIT A

           NAME, BUSINESS ADDRESS AND PRESENT PRINCIPAL OCCUPATION OF
               EACH EXECUTIVE OFFICER AND DIRECTOR OF HALLIBURTON


I.   Executive Officers of Halliburton

Richard B. Cheney             3600 Lincoln Plaza        Chairman of the Board
                              500 North Akard Street    and Chief Executive
                              Dallas, Texas 75201-3391  Officer and Director

David J. Lesar                3600 Lincoln Plaza        President and Chief
                              500 North Akard Street    Operating Officer
                              Dallas, Texas 75201-3391

Dale P. Jones                 3600 Lincoln Plaza        Vice Chairman and
                              500 North Akard Street    Director
                              Dallas, Texas 75201-3391

Kenneth R. LeSuer             5151 San Felipe           Vice Chairman
                              Houston, Texas 77056

Lester L. Coleman             3600 Lincoln Plaza        Executive Vice President
                              500 North Akard Street    and General Counsel
                              Dallas, Texas 75201-3391

Gary V. Morris                4100 Clinton Drive        Executive Vice President
                              Houston, Texas 77020      and Chief Financial
                                                        Officer

Lewis W. Powers               4100 Clinton Drive        Senior Vice President
                              Houston, Texas 77020

Jerry H. Blurton              4100 Clinton Drive        Vice President and
                              Houston, Texas 77020      Treasurer

Robert Charles Muchmore, Jr.  4100 Clinton Drive        Vice President and
                              Houston, Texas 77020      Controller


                                       A-1




II.  Directors of Halliburton

Anne L. Armstrong          Kleberg National Bank Building    Chairman of the
                           6th and Kleberg Streets           Board of Trustees,
                           Kingsville, Texas 78363           Center for
                                                             Strategic and
                                                             International
                                                             Studies,
                                                             Washington, D.C.

Richard B. Cheney          3600 Lincoln Plaza                Chairman of the
                           500 North Akard Street            Board and Chief
                           Dallas, Texas 75201-3391          Executive Officer,
                                                             Halliburton Company

Lord Clitheroe             Downham Hall                      Chairman, The
                           Clitheroe                         Yorkshire Bank, PLC
                           Lancashire, BB7 4DN
                           England

Robert L. Crandall         AMR Corporation                   Chairman, President
                           4333 Amon Carter Boulevard        and Chief Executive
                           6 North                           Officer, AMR
                           Ft. Worth, Texas 76155            Corporation; and
                                                             Chairman and Chief
                                                             Executive Officer,
                                                             American Airlines,
                                                             Inc.

Charles J. DiBona          9306 Georgetown Pike              Retired President
                           Great Falls, Virginia  22066      and Chief Executive
                                                             Officer, American
                                                             Petroleum Institute

W.R. Howell                6501 Legacy Drive, Building A     Chairman Emeritus,
                           1st Floor                         J.C. Penney
                           Plano, Texas 75024                Company, Inc.

Dale P. Jones              3600 Lincoln Plaza                Vice Chairman,
                           500 North Akard Street            Halliburton Company
                           Dallas, Texas 75201-3391

Delano E. Lewis            635 Massachusetts Avenue, N.W.    President and Chief
                           Washington, DC 20001-3753         Executive Officer, 
                                                             National Public
                                                             Radio

C.J. Silas                 408 Professional Building         Retired Chairman of
                           4th & Keeler Streets              the Board and Chief
                           Bartlesville, Oklahoma 74003      Executive Officer,
                                                             Phillips Petroleum
                                                             Company

Roger T. Staubach          6750 LBJ Freeway, Suite 1100      Chairman and Chief
                           Dallas, Texas 75240               Executive Officer,
                                                             The Staubach
                                                             Company

Richard J. Stegemeier      376 South Valencia Avenue         Chairman Emeritus,
                           Brea, California 92621            Unocal Corporation


                                       A-2



Dresser Industries, Inc.


                             STOCK OPTION AGREEMENT


         This STOCK  OPTION  AGREEMENT  is dated as of February  25, 1998 by and
between Dresser Industries,  Inc., a Delaware  corporation (the "Company"),  and
Halliburton Company, a Delaware corporation (the "Grantee").

                                    RECITALS:

         The  Grantee,  the  Company  and Newco  propose  to enter into a Merger
Agreement  providing,  among other things, for the Merger pursuant to the Merger
Agreement  of  Newco  with and into the  Company  which  shall be the  surviving
corporation.

         As a condition and  inducement to the  Grantee's  willingness  to enter
into the Merger Agreement, the Grantee has requested that the Company agree, and
the Company has agreed, to grant the Grantee the Option.

         The  Board  of  Directors  of  the  Company  has  approved  the  Merger
Agreement,  the Merger and this  Agreement and has  recommended  approval of the
Merger Agreement by the holders of Company Common Stock.

         The  Board  of  Directors  of  the  Grantee  has  approved  the  Merger
Agreement,  the Merger and this  Agreement and has  recommended  approval of the
Charter Amendment and the Share Issuance by the holders of Parent Common Stock.

         NOW,  THEREFORE,  in  consideration of the foregoing and the respective
representations,  warranties,  covenants and  agreements set forth herein and in
the Merger Agreement, the Company and the Grantee agree as follows:

         1.  Capitalized  Terms.  Those  capitalized  terms used but not defined
herein  that are defined in the Merger  Agreement  are used herein with the same
meanings as ascribed to them therein;  provided,  however, that, as used in this
Agreement,  "Person"  shall have the meaning  specified in Sections  3(a)(9) and
13(d)(3) of the Exchange Act.  Those  capitalized  terms used in this  Agreement
that are not defined in the Merger  Agreement  are defined in Annex A hereto and
are used herein with the meanings ascribed to them therein.

         2.  The Option.

                  (a) Grant of Option.  Subject to the terms and  conditions set
         forth herein,  the Company  hereby grants to the Grantee an irrevocable
         option to purchase,  out of the authorized but unissued  Company Common
         Stock,  26,321,994  shares of Company  Common Stock (as adjusted as set
         forth herein) (the "Option Shares"), at the Exercise Price.

                  (b)Exercise Price.   The exercise price (the "Exercise Price")
         of  the Option  shall  be the lesser of (i) $44.00 per Option Share and
         (ii) the Common Stock Exchange Ratio

                             STOCK OPTION AGREEMENT
                                       -1-




         multiplied by the Closing Price of the Company Common Stock on the date
         of exercise of the Option.

                  (c) Term. The Option shall be exercisable at any time and from
         time to time  following the  occurrence of an Exercise  Event and shall
         remain in full force and effect  until the earliest to occur of (i) the
         Effective Time, (ii) the first anniversary of the receipt by Grantee of
         written  notice from the Company of the occurrence of an Exercise Event
         and (iii)  termination of the Merger  Agreement in accordance  with its
         terms prior to the occurrence of an Exercise Event (the "Option Term");
         provided,  however,  that the Option Term shall be  extended  until the
         commencement  of the Put Period if, at the end of the Option Term,  the
         events  described in clauses (i), (ii) and (iii) of Section  9.05(d) of
         the Merger  Agreement  have  transpired and the acceptance or agreement
         referenced  in  clause  (iii)  of such  Section  9.05(d)  has not  been
         terminated  prior  to  consummation  of the  transactions  contemplated
         thereby. If so extended, the Option Term shall expire contemporaneously
         with any  termination  of the  acceptance  or agreement  referenced  in
         clause (iii) of such Section 9.05(d).  If the Option is not theretofore
         exercised, the rights and obligations set forth in this Agreement shall
         terminate at the expiration of the Option Term.

                  (d)  Exercise of Option.  The Grantee may exercise the Option,
         in whole or in part,  at any  time  and from  time to time  during  the
         Option Term.  Notwithstanding  the  expiration of the Option Term,  the
         Grantee shall be entitled to purchase  those Option Shares with respect
         to which it has  exercised  the  Option  in  accordance  with the terms
         hereof prior to the expiration of the Option Term.

                           (i) If the Grantee wishes to exercise the Option,  it
                  shall send a written  notice (an "Exercise  Notice") (the date
                  of which being herein referred to as the "Notice Date") to the
                  Company  specifying  (i) the total number of Option  Shares it
                  intends to purchase pursuant to such exercise and (ii) a place
                  and a date (the  "Closing  Date") not  earlier  than three (3)
                  Business  Days nor later than 15 Business Days from the Notice
                  Date for the closing of the purchase and sale  pursuant to the
                  Option (the "Closing").

                           (ii) If the  Closing  cannot be effected by reason of
                  the application of any Law,  Regulation or Order,  the Closing
                  Date shall be extended to the tenth Business Day following the
                  expiration or termination of the  restriction  imposed by such
                  Law, Regulation or Order.  Without limiting the foregoing,  if
                  prior  notification to, or Authorization  of, any Governmental
                  Authority is required in connection  with the purchase of such
                  Option  Shares  by  virtue  of the  application  of such  Law,
                  Regulation  or Order,  the  Grantee  and, if  applicable,  the
                  Company shall promptly file the required notice or application
                  for Authorization and the Grantee, with the cooperation of the
                  Company, shall expeditiously process the same.

                           (iii)   Notwithstanding   Section  2(d)(ii),  if  the
                  Closing Date shall not have occurred  within nine months after
                  the related Notice Date as a result of one or more

                             STOCK OPTION AGREEMENT
                                       -2-



                  restrictions imposed by the application of any Law, Regulation
                  or Order,  the  exercise of the Option  effected on the Notice
                  Date shall be deemed to have expired.

                  (e)      Payment and Delivery of Certificates.

                           (i) At each  Closing,  the  Grantee  shall pay to the
                  Company in immediately  available  funds by wire transfer to a
                  bank account  designated by the Company an amount equal to the
                  Exercise Price multiplied by the Option Shares to be purchased
                  on such Closing Date.

                           (ii)  At  each  Closing,   simultaneously   with  the
                  delivery of immediately available funds as provided in Section
                  5(a),  the Company  shall deliver to the Grantee a certificate
                  or certificates representing the Option Shares to be purchased
                  at such Closing, which Option Shares shall be duly authorized,
                  validly  issued,  fully  paid and  nonassessable  and free and
                  clear of all  Liens,  and the  Grantee  shall  deliver  to the
                  Company its written  agreement that the Grantee will not offer
                  to  sell  or  otherwise  dispose  of  such  Option  Shares  in
                  violation  of  applicable   Law  or  the  provisions  of  this
                  Agreement.

                  (f) Certificates. Certificates for the Option Shares delivered
         at each Closing shall be endorsed with a restrictive  legend that shall
         read substantially as follows:

                           THE  TRANSFER  OF  THE  STOCK   REPRESENTED  BY  THIS
                           CERTIFICATE IS SUBJECT TO RESTRICTIONS  ARISING UNDER
                           THE SECURITIES ACT OF 1933, AS AMENDED,  AND PURSUANT
                           TO THE TERMS OF A STOCK OPTION  AGREEMENT DATED AS OF
                           FEBRUARY 25, 1998. A COPY OF SUCH  AGREEMENT  WILL BE
                           PROVIDED  TO THE HOLDER  HEREOF  WITHOUT  CHARGE UPON
                           RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR.

         A new certificate or certificates  evidencing the same number of shares
         of the  Company  Common  Stock will be issued to the Grantee in lieu of
         the  certificate  bearing the above  legend,  and such new  certificate
         shall not bear such  legend,  insofar as it  applies to the  Securities
         Act, if the  Grantee  shall have  delivered  to the Company a copy of a
         letter  from the staff of the  Commission,  or an opinion of counsel in
         form and  substance  reasonably  satisfactory  to the  Company  and its
         counsel, to the effect that such legend is not required for purposes of
         the Securities Act.

                  (g) If at the time of  issuance of any  Company  Common  Stock
         pursuant to any exercise of the Option,  the Company  shall have issued
         any share purchase  rights or similar  securities to holders of Company
         Common Stock,  then each Option Share purchased  pursuant to the Option
         shall also include rights with terms  substantially  the same as and at
         least as favorable  to the Grantee as those issued to other  holders of
         Company Common Stock.

                             STOCK OPTION AGREEMENT
                                       -3-




         3.       Adjustment Upon Changes in Capitalization, Etc.

                  (a) In the event of any change in the Company  Common Stock by
         reason of a stock dividend,  split-up,  combination,  recapitalization,
         exchange  of  shares or  similar  transaction,  the type and  number of
         shares or  securities  subject to the Option,  and the  Exercise  Price
         therefor,  shall be adjusted appropriately,  and proper provision shall
         be made in the  agreements  governing  such  transaction,  so that  the
         Grantee  shall  receive upon  exercise of the Option the same class and
         number of  outstanding  shares or other  securities  or  property  that
         Grantee would have  received in respect of the Company  Common Stock if
         the Option had been exercised  immediately  prior to such event, or the
         record date therefor, as applicable.

                  (b) If any  additional  shares  of  Company  Common  Stock are
         issued  after the date of this  Agreement  (other  than  pursuant to an
         event  described  Section 3(a) above),  the number of shares of Company
         Common Stock then remaining  subject to the Option shall be adjusted so
         that, after such issuance of additional  shares,  such number of shares
         then remaining subject to the Option,  together with shares theretofore
         issued  pursuant to the  Option,  equals 15% of the number of shares of
         Company Common Stock then issued and  outstanding;  provided,  however,
         that the number of shares of Company Common Stock subject to the Option
         shall only be increased  to the extent the Company  then has  available
         authorized but unissued and unreserved shares of Company Common Stock.

                  (c) To the  extent  any of the  provisions  of this  Agreement
         apply to the  Exercise  Price,  they  shall be  deemed  to refer to the
         Exercise Price as adjusted pursuant to this Section 3.

         4.  Retention of Beneficial  Ownership.  To the extent that the Grantee
shall exercise the Option, the Grantee shall,  unless the Grantee shall exercise
the Put Right or the  Alternative  Put Right or the Company  shall  exercise the
Call Right or the Alternative  Call Right,  retain  Beneficial  Ownership of the
shares of Company  Common Stock so acquired  through the later of the end of the
Call Period or the end of the Alternative Call Period.

         5.       Repurchase at the Option of Grantee.

                  (a) At the  request of the  Grantee  made at any time during a
         period of sixty (60) days after the termination fee for which provision
         is made in Section 9.05(d) of the Merger Agreement becomes payable (the
         "Put Period"),  the Company (or any successor  thereto)  shall,  at the
         election of the Grantee (the "Put Right"),  repurchase from the Grantee
         (i) all or any portion of the Option that then remains  unexercised (or
         as to which the  Option  has been  exercised  but the  Closing  has not
         occurred)  and (ii) all or any portion of the shares of Company  Common
         Stock  purchased  by the Grantee  pursuant  hereto and with  respect to
         which the Grantee then has Beneficial Ownership.  The date on which the
         Grantee exercises its rights under this Section 4 is referred to as the
         "Put Date." Such  repurchase  shall be at an aggregate  price (the "Put
         Consideration") equal to the sum of:


                             STOCK OPTION AGREEMENT
                                       -4-



                           (i) the aggregate  Exercise Price paid by the Grantee
                  for any Option Shares  which the  Grantee owns and as to which
                  the Grantee is exercising the Put Right;

                           (ii) the excess, if any, of the Applicable Price over
                  the  Exercise  Price paid by the Grantee for each Option Share
                  as to which the Grantee is exercising the Put Right multiplied
                  by the number of such shares; and

                           (iii) the excess, if any, of (x) the Applicable Price
                  for each share of Company  Common  Stock over (y) the Exercise
                  Price multiplied by the number of Unexercised Option Shares as
                  to which the Grantee is exercising the Put Right.

                  (b) At the request of the  Grantee  made at any time after the
         first Exercise Event and ending on the First  Anniversary of the Notice
         Date (the  "Alternative  Put  Period"),  the Company (or any  successor
         thereto)  shall, at the election of the Grantee (the  "Alternative  Put
         Right"),  repurchase  from the Grantee all or any portion of the shares
         of Company Common Stock  purchased by the Grantee  pursuant  hereto and
         with respect to which the Grantee then has  Beneficial  Ownership.  The
         date on which the Grantee  exercises its rights under this Section 4 is
         referred to as the  "Alternative Put Date." Such repurchase shall be at
         an aggregate price (the "Alternative Put  Consideration")  equal to the
         Exercise  Price  multiplied  by the number of shares of Company  Common
         Stock so  purchased  by the Company and for which the  Alternative  Put
         Right has been exercised.

                  (c) If the Grantee  exercises its rights under this Section 4,
         the Company shall,  within five Business Days after the Put Date or the
         Alternative Put Period,  pay the Put  Consideration  or the Alternative
         Put  Consideration,  as the case may be, to the Grantee in  immediately
         available  funds,  and the Grantee  shall  surrender to the Company the
         Option or portion of the Option  and the  certificates  evidencing  the
         shares of Company Common Stock purchased thereunder.  The Grantee shall
         warrant  to the  Company  that,  immediately  prior  to the  repurchase
         thereof  pursuant  to this  Section 4, the  Grantee had sole record and
         Beneficial Ownership of the Option or such shares, or both, as the case
         may be, and that the Option or such  shares,  or both,  as the case may
         be, were then held free and clear of all Liens.

                  (d) If the Option has been exercised,  in whole or in part, as
         to any Option Shares  subject to the Put Right or the  Alternative  Put
         Right but the Closing  thereunder has not occurred,  the payment of the
         Put Consideration or the Alternative Put  Consideration  shall, to that
         extent, render such exercise null and void.

                  (e)  Notwithstanding  any  provision  to the  contrary in this
         Agreement,  the Grantee may not  exercise  its rights  pursuant to this
         Section 4 in a manner  that  would  result in the cash  payment  to the
         Grantee of an  aggregate  amount under this Section 4 of more than $225
         million,  including the amount, if any, paid to the Grantee pursuant to
         Section 9.05 of the Merger Agreement;  provided,  however, that nothing
         in this  sentence  shall limit the  Grantee's  ability to exercise  the
         Option in accordance with its terms.


                             STOCK OPTION AGREEMENT
                                       -5-



         6.       Repurchase at the Option of the Company.

                  (a) To the  extent  the  Grantee  shall  not  have  previously
         exercised  its rights  under  Section 5, at the  request of the Company
         made at any time  during the sixty (60) day  period  commencing  at the
         expiration  of the Put Period  (the "Call  Period"),  the  Company  may
         repurchase from the Grantee, and the Grantee shall sell, or cause to be
         sold,  to the  Company,  all (but not less than  all) of the  shares of
         Company Common Stock acquired by the Grantee  pursuant  hereto and with
         respect to which the  Grantee  has  Beneficial  Ownership  (other  than
         Beneficial  Ownership  derived  solely from the power to vote or direct
         the voting of such Company Common Stock) at the time of such repurchase
         at a price per share  equal to the  greater of (A) the  Current  Market
         Price and (B) the Exercise  Price per share in respect of the shares so
         acquired  (such price per share  multiplied  by the number of shares of
         Company Common Stock to be repurchased pursuant to this Section 6 being
         herein called the "Call Consideration").  The date on which the Company
         exercises  its rights  under this Section 6 is referred to as the "Call
         Date."

                  (b) If (x) at the  end  of the  Option  Term  (without  giving
         effect  to any  extension  thereof)  not all the  events  described  in
         clauses (i), (ii) and (iii) of Section 9.05(d) of the Merger  Agreement
         have  occurred  or,  (y) if at the end of the  Option  Term  (including
         giving effect to any extension  thereof) all the events  referred to in
         clause (x) have occurred but the acceptance or agreement  referenced in
         clause  (iii)  of such  Section  9.05(d)  has been  terminated  without
         consummation of the  transactions  contemplated  thereby,  then, at the
         request  of the  Company  made at any time  during  the sixty  (60) day
         period  commencing at the expiration of the Alternative Put Period (the
         "Alternative  Call  Period"),  the  Company  may  repurchase  from  the
         Grantee,  and the  Grantee  shall  sell,  or cause  to be sold,  to the
         Company,  all (but not less than all) of the shares of  Company  Common
         Stock acquired by the Grantee pursuant hereto and with respect to which
         the Grantee has Beneficial  Ownership (other than Beneficial  Ownership
         derived  solely  from the  power to vote or direct  the  voting of such
         Company  Common  Stock) at the time of such  repurchase  at a price per
         share equal to the Exercise Price per share in respect of the shares so
         acquired  (such price per share  multiplied  by the number of shares of
         Company Common Stock to be repurchased pursuant to this Section 6 being
         herein called the "Alternative Call Consideration").  The date on which
         the Company exercises its rights under this Section 6 is referred to as
         the "Alternative Call Date."

                  (c) If the Company  exercises its rights under this Section 6,
         the Company shall, within five Business Days pay the Call Consideration
         in immediately  available funds, and the Grantee shall surrender to the
         Company  certificates  evidencing  the shares of Company  Common  Stock
         purchased hereunder, and the Grantee shall warrant to the Company that,
         immediately prior to the repurchase thereof pursuant to this Section 6,
         the Grantee had sole record and Beneficial Ownership of such shares and
         that such shares were then held free and clear of all Liens.

                  7.       Registration Rights.


                             STOCK OPTION AGREEMENT
                                       -6-



                  (a) The Company shall, if requested by the Grantee at any time
         and from time to time during the Registration  Period, as expeditiously
         as practicable,  prepare, file and cause to be made effective up to two
         registration  statements under the Securities Act if such  registration
         is required in order to permit the  offering,  sale and delivery of any
         or all shares of Company  Common  Stock or other  securities  that have
         been  acquired by or are issuable to the Grantee  upon  exercise of the
         Option  in  accordance  with  the  intended  method  of sale  or  other
         disposition stated by the Grantee, including, at the sole discretion of
         the Company, a "shelf" registration  statement under Rule 415 under the
         Securities  Act or any successor  provision,  and the Company shall use
         all reasonable efforts to qualify such shares or other securities under
         any  applicable  state  securities  laws.  The  Company  shall  use all
         reasonable efforts to cause each such registration  statement to become
         effective,  to obtain all consents or waivers of other parties that are
         required therefor and to keep such registration statement effective for
         such  period  not in excess of 180 days from the day such  registration
         statement  first becomes  effective as may be  reasonably  necessary to
         effect such sale or other  disposition.  The obligations of the Company
         hereunder  to  file  a  registration  statement  and  to  maintain  its
         effectiveness  may be  suspended  for one or more  periods  of time not
         exceeding  60 days in the  aggregate  if the Board of  Directors of the
         Company  shall  have  determined  in good faith that the filing of such
         registration  or the  maintenance  of its  effectiveness  would require
         disclosure of nonpublic information that would materially and adversely
         affect the Company.  For purposes of  determining  whether two requests
         have been made  under  this  Section  7, only  requests  relating  to a
         registration  statement that has become  effective under the Securities
         Act and  pursuant  to which the  Grantee  has  disposed  of all  shares
         covered thereby in the manner contemplated therein shall be counted.

                  (b) The Registration  Expenses shall be for the account of the
         Company;  provided,  however, that the Company shall not be required to
         pay any Registration  Expenses with respect to such registration if the
         registration  request is  subsequently  withdrawn at the request of the
         Grantee  unless the Grantee  agrees to forfeit its right to request one
         registration;  and  provided  further,  that,  if at the  time  of such
         withdrawal the Grantee has learned of a material  adverse change in the
         results of  operations,  condition  (financial  or other),  business or
         prospects of the Company as compared with the information  known to the
         Grantee at the time of its request and has  withdrawn  the request with
         reasonable  promptness  following  disclosure  by the  Company  of such
         material adverse change,  then the Grantee shall not be required to pay
         any of such Registration Expenses and shall retain all remaining rights
         to request registration.

                  (c) The  Grantee  shall  provide  all  information  reasonably
         requested by the Company for inclusion in any registration statement to
         be filed hereunder. If during the Registration Period the Company shall
         propose to register  under the  Securities  Act the offering,  sale and
         delivery  of Company  Common  Stock for cash for its own account or for
         any other  stockholder of the Company pursuant to a firm  underwriting,
         it shall,  in addition to the Company's  other  obligations  under this
         Section  7,  allow  the  Grantee  the  right  to  participate  in  such
         registration   provided   that   the   Grantee   participates   in  the
         underwriting;  provided,  however, that, if the managing underwriter of
         such  offering  advises the Company in writing  that in its opinion the
         number of shares of Company Common Stock requested to

                             STOCK OPTION AGREEMENT
                                       -7-



         be included in such registration exceeds the number that can be sold in
         such offering,  the Company shall,  after fully  including  therein all
         securities to be sold by the Company,  include the shares  requested to
         be included  therein by Grantee pro rata (based on the number of shares
         intended  to be  included  therein)  with  the  shares  intended  to be
         included therein by Persons other than the Company.

                  (d) In  connection  with any  offering,  sale and  delivery of
         Company  Common Stock  pursuant to a  registration  statement  effected
         pursuant to this Section 7, the Company and the Grantee  shall  provide
         each  other  and  each  underwriter  of  the  offering  with  customary
         representations,  warranties  and  covenants,  including  covenants  of
         indemnification and contribution.

         8. First Refusal. Subject to the provisions of Section 4 herein, at any
time after the first  occurrence  of an  Exercise  Event and prior to the second
anniversary  of the first purchase of shares of Company Common Stock pursuant to
the Option, if the Grantee shall desire to sell,  assign,  transfer or otherwise
dispose of all or any of the Option  Shares or other  securities  acquired by it
pursuant to the Option, it shall give the Company written notice of the proposed
transaction  (an  "Offeror's  Notice"),  identifying  the  proposed  transferee,
accompanied  by a copy of a  binding  offer to  purchase  such  shares  or other
securities signed by such transferee and setting forth the terms of the proposed
transaction.  An Offeror's Notice shall be deemed an offer by the Grantee to the
Company,  which may be accepted,  in whole but not in part,  within ten Business
Days of the receipt of such Offeror's  Notice,  on the same terms and conditions
and at the same price at which the Grantee is proposing to transfer  such shares
or other securities to such transferee. The purchase of any such shares or other
securities by the Company shall be settled  within ten Business Days of the date
of the  acceptance  of the offer  and the  purchase  price  shall be paid to the
Grantee in immediately  available  funds. If the Company shall fail or refuse to
purchase all the shares or other securities  covered by an Offeror's Notice, the
Grantee may, within 60 days from the date of the Offeror's Notice, sell all, but
not less than all, of such shares or other securities to the proposed transferee
at no less than the price  specified and on terms no more  favorable  than those
set forth in the Offeror's  Notice;  provided,  however,  that the provisions of
this sentence  shall not limit the rights the Grantee may otherwise  have if the
Company has accepted the offer contained in the Offeror's  Notice and wrongfully
refuses  to  purchase  the  shares  or other  securities  subject  thereto.  The
requirements  of this  Section  8 shall not  apply to (a) any  disposition  as a
result of which the proposed  transferee would own beneficially not more than 2%
of the outstanding  voting power of the Company,  (b) any disposition of Company
Common  Stock or other  securities  by a Person to whom the Grantee has assigned
its rights  under the Option  with the consent of the  Company,  (c) any sale by
means  of a public  offering  registered  under  the  Securities  Act or (d) any
transfer to a wholly owned  Subsidiary of the Grantee which agrees in writing to
be bound by the terms hereof.

         9.       Profit Limitation.

                  (a) Notwithstanding any other provision of this Agreement,  in
         no event shall the  Grantee's  Total Profit exceed $225 million and, if
         it  otherwise  would  exceed  such  amount,  the  Grantee,  at its sole
         election,  shall  either (i) deliver to the  Company  for  cancellation
         Option Shares previously  purchased by Grantee,  (ii) pay cash or other
         consideration to the

                             STOCK OPTION AGREEMENT
                                       -8-




         Company  or  (iii)  undertake  any  combination  thereof,  so that  the
         Grantee's  Total Profit shall not exceed $225 million after taking into
         account the foregoing actions.

                  (b)  Notwithstanding  any other  provision of this  Agreement,
         this Stock  Option may not be exercised  for a number of Option  shares
         that would, as of the Notice Date, result in a Notional Total Profit of
         more than $225 million,  and, if exercise of the Option otherwise would
         exceed such amount,  the Grantee,  at its sole option, may increase the
         Exercise  Price  for that  number  of  Option  Shares  set forth in the
         Exercise Notice so that the Notional Total Profit shall not exceed $225
         million;  provided,  however,  that  nothing  in  this  sentence  shall
         restrict any exercise of the Option otherwise permitted by this Section
         9(b) on any subsequent  date at the Exercise Price set forth in Section
         2(b).

         10. Listing.  If the Company Common Stock or any other  securities then
subject  to the  Option  are then  listed on the New York  Stock  Exchange,  the
Company,  upon the  occurrence  of an  Exercise  Event,  will  promptly  file an
application  to list on the New York Stock  Exchange  the shares of the  Company
Common  Stock or other  securities  then  subject to the Option and will use all
reasonable efforts to cause such listing  application to be approved as promptly
as practicable.

         11.  Replacement of Agreement.  Upon receipt by the Company of evidence
reasonably  satisfactory to it of the loss, theft,  destruction or mutilation of
this  Agreement,  and (in the case of loss,  theft or destruction) of reasonably
satisfactory  indemnification,  and  upon  surrender  and  cancellation  of this
Agreement, if mutilated, the Company will execute and deliver a new Agreement of
like tenor and date.  Any such new  Agreement  shall  constitute  an  additional
contractual  obligation  of the Company,  whether or not the  Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.

                  12.      Miscellaneous.

                  (a)  Expenses.  Except as  otherwise  provided  in the  Merger
         Agreement  or as  otherwise  expressly  provided  herein,  each  of the
         parties hereto shall bear and pay all costs and expenses incurred by it
         or on its  behalf  in  connection  with the  transactions  contemplated
         hereunder,   including   fees  and   expenses  of  its  own   financial
         consultants, investment bankers, accountants and counsel.

                  (b) Waiver and Amendment.  Any provision of this Agreement may
         be waived at any time by the party that is entitled to the  benefits of
         such provision. This Agreement may not be modified, amended, altered or
         supplemented  except  upon the  execution  and  delivery  of a  written
         agreement executed by the parties hereto.

                  (c)   Entire   Agreement;    No   Third   Party   Beneficiary;
         Severability.  Except as otherwise  set forth in the Merger  Agreement,
         this Agreement  (including the Merger Agreement and the other documents
         and  instruments  referred to herein and therein) (i)  constitutes  the
         entire    agreement   and   supersedes   all   prior   agreements   and
         understandings, both written and oral, including without limitation any
         conflicting  provisions of the Confidentiality  Agreement,  between the
         parties with respect to the subject matter hereof and

                             STOCK OPTION AGREEMENT
                                       -9-



         (ii) is not  intended to confer upon any Person  other than the parties
         hereto any rights or remedies hereunder.

                  (d)  Severability.  If any  term or  other  provision  of this
         Agreement is invalid,  illegal or  incapable  of being  enforced by any
         rule of law or public  policy,  all other  conditions and provisions of
         this Agreement  shall  nevertheless  remain in full force and effect so
         long  as  the  economic  or  legal   substance   of  the   transactions
         contemplated hereby is not affected in any manner materially adverse to
         any party. Upon such  determination that any term or other provision is
         invalid,  illegal or incapable of being  enforced,  the parties  hereto
         shall  negotiate in good faith to modify this Agreement so as to effect
         the  original  intent of the  parties  as  closely  as  possible  in an
         acceptable manner to the end that transactions  contemplated hereby are
         fulfilled to the extent possible.

                  (e)      Governing Law.  This Agreement  shall be governed by,
         and construed in accordance  with,  the Laws  of the State of Delaware,
         regardless  of the  Laws  that  might otherwise govern under applicable
         principles of conflicts of law.

                  (f)      Descriptive   Headings.   The   descriptive  headings
         contained  herein  are  for convenience or reference only and shall not
         affect in any way the meaning or interpretation of this Agreement.

                  (g) Notices.  All notices and other  communications  hereunder
         shall be in writing and shall be deemed given if delivered  personally,
         telecopied  (with  confirmation)  or mailed by  registered or certified
         mail  (return  receipt  requested)  to the  parties  at  the  following
         addresses or sent by electronic  transmission to the telecopier  number
         specified below:

                  If to the Company to:

                           Dresser Industries, Inc.
                           2001 Ross Avenue
                           Dallas, Texas  75221
                           Attention:  Clint Ables
                           Telecopier No.:  (214) 740-6904

                  with a copy to:

                           Weil, Gotshal & Manges LLP
                           767 Fifth Avenue
                           New York, New York 10153
                           Attention:  Dennis J. Block
                           Telecopier No.: (212) 310-8007


                             STOCK OPTION AGREEMENT
                                      -10-



                  If to Grantee to:

                           Halliburton Company
                           3600 Lincoln Plaza
                           500 North Akard
                           Dallas, Texas  75201-3391
                           Attention:  Lester L. Coleman
                                       Executive Vice President and General
                                       Counsel
                           Telecopier No.:  (214) 978-2658

                  with a copy to:

                           Vinson & Elkins L.L.P.
                           2300 First City Tower
                           1001 Fannin Street
                           Houston, Texas  77002-6760
                           Attention:  William E. Joor III
                           Telecopier No.:  (713) 615-5201

                  (h) Counterparts. This Agreement and any amendments hereto may
         be executed in counterparts,  each of which shall be deemed an original
         and all of which taken together shall constitute but a single document.

                  (i) Assignment.  Neither this Agreement nor any of the rights,
         interests  or  obligations  hereunder  or  under  the  Option  shall be
         assigned by either of the parties  hereto  (whether by operation of law
         or  otherwise)  without the prior  written  consent of the other party,
         except that the Grantee may assign  this  Agreement  to a wholly  owned
         Subsidiary of the Grantee;  provided,  however, that no such assignment
         shall have the effect of  releasing  the Grantee  from its  obligations
         hereunder.  Subject to the preceding sentence,  this Agreement shall be
         binding upon, inure to the benefit of and be enforceable by the parties
         and their respective successors and assigns.

                  (j) Further  Assurances.  In the event of any  exercise of the
         Option by the Grantee,  the Company and the Grantee  shall  execute and
         deliver all other  documents and  instruments and take all other action
         that  may  be  reasonably   necessary  in  order  to   consummate   the
         transactions provided for by such exercise.

                  (k)   Specific   Performance.   The  parties   hereto   hereby
         acknowledge  and agree that the failure of any party to this  Agreement
         to  perform  its   agreements   and  covenants   hereunder  will  cause
         irreparable  injury  to the  other  party to this  Agreement  for which
         damages,   even  if  available,   will  not  be  an  adequate   remedy.
         Accordingly, each of the parties hereto hereby consents to the granting
         of equitable  relief  (including  specific  performance  and injunctive
         relief) by any court of competent  jurisdiction  to enforce any party's
         obligations   hereunder.   The  parties  further  agree  to  waive  any
         requirement  for the securing or posting of any bond in connection with
         the obtaining of any such equitable relief and that this provision is

                             STOCK OPTION AGREEMENT
                                      -11-



         without  prejudice to any other rights that the parties hereto may have
         for any failure to perform this Agreement.


                             STOCK OPTION AGREEMENT
                                      -12-




         IN WITNESS WHEREOF,  the Company and the Grantee have caused this Stock
Option  Agreement  to be  signed by their  respective  officers  thereunto  duly
authorized, all as of the day and year first written above.

                                       DRESSER INDUSTRIES, INC.


                                       By:  /s/  W. E. Bradford
                                          ---------------------------------


                                       HALLIBURTON COMPANY


                                       By:  /s/  David J. Lesar
                                          ---------------------------------





                             STOCK OPTION AGREEMENT
                                      -13-


                                                                        ANNEX A



                            SCHEDULE OF DEFINED TERMS

         The following terms when used in the Stock Option  Agreement shall have
the meanings set forth below unless the context shall otherwise require:

         "Agreement" shall mean this Stock Option Agreement.

         "Alternative  Call  Consideration"  shall have the meaning  ascribed to
such term in Section 6(b).

         "Alternative Call Date" shall have the meaning ascribed to such term in
Section 6(b).

         "Alternative  Call Period" shall have the meaning ascribed to such term
in Section 6(b).

         "Alternative  Call Right" shall have the meaning  ascribed to such term
in Section 6(b).

         "Alternative Put Consideration" shall have the meaning ascribed to such
term in Section 5(b).

         "Alternative  Put Date" shall have the meaning ascribed to such term in
Section 5(b).

         "Alternative  Put Period" shall have the meaning  ascribed to such term
in Section 5(b).

         "Alternative Put Right" shall have the meaning ascribed to such term in
Section 5(b).

         "Applicable  Price" means the highest of (i) the highest purchase price
per share paid pursuant to a tender or exchange offer made for shares of Company
Common  Stock  after the date  hereof and on or prior to the Put Date,  (ii) the
price per share to be paid by any third  Person  for  shares of  Company  Common
Stock pursuant to an agreement for a Business  Combination  Transaction  entered
into on or prior to the Put Date,  and (iii) the Current  Market  Price.  If the
consideration  to be  offered,  paid  or  received  pursuant  to  either  of the
foregoing  clauses  (i) or (ii) shall be other  than in cash,  the value of such
consideration  shall be  determined in good faith by an  independent  nationally
recognized  investment  banking  firm  selected by the  Grantee  and  reasonably
acceptable  to the Company,  which  determination  shall be  conclusive  for all
purposes of this Agreement.

         "Beneficial Ownership," "Beneficial Owner" and "Beneficially Own" shall
have the meanings ascribed to them in Rule 13d-3 under the Exchange Act.

         "Business  Combination  Transaction"  shall  mean (i) a  consolidation,
exchange  of shares or merger of the  Company  with any  Person,  other than the
Grantee or one of its  subsidiaries,  and, in the case of a merger, in which the
Company shall not be the continuing or surviving  corporation,  (ii) a merger of
the Company with a Person, other than the Grantee or one of its Subsidiaries, in

                             STOCK OPTION AGREEMENT
                                      -14-



which the Company shall be the continuing or surviving  corporation but the then
outstanding  shares of Company  Common  Stock shall be changed into or exchanged
for stock or other  securities of the Company or any other Person or cash or any
other  property or the shares of Company  Common stock  outstanding  immediately
before such merger shall after such merger represent less than 50% of the common
shares and common share equivalents of the Company outstanding immediately after
the merger or (iii) a sale, lease or other transfer of all or substantially  all
the assets of the  Company to any  Person,  other than the Grantee or one of its
Subsidiaries.

         "Call  Consideration"  shall have the meaning  ascribed to such term in
Section 5 herein.

         "Call Date"  shall have the meaning  ascribed to such term in Section 5
herein.

         "Call Period" shall have the meaning ascribed to such term in Section 5
herein.

         "Closing"  shall have the  meaning  ascribed  to such term in Section 2
herein.

         "Closing Date" shall have the meaning  ascribed to such term in Section
2 herein.

         "Confidentiality  Agreement"  shall mean that certain Letter  Agreement
between the parties hereto dated February 2, 1998.

         "Current  Market Price" shall mean, as of any date,  the average of the
closing prices (or, if such securities  should not trade on any trading day, the
average of the bid and asked prices  therefor on such day) of the Company Common
Stock as reported on the New York Stock  Exchange  Composite Tape during the ten
consecutive  trading days ending on (and  including) the trading day immediately
prior to such date or, if the  shares of  Company  Common  Stock are not  quoted
thereon,  on The Nasdaq Stock  Market or, if the shares of Company  Common Stock
are  not  quoted  thereon,  on the  principal  trading  market  (as  defined  in
Regulation M under the Exchange Act) on which such shares are traded as reported
by a recognized source during such ten Business Day period.

         "Exercise Event" shall mean any of the events giving rise to a right of
termination of the Merger  Agreement  under Section  9.01(b)  (breach),  9.01(f)
(failure to obtain  stockholder  approval),  9.01(h)  (fiduciary out) or 9.01(j)
(change of recommendation);  provided,  however, that, in the case of the events
set forth in Sections 9.01(b) and 9.01(f),  at the time of such events described
in Section 9.01(b) or prior to the Company  Stockholders'  Meeting referenced in
Section 9.01(f),  there shall also have been an Acquisition  Proposal  involving
the  Company  or any of its  Subsidiaries  that,  at the time of such  events or
meeting,  shall  not have  been (x)  rejected  by the  Company  and its Board of
Directors or (y) withdrawn by the Person making such Acquisition Proposal.

         "Exercise  Notice"  shall  have the  meaning  ascribed  to such term in
Section 2(d)(i) herein.

         "Exercise  Price"  shall  have the  meaning  ascribed  to such  term in
Section 2 herein.

         "Merger Agreement" shall mean that certain Agreement and Plan of Merger
dated as of the date hereof among Halliburton  Company, a Delaware  corporation,
Dresser Industries, Inc., a

                             STOCK OPTION AGREEMENT
                                      -15-



Delaware  corporation,  and Halliburton N.C., Inc., a Delaware corporation and a
wholly owned subsidiary of Halliburton Company.

         "Newco" shall mean Halliburton N.C., Inc., a Delaware corporation and a
wholly owned subsidiary of Grantee.

         "Notice Date" shall have the meaning ascribed to such term in Section 2
herein.

         "Notional  Total  Profit"  shall  mean,  with  respect to any number of
Option  Shares as to which the Grantee may propose to exercise  the Option,  the
Total Profit  determined as of the date of the Exercise Notice assuming that the
Option were exercised on such date for such number of Option Shares and assuming
such Option  Shares,  together  with all other Option Shares held by the Grantee
and its  Affiliates  as of such date,  were sold for cash at the closing  market
price for the Company  Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).

         "Offeror's  Notice"  shall have the  meaning  ascribed  to such term in
Section 8 herein.

         "Option"  shall  mean the  option  granted  by the  Company  to Grantee
pursuant to Section 2 herein.

         "Option Shares" shall have the meaning ascribed to such term in Section
2 herein.

         "Option Term" shall have the meaning ascribed to such term in Section 2
herein.

         "Put  Consideration"  shall have the  meaning  ascribed to such term in
Section 4 herein.

         "Put Date"  shall have the  meaning  ascribed to such term in Section 4
herein.

         "Put Period" shall have the meaning  ascribed to such term in Section 4
herein.

         "Put Right"  shall have the meaning  ascribed to such term in Section 4
herein.

         "Registration  Expenses"  shall mean the expenses  associated  with the
preparation  and  filing of any  registration  statement  pursuant  to Section 6
herein and any sale  covered  thereby  (including  any fees  related to blue sky
qualifications  and  filing  fees in  respect  of the  National  Association  of
Securities Dealers,  Inc.), but excluding  underwriting discounts or commissions
or brokers' fees in respect to shares to be sold by the Grantee and the fees and
disbursements of the Grantee's counsel.

         "Registration  Period" shall mean the period of two years following the
first exercise of the Option by the Grantee.

         "Total  Profit" shall mean the aggregate  (before  income taxes) of the
following:  (i) all amounts received by the Grantee pursuant to Sections 5 and 6
for the repurchase of all or part of the unexercised portion of the Option, (ii)
(A) the net cash amounts received by the Grantee pursuant

                             STOCK OPTION AGREEMENT
                                      -16-



to the sale of Option  Shares (or any other  securities  into which such  Option
Shares are converted or exchanges) to any party not an Affiliate of the Grantee,
less (B) the  Grantee's  purchase  price for such  Option  Shares  and (iii) all
amounts received by the Grantee from the Company pursuant to Section 9.05 (other
than Section 9.05(f)) of the Merger Agreement.

         "Unexercised  Option Shares" shall mean those Option Shares as to which
the Option remains unexercised from time to time.


                             STOCK OPTION AGREEMENT
                                      -17-



                          AGREEMENT AND PLAN OF MERGER


                                  By and Among


                               Halliburton Company


                             Halliburton N.C., Inc.


                                       and


                            Dresser Industries, Inc.








                                TABLE OF CONTENTS
                                                                            Page

                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.01               Definitions.........................................1
SECTION 1.02               Rules of Construction...............................1

                                   ARTICLE II

                                 TERMS OF MERGER

SECTION 2.01               Statutory Merger....................................2
SECTION 2.02               Effective Time......................................2
SECTION 2.03               Effect of the Merger................................2
SECTION 2.04               Certificate of Incorporation; Bylaws................2
SECTION 2.05               Directors and Officers..............................2

                                   ARTICLE III

               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

SECTION 3.01               Merger Consideration; Conversion and Cancellation of
                           Securities..........................................2
SECTION 3.02               Exchange of Certificates............................3
SECTION 3.03               Closing.............................................6
SECTION 3.04               Stock Transfer Books................................6

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

SECTION 4.01               Organization and Qualification; Subsidiaries........6
SECTION 4.02               Certificate of Incorporation and Bylaws.............6
SECTION 4.03               Capitalization......................................6
SECTION 4.04               Authorization of Agreement..........................8
SECTION 4.05               Approvals...........................................8
SECTION 4.06               No Violation........................................8
SECTION 4.07               Reports.............................................9
SECTION 4.08               No Material Adverse Effect; Conduct................10


                          AGREEMENT AND PLAN OF MERGER
                                      -ii-



SECTION 4.09               Certain Business Practices.........................10
SECTION 4.10               Certain Obligations................................10
SECTION 4.11               Authorizations; Compliance.........................10
SECTION 4.12               Litigation; Compliance with Laws...................11
SECTION 4.13               Employee Benefit Plans.............................11
SECTION 4.14               Taxes..............................................14
SECTION 4.15               Environmental Matters..............................14
SECTION 4.16               Insurance..........................................14
SECTION 4.17               Pooling; Tax Matters...............................15
SECTION 4.18               Affiliates.........................................15
SECTION 4.19               Opinion of Financial Advisor.......................15
SECTION 4.20               Brokers............................................15

                                    ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE PARENT

SECTION 5.01               Organization and Qualification; Subsidiaries.......16
SECTION 5.02               Certificate of Incorporation and Bylaws............16
SECTION 5.03               Capitalization.....................................16
SECTION 5.04               Authorization of Agreement.........................17
SECTION 5.05               Approvals..........................................18
SECTION 5.06               No Violation.......................................18
SECTION 5.07               Reports............................................19
SECTION 5.08               No Material Adverse Effect; Conduct................19
SECTION 5.09               Certain Business Practices.........................20
SECTION 5.10               Certain Obligations................................20
SECTION 5.11               Authorizations; Compliance.........................20
SECTION 5.12               Litigation; Compliance with Laws...................20
SECTION 5.13               Employee Benefit Plans.............................21
SECTION 5.14               Taxes..............................................23
SECTION 5.15               Environmental Matters..............................24
SECTION 5.16               Insurance..........................................24
SECTION 5.17               Pooling; Tax Matters...............................24
SECTION 5.18               Affiliates................................... .....25
SECTION 5.19               Brokers............................................26
SECTION 5.20               Opinion of Financial Advisor.......................26
SECTION 5.21               Acquiring Person...................................26

                          AGREEMENT AND PLAN OF MERGER
                                      -iii-



                                   ARTICLE VI

                                    COVENANTS

SECTION 6.01               Affirmative Covenants..............................26
SECTION 6.02               Negative Covenants.................................27
SECTION 6.03               No Solicitation by the Company.....................33
SECTION 6.04               No Solicitation by the Parent......................34
SECTION 6.05               Access and Information.............................35

                                   ARTICLE VII

                              ADDITIONAL AGREEMENTS

SECTION 7.01               Meetings of Stockholders...........................35
SECTION 7.02               Registration Statement; Proxy Statements...........36
SECTION 7.03               Appropriate Action; Consents; Filings..............38
SECTION 7.04               Affiliates; Pooling; Tax Treatment.................40
SECTION 7.05               Public Announcements...............................40
SECTION 7.06               NYSE Listing.......................................40
SECTION 7.07               Rights Agreement; State Takeover Statutes..........40
SECTION 7.08               Comfort Letters....................................41
SECTION 7.09               Assumption of Obligations to Issue Stock and
                           Obligations of Employee Benefit Plans; Employees...41
SECTION 7.10               Indemnification of Directors and Officers..........44
SECTION 7.11               Newco..............................................45
SECTION 7.12               Event Notices......................................45
SECTION 7.13               Parent Board of Directors; Committees..............46
SECTION 7.14               Transition Management..............................46
SECTION 7.15               Employment Contracts...............................46
SECTION 7.16               Waiver by Company Joint Venture Partners...........46

                                  ARTICLE VIII

                               CLOSING CONDITIONS

SECTION 8.01               Conditions to Obligations of Each Party Under This
                           Agreement..........................................47
SECTION 8.02               Additional Conditions to Obligations of the Parent
                           Companies..........................................48
SECTION 8.03               Additional  Conditions  to  Obligations  of  the
                           Company............................................48

                          AGREEMENT AND PLAN OF MERGER
                                      -iv-



                                   ARTICLE IX

                        TERMINATION, AMENDMENT AND WAIVER

SECTION 9.01               Termination........................................49
SECTION 9.02               Effect of Termination..............................51
SECTION 9.03               Amendment..........................................51
SECTION 9.04               Waiver.............................................51
SECTION 9.05               Fees, Expenses and Other Payments..................52

                                    ARTICLE X

                               GENERAL PROVISIONS

SECTION 10.01              Effectiveness  of  Representations,  Warranties  and
                           Agreements.........................................54
SECTION 10.02              Notices............................................54
SECTION 10.03              Headings...........................................55
SECTION 10.04              Severability.......................................55
SECTION 10.05              Entire Agreement...................................55
SECTION 10.06              Assignment.........................................55
SECTION 10.07              Parties in Interest................................56
SECTION 10.08              Failure or Indulgence Not Waiver; Remedies
                           Cumulative.........................................56
SECTION 10.09              Governing Law......................................56
SECTION 10.10              Specific Performance...............................56
SECTION 10.11              Counterparts.......................................56


                          AGREEMENT AND PLAN OF MERGER
                                      -v-




                                     ANNEXES


Annex A           Schedule of Defined Terms
Annex B           Affiliate's Agreement (Dresser Industries, Inc.) Affiliates)
Annex C           Affiliate's Agreement (Halliburton Company) Affiliates)




                          AGREEMENT AND PLAN OF MERGER
                                      -vi-




                          AGREEMENT AND PLAN OF MERGER


         THIS AGREEMENT AND PLAN OF MERGER,  dated as of February 25, 1998 (this
"Agreement"),  is by and among Halliburton  Company, a Delaware corporation (the
"Parent"),  Halliburton  N.C.,  Inc., a Delaware  corporation and a wholly owned
direct  subsidiary  of the Parent  ("Newco"),  and Dresser  Industries,  Inc., a
Delaware  corporation  (the  "Company").  The  Parent  and Newco  are  sometimes
referred to herein as the "Parent Companies."

                                    RECITALS:

         The  Company  and the Parent  have  determined  to engage in a business
combination as peer firms in a merger of equals.

         In  furtherance  thereof,  the  respective  Boards of  Directors of the
Company,  the Parent and Newco have  approved  this  Agreement and the Merger of
Newco with and into the Company.

         For federal  income tax  purposes,  it is intended that the Merger will
qualify as a  reorganization  within the  meaning of the  provisions  of Section
368(a) of the Code.

         The Merger is intended to be treated as a "pooling  of  interests"  for
accounting purposes.

         The parties hereto  acknowledge the execution and delivery of the Stock
Option  Agreements   concurrently  with  the  execution  and  delivery  of  this
Agreement.

         NOW,  THEREFORE,  in  consideration of the foregoing and the respective
representations,   warranties,  covenants  and  agreements  set  forth  in  this
Agreement, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         SECTION 1.01 Definitions.  Certain  capitalized and other terms used in
this  Agreement  are  defined  in Annex A hereto  and are used  herein  with the
meanings ascribed to them therein.

         SECTION  1.02  Rules of  Construction.  Unless  the  context  otherwise
requires, as used in this Agreement:  (a) a term has the meaning ascribed to it;
(b) an accounting term not otherwise  defined has the meaning  ascribed to it in
accordance  with  GAAP;  (c)  "or"  is  not  exclusive;  (d)  "including"  means
"including,  without  limitation;" (e) words in the singular include the plural;
(f) words in the plural include the singular; (g) words applicable to one gender
shall be construed to apply to each gender;  (h) the terms  "hereof,"  "herein,"
"hereby,"  "hereto"  and  derivative  or  similar  words  refer  to this  entire
Agreement; and (i) the terms "Article" or "Section" shall refer to the specified
Article or Section of this Agreement.

                          AGREEMENT AND PLAN OF MERGER
                                       -1-



                                   ARTICLE II

                                 TERMS OF MERGER

         SECTION 2.01 Statutory Merger.  Subject to the terms and conditions and
in reliance  upon the  representations,  warranties,  covenants  and  agreements
contained  herein,  Newco shall merge with and into the Company at the Effective
Time.  The terms and  conditions of the Merger and the mode of carrying the same
into effect shall be as set forth in this Agreement.  As a result of the Merger,
the  separate  corporate  existence  of Newco shall cease and the Company  shall
continue as the Surviving Corporation.

         SECTION  2.02  Effective  Time.  As  soon  as  practicable   after  the
satisfaction  or, if permissible,  waiver of the conditions set forth in Article
VIII,  the parties  hereto shall cause the Merger to be  consummated by filing a
Certificate  of Merger with the Secretary of State of the State of Delaware,  in
such  form as  required  by,  and  executed  in  accordance  with  the  relevant
provisions of, the GCL.

         SECTION 2.03 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the GCL. Without
limiting the generality of the foregoing,  and subject thereto, at the Effective
Time, except as otherwise provided herein, all the property, rights, privileges,
powers and  franchises  of Newco and the  Company  shall  vest in the  Surviving
Corporation,  and all debts,  liabilities  and  duties of Newco and the  Company
shall become the debts, liabilities and duties of the Surviving Corporation.

         SECTION 2.04  Certificate of  Incorporation;  Bylaws.  At the Effective
Time, the  certificate  of  incorporation  and the bylaws of the Company,  as in
effect  immediately  prior to the Effective  Time,  shall be the  certificate of
incorporation and the bylaws of the Surviving Corporation.

         SECTION 2.05 Directors and Officers. The directors of Newco immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
each to hold office in accordance  with the  certificate  of  incorporation  and
bylaws of the Surviving Corporation, and the officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving  Corporation,
in each case until their respective successors are duly elected or appointed and
qualified.

                                   ARTICLE III

               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

         SECTION  3.01 Merger  Consideration;  Conversion  and  Cancellation  of
Securities.  At the  Effective  Time,  by virtue of the Merger and  without  any
action on the part of the Parent Companies, the Company or the holders of any of
the following securities:


                          AGREEMENT AND PLAN OF MERGER
                                       -2-




                  (a) Subject to the other  provisions of this Article III, each
         share of  Company  Common  Stock,  including  the  associated  right to
         receive or purchase  shares of Series A Junior  Preferred  Stock of the
         Company pursuant to the terms of the Company's Rights Agreement, issued
         and outstanding  immediately prior to the Effective Time (excluding any
         Company Common Stock  described in Section  3.01(c)) shall be converted
         into one share of Parent Common Stock.  Notwithstanding  the foregoing,
         if  between  the  date of this  Agreement  and the  Effective  Time the
         outstanding  shares of the Parent  Common  Stock or the Company  Common
         Stock shall have been  changed  into a different  number of shares or a
         different  class,  by  reason  of  any  stock  dividend,   subdivision,
         reclassification,  recapitalization,  split, combination or exchange of
         shares,  the  Common  Stock  Exchange  Ratio  shall be  correspondingly
         adjusted to reflect such stock dividend, subdivision, reclassification,
         recapitalization, split, combination or exchange of shares.

                  (b) All shares of Company Common Stock shall,  upon conversion
         thereof into shares of Parent Common Stock at the Effective Time, cease
         to be outstanding and shall be automatically  canceled and retired, and
         each certificate previously evidencing Company Common Stock outstanding
         immediately  prior to the  Effective  Time (other than  Company  Common
         Stock described in Section 3.01(c)) shall thereafter be deemed, for all
         purposes  other than the  payment of  dividends  or  distributions,  to
         represent  that  number of shares of  Parent  Common  Stock  determined
         pursuant to the Common Stock  Exchange  Ratio and, if  applicable,  the
         right to receive cash pursuant to Section  3.02(d) or (e) or both.  The
         holders of  certificates  previously  evidencing  Company  Common Stock
         shall  cease to have any rights  with  respect to such  Company  Common
         Stock except as otherwise provided herein or by law.

                  (c)  Notwithstanding  any  provision of this  Agreement to the
         contrary,  each share of Company  Common  Stock held in the treasury of
         the Company and each share of Company  Common Stock,  if any,  owned by
         the Parent or any direct or indirect  wholly  owned  Subsidiary  of the
         Parent or of the Company  immediately prior to the Effective Time shall
         be canceled and extinguished without conversion thereof.

                  (d) Each share of common stock,  par value $1.00 per share, of
         Newco issued and  outstanding  immediately  prior to the Effective Time
         shall be converted  into one share of common stock,  par value $.25 per
         share, of the Surviving Corporation.

         SECTION 3.02               Exchange of Certificates.

                  (a) Exchange  Fund. At the Closing,  the Parent shall deposit,
         or cause to be deposited,  with the Exchange Agent,  for the benefit of
         the former holders of Company Common Stock and for exchange through the
         Exchange  Agent in  accordance  with  this  Article  III,  certificates
         evidencing  that number of shares of Parent  Common  Stock equal to the
         product of the Common Stock  Exchange Ratio and the number of shares of
         Company Common Stock issued and  outstanding  immediately  prior to the
         Effective Time (exclusive

                          AGREEMENT AND PLAN OF MERGER
                                       -3-




         of any such shares to be canceled  pursuant  to Section  3.01(c)).  The
         Exchange  Agent shall,  pursuant to irrevocable  instructions  from the
         Parent,  deliver certificates  evidencing Parent Common Stock, together
         with any cash to be paid in lieu of  fractional  interests in shares of
         Parent  Common Stock  pursuant to Section  3.02(e) and any dividends or
         distributions  related to such Parent  Common Stock to be paid pursuant
         to Section 3.02(d), in exchange for certificates theretofore evidencing
         Company  Common Stock  surrendered  to the Exchange  Agent  pursuant to
         Section 3.02(c).  Except as contemplated by Sections  3.02(f),  (g) and
         (h), the Exchange Fund shall not be used for any other purpose.

                  (b) Letter of  Transmittal.  Not later than five (5)  Business
         Days after the Effective Time, the Parent will cause the Exchange Agent
         to send to each record holder of Company Common Stock immediately prior
         to the Effective  Time a letter of  transmittal  and other  appropriate
         materials for use in  surrendering  to the Exchange Agent  certificates
         that prior to the Effective  Time  evidenced  shares of Company  Common
         Stock.

                  (c) Exchange  Procedures.  Promptly after the Effective  Time,
         the Exchange  Agent shall  distribute  to each former holder of Company
         Common Stock,  upon surrender to the Exchange Agent for cancellation of
         one or more certificates  that theretofore  evidenced shares of Company
         Common Stock,  certificates evidencing the appropriate number of shares
         of the Parent  Common  Stock into which such  shares of Company  Common
         Stock were converted pursuant to the Merger. If shares of Parent Common
         Stock are to be issued to a Person  other than the Person in whose name
         the surrendered certificate or certificates are registered, it shall be
         a condition  of issuance of Parent  Common  Stock that the  surrendered
         certificate or certificates shall be properly endorsed, with signatures
         guaranteed,  or  otherwise  in proper  form for  transfer  and that the
         Person  requesting  such payment  shall pay any transfer or other taxes
         required by reason of the  issuance of Parent  Common Stock to a Person
         other than the  registered  holder of the  surrendered  certificate  or
         certificates or such Person shall establish to the  satisfaction of the
         Parent that such tax has been paid or is not applicable.

                  (d)  Distributions  with  Respect  to  Unexchanged  Shares  of
         Company Common Stock. No dividends or other  distributions  declared or
         made with  respect to the Parent  Common Stock with a record date after
         the Effective Time shall be paid to the holder of any certificate  that
         theretofore  evidenced  shares of Company Common Stock until the holder
         of such certificate  shall surrender such  certificate.  Subject to the
         effect of any applicable  abandoned property,  escheat or similar laws,
         following surrender of any such certificate, there shall be paid to the
         holder of the  certificates  evidencing  whole shares of Parent  Common
         Stock issued in exchange therefor,  without interest, (i) promptly, the
         amount of any cash payable with respect to a fractional share of Parent
         Common  Stock to which  such  holder is  entitled  pursuant  to Section
         3.02(e),  (ii) the amount of  dividends or other  distributions  with a
         record date after the Effective Time  theretofore  paid with respect to
         such whole shares of Parent  Common Stock and (iii) at the  appropriate
         payment date,  the amount of dividends or other  distributions,  with a
         record date after the Effective Time but prior to surrender and a

                          AGREEMENT AND PLAN OF MERGER
                                       -4-




         payment date occurring  after  surrender,  payable with respect to such
         whole shares of Parent Common Stock.

                  (e) No Fractional Shares.  Notwithstanding  anything herein to
         the contrary,  no certificates or scrip evidencing fractional shares of
         Parent Common Stock shall be issued in connection with the Merger,  and
         any such  fractional  share  interests  to which a holder  of record of
         Company Common Stock at the Effective Time would  otherwise be entitled
         shall not entitle such holder to vote or to any rights of a stockholder
         of the Parent.  In lieu of any such fractional  shares,  each holder of
         record of Company  Common Stock at the  Effective  Time who but for the
         provisions  of this  Section  3.02(e)  would be  entitled  to receive a
         fractional  interest of a share of Parent Common Stock by virtue of the
         Merger shall be paid cash, without any interest thereon, as hereinafter
         provided. The Parent shall instruct the Exchange Agent to determine the
         number of whole  shares and  fractional  shares of Parent  Common Stock
         allocable  to each  holder  of record of  Company  Common  Stock at the
         Effective  Time,  to aggregate  all such  fractional  shares into whole
         shares, to sell the whole shares obtained thereby in the open market at
         then  prevailing  prices on behalf of holders  who  otherwise  would be
         entitled to receive  fractional  share  interests  and to distribute to
         each such holder such holder's  ratable share of the total  proceeds of
         such sale, after making  appropriate  deductions of the amount, if any,
         required  for  federal  income  tax  withholding   purposes  and  after
         deducting  any  applicable   transfer  taxes.  All  brokers'  fees  and
         commissions incurred in connection with such sales shall be paid by the
         Parent.

                  (f)  Termination of Exchange Fund. Any portion of the Exchange
         Fund that  remains  unclaimed by the former  holders of Company  Common
         Stock for 12 months after the Effective  Time shall be delivered to the
         Parent, upon demand, and any former holders of Company Common Stock who
         have not  theretofore  complied with this Article III shall  thereafter
         look only to the  Parent for the  Parent  Common  Stock and any cash to
         which they are entitled.  Notwithstanding  any other provisions herein,
         neither the Exchange  Agent nor any party hereto shall be liable to any
         former holder of Company Common Stock for any Parent Common Stock, cash
         in lieu of  fractional  share  interests or dividends or  distributions
         thereon  delivered  to a public  official  pursuant  to any  applicable
         abandoned property, escheat or similar law.

                  (g) Withholding of Tax. The Parent shall be entitled to deduct
         and withhold from the consideration  otherwise payable pursuant to this
         Agreement to any former holder of Company  Common Stock such amounts as
         the Parent (or any affiliate thereof) or the Exchange Agent is required
         to deduct and withhold with respect to the making of such payment under
         the Code or state, local or foreign tax Law. To the extent that amounts
         are so withheld by the Parent,  such withheld  amounts shall be treated
         for all  purposes of this  Agreement  as having been paid to the former
         holder of Company  Common Stock in respect of which such  deduction and
         withholding was made by the Parent.


                          AGREEMENT AND PLAN OF MERGER
                                       -5-




                  (h) Investment of Exchange Fund. The Exchange Agent may invest
         any  cash  included  in  the  Exchange  Fund  in  deposit  accounts  or
         short-term money market  instruments,  as directed by the Parent,  on a
         daily  basis.  Any  interest  and  other  income  resulting  from  such
         investments shall be paid to the Parent.  The Parent shall deposit with
         the Exchange Agent as part of the Exchange Fund cash in an amount equal
         to any loss of principal resulting from such investments promptly after
         the incurrence of such a loss.

         SECTION 3.03  Closing.  The Closing  shall take place at the offices of
Vinson & Elkins  L.L.P.,  4000 Trammel Crow  Center,  2001 Ross Avenue,  Dallas,
Texas 75201,  at 10:00 a.m. on the next Business Day following the date on which
the  conditions  to the Closing  have been  satisfied or waived or at such other
place,  time and date as the parties hereto may agree.  At the conclusion of the
Closing on the Closing Date, the parties  hereto shall cause the  Certificate of
Merger to be filed with the Secretary of State of the State of Delaware.

         SECTION 3.04 Stock Transfer Books. At the close of business on the date
of the Effective  Time,  the stock transfer books of the Company shall be closed
and there shall be no further  registration  of  transfers  of shares of Company
Common Stock thereafter on the records of the Company.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company  hereby  represents  and warrants to the Parent  Companies,
subject to the limitations set forth in Section 10.01, that:

         SECTION 4.01 Organization and Qualification;  Subsidiaries. The Company
and  each  Significant  Subsidiary  of  the  Company  are  legal  entities  duly
organized,  validly  existing  and in good  standing  under  the  Laws of  their
respective  jurisdictions of  incorporation or organization,  have all requisite
corporate  power and  authority  to own,  lease  and  operate  their  respective
properties and to carry on their  businesses as they are now being conducted and
are duly qualified and in good standing to do business in the  jurisdictions  in
which the nature of the businesses conducted by them or the ownership or leasing
of their respective  properties makes such qualification  necessary,  other than
any matters, including the failure to be so qualified and in good standing, that
could not  reasonably  be  expected  to have a  Material  Adverse  Effect on the
Company.  Section 4.01 of the Company's  Disclosure Letter sets forth a true and
complete list of all the  Company's  directly or  indirectly  owned  Significant
Subsidiaries,  together  with  (A)  a  specification  of  the  nature  of  legal
organization of such  Subsidiary,  and (B) the  jurisdiction of incorporation or
other organization of such Subsidiary.

         SECTION 4.02 Certificate of Incorporation  and Bylaws.  The Company has
heretofore  marked for  identification  and delivered to the Parent complete and
correct copies of the certificate of incorporation  and the bylaws, in each case
as amended or restated to the date hereof, of the

                          AGREEMENT AND PLAN OF MERGER
                                       -6-




Company.  The  Company  is not in  violation  of  any of the  provisions  of its
certificate of incorporation or bylaws.

         SECTION 4.03               Capitalization.

                  (a) The  authorized  capital stock of the Company  consists of
         (i)  400,000,000  shares of  Company  Common  Stock,  of  which,  as of
         February 23, 1998, (A) 175,479,962  shares were issued and outstanding,
         all of which  are  duly  authorized,  validly  issued,  fully  paid and
         nonassessable  and not subject to preemptive rights created by statute,
         the Company's  certificate of  incorporation or bylaws or any agreement
         to which the  Company is a party or is bound and (B)  9,385,769  shares
         were held in the treasury of the Company and (ii) 10,000,000  shares of
         Preferred  Stock,  with no par  value,  of which  none are  issued  and
         outstanding  but of which  2,000,000  shares  have been  designated  as
         Series A Junior Preferred Stock.  Since October 31, 1997, except as set
         forth in Section  4.03(a) of the Company's  Disclosure  Letter,  (x) no
         shares of Company Common Stock have been issued by the Company,  except
         upon exercise of Company Stock  Options  outstanding  under the Company
         Stock Plans and (y) the  Company  has not  granted any options  for, or
         other rights to purchase, shares of Company Common Stock.

                  (b) Except for shares  reserved for  issuance  pursuant to the
         Company  Stock  Plans  described  in Section  4.03(b) of the  Company's
         Disclosure  Letter  (which  reservations  are also  listed in detail in
         Section  4.03(b)  of the  Company's  Disclosure  Letter),  no shares of
         Common Stock are reserved for issuance,  and,  except for the Company's
         Rights  Plan  and  Company  Stock  Options,  there  are  no  contracts,
         agreements,  commitments or arrangements  obligating the Company (i) to
         offer,  sell, issue or grant any Equity Security of the Company or (ii)
         to redeem,  purchase or acquire,  or offer to purchase or acquire,  any
         outstanding Equity Security of the Company.

                  (c)  Except as set forth in Section  4.03(c) of the  Company's
         Disclosure Letter, (i) all the issued and outstanding shares of capital
         stock of, or other equity interests in, each Significant  Subsidiary of
         the Company are owned by the Company or one of its  Subsidiaries,  have
         been duly  authorized  and are validly  issued,  and,  with  respect to
         capital stock, are fully paid and nonassessable, and were not issued in
         violation of any  preemptive  or similar  rights of any past or present
         equity holder of such Subsidiary;  (ii) all such issued and outstanding
         shares, or other equity interests, that are owned by the Company or one
         of its  Subsidiaries  are owned free and clear of all  Liens;  (iii) no
         shares  of  capital  stock  of,  or  other  equity  interests  in,  any
         Significant  Subsidiary of the Company are reserved for  issuance,  and
         there  are  no  contracts,  agreements,   commitments  or  arrangements
         obligating the Company or any of its  Significant  Subsidiaries  (A) to
         offer, sell, issue,  grant,  pledge,  dispose of or encumber any Equity
         Securities of any of the Significant Subsidiaries of the Company or (B)
         to redeem,  purchase or acquire,  or offer to purchase or acquire,  any
         outstanding Equity Securities of any of the Significant Subsidiaries of
         the  Company  or (C) to grant  any Lien on any  outstanding  shares  of
         capital stock of, or other equity  interests in, any of the Significant
         Subsidiaries of

                          AGREEMENT AND PLAN OF MERGER
                                       -7-




         the Company;  except for any matter under clause (i),  (ii) or (iii) of
         this Section  4.03(c) that could not  reasonably  be expected to have a
         Material Adverse Effect on the Company.

                  (d) Except for the revocable proxies granted by the Company or
         its  Subsidiaries  with  respect to the capital  stock of  Subsidiaries
         owned by the Company or its  Subsidiaries,  there are no voting trusts,
         proxies  or other  agreements,  commitments  or  understandings  of any
         character to which the Company or any of its  Significant  Subsidiaries
         is a  party  or  by  which  the  Company  or  any  of  its  Significant
         Subsidiaries  is bound  with  respect  to the  voting of any  shares of
         capital stock of the Company or any of its Significant Subsidiaries.

         SECTION 4.04 Authorization of Agreement.  The Company has all requisite
corporate  power and  authority  to execute and deliver this  Agreement  and the
Company Stock Option Agreement and, subject,  in the case of this Agreement,  to
approval  of this  Agreement  by the  holders of a majority  of the  outstanding
shares of Company Common Stock in accordance  with the applicable  provisions of
the  GCL  and  the  Company's  certificate  of  incorporation,  to  perform  its
obligations   hereunder  and  thereunder  and  to  consummate  the  transactions
contemplated hereby. The execution and delivery by the Company of this Agreement
and the Company Stock Option Agreement and the performance by the Company of its
obligations  hereunder and thereunder  have been duly and validly  authorized by
all  requisite  corporate  action on the part of the Company  (other than,  with
respect to the  Merger,  the  approval  and  adoption of this  Agreement  by the
holders of a majority  of the  outstanding  shares of  Company  Common  Stock in
accordance  with  the  applicable  provisions  of  the  GCL  and  the  Company's
certificate  of  incorporation).  This  Agreement  and the Company  Stock Option
Agreement have been duly executed and delivered by the Company and (assuming due
authorization,  execution  and  delivery  hereof  by the other  parties  hereto)
constitute  legal,  valid and binding  obligations  of the Company,  enforceable
against the Company in  accordance  with their terms,  except as the same may be
limited by legal principles of general  applicability  governing the application
and availability of equitable remedies.

         SECTION 4.05 Approvals. Except for the applicable requirements, if any,
of (a) the  Securities  Act, (b) the Exchange Act, (c) state  securities or blue
sky laws, (d) the HSR Act, (e) the competition  Laws,  Regulations and Orders of
foreign  Governmental  Authorities as set forth in Section 4.05 of the Company's
Disclosure  Letter,  (f) the NYSE, (g) the filing and recordation of appropriate
merger  documents  as required by the GCL and (h) those  Laws,  Regulations  and
Orders  noncompliance  with which  could not  reasonably  be  expected to have a
Material  Adverse  Effect on the Company,  no filing or  registration  with,  no
waiting period imposed by and no Authorization of, any Governmental Authority is
required under any Law,  Regulation or Order applicable to the Company or any of
its  Subsidiaries  to permit the  Company to  execute,  deliver or perform  this
Agreement  or  the  Company  Stock  Option   Agreement  or  to  consummate   the
transactions contemplated hereby or thereby.

         SECTION 4.06 No  Violation.  Assuming  effectuation  of all filings and
registrations with,  termination or expiration of any applicable waiting periods
imposed  by  and  receipt  of all  Authorizations  of  Governmental  Authorities
indicated as required in Section 4.05 and receipt of the

                          AGREEMENT AND PLAN OF MERGER
                                       -8-



approval  of this  Agreement  by the  holders of a majority  of the  outstanding
shares of Company Common Stock as required by the GCL and except as set forth in
Section 4.06 of the  Company's  Disclosure  Letter,  neither the  execution  and
delivery by the Company of this Agreement or the Company Stock Option  Agreement
nor the  performance by the Company of its  obligations  hereunder or thereunder
will (a)  violate or breach  the terms of or cause a default  under (i) any Law,
Regulation  or  Order  applicable  to  the  Company,  (ii)  the  certificate  of
incorporation  or bylaws of the Company or (iii) any  contract or  agreement  to
which the Company or any of its Subsidiaries is a party or by which it or any of
its  properties or assets is bound,  or (b) with the passage of time, the giving
of notice or the taking of any action by a third Person, have any of the effects
set forth in clause (a) of this Section, except in any such case for any matters
described  in this  Section  (other  than  clause  (ii)  hereof)  that could not
reasonably be expected to have Material Adverse Effect on the Company.  Prior to
the execution of this Agreement, the Board of Directors of the Company has taken
all necessary action to cause this Agreement and the  transactions  contemplated
hereby to be exempt from the  provisions of Section 203 of the GCL and to ensure
that the  execution,  delivery and  performance of this Agreement by the parties
hereto  will not cause any  rights to be  distributed  or to become  exercisable
under the Company's Rights Agreement.  Assuming the representation of the Parent
in Section 5.17(g) is true, neither of the Parent Companies is (a) an "Acquiring
Person" as defined  in the  Company's  Rights  Agreement  or (b) will  become an
"Acquiring  Person"  as defined  therein as a result of any of the  transactions
contemplated by this Agreement.

         SECTION 4.07               Reports.

                  (a) Since October 31, 1994,  (i) the Company has filed all SEC
         Reports  required  to be filed by it with the  Commission  and (ii) the
         Company and its  Subsidiaries  have filed all other Reports required to
         be  filed  by any of them  with  any  other  Governmental  Authorities,
         including state securities administrators,  except where the failure to
         file any such  Reports  could  not  reasonably  be  expected  to have a
         Material  Adverse  Effect on the Company.  Such Reports,  including all
         those filed after the date of this Agreement and prior to the Effective
         Time, (x) were prepared in all material respects in accordance with the
         requirements  of  applicable  Law  (including,  with respect to the SEC
         Reports,  the  Securities Act and the Exchange Act, as the case may be,
         and the applicable  Regulations of the Commission  thereunder) and (y),
         in the case of the SEC  Reports,  did not at the time they  were  filed
         contain  any untrue  statement  of a  material  fact or omit to state a
         material  fact  required to be stated  therein or necessary in order to
         make the statements  therein,  in the light of the circumstances  under
         which they were made, not misleading.

                  (b) The Company's Audited  Consolidated  Financial  Statements
         and any consolidated financial statements of the Company (including any
         related  notes  thereto)  contained  in any SEC  Reports  filed  by the
         Company with the  Commission  after the date of this Agreement (i) have
         been or will have been prepared in accordance  with GAAP (except (A) to
         the extent  required  by changes in GAAP and (B),  with  respect to the
         Company's  Audited  Consolidated   Financial  Statements,   as  may  be
         indicated  in the notes  thereto and (C), in the case of any  unaudited
         interim financial statements, as permitted by Form 10-Q) and

                          AGREEMENT AND PLAN OF MERGER
                                       -9-



         (ii) fairly present the consolidated  financial position of the Company
         and  its  Subsidiaries  as of the  respective  dates  thereof  and  the
         consolidated results of their operations and cash flows for the periods
         indicated  (subject,  in the case of any  unaudited  interim  financial
         statements, to normal and recurring year-end adjustments).

                  (c)  Except as set forth in Section  4.07(c) of the  Company's
         Disclosure  Letter,  there exist no  liabilities  or obligations of the
         Company and its Subsidiaries that are Material to the Company,  whether
         accrued, absolute, contingent or threatened, and that would be required
         to be reflected,  reserved for or disclosed  under GAAP in consolidated
         financial  statements  of the Company as of and for the period ended on
         the  date  of  this   representation  and  warranty,   other  than  (i)
         liabilities or obligations that are adequately reflected,  reserved for
         or  disclosed  in  the   Company's   Audited   Consolidated   Financial
         Statements,  (ii)  liabilities or obligations  incurred in the ordinary
         course of  business  of the  Company  since  October  31,  1997,  (iii)
         liabilities  or  obligations  the  incurrence  of which is permitted by
         Section  6.02(a)  and  (iv)  liabilities  or  obligations  that are not
         Material to the Company.

         SECTION 4.08               No Material Adverse Effect; Conduct.

                  (a) Since  October 31,  1997,  no event  (other than any event
         that is of general  application to all or a substantial  portion of the
         Company's  industry and other than any event that is expressly  subject
         to any other  representation or warranty  contained in Article IV) has,
         to the  Knowledge  of  the  Company,  occurred  that,  individually  or
         together with other  similar  events,  could  reasonably be expected to
         constitute or cause a Material Adverse Effect on the Company.

                  (b)  Except as set forth in Section  4.08(b) of the  Company's
         Disclosure Letter,  during the period from October 31, 1997 to the date
         of this Agreement,  neither the Company nor any of its Subsidiaries has
         engaged in any conduct  that is  proscribed  during the period from the
         date of this Agreement to the Effective Time by subsections (i) through
         (xiv) of Section 6.02(a).

         SECTION  4.09  Certain  Business  Practices.  As of the  date  of  this
Agreement,  neither the  Company or any of its  Subsidiaries  nor any  director,
officer,  employee  or agent of the Company or any of its  Subsidiaries  has (a)
used  any  funds  for  unlawful  contributions,  gifts,  entertainment  or other
unlawful expenses relating to political activity,  (b) made any unlawful payment
to any foreign or domestic  government official or employee or to any foreign or
domestic  political  party or campaign or violated any  provision of the Foreign
Corrupt Practices Act of 1977, as amended, (c) consummated any transaction, made
any payment, entered into any agreement or arrangement or taken any other action
in violation of Section 1128B(b) of the Social Security Act, as amended,  or (d)
made any other  unlawful  payment,  except for any such  matters  that could not
reasonably be expected to have a Material Adverse Effect on the Company.

                          AGREEMENT AND PLAN OF MERGER
                                      -10-



         SECTION  4.10 Certain  Obligations.  Except for those listed in Section
4.10 of the  Company's  Disclosure  Letter,  neither  the Company nor any of its
Subsidiaries  is a party to or bound by any (a) Noncompete  Agreement or (b) any
agreement that contains change of control or similar  provisions that would give
any Person that is a party to any such  agreement the right,  as a result of the
execution  of this  Agreement  or the  consummation  of any of the  transactions
contemplated  hereby,  to purchase any  Material  interest of the Company in any
joint venture, partnership or similar arrangement.

         SECTION   4.11   Authorizations;   Compliance.   The  Company  and  its
Subsidiaries  have  obtained all  Authorizations  that are necessary to carry on
their businesses as currently  conducted,  except for any such Authorizations as
to which,  individually  or in the  aggregate,  the failure to possess could not
reasonably be expected to have a Material  Adverse  Effect on the Company.  Such
Authorizations  are in full  force and  effect,  have not been  violated  in any
respect that could  reasonably be expected to have a Material  Adverse Effect on
the Company and there is no action,  proceeding or investigation  pending or, to
the Knowledge of the Company,  threatened  regarding  suspension,  revocation or
cancellation of any such Authorizations, except for any suspensions, revocations
or  cancellations  of  any  such  Authorizations  that,  individually  or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Company.

         SECTION 4.12  Litigation;  Compliance with Laws.  There are no actions,
suits,  investigations or proceedings (including any proceedings in arbitration)
pending or, to the Knowledge of the Company,  threatened  against the Company or
any of its  Subsidiaries,  at law or in equity, in any Court or before or by any
Governmental  Authority,  except actions,  suits,  investigations or proceedings
that are disclosed in the  Company's SEC Reports,  that are set forth in Section
4.12 or Section 4.15 of the Company's  Disclosure  Letter or that,  individually
or, with respect to multiple  actions,  suits or proceedings that allege similar
theories  of  recovery  based on  similar  facts,  in the  aggregate,  could not
reasonably be expected to have a Material  Adverse Effect on the Company.  There
are no Material  claims pending or, to the Knowledge of the Company,  threatened
by  any  Persons   against  the   Company  or  any  of  its   Subsidiaries   for
indemnification pursuant to any statute,  organizational  document,  contract or
otherwise with respect to any claim, action,  suit,  investigation or proceeding
pending in any Court or before or by any Governmental  Authority.  Except as set
forth in Section 4.12 of the Company's Disclosure Letter and with respect to the
matters  covered by  Sections  4.09,  4.13,  4.14 and 4.15,  the Company and its
Subsidiaries  are  in  substantial  compliance  with  all  applicable  Laws  and
Regulations  and are not in default with respect to any Order  applicable to the
Company or any of its  Subsidiaries,  except  such  events of  noncompliance  or
defaults  that,  individually  or in the  aggregate,  could  not  reasonably  be
expected to have a Material Adverse Effect on the Company.

         SECTION  4.13   Employee  Benefit  Plans.  Except  as  set forth in the
Company's SEC Reports or in Section 4.13 of the Company's Disclosure Letter:

                  (a)  With  respect to each Company  Benefit Plan, no event has
         occurred  and,  to  the  Knowledge  of  the  Company,  there  exists no
         condition or set of circumstances in connection

                          AGREEMENT AND PLAN OF MERGER
                                      -11-



         with which the Company or any of its  Subsidiaries  could be subject to
         any liability under the terms of such Company Benefit Plan,  ERISA, the
         Code or any other  applicable  Law,  other than any condition or set of
         circumstances  that could not reasonably be expected to have a Material
         Adverse Effect on the Company.

                  (b) Each Current Company Benefit Plan intended to be qualified
         under Section 401 of the Code (i) satisfies in form the requirements of
         such Section except to the extent amendments are not required by Law to
         be made  until a date after the  Effective  Time,  (ii) has  received a
         favorable  determination  letter from the IRS regarding  such qualified
         status  and  (iii)  has not,  since  the  receipt  of the  most  recent
         favorable  determination  letter,  been amended  other than  amendments
         required by applicable Law.

                  (c) Except as would not  reasonably be expected to result in a
         Material  Adverse Effect on the Company,  there has been no termination
         or partial  termination of any Current  Company Benefit Plan within the
         meaning of Section  4.11(d)(3) of the Code and, to the Knowledge of the
         Company,  each  Current  Company  Benefit  Plan  has been  operated  in
         material compliance with its provisions and with applicable Law.

                  (d) Any Terminated  Company Benefit Plan intended to have been
         qualified   under   Section  401  of  the  Code  received  a  favorable
         determination letter from the IRS with respect to its termination.

                  (e) There are no actions,  suits or claims pending (other than
         routine  claims for  benefits)  or, to the  Knowledge  of the  Company,
         threatened against, or with respect to, any Company Benefit Plan or its
         assets that could  reasonably  be  expected to have a Material  Adverse
         Effect on the Company and, to the Knowledge of the Company, no facts or
         circumstances exist that could give rise to any such actions,  suits or
         claims,  except as would not  reasonably be expected to have a Material
         Adverse Effect on the Company.

                  (f) To  the  Knowledge  of the  Company,  there  is no  matter
         pending (other than routine qualification  determination  filings) with
         respect to any Company  Benefit Plans before the IRS, the Department of
         Labor, the PBGC or any other  Governmental  Authority,  except as would
         not  reasonably  be expected to have a Material  Adverse  Effect on the
         Company.

                  (g) All  contributions  required to be made to Company Benefit
         Plans pursuant to their terms and the provisions of ERISA,  the Code or
         any other  applicable  Law have been timely  made,  except as would not
         reasonably  be  expected  to  have a  Material  Adverse  Effect  on the
         Company.

                  (h) As to any Current Company Benefit Plan subject to Title IV
         of ERISA,  (i) there has been no event or  condition  which  presents a
         significant  risk of plan  termination,  (ii)  no  accumulated  funding
         deficiency, whether or not waived, within the meaning of Section 302 of
         ERISA or Section 412 of the Code has been incurred  (iii) no reportable
         event

                          AGREEMENT AND PLAN OF MERGER
                                      -12-




         within the meaning of Section  4043 of ERISA (for which the  disclosure
         requirements of Regulation section 4043.1, et seq.,  promulgated by the
         PBGC,  have not been waived) has occurred within six years prior to the
         date of this  Agreement,  (iv) no notice of  intent to  terminate  such
         Benefit  Plan  has been  given  under  Section  4041 of  ERISA,  (v) no
         proceeding has been instituted under Section 4042 of ERISA to terminate
         such Benefit  Plan,  (vi) no  liability  to the PBGC has been  incurred
         (other than with respect to required  premium  payments)  and (vii) the
         assets of the Benefit Plan equal or exceed the actuarial  present value
         of the  benefit  liabilities,  within the  meaning  of Section  4041 of
         ERISA,  under  the  Benefit  Plan,  based  upon  reasonable   actuarial
         assumptions and the asset valuation principles established by the PBGC,
         except as would not  reasonably be expected to have a Material  Adverse
         Effect on the Company.

                  (i) In connection with the  consummation  of the  transactions
         contemplated by this Agreement,  no payment of money or other property,
         acceleration  of benefits or provision of other rights has been or will
         be made under any Current Company Benefit Plan that could reasonably be
         expected to be nondeductible under Section 280G of the Code, whether or
         not some other  subsequent  action or event  would be required to cause
         such payment, acceleration or provision to be triggered.

                  (j) The  execution  and  delivery  of this  Agreement  and the
         consummation  of the  transactions  contemplated  hereby  will  not (i)
         require  the  Company  or any  of its  Subsidiaries  to  make a  larger
         contribution to, or pay greater benefits or provide other rights under,
         any Current  Company  Benefit Plan or any of the programs,  agreements,
         policies or other  arrangements  described in the Company's  Disclosure
         Letter in  response to  paragraph  (k) below than it  otherwise  would,
         whether or not some other subsequent  action or event would be required
         to cause such  payment or  provision  to be triggered or (ii) create or
         give rise to any additional  vested rights or service credits under any
         Current  Company  Benefit  Plan  or any of such  programs,  agreements,
         policies or other  arrangements,  whether or not some other  subsequent
         action  or  event  would  be   required  to  cause  such   creation  or
         acceleration to be triggered.

                  (k) Neither the Company nor any of its Subsidiaries is a party
         to or is bound by any severance or change in control agreement, program
         or policy (involving  $500,000 or more of future payments) with respect
         to any employee, officer or director.

                  (l) No Current  Company  Benefit  Plan  (other  than a Company
         Benefit Plan maintained  outside the United States that is either fully
         insured or fully funded  through a retirement  plan)  provides  retiree
         medical or retiree  life  insurance  benefits to any Person and neither
         the Company nor any of its  Subsidiaries is  contractually or otherwise
         obligated  (whether  or not in writing) to provide any Person with life
         insurance  or  medical  benefits  upon  retirement  or  termination  of
         employment,  other than as required by the  provisions  of Sections 601
         through 608 of ERISA and Section 4980B of the Code.


                          AGREEMENT AND PLAN OF MERGER
                                      -13-



                  (m)  Neither   the   Company  nor  any  of  its   Subsidiaries
         contributes or has an obligation to contribute,  and has not within six
         years  prior  to  the  date  of  this  Agreement  contributed,  had  an
         obligation to contribute, or had any other liability to a multiemployer
         plan within the meaning of Section 3(37) of ERISA.

                  (n) The Company has not contributed,  transferred or otherwise
         provided any cash, securities or other property to any grantee,  trust,
         escrow or other arrangement that has the effect of providing or setting
         aside  assets  for  benefits   payable  pursuant  to  any  termination,
         severance or other change in control agreement.

                  (o)  Except  as would not  reasonably  be  expected  to have a
         Material  Adverse Effect on the Company,  (i) no collective  bargaining
         agreement   is  being   negotiated   by  the  Company  or  any  of  its
         Subsidiaries,  (ii) there is no  pending  or, to the  Knowledge  of the
         Company,  threatened labor dispute, strike or work stoppage against the
         Company  or any of its  Subsidiaries,  (iii)  to the  Knowledge  of the
         Company,  neither  the  Company  or  any of its  Subsidiaries  nor  any
         representative  or employee  of the Company or any of its  Subsidiaries
         has in the United States  committed any Material unfair labor practices
         in connection with the operation of the business of the Company and its
         Subsidiaries,  and (iv) there is no pending or, to the Knowledge of the
         Company,  threatened  charge or complaint against the Company or any of
         its Subsidiaries by or before the National Labor Relations Board or any
         comparable agency of any state of the United States.

                  SECTION 4.14      Taxes.

                  (a)  Except  for such  matters  as  could  not  reasonably  be
         expected to have a Material Adverse Effect on the Company,  all returns
         and  reports  of or with  respect to any Tax ("Tax  Returns")  that are
         required  to be filed by or with  respect to the  Company or any of its
         Subsidiaries  on or  before  the  Effective  Time  have been or will be
         timely  filed,  all Taxes that are shown to be due on such Tax  Returns
         have  been  or  will  be  timely  paid in  full,  all  withholding  Tax
         requirements  imposed on or with  respect to the  Company or any of its
         Subsidiaries have been or will be satisfied in full in all respects and
         no penalty, interest or other charge is or will become due with respect
         to the late  filing of any such Tax Return or late  payment of any such
         Tax.

                  (b)  There  is no  claim  against  the  Company  or any of its
         Subsidiaries for any Taxes, and no assessment, deficiency or adjustment
         has been  asserted or proposed in writing  with respect to any such Tax
         Return,  that, in either case,  could  reasonably be expected to have a
         Material Adverse Effect on the Company.

         SECTION 4.15               Environmental Matters.

                  (a)      Except for  matters  disclosed  in  the Company's SEC
         Reports  or  in  Section 4.15  of  the  Company's Disclosure Letter and
         except for matters that, individually or

                          AGREEMENT AND PLAN OF MERGER
                                      -14-



         in the  aggregate,  could not reasonably be expected to have a Material
         Adverse  Effect on the  Company,  (i) the  properties,  operations  and
         activities of the Company and its  Subsidiaries  are in compliance with
         all   applicable   Environmental   Laws;   (ii)  the  Company  and  its
         Subsidiaries  and the  properties and operations of the Company and its
         Subsidiaries  are not  subject  to any  existing,  pending  or,  to the
         Knowledge  of the  Company,  threatened  action,  suit,  investigation,
         inquiry or proceeding by or before any Court or Governmental  Authority
         under any Environmental Law; (iii) all Authorizations, if any, required
         to be obtained or filed by the Company or any of its Subsidiaries under
         any  Environmental  Law in connection  with the business of the Company
         and its  Subsidiaries  have  been  obtained  or filed and are valid and
         currently  in full force and  effect;  (iv),  to the  Knowledge  of the
         Company,  there  has  been  no  release  of  any  hazardous  substance,
         pollutant or  contaminant  into the  environment  by the Company or its
         Subsidiaries or in connection with their properties or operations;  and
         (v)  there  has been no  exposure  of any  Person  or  property  to any
         hazardous  substance,  pollutant or contaminant in connection  with the
         properties,   operations   and   activities  of  the  Company  and  its
         Subsidiaries.

                   (b) The Company and its  Subsidiaries  have made available to
         the Parent all internal and external  environmental  audits and studies
         and all correspondence on environmental  matters (in each case relevant
         to the Company or any of its  Subsidiaries)  in the  possession  of the
         Company or its  Subsidiaries  for such matters as could  reasonably  be
         expected to have a Material Adverse Effect on the Company.

         SECTION 4.16 Insurance.  The Company and its  Subsidiaries  own and are
beneficiaries  under  all such  insurance  policies  underwritten  by  reputable
insurers  that,  as  to  risks   insured,   coverages  and  related  limits  and
deductibles,  are  customary  in the  industries  in which the  Company  and its
Subsidiaries  operate.  All  premiums  due with  respect  to all such  insurance
policies  that are Material have been paid and, to the Knowledge of the Company,
all such policies are in full force and effect.

         SECTION  4.17  Pooling;  Tax  Matters.  Neither the Company nor, to the
Knowledge of the Company,  any of its Affiliates has taken or agreed to take any
action  that would  prevent  (a) the Merger  from being  treated  for  financial
accounting  purposes as a "pooling of interests" in accordance with GAAP and the
Regulations   of  the   Commission  or  (b)  the  Merger  from   constituting  a
reorganization  within  the  meaning  of  section  368(a) of the  Code.  Without
limiting the generality of the foregoing:

                  (a) Prior to and in  connection  with the Merger,  (i) none of
         the  Company  Common  Stock  will be  redeemed,  (ii) no  extraordinary
         distribution  will be made with respect to Company  Common  Stock,  and
         (iii) none of the Company  Common  Stock will be acquired by any person
         related (as defined in Treas. Reg. ss. 1.368-1(e)(3)  without regard to
         ss. 1.368- 1(e)(3)(i)(A)) to the Company.


                          AGREEMENT AND PLAN OF MERGER
                                      -15-



                  (b) The Company and the  stockholders of the Company will each
         pay their respective expenses,  if any, incurred in connection with the
         Merger.

                  (c) There is no intercorporate  indebtedness  existing between
         the  Company  and the Parent or between  the Company and Newco that was
         issued, acquired or will be settled at a discount.

                  (d) The  Company  is  not  an investment company as defined in
         section 368(a)(2)(F)(iii) and (iv) of the Code.

                  (e) The Company is not under the  jurisdiction of a court in a
         title 11 or similar case within the meaning of section  368(a)(3)(A) of
         the Code.

         SECTION  4.18  Affiliates.  Section  4.18 of the  Company's  Disclosure
Letter  contains a true and  complete  list of all Persons who are  directors or
executive officers of the Company and any other Persons who, to the Knowledge of
the Company,  may be deemed to be Affiliates of the Company.  Concurrently  with
the execution and delivery of this  Agreement,  the Company has delivered to the
Parent  an  executed  letter  agreement,  substantially  in the  form of Annex B
hereto, from each such Person so identified.

         SECTION 4.19 Opinion of Financial Advisor. The Company has received the
opinion of Salomon Smith Barney on the date of this Agreement to the effect that
the Common Stock Exchange Ratio is fair,  from a financial point of view, to the
holders of Company Common Stock.

         SECTION 4.20 Brokers.  No broker,  finder or  investment  banker (other
than Salomon Smith Barney) is entitled to any  brokerage,  finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements  made by or on behalf of the Company.  Prior to the date
of this  Agreement,  the Company has made available to the Parent a complete and
correct  copy of all  agreements  between the Company and Salomon  Smith  Barney
pursuant  to which such firm will be  entitled  to any  payment  relating to the
transactions contemplated by this Agreement.

                                    ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE PARENT

         The Parent  Companies  hereby  represent  and  warrant to the  Company,
subject to the limitations set forth in Section 10.01, that:

         SECTION 5.01 Organization and Qualification;  Subsidiaries. The Parent,
Newco and each other  Significant  Subsidiary  of the Parent are legal  entities
duly  organized,  validly  existing and in good standing under the laws of their
respective  jurisdictions of  incorporation or organization,  have all requisite
corporate  power and  authority  to own,  lease  and  operate  their  respective
properties

                          AGREEMENT AND PLAN OF MERGER
                                      -16-




and to carry on their  businesses  as they are now being  conducted and are duly
qualified and in good standing to do business in each  jurisdiction in which the
nature of the business  conducted  by them or the  ownership or leasing of their
respective  properties  makes  such  qualification  necessary,  other  than  any
matters,  including  the failure to be so qualified and in good  standing,  that
could not  reasonably  be  expected  to have a  Material  Adverse  Effect on the
Parent.  Section  5.01 of the Parent's  Disclosure  Letter sets forth a true and
complete  list of all the  Parent's  directly or  indirectly  owned  Significant
Subsidiaries,  together  with  (A)  a  specification  of  the  nature  of  legal
organization of such Subsidiary and (B) the  jurisdiction  of  incorporation  or
other organization of such Subsidiary.

         SECTION 5.02  Certificate of Incorporation  and Bylaws.  The Parent has
heretofore marked for  identification  and furnished to the Company complete and
correct copies of the certificate of incorporation  and the bylaws, in each case
as amended or restated to the date hereof,  of the Parent.  The Parent is not in
violation  of any of the  provisions  of its  certificate  of  incorporation  or
bylaws.

         SECTION 5.03  Capitalization.

                  (a) The authorized capital stock of the Parent consists of (i)
         400,000,000  shares of Parent  Common Stock of which as of February 23,
         1998, 262,591,336 shares were issued and outstanding,  all of which are
         duly authorized,  validly issued,  fully paid and nonassessable and not
         subject  to  preemptive   rights  created  by  statute,   the  Parent's
         certificate  of  incorporation  or bylaws or any agreement to which the
         Parent is a party or is bound,  and (ii) 5,000,000  shares of Preferred
         Stock,  without  par  value,  of  which  none is  issued  but of  which
         2,000,000 shares have been designated as Series A Junior  Participating
         Preferred  Stock.  Since  December  31,  1997,  except  as set forth in
         Section  5.03(a) of the Parent's  Disclosure  Letter,  (x) no shares of
         Parent  Common  Stock have been issued by the Parent  except the Parent
         Common Stock  issued  pursuant to the  exercise of  outstanding  Parent
         Stock  Options  and Parent  Restricted  Stock and Parent  Common  Stock
         issued  otherwise  as set  forth in  Section  5.03(a)  of the  Parent's
         Disclosure  Letter and (y) the Parent has not granted any options  for,
         or other rights to purchase, shares of Parent Common Stock.

                  (b)  Except as set forth in Section  5.03(b)  of the  Parent's
         Disclosure  Letter and except for shares reserved for issuance pursuant
         to the Parent Stock Plans  described in Section 5.03(b) of the Parent's
         Disclosure  Letter,  no shares of Parent  Common Stock are reserved for
         issuance,  and,  except  for  the  Parent  Stock  Options,  the  Parent
         Restricted Stock agreements and for the Parent's  obligations under the
         Parent's  Rights  Agreement,   there  are  no  contracts,   agreements,
         commitments or arrangements  obligating the Parent (i) to offer,  sell,
         issue or grant any Equity  Securities  of the Parent or (ii) to redeem,
         purchase or acquire,  or offer to purchase or acquire,  any outstanding
         Equity  Securities  of the Parent or to grant any Lien on any shares of
         capital stock of the Parent.

                  (c)  Except as set forth in Section  5.03(c)  of the  Parent's
         Disclosure Letter, (i) all the issued and outstanding shares of capital
         stock of, or other equity interests in, each Significant  Subsidiary of
         the  Parent  are owned  by the  Parent or one of its Subsidiaries, have

                          AGREEMENT AND PLAN OF MERGER
                                      -17-



         been duly  authorized  and are validly  issued,  and,  with  respect to
         capital stock, are fully paid and nonassessable, and were not issued in
         violation of any  preemptive  or similar  rights of any past or present
         equity holder of such Subsidiary;  (ii) all such issued and outstanding
         shares, or other equity interests,  that are owned by the Parent or one
         of its  Subsidiaries  are owned free and clear of all  Liens;  (iii) no
         shares  of  capital  stock  of,  or  other  equity  interests  in,  any
         Significant  Subsidiary  of the Parent are reserved for  issuance,  and
         there  are  no  contracts,  agreements,   commitments  or  arrangements
         obligating  the Parent or any of its  Significant  Subsidiaries  (A) to
         offer, sell, issue,  grant,  pledge,  dispose of or encumber any Equity
         Securities of any of the Significant  Subsidiaries of the Parent or (B)
         to redeem,  purchase or acquire,  or offer to purchase or acquire,  any
         outstanding Equity Securities of any of the Significant Subsidiaries of
         the  Parent  or (C) to grant  any  Lien on any  outstanding  shares  of
         capital stock of, or other equity  interests in, any of the Significant
         Subsidiaries  of the Parent;  except for any matter  under  clause (i),
         (ii) or (iii) of this  Section  5.03(c)  that could not  reasonably  be
         expected to have a Material Adverse Effect on the Parent.

                  (d) Except for revocable  proxies granted by the Parent or its
         Subsidiaries with respect to the capital stock of Subsidiaries owned by
         the Parent or its Subsidiaries,  there are no voting trusts, proxies or
         other  agreements,  commitments or  understandings  of any character to
         which the Parent or any of its  Significant  Subsidiaries is a party or
         by which the  Parent or any of its  Significant  Subsidiaries  is bound
         with respect to the voting of any shares of capital stock of the Parent
         or any of its Significant Subsidiaries.

         SECTION 5.04  Authorization of Agreement.  Each of the Parent and Newco
has all  requisite  corporate  power and  authority  to execute and deliver this
Agreement and, in the case of the Parent,  the Parent Stock Option Agreement and
subject, in the case of this Agreement, to approval of the Charter Amendment and
the Share  Issuance by the holders of a majority  of the  outstanding  shares of
Parent Common Stock in accordance with the applicable  provisions of the GCL and
the Parent's certificate of incorporation,  to perform its obligations hereunder
and, in the case of the Parent,  thereunder and to consummate  the  transactions
contemplated hereby and, in the case of the Parent,  thereby.  The execution and
delivery by each of the Parent and Newco of this Agreement and the execution and
delivery by the Parent of the Parent Stock Option  Agreement and the performance
of their  respective  obligations  hereunder  and,  in the  case of the  Parent,
thereunder  have been duly and validly  authorized  by all  requisite  corporate
action on the part of the Parent  and  Newco,  respectively  (other  than,  with
respect to the Merger,  the approval and adoption of the Charter  Amendment  and
the Share  Issuance by the holders of a majority  of the  outstanding  shares of
Parent Common Stock in accordance with the applicable  provisions of the GCL and
the  Parent's  certificate  of  incorporation).  This  Agreement  has been  duly
executed and delivered by the Parent and Newco and (assuming due  authorization,
execution and delivery  hereof by the other party  hereto)  constitutes a legal,
valid and binding  obligation of the Parent and Newco,  enforceable  against the
Parent and Newco in accordance with its terms, except as the same may be limited
by legal  principles  of general  applicability  governing the  application  and
availability of equitable  remedies.  The Parent Stock Option Agreement has been
duly  executed and  delivered  by the Parent and  (assuming  due  authorization,
execution and delivery thereof by the other party thereto)  constitutes a legal,
valid and

                          AGREEMENT AND PLAN OF MERGER
                                      -18-



binding  obligation of the Parent  enforceable  against the Parent in accordance
with its terms, except as the same may be limited by legal principles of general
applicability governing the application and availability of equitable remedies.

         SECTION 5.05 Approvals. Except for the applicable requirements, if any,
of (a) the  Securities  Act, (b) the Exchange Act, (c) state  securities or blue
sky laws, (d) the HSR Act, (e) the competition  Laws,  Regulations and Orders of
foreign  Governmental  Authorities  as set forth in Section 5.05 of the Parent's
Disclosure  Letter,  (f) the NYSE, (g) the filing and recordation of appropriate
merger  documents  as required by the GCL and (h) those  Laws,  Regulations  and
Orders  noncompliance  with which  could not  reasonably  be  expected to have a
Material  Adverse  Effect on the  Parent,  no filing or  registration  with,  no
waiting period imposed by and no Authorization of, any Governmental Authority is
required under any Law, Regulation or Order applicable to the Parent or Newco to
permit the Parent or Newco to execute,  deliver or perform this Agreement or, in
the case of the Parent,  the Parent Stock Option  Agreement or to consummate the
transactions  contemplated  hereby or thereby.  To the  Knowledge of the Parent,
there  are no facts or  circumstances  that  could  reasonably  be  expected  to
preclude the Parent Common Stock to be issued in the Merger from being  approved
for listing on the NYSE.

         SECTION 5.06 No  Violation.  Assuming  effectuation  of all filings and
registrations with,  termination or expiration of any applicable waiting periods
imposed  by, and  receipt of all  Authorizations  of,  Governmental  Authorities
indicated as required in Section 5.05 and receipt of the approval of the Charter
Amendment and the Share Issuance by the holders of a majority of the outstanding
shares of Parent  Common Stock as required by the GCL and except as set forth in
Section  5.06 of the  Parent's  Disclosure  Letter,  neither the  execution  and
delivery by the Parent or Newco of this Agreement or by the Parent of the Parent
Stock  Option  Agreement  nor the  performance  by the  Parent  or  Newco of its
obligations  hereunder or thereunder  will (a) violate or breach the terms of or
cause a default under (i) any Law,  Regulation or Order applicable to the Parent
or Newco, (ii) the certificate of incorporation or bylaws of the Parent or Newco
or  (iii)  any  contract  or  agreement  to  which  the  Parent  or  any  of its
Subsidiaries  is a party or by which it or any of its  properties  or  assets is
bound,  or (b), with the passage of time,  the giving of notice or the taking of
any action by a third Person, have any of the effects set forth in clause (a) of
this Section,  except in any such case for any matters described in this Section
(other than clause (ii) hereof) that could not  reasonably be expected to have a
Material Adverse Effect on the Parent.

         SECTION 5.07 Reports.

                  (a) Since December 31, 1994, the (i) Parent or its predecessor
         has filed all SEC  Reports  required to be filed by the Parent with the
         Commission  and (ii) the  Parent  and its  Subsidiaries  have filed all
         other  Reports  required  to be  filed by any of them  with  any  other
         Governmental  Authorities,  including state securities  administrators,
         except where the failure to file any such Reports could not  reasonably
         be  expected  to have a Material  Adverse  Effect on the  Parent.  Such
         Reports,  including  those filed after the date of this  Agreement  and
         prior to the Effective Time, (i) were prepared in all material respects
         in accordance with applicable

                          AGREEMENT AND PLAN OF MERGER
                                      -19-



         Law (including, with respect to the SEC Reports, the Securities Act and
         the Exchange Act, as the case may be, and the applicable Regulations of
         the Commission thereunder) and (ii) in the case of the SEC Reports, did
         not at the time they were  filed  contain  any  untrue  statement  of a
         material  fact or omit to state a material  fact  required to be stated
         therein or necessary in order to make the  statements  therein,  in the
         light of the circumstances under which they were made, not misleading.

                  (b) The Parent's Audited Consolidated Financial Statements and
         any  consolidated  financial  statements of the Parent  (including  any
         related notes thereto) contained in any SEC Reports filed by the Parent
         with the  Commission  after the date of this Agreement (i) have been or
         will have been prepared in accordance with the published Regulations of
         the  Commission  and in accordance  with GAAP (except (A) to the extent
         required by changes in GAAP, (B), with respect to the Parent's  Audited
         Consolidated  Financial  Statements,  as may be  indicated in the notes
         thereto and (C) in the case of any unaudited financial  statements,  as
         permitted  by Form  10-Q)  and (ii)  fairly  present  the  consolidated
         financial  position  of  the  Parent  and  its  Subsidiaries  as of the
         respective  dates  thereof  and  the  consolidated   results  of  their
         operations and cash flows for the periods  indicated  (subject,  in the
         case of any  unaudited  interim  financial  statements,  to normal  and
         recurring year-end adjustments).

                  (c)  Except as set forth in Section  5.07(c)  of the  Parent's
         Disclosure  Letter,  there exist no  liabilities  or obligations of the
         Parent and its  Subsidiaries  that are Material to the Parent,  whether
         accrued, absolute,  contingent or threatened, that would be required to
         be  reflected,  reserved  for or disclosed  under GAAP in  consolidated
         financial  statements  of the Parent as of and for the period  ended on
         the  date  of  this   representation  and  warranty,   other  than  (i)
         liabilities or obligations that are adequately reflected,  reserved for
         or disclosed in the Parent's Audited Consolidated Financial Statements,
         (ii)  liabilities  or  obligations  incurred in the ordinary  course of
         business of the Parent since  December 31, 1997,  (iii)  liabilities or
         obligations the incurrence of which is permitted by Section 6.02(b) and
         (iv) liabilities or obligations that are not Material to the Parent.

         SECTION 5.08      No Material Adverse Effect; Conduct.

                  (a) Since  December 31,  1997,  no event (other than any event
         that is of general  application to all or a substantial  portion of the
         Parent's  industries and other than any event that is expressly subject
         to any other representation or warranty contained in Article V) has, to
         the Knowledge of the Parent,  occurred that,  individually  or together
         with other similar events,  could  reasonably be expected to constitute
         or cause a Material Adverse Effect on the Parent.

                  (b)  Except as set forth in Section  5.08(b)  of the  Parent's
         Disclosure  Letter,  during the period from  December 31, 1997,  to the
         date of this Agreement,  neither the Parent nor any of its Subsidiaries
         has engaged in any conduct  that is  proscribed  during the period from
         the

                          AGREEMENT AND PLAN OF MERGER
                                      -20-



         date of this Agreement to the Effective Time by subsections (i) through
         (xiv) of Section 6.02(b).

         SECTION  5.09  Certain  Business  Practices.  As of the  date  of  this
Agreement,  neither  the  Parent or any of its  Subsidiaries  nor any  director,
officer, employee or agent of the Parent or any of its Subsidiaries has (a) used
any funds for unlawful  contributions,  gifts,  entertainment  or other unlawful
expenses  relating to political  activity,  (b) made any unlawful payment to any
foreign  or  domestic  government  official  or  employee  or to any  foreign or
domestic  political  party or campaign or violated any  provision of the Foreign
Corrupt Practices Act of 1977, as amended, (c) consummated any transaction, made
any payment, entered into any agreement or arrangement or taken any other action
in violation of Section 1128B(b) of the Social Security Act, as amended,  or (d)
made any other  unlawful  payment,  except for any such  matters  that could not
reasonably be expected to have a Material Adverse Effect on the Parent.

         SECTION  5.10 Certain  Obligations.  Except for those listed in Section
5.10 of the Parent's  Disclosure Letter or filed as Exhibits to the Parent's SEC
Reports,  neither the Parent nor any of its  Subsidiaries is a party to or bound
by (a) any  Noncompete  Agreement or (b) any agreement  that contains  change of
control or similar  provisions that would give any Person that is a party to any
such agreement the right,  as a result of the execution of this Agreement or the
consummation of any of the  transactions  contemplated  hereby,  to purchase any
Material  interest of the Parent in any joint  venture,  partnership  or similar
arrangement..

         SECTION   5.11   Authorizations;   Compliance.   The   Parent  and  its
Subsidiaries  have  obtained all  Authorizations  that are necessary to carry on
their businesses as currently  conducted,  except for any such Authorizations as
to which the failure to possess,  individually  or in the  aggregate,  could not
reasonably  be expected to have a Material  Adverse  Effect on the Parent.  Such
Authorizations  are in full  force and  effect,  have not been  violated  in any
respect that could  reasonably be expected to have a Material  Adverse Effect on
the  Parent  and there is no  action,  proceeding  or  investigation  pending or
threatened  regarding  suspension,  revocation  or  cancellation  of any of such
Authorizations, except in the case of any suspension, revocation or cancellation
of such  Authorizations that could not reasonably be expected to have a Material
Adverse Effect on the Parent.

         SECTION 5.12  Litigation;  Compliance with Laws.  There are no actions,
suits,  investigations or proceedings (including any proceedings in arbitration)
pending or, to the Knowledge of the Parent, threatened against the Parent or any
of its  Subsidiaries,  at law or in  equity,  in any  Court or  before or by any
Governmental  Authority,  except actions,  suits,  proceedings or investigations
that are  disclosed in the  Parent's SEC Reports,  that are set forth in Section
5.12 or Section 5.15 of the Parent's Disclosure Letter or that, individually or,
with  respect to multiple  actions,  suits or  proceedings  that allege  similar
theories  of  recovery  based on  similar  facts,  in the  aggregate,  could not
reasonably be expected to have a Material  Adverse  Effect on the Parent.  There
are no Material claims pending or, to the Knowledge of the Parent, threatened by
any Persons against the Parent or any of its  Subsidiaries  for  indemnification
pursuant to any statute, organizational

                          AGREEMENT AND PLAN OF MERGER
                                      -21-



document,  contract  or  otherwise  with  respect  to any claim,  action,  suit,
investigation  or  proceeding   pending  in  any  Court  or  before  or  by  any
Governmental  Authority.  Except with respect to the matters covered by Sections
5.09,  5.13, 5.14 and 5.15, the Parent and its  Subsidiaries  are in substantial
compliance  with all applicable Laws and Regulations and are not in default with
respect to any Order applicable to the Parent or any of its Subsidiaries, except
such events of noncompliance or defaults that, individually or in the aggregate,
could not  reasonably  be  expected  to have a  Material  Adverse  Effect on the
Parent.

         SECTION 5.13  Employee  Benefit  Plans.   Except  as  set  forth in the
Parent's SEC Reports or in Section 5.13 of the Parent's Disclosure Letter:

                  (a) With  respect to each Parent  Benefit  Plan,  no event has
         occurred and, to the Knowledge of the Parent, there exists no condition
         or set of  circumstances  in connection with which the Parent or any of
         its  Subsidiaries  could be subject to any liability under the terms of
         such Parent Benefit Plan,  ERISA, the Code or any other applicable Law,
         other  than  any  condition  or set of  circumstances  that  could  not
         reasonably be expected to have a Material Adverse Effect on the Parent.

                  (b) Each Current  Parent Benefit Plan intended to be qualified
         under Section 401 of the Code (i) satisfies in form the requirements of
         such Section except to the extent amendments are not required by Law to
         be made  until a date after the  Effective  Time,  (ii) has  received a
         favorable  determination  letter from the IRS regarding  such qualified
         status,  and  (iii)  has not,  since  the  receipt  of the most  recent
         favorable  determination  letter,  been amended  other than  amendments
         required by applicable Law.

                  (c) Except as would not  reasonably be expected to result in a
         Material Adverse Effect on the Parent, there has been no termination or
         partial  termination  of any  Current  Parent  Benefit  Plan within the
         meaning of Section  4.11(d)(3) of the Code and, to the Knowledge of the
         Parent,  each Current Parent Benefit Plan has been operated in material
         compliance with its provisions and with applicable Law.

                  (d) Any  Terminated  Parent Benefit Plan intended to have been
         qualified   under   Section  401  of  the  Code  received  a  favorable
         determination letter from the IRS with respect to its termination.

                  (e) There are no actions,  suits or claims pending (other than
         routine  claims  for  benefits)  or, to the  Knowledge  of the  Parent,
         threatened  against, or with respect to, any Parent Benefit Plan or its
         assets that could  reasonably  be  expected to have a Material  Adverse
         Effect on the Parent and, to the  Knowledge of the Parent,  no facts or
         circumstances exist that could give rise to any such actions,  suits or
         claims,  except as would not  reasonably be expected to have a Material
         Adverse Effect on the Parent.


                          AGREEMENT AND PLAN OF MERGER
                                      -22-



                  (f) To the Knowledge of the Parent, there is no matter pending
         (other than routine qualification  determination  filings) with respect
         to any Parent  Benefit  Plans before the IRS, the  Department of Labor,
         the PBGC or any  other  Governmental  Authority,  except  as would  not
         reasonably be expected to have a Material Adverse Effect on the Parent.

                  (g) All  contributions  required to be made to Parent  Benefit
         Plans pursuant to their terms and the provisions of ERISA,  the Code or
         any other  applicable  Law have been timely  made,  except as would not
         reasonably be expected to have a Material Adverse Effect on the Parent.

                  (h) As to any Current  Parent Benefit Plan subject to Title IV
         of ERISA,  (i) there has been no event or  condition  which  presents a
         significant  risk of plan  termination,  (ii)  no  accumulated  funding
         deficiency, whether or not waived, within the meaning of Section 302 of
         ERISA or Section 412 of the Code has been incurred  (iii) no reportable
         event  within  the  meaning  of  Section  4043 of ERISA  (for which the
         disclosure   requirements  of  Regulation   section  4043.1,  et  seq.,
         promulgated  by the PBGC have not been waived) has occurred  within six
         years prior to the date of this Agreement,  (iv) no notice of intent to
         terminate such Benefit Plan has been given under Section 4041 of ERISA,
         (v) no proceeding  has been  instituted  under Section 4042 of ERISA to
         terminate  such  Benefit  Plan,  (vi) no liability to the PBGC has been
         incurred  (other than with respect to required  premium  payments)  and
         (vii) the assets of the  Benefit  Plan  equal or exceed  the  actuarial
         present value of the benefit liabilities, within the meaning of Section
         4041 of ERISA, under the Benefit Plan, based upon reasonable  actuarial
         assumptions and the asset valuation principles established by the PBGC,
         except as would not  reasonably be expected to have a Material  Adverse
         Effect on the Parent.

                  (i) In connection with the  consummation  of the  transactions
         contemplated by this Agreement,  no payment of money or other property,
         acceleration  of benefits or provision of other rights has been or will
         be made under any Current Parent Benefit Plan that could  reasonably be
         expected to be nondeductible under Section 280G of the Code, whether or
         not some other  subsequent  action or event  would be required to cause
         such payment, acceleration or provision to be triggered.

                  (j) The  execution  and  delivery  of this  Agreement  and the
         consummation  of the  transactions  contemplated  hereby  will  not (i)
         require  the  Parent  or any  of  its  Subsidiaries  to  make a  larger
         contribution to, or pay greater benefits or provide other rights under,
         any Current  Parent  Benefit Plan or any of the  programs,  agreements,
         policies or other  arrangements  described in the  Parent's  Disclosure
         Letter in  response to  paragraph  (k) below than it  otherwise  would,
         whether or not some other subsequent  action or event would be required
         to cause such  payment or  provision  to be triggered or (ii) create or
         give rise to any additional  vested rights or service credits under any
         Current  Parent  Benefit  Plan  or any of  such  programs,  agreements,
         policies or other  arrangements,  whether or not some other  subsequent
         action  or  event  would  be   required  to  cause  such   creation  or
         acceleration to be triggered.

                          AGREEMENT AND PLAN OF MERGER
                                      -23-



                  (k) Neither the Parent nor any of its  Subsidiaries is a party
         to or is bound by any severance or change in control agreement, program
         or policy (involving  $500,000 or more of future payments) with respect
         to any employee, officer or director.

                  (l) No  Current  Parent  Benefit  Plan  (other  than a  Parent
         Benefit Plan maintained  outside the United States that is either fully
         insured or fully funded  through a retirement  plan)  provides  retiree
         medical or retiree  life  insurance  benefits to any Person and neither
         the Parent nor any of its  Subsidiaries is  contractually  or otherwise
         obligated  (whether  or not in writing) to provide any Person with life
         insurance  or  medical  benefits  upon  retirement  or  termination  of
         employment,  other than as required by the  provisions  of Sections 601
         through 608 of ERISA and Section 4980B of the Code.

                  (m) Neither the Parent nor any of its Subsidiaries contributes
         or has an obligation to contribute,  and has not within six years prior
         to the  date  of  this  Agreement  contributed,  had an  obligation  to
         contribute,  or had any other liability to a multiemployer  plan within
         the meaning of Section 3(37) of ERISA.

                  (n) The Parent has not  contributed,  transferred or otherwise
         provided any cash, securities or other property to any grantee,  trust,
         escrow or other arrangement that has the effect of providing or setting
         aside  assets  for  benefits   payable  pursuant  to  any  termination,
         severance or other change in control agreement.

                  (o)  Except  as would not  reasonably  be  expected  to have a
         Material  Adverse  Effect on the Parent,  (i) no collective  bargaining
         agreement is being negotiated by the Parent or any of its Subsidiaries,
         (ii) there is no pending or, to the Knowledge of the Parent, threatened
         labor dispute, strike or work stoppage against the Parent or any of its
         Subsidiaries,  (iii) to the Knowledge of the Parent, neither the Parent
         or any of its  Subsidiaries nor any  representative  or employee of the
         Parent or any of its  Subsidiaries  has in the United States  committed
         any Material unfair labor practices in connection with the operation of
         the business of the Parent and its  Subsidiaries,  and (iv) there is no
         pending  or,  to the  Knowledge  of the  Parent,  threatened  charge or
         complaint  against the Parent or any of its  Subsidiaries  by or before
         the National  Labor  Relations  Board or any  comparable  agency of any
         state of the United States.

                  SECTION 5.14   Taxes.

                  (a)  Except  for such  matters  as  could  not  reasonably  be
         expected  to have a  Material  Adverse  Effect on the  Parent,  all Tax
         Returns  that are required to be filed by or with respect to the Parent
         or any of its Subsidiaries on or before the Effective Time have been or
         will be timely  filed,  all Taxes  that are shown to be due on such Tax
         Returns have been or will be timely paid in full, all  withholding  Tax
         requirements  imposed  on or with  respect  to the Parent or any of its
         Subsidiaries have been or will be satisfied in full in all respects and
         no penalty, interest or other charge is or will become due with respect
         to the late  filing of any such Tax Return or late  payment of any such
         Tax.

                          AGREEMENT AND PLAN OF MERGER
                                      -24-



                  (b)  There  is no  claim  against  the  Parent  or  any of its
         Subsidiaries for any Taxes, and no assessment, deficiency or adjustment
         has been  asserted or proposed in writing  with respect to any such Tax
         Return,  that, in either case,  could  reasonably be expected to have a
         Material Adverse Effect on the Parent.

         SECTION 5.15 Environmental Matters. Except for matters disclosed in the
Parent's SEC Reports or in Section 5.15 of the  Parent's  Disclosure  Letter and
except for matters that, individually or in the aggregate,  could not reasonably
be expected to have a Material Adverse Effect on the Parent, (a) the properties,
operations and activities of the Parent and its  Subsidiaries  are in compliance
with all applicable  Environmental Laws; (b) the Parent and its Subsidiaries and
the properties and operations of the Parent and its Subsidiaries are not subject
to any existing,  pending or, to the Knowledge of the Parent, threatened action,
suit,   investigation,   inquiry  or  proceeding  by  or  before  any  Court  or
Governmental  Authority under any Environmental  Law; (c) all  Authorizations if
any,  required to be obtained or filed by the Parent or any of its  Subsidiaries
under any  Environmental  Law in connection  with the business of the Parent and
its Subsidiaries have been obtained or filed and are valid and currently in full
force and effect; (d), to the Knowledge of the Parent, there has been no release
of any hazardous substance, pollutant or contaminant into the environment by the
Parent or its Subsidiaries or in connection with their properties or operations;
and (e) there has been no exposure  of any Person or  property to any  hazardous
substance,   pollutant  or  contaminant  in  connection   with  the  properties,
operations and activities of the Parent and its Subsidiaries.

         SECTION 5.16  Insurance.  The Parent and its  Subsidiaries  own and are
beneficiaries  under  all such  insurance  policies  underwritten  by  reputable
insurers  that,  as  to  risks   insured,   coverages  and  related  limits  and
deductibles,  are  customary  in the  industries  in which  the  Parent  and its
Subsidiaries  operate.  All  premiums  due with  respect  to all such  insurance
policies  that are Material  have been paid and, to the Knowledge of the Parent,
all such policies are in full force and effect.

         SECTION  5.17  Pooling;  Tax  Matters.  Neither  the Parent nor, to the
Knowledge of the Parent,  any of its  Affiliates has taken or agreed to take any
action  that would  prevent  (a) the Merger  from being  treated  for  financial
accounting  purposes as a "pooling of interests" in accordance with GAAP and the
Regulations   of  the   Commission  or  (b)  the  Merger  from   constituting  a
reorganization  within  the  meaning  of  section  368(a) of the  Code.  Without
limiting the generality of the foregoing:

                  (a) In connection with the Merger,  none of the Company Common
         Stock will be acquired by the Parent or a person related (as defined in
         Treas. Reg. ss.  1.368-1(e)(3))  to the Parent for consideration  other
         than the Parent  Common Stock  except for any cash  received in lieu of
         fractional  share  interests  in the Parent  Common  Stock  pursuant to
         Section 3.02(e) of this Agreement.


                          AGREEMENT AND PLAN OF MERGER
                                      -25-



                  (b) Following the Merger, the Surviving  Corporation will hold
         at least 90  percent  of the fair  market  value of the  Company's  net
         assets,  at least 70 percent of the fair market value of the  Company's
         gross  assets,  at least 90 percent of the fair market value of the net
         assets of Newco and at least 70 percent of the fair market value of the
         gross assets of Newco,  held  immediately  prior to the Merger,  taking
         into account  amounts  used to pay Expenses  relating to the Merger and
         any distributions other than regular dividends.

                  (c) The Parent has no plan or intention to (i)  liquidate  the
         Surviving  Corporation,  (ii) merge the Surviving  Corporation  with or
         into another corporation,  (iii) sell or otherwise dispose of the stock
         of  the  Surviving  Corporation  except  for  transfers  or  successive
         transfers to one or more corporations controlled (within the meaning of
         section 368(c) of the Code) in each case by the transferor corporation,
         (iv) cause the Surviving  Corporation to issue additional shares of its
         capital stock that would result in the Parent's  losing control (within
         the  meaning  of  section   368(c)  of  the  Code)  of  the   Surviving
         Corporation,  (v) cause or permit the Surviving  Corporation to sell or
         otherwise dispose of any of its assets or of any of the assets acquired
         from  Newco  except for  dispositions  made in the  ordinary  course of
         business  or  transfers  or   successive   transfers  to  one  or  more
         corporations  controlled  (within the meaning of section  368(c) of the
         Code) in each case by the transferor corporation,  or (vi) reacquire or
         cause any  person  related to the  Parent  (as  defined in Treas.  Reg.
         1.368- 1(a)(3)) to acquire any of the Parent Common Stock issued to the
         holders of Company Common Stock pursuant to the Merger.

                  (d)  Newco has no  liabilities  that  will be  assumed  by the
         Surviving  Corporation  in the  Merger  and  will not  transfer  to the
         Surviving Corporation in the Merger any assets subject to liabilities.

                  (e)      Following the Merger, the Surviving Corporation will
         continue  the  historic  business  of the  Company or use a significant
         portion of its assets in a business, within the meaning of Treas. Reg.
         ss. 1.368-1(d).

                  (f) There is no intercorporate  indebtedness  existing between
         the  Company  and the Parent or between  the Company and Newco that was
         issued, acquired or will be settled at a discount.

                  (g)      Neither  the  Parent  nor  any  person related to the
         Parent (within  the  meaning of Treas. Reg. ss. 1.368-1(e)(3)) owns, or
         has  owned  during the past five years, any shares of the capital stock
         of the Company other than up to 500 shares of Company Common Stock.

         SECTION 5.18 Affiliates. Section 5.18 of the Parent's Disclosure Letter
contains a true and complete  list of all Persons  who, to the  Knowledge of the
Parent,  may be deemed to be Affiliates  of the Parent,  including all directors
and  executive  officers  of the Parent.  Concurrently  with the  execution  and
delivery of this Agreement, the Parent has delivered to the Company an

                          AGREEMENT AND PLAN OF MERGER
                                      -26-



executed letter  agreement,  substantially  in the form of Annex C hereto,  from
each such Person so identified as an Affiliate of the Parent.

         SECTION  5.19  Brokers.  Except  as set  forth in  Section  5.19 of the
Parent's  Disclosure Letter, no broker,  finder or investment banker (other than
SBC  Warburg  Dillon  Read Inc.  and  Goldman,  Sachs & Co.) is  entitled to any
brokerage,   finder's  or  other  fee  or  commission  in  connection  with  the
transactions  contemplated by this Agreement based upon  arrangements made by or
on behalf of the  Parent.  Prior to the date of this  Agreement,  the Parent has
made  available  to the Company a complete  and correct  copy of all  agreements
between the Parent and SBC Warburg Dillon Read Inc. or Goldman,  Sachs & Co. and
pursuant to which either of such firms will be entitled to any payment  relating
to the transactions contemplated by this Agreement.

         SECTION 5.20 Opinion of Financial Advisor.  The Parent has received the
opinions of SBC Warburg Dillon Read Inc. and Goldman, Sachs & Co. on the date of
this  Agreement to the effect that the Common Stock Exchange Ratio is fair, from
a financial point of view, to the Parent.

         SECTION 5.21 Acquiring  Person.  Based on the  information set forth in
the Company's SEC Reports,  no holder of 5% or more of the  outstanding  Company
Common Stock whose  existence is disclosed  therein will at the  Effective  Time
become an  "Acquiring  Person," as such term is defined in the  Parent's  Rights
Agreement,  as a  result  of  any  of  the  transactions  contemplated  by  this
Agreement.

                                   ARTICLE VI

                                    COVENANTS

         SECTION 6.01    Affirmative Covenants.

                  (a) The Company hereby covenants and agrees that, prior to the
         Effective  Time,  unless  otherwise  expressly   contemplated  by  this
         Agreement or  consented  to in writing by the Parent,  it will and will
         cause its Subsidiaries to:

                           (i)   operate its business in the usual and ordinary
                  course consistent with past practices;

                           (ii)  use  all   reasonable   efforts   to   preserve
                  substantially intact its business  organization,  maintain its
                  rights and  franchises,  retain the services of its respective
                  key  employees  (subject to its work force  requirements)  and
                  maintain its relationships  with its respective  customers and
                  suppliers;

                           (iii) maintain and keep its  properties and assets in
                  as  good repair and condition as at present, ordinary wear and
                  tear excepted; and


                          AGREEMENT AND PLAN OF MERGER
                                      -27-



                           (iv)  use  all  reasonable  efforts  to  keep in full
                  force and effect insurance and bonds comparable  in amount and
                  scope of coverage to that currently maintained;

         except for any matters that,  individually  or in the aggregate,  could
         not  reasonably  be expected to have a Material  Adverse  Effect on the
         Company.

                  (b) The Parent hereby  covenants and agrees that, prior to the
         Effective  Time,  unless  otherwise  expressly   contemplated  by  this
         Agreement or  consented to in writing by the Company,  it will and will
         cause its Subsidiaries to:

                           (i)   operate  its business in the usual and ordinary
                  course consistent with past practices;

                           (ii)  use  all   reasonable   efforts   to   preserve
                  substantially intact its business  organization,  maintain its
                  rights and  franchises,  retain the services of its respective
                  key  employees  (subject to its work force  requirements)  and
                  maintain its relationships  with its respective  customers and
                  suppliers;

                           (iii) maintain  and keep its properties and assets in
                  as good  repair and condition as at present, ordinary wear and
                  tear excepted; and

                           (iv)  use  all  reasonable  efforts  to  keep in full
                  force  and effect insurance and bonds comparable in amount and
                  scope of coverage to that currently maintained;

         except for any matters that,  individually  or in the aggregate,  could
         not  reasonably  be expected to have a Material  Adverse  Effect on the
         Parent.

         SECTION 6.02   Negative Covenants.

                  (a) The Company covenants and agrees that, except as expressly
         set forth in the Company's Disclosure Letter, as expressly contemplated
         by this  Agreement  or as  otherwise  consented  to in  writing  by the
         Parent,  from the date of this Agreement  until the Effective  Time, it
         will not do, and will not permit any of its  Subsidiaries to do, any of
         the following:

                           (i) (A)  increase the  compensation  payable to or to
                  become  payable to any  director  or  executive  officer,  (B)
                  except as otherwise provided in Section 6.02(a)(ii), grant any
                  severance or  termination  pay; (C) amend or otherwise  modify
                  the terms of any outstanding  options,  warrants or rights the
                  effect of which shall be to make such terms more  favorable to
                  the holders  thereof;  (D) take any action to  accelerate  the
                  vesting of any outstanding Company Stock Options; (E) amend or
                  take any other  actions to increase  the amount or  accelerate
                  the payment or vesting of any benefit  under any Benefit  Plan
                  (including the acceleration of vesting, waiving of performance
                  criteria  or the  adjustment  of awards  or any other  actions
                  permitted upon

                          AGREEMENT AND PLAN OF MERGER
                                      -28-



                  a change in control of such party or  permitted  upon a filing
                  under  Section 13(d) or 14(d) of the Exchange Act with respect
                  to  such  party)  or (F)  contribute,  transfer  or  otherwise
                  provide any cash, securities or other property to any grantee,
                  trust,  escrow  or other  arrangement  that has the  effect of
                  providing  or  setting  aside  assets  for  benefits   payable
                  pursuant  to any  termination,  severance  or other  change in
                  control  agreement;  except  (i)  pursuant  to  any  contract,
                  agreement or other legal  obligation  of the Company or any of
                  its Subsidiaries existing at the date of this Agreement,  (ii)
                  in the case of severance or termination payments,  pursuant to
                  the  severance  policy  of the  Company  or  its  Subsidiaries
                  existing at the date of this  Agreement  and (iii) in the case
                  of  options,  warrants,  rights or Benefit  Plans,  amendments
                  required by ERISA or other applicable Law.

                           (ii) (A)  enter  into  any  employment  or  severance
                  agreement  with,  any  director or executive  officer,  either
                  individually  or as  part  of a class  of  similarly  situated
                  persons, or (B) establish, adopt or enter into any new Benefit
                  Plan; except  employment and severance  agreements and Benefit
                  Plans  for the  benefit  of any  newly  employed  or  promoted
                  officers  or  employees,  in  which  case  the  terms  of such
                  agreements  and Benefit Plans shall be  reasonably  consistent
                  with those existing at the date of this Agreement,  and except
                  Benefit Plans relating to health and life  insurance  benefits
                  established  or adopted  in the  ordinary  course of  business
                  consistent with past practice;

                           (iii) declare or pay any  extraordinary  dividend on,
                  or make any  other  distribution  in  respect  of  outstanding
                  shares of  capital  stock,  except for  dividends  by a wholly
                  owned  Subsidiary  of the  Company  to the  Company or another
                  wholly owned  Subsidiary of the Company and cash  dividends on
                  the Company  Common Stock  payable at  approximately  the same
                  times as paid  during the fiscal  year ended  October 31, 1997
                  and in  amounts  per  share not to  exceed  those  paid on the
                  Company  Common Stock during the fourth  quarter of the fiscal
                  year ended October 31, 1997;

                           (iv) (A) redeem,  purchase  or  acquire,  or offer to
                  purchase or acquire,  any outstanding Equity Securities of the
                  Company  or any of its  Subsidiaries  other  than (1) any such
                  acquisition  by  the  Company  or  any  of  its  wholly  owned
                  Subsidiaries  directly from any wholly owned Subsidiary of the
                  Company,  (2) any  repurchase,  forfeiture  or  retirement  of
                  shares  of  Company  Common  Stock or  Company  Stock  Options
                  occurring  pursuant  to the terms (as in effect on the date of
                  this Agreement) of any existing Benefit Plan of the Company or
                  any of its  Subsidiaries,  (3) the repurchase or redemption of
                  rights pursuant to the terms (as in effect on the date of this
                  Agreement)  of the  Company  Rights  Agreement  to the  extent
                  required  by a  court  of  competent  jurisdiction  or (4) any
                  periodic  purchase of Company  Common Stock for  allocation to
                  employee's  accounts  occurring  pursuant  to the terms (as in
                  effect on the date of this Agreement) of any existing employee
                  stock  purchase  plan;  (B)  effect  any   reorganization   or
                  recapitalization;  or (C) split,  combine or reclassify any of
                  the

                          AGREEMENT AND PLAN OF MERGER
                                      -29-



                  capital stock of, or other equity interests in, the Company or
                  any of its  Subsidiaries  or issue or authorize or propose the
                  issuance of any other  securities in respect of, in lieu of or
                  in substitution for, such Equity Securities;

                           (v) (A) offer, sell, issue or grant, or authorize the
                  offering, sale, issuance or grant, of any Equity Securities of
                  the Company or any of its  Subsidiaries,  other than issuances
                  of Company Common Stock (1) upon the exercise of Company Stock
                  Options   outstanding   at  the  date  of  this  Agreement  in
                  accordance with the terms thereof (as in effect on the date of
                  this  Agreement),  (2) upon the expiration of any restrictions
                  upon  issuance  of any  grant  existing  at the  date  of this
                  Agreement of restricted  stock or bonus stock  pursuant to the
                  terms  (as in  effect  on the date of this  Agreement)  of any
                  Benefit Plans of the Company or any of its  Subsidiaries,  (3)
                  that constitute periodic issuances of shares of Company Common
                  Stock  required by the terms (as in effect on the date of this
                  Agreement)  of any Benefit  Plans of the Company or any of its
                  Subsidiaries or (4) issuances of Company Common Stock pursuant
                  to the Company's dividend reinvestment program as in effect on
                  the date of this  Agreement or (B) grant any Lien with respect
                  to any Equity Securities of any Subsidiary of the Company;

                           (vi)  acquire  or agree to  acquire,  by  merging  or
                  consolidating with, by purchasing an equity interest in or all
                  or a portion  of the assets  of, or in any other  manner,  any
                  business or any corporation, partnership, association or other
                  business  organization  or division  thereof or  otherwise  to
                  acquire  any assets of any other  Person  (other than any such
                  transaction  that  is not  Material  to the  Company  and  the
                  purchase of assets from  suppliers  or vendors in the ordinary
                  course of business and consistent with past practice);

                           (vii) sell, lease,  exchange or otherwise dispose of,
                  or grant any Lien with  respect  to,  any of the assets of the
                  Company or any of its  Subsidiaries  that are  Material to the
                  Company,  except for dispositions of assets and inventories in
                  the  ordinary  course of  business  and  consistent  with past
                  practice and  dispositions  of assets and purchase money Liens
                  incurred in connection with the original acquisition of assets
                  and secured by the assets;

                           (viii) adopt any  amendments to its charter or bylaws
                  or other  organizational  documents that would alter the terms
                  of its capital stock or other equity interests or would have a
                  Material Adverse Effect on the Company;

                           (ix) (A) change any of its methods of  accounting  in
                  effect at  October  31,  1997,  except as may be  required  to
                  comply with GAAP, (B) make or rescind any election relating to
                  Taxes (other than any election that must be made  periodically
                  and that is made consistent with past practice), (C) settle or
                  compromise any claim,  action, suit,  litigation,  proceeding,
                  arbitration, investigation, audit or controversy

                          AGREEMENT AND PLAN OF MERGER
                                      -30-



                  relating  to  Taxes  or  (D)  change  any of  its  methods  of
                  reporting income or deductions for federal income tax purposes
                  from those  employed in the  preparation of the federal income
                  tax  returns  for the taxable  year ended  October  31,  1996,
                  except,  in  each  case,  as may be  required  by Law  and for
                  matters  that  could  not  reasonably  be  expected  to have a
                  Material Adverse Effect on the Company;

                           (x)  incur  any  obligations  for  borrowed  money or
                  purchase money  indebtedness that are Material to the Company,
                  whether or not evidenced by a note, bond, debenture or similar
                  instrument,  except  purchase money  indebtedness  as to which
                  Liens  may  be  granted  pursuant  to  Section   6.02(a)(vii),
                  drawings  under  credit  lines  existing  at the  date of this
                  Agreement and  borrowings  evidenced by  obligations  having a
                  term of up to five  years  issued  in the  ordinary  course of
                  business consistent with past practice.

                           (xi) subject to the fiduciary  duties of its Board of
                  Directors, release any third Person from its obligations under
                  any  existing  standstill  agreement  relating  to a Competing
                  Transaction or otherwise under any  confidentiality  agreement
                  or similar agreement;

                           (xii)  enter  into any  Material  agreement  with any
                  third Person that provides for an exclusive  arrangement  with
                  that third Person;

                           (xiii)  subject to the fiduciary  duties of its Board
                  of Directors,  amend, modify or terminate the Company's Rights
                  Agreement  or  redeem  any  rights to  purchase  shares of the
                  Company's  Series A Junior  Preferred  Stock  except as may be
                  necessary to consummate the transactions  contemplated by this
                  Agreement; or

                           (xiv)   agree  in  writing  or otherwise to do any of
                  the foregoing.

                  (b) The Parent covenants and agrees that,  except as expressly
         set forth in the Parent's Disclosure Letter, as expressly  contemplated
         by this  Agreement  or as  otherwise  consented  to in  writing  by the
         Company,  from the date of this Agreement  until the Effective Time, it
         will not do, and will not permit any of its  Subsidiaries to do, any of
         the following:

                           (i) (A)  increase the  compensation  payable to or to
                  become  payable to any  director  or  executive  officer,  (B)
                  except as otherwise provided in Section 6.02(b)(ii), grant any
                  severance or  termination  pay; (C) amend or otherwise  modify
                  the terms of any outstanding  options,  warrants or rights the
                  effect of which shall be to make such terms more  favorable to
                  the holders  thereof;  (D) take any action to  accelerate  the
                  vesting of any outstanding Parent Stock Options;  (E) amend or
                  take any other  actions to increase  the amount or  accelerate
                  the payment or vesting of any benefit  under any Benefit  Plan
                  (including the acceleration of vesting, waiving of performance
                  criteria  or the  adjustment  of awards  or any other  actions
                  permitted upon a change in control

                          AGREEMENT AND PLAN OF MERGER
                                      -31-



                  of such party or permitted  upon a filing under  Section 13(d)
                  or 14(d) of the  Exchange  Act with  respect to such party) or
                  (F)  contribute,  transfer  or  otherwise  provide  any  cash,
                  securities or other property to any grantee,  trust, escrow or
                  other  arrangement that has the effect of providing or setting
                  aside assets for benefits payable pursuant to any termination,
                  severance  or other  change in control  agreement;  except (i)
                  pursuant to any contract,  agreement or other legal obligation
                  of the Parent or any of its Subsidiaries  existing at the date
                  of  this   Agreement,   (ii)  in  the  case  of  severance  or
                  termination payments,  pursuant to the severance policy of the
                  Parent  or its  Subsidiaries  existing  at the  date  of  this
                  Agreement,  (iii) in the case of options,  warrants, rights or
                  Benefit   Plans,   amendments   required  by  ERISA  or  other
                  applicable Law and (iv) any such increase,  grant,  amendment,
                  modification  or action that,  taken  together  with all other
                  such increases, grants, amendments, modifications and actions,
                  does not  result in a Material  increase  in  compensation  or
                  benefits expense to the Parent and its Subsidiaries,  taken as
                  a whole;

                           (ii) (A)  enter  into  any  employment  or  severance
                  agreement  with,  any  director or executive  officer,  either
                  individually  or as  part  of a class  of  similarly  situated
                  persons, or (B) establish, adopt or enter into any new Benefit
                  Plan; except  employment and severance  agreements and Benefit
                  Plans  for the  benefit  of any  newly  employed  or  promoted
                  officers  or  employees,  in  which  case  the  terms  of such
                  agreements  and Benefit Plans shall be  reasonably  consistent
                  with those existing at the date of this Agreement,  and except
                  Benefit Plans relating to health and life  insurance  benefits
                  established  or adopted  in the  ordinary  course of  business
                  consistent with past practice;

                           (iii) declare or pay any  extraordinary  dividend on,
                  or make any  other  distribution  in  respect  of  outstanding
                  shares of  capital  stock,  except for  dividends  by a wholly
                  owned Subsidiary of the Parent to the Parent or another wholly
                  owned  Subsidiary  of the  Parent  and cash  dividends  on the
                  Parent  Common Stock payable at  approximately  the same times
                  and in amounts  per share as those  paid on the Parent  Common
                  Stock during the fiscal year ended December 31, 1997;

                           (iv) (A) redeem,  purchase  or  acquire,  or offer to
                  purchase or acquire,  any outstanding Equity Securities of the
                  Parent  or any of its  Subsidiaries  other  than  (1) any such
                  acquisition   by  the  Parent  or  any  of  its  wholly  owned
                  Subsidiaries  directly from any wholly owned Subsidiary of the
                  Parent, (2) any repurchase, forfeiture or retirement of shares
                  of Parent  Common  Stock or  Parent  Stock  Options  occurring
                  pursuant  to the  terms  (as in  effect  on the  date  of this
                  Agreement)  of any existing  Benefit Plan of the Parent or any
                  of its  Subsidiaries,  (3) the  repurchase  or  redemption  of
                  rights pursuant to the terms (as in effect on the date of this
                  Agreement)  of the  Parent's  Rights  Agreement  to the extent
                  required  by a  court  of  competent  jurisdiction  or (4) any
                  periodic  purchase of Parent  Common Stock for  allocation  to
                  employee's  accounts  occurring  pursuant  to the terms (as in
                  effect on the date of this

                          AGREEMENT AND PLAN OF MERGER
                                      -32-



                  Agreement) of any existing  employee  stock purchase plan; (B)
                  effect any reorganization or  recapitalization;  or (C) split,
                  combine  or  reclassify  any of the Equity  Securities  of the
                  Parent or any of its  Subsidiaries  or issue or  authorize  or
                  propose the issuance of any other securities in respect of, in
                  lieu of or in substitution for, such Equity Securities;

                           (v) (A) offer, sell, issue or grant, or authorize the
                  offering, sale, issuance or grant, of any Equity Securities of
                  the Parent or any of its Subsidiaries, other than issuances of
                  Parent  Common  Stock (1) upon the  exercise  of Parent  Stock
                  Options   outstanding   at  the  date  of  this  Agreement  in
                  accordance with the terms thereof (as in effect on the date of
                  this Agreement),  (2) as Parent Restricted Stock, (3) upon the
                  expiration  of any  restrictions  upon  issuance  of any grant
                  existing at the date of this Agreement of restricted  stock or
                  bonus stock pursuant to the terms (as in effect on the date of
                  this  Agreement)  of any Benefit Plans of the Parent or any of
                  its Subsidiaries or (4) that constitute  periodic issuances of
                  shares of Parent  Common  Stock  required  by the terms (as in
                  effect on the date of this  Agreement)  of any Benefit Plan of
                  the Parent or any of its  Subsidiaries;  or (B) grant any Lien
                  with respect to any Equity Securities of any Subsidiary of the
                  Parent;

                           (vi)  acquire  or agree to  acquire,  by  merging  or
                  consolidating with, by purchasing an equity interest in or all
                  or a portion  of the assets  of, or in any other  manner,  any
                  business or any corporation, partnership, association or other
                  business  organization  or division  thereof,  or otherwise to
                  acquire  any assets of any other  Person  (other than any such
                  transaction  that  is not  Material  to  the  Parent  and  the
                  purchase of assets from  suppliers  or vendors in the ordinary
                  course of business and consistent with past practice);

                           (vii) sell, lease,  exchange or otherwise dispose of,
                  or grant any Lien with  respect  to,  any of the assets of the
                  Parent or any of its  Subsidiaries  that are  Material  to the
                  Parent,  except for  dispositions of assets and inventories in
                  the  ordinary  course of  business  and  consistent  with past
                  practice and  dispositions  of assets and purchase money Liens
                  incurred in connection with the original acquisition of assets
                  and secured by the assets;

                           (viii) adopt any  amendments to its charter or bylaws
                  or other  organizational  documents that would alter the terms
                  of its capital stock or other equity interests or would have a
                  Material Adverse Effect on the Parent;

                           (ix) (A) change any of its methods of  accounting  in
                  effect at  December  31,  1997,  except as may be  required to
                  comply with GAAP, (B) make or rescind any election relating to
                  Taxes (other than any election that must be made  periodically
                  that is made  consistent  with past  practice),  (C) settle or
                  compromise any claim,  action, suit,  litigation,  proceeding,
                  arbitration, investigation, audit or controversy relating to

                          AGREEMENT AND PLAN OF MERGER
                                      -33-



                  Taxes or (D) change any of its methods of reporting  income or
                  deductions for federal income tax purposes from those employed
                  in the  preparation  of the federal income tax returns for the
                  taxable year ended December 31, 1996, except, in each case, as
                  may  be  required  by Law  and  for  matters  that  could  not
                  reasonably  be expected to have a Material  Adverse  Effect on
                  the Parent;

                           (x)  incur  any  obligations  for  borrowed  money or
                  purchase money  indebtedness  that are Material to the Parent,
                  whether or not evidenced by a note, bond, debenture or similar
                  instrument,  except  purchase money  indebtedness  as to which
                  Liens  may  be  granted  pursuant  to  Section   6.02(b)(vii),
                  drawings  under  credit  lines  existing  at the  date of this
                  Agreement and  borrowings  evidenced by  obligations  having a
                  term of up to five  years  issued  in the  ordinary  course of
                  business consistent with past practice.

                           (xi) subject to the fiduciary  duties of its Board of
                  Directors, release any third Person from its obligations under
                  any  existing  standstill  agreement  relating  to a Competing
                  Transaction or otherwise under any  confidentiality  agreement
                  or similar agreement;

                           (xii)  enter  into any  Material  agreement  with any
                  third Person that provides for an exclusive  arrangement  with
                  that third Person;

                           (xiii)  subject to the fiduciary  duties of its Board
                  of Directors,  amend,  modify or terminate the Parent's Rights
                  Agreement  or  redeem  any  rights to  purchase  shares of the
                  Parent's Series A Junior Participating  Preferred Stock except
                  as  may  be   necessary   to   consummate   the   transactions
                  contemplated by this Agreement; or

                           (xiv)   agree  in  writing  or otherwise to do any of
                  the foregoing.

         SECTION  6.03 No  Solicitation  by the  Company.  From the date of this
Agreement  until the earlier of the Effective  Time or the  termination  of this
Agreement  pursuant to Section 9.01, the Company agrees that neither the Company
nor any of its Subsidiaries nor any of the directors and officers of the Company
or any of its  Subsidiaries  shall,  and that it shall  direct  and use its best
efforts  to cause the other  employees,  agents and  representatives  (including
investment  bankers,  attorneys  and  accountants)  employed  or retained by the
Company or any of its  Subsidiaries  not to,  directly or indirectly,  initiate,
solicit,  encourage  or otherwise  facilitate  (including  by way of  furnishing
information or assistance)  any  Acquisition  Proposal or any inquiries that may
reasonably be expected to lead to an Acquisition  Proposal.  The Company further
agrees  that  neither the  Company  nor any of its  Subsidiaries  nor any of the
directors and officers of the Company or any of its Subsidiaries shall, and that
it shall  direct and use its best efforts to cause the other  employees,  agents
and representatives  (including  investment bankers,  attorneys and accountants)
employed or retained by the Company or any of its  Subsidiaries not to, directly
or  indirectly,  engage  in any  discussion  with or  provide  any  confidential
information or data to any Person that may reasonably be expected to

                          AGREEMENT AND PLAN OF MERGER
                                      -34-



lead to an Acquisition  Proposal or engage in any  negotiations  concerning,  or
otherwise facilitate any effort or attempt to make or implement,  an Acquisition
Proposal.  Notwithstanding the foregoing,  the Board of Directors of the Company
shall be permitted (A), to the extent applicable,  to comply,  with regard to an
Acquisition Proposal, with Rule 14e-2(a) promulgated under the Exchange Act, (B)
in response to an unsolicited  bona fide written  Acquisition  Proposal from any
Person, to recommend such Acquisition Proposal to the Company's  stockholders or
withdraw or modify in any adverse manner its approval or  recommendation of this
Agreement, or both, or (C) to engage in any discussions or negotiations with, or
provide any information  to, any Person in response to an unsolicited  bona fide
written Acquisition Proposal by any such Person, if and only to the extent that,
in any such case  described in clause (B) or (C), (i) the Required  Company Vote
shall not have been  theretofore  obtained,  (ii) the Board of  Directors of the
Company shall have concluded in good faith that such Acquisition Proposal (x) in
the case of that described in clause (B) above would, if consummated, constitute
a Superior  Proposal  or (y),  in the case  described  in clause (C) above could
reasonably  be expected to  constitute a Superior  Proposal,  (iii) the Board of
Directors  of the Company  shall have  determined  in good faith on the basis of
advice of outside  legal counsel that such action is necessary for such Board of
Directors  to act  in a  manner  consistent  with  its  fiduciary  duties  under
applicable Law and (iv) prior to providing any information or data to any Person
in  connection  with an  Acquisition  Proposal by any such Person,  the Board of
Directors  shall have  received  from such  Person an  executed  confidentiality
agreement containing customary terms and provisions.  The Company shall promptly
notify the Parent of such  inquiries,  proposals  or offers  received by, or any
such  discussions or negotiations  sought to be initiated or continued with, any
of its representatives  indicating,  in connection with such notice, the name of
such Person and the material  terms and  conditions  of any proposals or offers.
The Company agrees that it will immediately cease and cause to be terminated any
existing  activities,  discussions or  negotiations  with any parties  conducted
heretofore  with respect to any  Acquisition  Proposal.  Nothing in this Section
6.03 shall permit the Parent or the Company to terminate this Agreement  (except
as specifically provided in Article IX).

         SECTION  6.04 No  Solicitation  by the  Parent.  From  the date of this
Agreement  until the earlier of the Effective  Time or the  termination  of this
Agreement  pursuant to Section  9.01,  the Parent agrees that neither the Parent
nor any of its  Subsidiaries nor any of the directors and officers of the Parent
or any of its  Subsidiaries  shall,  and that it shall  direct  and use its best
efforts  to cause the other  employees,  agents and  representatives  (including
investment  bankers,  attorneys  and  accountants)  employed  or retained by the
Parent or any of its  Subsidiaries  not to,  directly or  indirectly,  initiate,
solicit,  encourage  or otherwise  facilitate  (including  by way of  furnishing
information or assistance)  any  Acquisition  Proposal or any inquiries that may
reasonably be expected to lead to an  Acquisition  Proposal.  The Parent further
agrees  that  neither  the  Parent  nor any of its  Subsidiaries  nor any of the
directors and officers of the Parent or any of its Subsidiaries  shall, and that
it shall  direct and use its best efforts to cause the other  employees,  agents
and representatives  (including  investment bankers,  attorneys and accountants)
employed or retained by the Parent or any of its  Subsidiaries  not to, directly
or  indirectly,  engage  in any  discussion  with or  provide  any  confidential
information  or data to any Person that may reasonably be expected to lead to an
Acquisition  Proposal or engage in any  negotiations  concerning,  or  otherwise
facilitate any effort or attempt to make or implement,  an Acquisition Proposal.
Notwithstanding the foregoing, the Board

                          AGREEMENT AND PLAN OF MERGER
                                      -35-



of Directors of the Parent shall be permitted (A), to the extent applicable,  to
comply, with regard to an Acquisition  Proposal,  with Rule 14e-2(a) promulgated
under the  Exchange  Act,  (B) in response to an  unsolicited  bona fide written
Acquisition  Proposal from any Person, to recommend such Acquisition Proposal to
the  Parent's  stockholders  or  withdraw  or modify in any  adverse  manner its
approval or recommendation  of this Agreement,  or both, or (C) to engage in any
discussions or  negotiations  with, or provide any information to, any Person in
response to an unsolicited  bona fide written  Acquisition  Proposal by any such
Person, if and only to the extent that, in any such case described in clause (B)
or (C), (i) the Required Parent Vote shall not have been  theretofore  obtained,
(ii) the Board of  Directors  of the Parent  shall have  concluded in good faith
that such  Acquisition  Proposal (x) in the case of that described in clause (B)
above would, if consummated,  constitute a Superior Proposal or (y), in the case
described  in clause (C) above could  reasonably  be expected  to  constitute  a
Superior  Proposal,  (iii) the  Board of  Directors  of the  Parent  shall  have
determined  in good faith on the basis of advice of outside  legal  counsel that
such  action  is  necessary  for  such  Board  of  Directors  to act in a manner
consistent  with its  fiduciary  duties under  applicable  Law and (iv) prior to
providing  any  information  or  data  to  any  Person  in  connection  with  an
Acquisition  Proposal  by any such  Person,  the Board of  Directors  shall have
received  from such  Person an  executed  confidentiality  agreement  containing
customary terms and provisions.  The Parent shall promptly notify the Company of
such  inquiries,  proposals or offers  received by, or any such  discussions  or
negotiations   sought  to  be   initiated  or   continued   with,   any  of  its
representatives  indicating,  in connection  with such notice,  the name of such
Person and the material  terms and  conditions of any  proposals or offers.  The
Parent  agrees that it will  immediately  cease and cause to be  terminated  any
existing  activities,  discussions or  negotiations  with any parties  conducted
heretofore  with respect to any  Acquisition  Proposal.  Nothing in this Section
6.04 shall permit the Parent or the Company to terminate this Agreement  (except
as specifically provided in Article IX).

         SECTION 6.05   Access and Information.

                  (a) Each of the Company and the Parent shall,  and shall cause
         its  Subsidiaries  to,  (i)  afford  to the  other  and  its  officers,
         directors, employees,  accountants,  consultants, legal counsel, agents
         and other  representatives  (collectively,  in the case of the Company,
         the  "Company's  Representatives"  and, in the case of the Parent,  the
         "Parent's Representatives") access, at reasonable times upon reasonable
         prior notice, to the officers,  employees, agents, properties,  offices
         and other facilities of the other and to its books and records and (ii)
         furnish promptly to the other and its Representatives  such information
         concerning its business,  properties,  contracts, records and personnel
         (including financial,  operating and other data and information) as may
         be  reasonably  requested,  from  time to time,  by or on behalf of the
         other party.

                  (b) Each party to this Agreement (the Parent  Companies  being
         considered  one party for purposes of this Section  6.05(b)) shall hold
         in confidence all nonpublic  information  received from the other party
         to this  Agreement  until such time as such  information  is  otherwise
         publicly  available.  If this  Agreement is  terminated  for any reason
         pursuant  to  Article  IX hereof,  each of the  Company  and the Parent
         shall, within ten days after a request

                          AGREEMENT AND PLAN OF MERGER
                                      -36-



         therefor from the other, return or destroy (and provide the other party
         within such  ten-day  time period with a  certificate  of an  executive
         officer  certifying such destruction) all of the information  furnished
         to such party and its  Representatives  pursuant to the  provisions  of
         Section 6.05(a) and all internal memoranda,  analyses,  evaluations and
         other similar material containing, reflecting or prepared from any such
         information,  in each case  other  than  information  available  to the
         general public without restriction.

                                   ARTICLE VII

                              ADDITIONAL AGREEMENTS

         SECTION 7.01   Meetings of Stockholders.

                  (a)  The  Company  shall,  promptly  after  the  date  of this
         Agreement,  take all actions  necessary in accordance  with the GCL and
         its  certificate  of  incorporation  and  bylaws  to  convene a special
         meeting of the Company's stockholders to consider approval and adoption
         of this Agreement and the Merger (the "Company Stockholders' Meeting"),
         and the Company shall consult with the Parent in connection  therewith.
         Subject to Section 6.03 herein and to the fiduciary duties of its Board
         of Directors,  the Board of Directors of the Company shall recommend to
         the  stockholders of the Company the approval of this Agreement and the
         Company shall use all reasonable  efforts to solicit from  stockholders
         of the Company  proxies in favor of the  approval  and adoption of this
         Agreement  and  the  Merger  and to  secure  the  vote  or  consent  of
         stockholders  required by the GCL and its certificate of  incorporation
         and bylaws to  approve  and adopt this  Agreement  and the Merger  (the
         "Required Company Vote").

                  (b)  The  Parent  shall,  promptly  after  the  date  of  this
         Agreement,  take all actions  necessary in accordance  with the GCL and
         its  certificate  of  incorporation  and  bylaws  to  convene a special
         meeting  of the  Parent's  stockholders  to  consider  approval  of the
         Charter  Amendment and the Share  Issuance  (the "Parent  Stockholders'
         Meeting"),  and the Parent shall consult with the Company in connection
         therewith.  Subject to Section 6.04 and to the fiduciary  duties of its
         Board  of  Directors,  the  Board  of  Directors  of the  Parent  shall
         recommend to the stockholders of the Parent the approval of the Charter
         Amendment  and  the  Share  Issuance  and  the  Parent  shall  use  all
         reasonable  efforts to solicit from  stockholders of the Parent proxies
         in  favor  of the  approval  of the  Charter  Amendment  and the  Share
         Issuance and to secure the vote or consent of the  stockholders  of the
         Parent  required  by the GCL and the rules of the NYSE to  approve  the
         Charter Amendment and the Share Issuance (the "Required Parent Vote").


                          AGREEMENT AND PLAN OF MERGER
                                      -37-



         SECTION 7.02   Registration Statement; Proxy Statements.

                  (a)  Joint   Proxy   Statement/Prospectus.   As   promptly  as
         practicable  after the execution of this Agreement,  the Parent and the
         Company  shall  jointly  prepare and file with the  Commission  a joint
         proxy  statement  and  forms  of  proxies  in  connection  with (i) the
         solicitation of proxies to be voted at the Parent Stockholders' Meeting
         with respect to the Charter  Amendment and the Share  Issuance and (ii)
         in  connection  with the  solicitation  of  proxies  to be voted at the
         Company  Stockholders'  Meeting with respect to this  Agreement and the
         Merger  (such  joint  proxy  statement,  together  with any  amendments
         thereof or supplements  thereto effected prior to the effective date of
         the Registration Statement, being the "Joint Proxy Statement"). At such
         time as the Parent and the Company deem  appropriate,  the Parent shall
         prepare and file with the Commission a  registration  statement on Form
         S-4 (such registration statement,  together with any amendments thereof
         or supplements thereto, being the "Registration Statement"), containing
         a  proxy  statement  for   stockholders  of  the  Parent  and  a  proxy
         statement/prospectus for stockholders of the Company in connection with
         the  registration  under the Securities  Act of the offering,  sale and
         delivery  of the  Parent  Common  Stock to be issued  pursuant  to this
         Agreement  in the Merger to  stockholders  of the  Company  (the "Joint
         Proxy  Statement/Prospectus").  The  Joint  Proxy  Statement/Prospectus
         shall include  substantially all the information  included in the Joint
         Proxy  Statement,  as it  shall  be then  amended.  Each of the  Parent
         Companies and the Company shall furnish all  information  concerning it
         and the  holders  of its  capital  stock as the  other  may  reasonably
         request in connection with such actions.  Each of the Parent  Companies
         and the Company  will use all  reasonable  efforts to have or cause the
         Registration  Statement to become effective as promptly as practicable,
         and shall take any action  required  to be taken  under any  applicable
         federal or state  securities  Laws in  connection  with the issuance of
         shares of Parent Common Stock in the Merger. As promptly as practicable
         after the Registration  Statement shall have become effective,  (x) the
         Parent  shall  mail  the  Joint  Proxy   Statement/Prospectus   to  its
         stockholders  entitled  to  notice  of and  to  vote  at  the  Parent's
         Stockholders'  Meeting and (y) the  Company  shall mail the Joint Proxy
         Statement/Prospectus  to its stockholders  entitled to notice of and to
         vote at the Company Stockholders' Meeting.

                  (b)  Company  Information.  The  information  supplied  by the
         Company for inclusion in the  Registration  Statement shall not, at the
         time the  Registration  Statement  is declared  effective,  contain any
         untrue  statement of a material fact or omit to state any material fact
         required  to be  stated  therein  or  necessary  in  order  to make the
         statements  therein not  misleading.  The  information  supplied by the
         Company for inclusion in (i) the Joint Proxy Statement/Prospectus shall
         not,  at  the  date  the  Joint  Proxy   Statement/Prospectus  (or  any
         supplement  thereto) is first mailed to stockholders of the Parent,  at
         the date (if  different) the Joint Proxy  Statement/Prospectus  (or any
         supplement  thereto) is first mailed to stockholders of the Company, at
         the  time  of  the  Parent  Stockholders'  Meeting,  at  the  time  (if
         different)  of the Company  Stockholders'  Meeting or at the  Effective
         Time,  contain any untrue statement of a material fact or omit to state
         any material fact required to be stated

                          AGREEMENT AND PLAN OF MERGER
                                      -38-



         therein or necessary in order to make the  statements  therein,  in the
         light of the circumstances  under which they were made, not misleading.
         If at any time prior to the  Effective  Time any event or  circumstance
         relating  to the  Company or any of its  Subsidiaries,  or its or their
         respective  officers or directors,  should be discovered by the Company
         that should be set forth in an amendment to the Registration  Statement
         or a supplement  to the Joint Proxy  Statement/Prospectus,  the Company
         shall  promptly  inform the Parent.  All documents  that the Company is
         responsible  for filing  with the  Commission  in  connection  with the
         transactions  contemplated  herein  shall  comply  as to  form  in  all
         material  respects with the applicable  requirements  of the Securities
         Act  and  the  Regulations  thereunder  and  the  Exchange  Act and the
         Regulations thereunder.

                  (c) The Parent Companies Information. The information supplied
         by the Parent  Companies  for inclusion in the  Registration  Statement
         shall  not,  at  the  time  the  Registration   Statement  is  declared
         effective,  contain any untrue  statement of a material fact or omit to
         state any material fact  required to be stated  therein or necessary in
         order to make the statements  therein not misleading.  Such information
         supplied  by  the  Parent  for   inclusion   in  (i)  the  Joint  Proxy
         Statement/Prospectus   shall   not,   at  the  date  the  Joint   Proxy
         Statement/Prospectus  (or any  supplement  thereto) is first  mailed to
         stockholders of the Parent,  at the date (if different) the Joint Proxy
         Statement/Prospectus  (or any  supplement  thereto) is first  mailed to
         stockholders  of the Company,  at the time of the Parent  Stockholders'
         Meeting,  at the  time  (if  different)  of the  Company  Stockholders'
         Meeting or at the  Effective  Time,  contain any untrue  statement of a
         material  fact or omit to state any material fact required to be stated
         therein or necessary in order to make the  statements  therein,  in the
         light of the  circumstances  under which they are made, not misleading.
         If at any time prior to the  Effective  Time any event or  circumstance
         relating to the Parent or any of its Affiliates, or to their respective
         officers or  directors,  should be discovered by the Parent that should
         be set  forth  in an  amendment  to  the  Registration  Statement  or a
         supplement  to the Joint Proxy  Statement/Prospectus,  the Parent shall
         promptly  inform the Company.  All documents that the Parent  Companies
         are  responsible  for filing with the Commission in connection with the
         transactions  contemplated  hereby  shall  comply  as to  form  in  all
         material  respects with the applicable  requirements  of the Securities
         Act  and  the  Regulations  thereunder  and  the  Exchange  Act and the
         Regulations thereunder.

                  (d) No amendment or supplement to the Registration  Statement,
         the Joint Proxy Statement or the Joint Proxy Statement/Prospectus shall
         be made by the Parent or the Company  without the approval of the other
         party, which shall not be unreasonably  withheld or delayed. The Parent
         and the Company each will advise the other,  promptly after it receives
         notice thereof, of the time when the Registration  Statement has become
         effective or any  supplement or amendment has been filed,  the issuance
         of any stop order  suspending  the  effectiveness  of the  Registration
         Statement or the  solicitation  of proxies  pursuant to the Joint Proxy
         Statement/Prospectus, the suspension of the qualification of the Parent
         Common  Stock  issuable in  connection  with the Merger for offering or
         sale in any  jurisdiction,  any request by the staff of the  Commission
         for amendment of the Registration Statement, the

                          AGREEMENT AND PLAN OF MERGER
                                      -39-



         Joint  Proxy  Statement  or the Joint Proxy  Statement/Prospectus,  the
         receipt  from the staff of the  Commission  of comments  thereon or any
         request by the staff of the Commission for additional  information with
         respect thereto.

         SECTION 7.03    Appropriate Action; Consents; Filings.

                  (a) The Company and the Parent  shall each use all  reasonable
         efforts (i) to take, or to cause to be taken,  all actions,  and to do,
         or to cause to be done, all things that, in either case, are necessary,
         proper or advisable under applicable Law or otherwise to consummate and
         make effective the transactions contemplated by this Agreement, (ii) to
         obtain from any Governmental  Authorities any  Authorizations or Orders
         required  to be  obtained  by the Parent or the Company or any of their
         Subsidiaries in connection with the authorization,  execution, delivery
         and  performance  of  this  Agreement  and  the   consummation  of  the
         transactions  contemplated hereby,  including the Merger, (iii) to make
         all  necessary   filings,   and  thereafter  make  any  other  required
         submissions,  with respect to this  Agreement  and the Merger  required
         under  (A)  the  Securities  Act (in the  case of the  Parent)  and the
         Exchange Act and the Regulations  thereunder,  and any other applicable
         federal  or state  securities  Laws,  (B) the HSR Act and (C) any other
         applicable  Law. The Parent and the Company shall  cooperate  with each
         other in  connection  with the  making of all such  filings,  including
         providing  copies of all such documents to the nonfiling  party and its
         advisors  prior  to  filings  and,  if  requested,   shall  accept  all
         reasonable  additions,  deletions or changes  suggested  in  connection
         therewith.  The Company and the Parent  shall  furnish all  information
         required for any application or other filing to be made pursuant to any
         applicable  Law  or any  applicable  Regulations  of  any  Governmental
         Authority  (including  all  information  required to be included in the
         Joint  Proxy  Statement,  the Joint Proxy  Statement/Prospectus  or the
         Registration   Statement)   in   connection   with   the   transactions
         contemplated by this Agreement.

                  (b) Each of the  Company  and the  Parent  shall  give  prompt
         notice to the other of (i) any notice or other  communication  from any
         Person  alleging  that the consent of such Person is or may be required
         in connection with the Merger,  (ii) any notice or other  communication
         from any  Governmental  Authority in connection with the Merger,  (iii)
         any actions, suits, claims,  investigations or proceedings commenced or
         threatened  in writing  against,  relating to or involving or otherwise
         affecting the Company,  the Parent or their Subsidiaries that relate to
         the consummation of the Merger;  and (iv) any change that is reasonably
         likely to have a Material  Adverse Effect on the Company or the Parent,
         respectively, or is likely to delay or impede the ability of either the
         Company or the Parent,  respectively,  to consummate  the  transactions
         contemplated   by  this  Agreement  or  to  fulfill  their   respective
         obligations set forth herein.

                  (c) The Parent  Companies  and the Company  agree to cooperate
         and use all  reasonable  efforts  vigorously  to contest and resist any
         action,  including legislative,  administrative or judicial action, and
         to have  vacated,  lifted,  reversed or overturned  any Order  (whether
         temporary, preliminary or permanent) of any Court or Governmental

                          AGREEMENT AND PLAN OF MERGER
                                      -40-



         Authority that is in effect and that  restricts,  prevents or prohibits
         the consummation of the Merger or any other  transactions  contemplated
         by this  Agreement,  including  the vigorous  pursuit of all  available
         avenues  of  administrative  and  judicial  appeal  and  all  available
         legislative  action.  Each of the Parent Companies and the Company also
         agree to take any and all actions,  including the disposition of assets
         or the  withdrawal  from doing  business in  particular  jurisdictions,
         required by any Court or  Governmental  Authority as a condition to the
         granting of any  Authorization  or Order necessary for the consummation
         of the Merger or as may be required to avoid,  lift,  vacate or reverse
         any  legislative  or judicial  action which would  otherwise  cause any
         condition to the Closing not to be satisfied;  provided,  however, that
         in no event shall either party take, or be required to take, any action
         that could  reasonably be expected to have a Material Adverse Effect on
         the Combined Companies.

                  (d) (i) Each of the  Company  and the  Parent  shall  give (or
                  shall cause their respective Subsidiaries to give) any notices
                  to  third  Persons,   and  use,  and  cause  their  respective
                  Subsidiaries  to use,  all  reasonable  efforts  to obtain any
                  consents from third Persons (A) necessary, proper or advisable
                  to consummate the transactions  contemplated by this Agreement
                  or to satisfy any of the conditions set forth in Article VIII,
                  (B) otherwise required under any contracts,  licenses,  leases
                  or other agreements in connection with the consummation of the
                  transactions  contemplated hereby or (C) required to prevent a
                  Material Adverse Effect on the Company from occurring prior to
                  or after the Effective  Time or a Material  Adverse  Effect on
                  the Parent from occurring after the Effective Time.

                           (ii) If any party  shall fail to obtain  any  consent
                  from a third Person described in subsection (d)(i) above, such
                  party  shall use all  reasonable  efforts,  and shall take any
                  such actions  reasonably  requested by the other  parties,  to
                  limit the  adverse  effect  upon the  Company  and the Parent,
                  their respective Subsidiaries, and their respective businesses
                  resulting,  or that could  reasonably  be  expected  to result
                  after the  Effective  Time,  from the  failure to obtain  such
                  consent.

         SECTION 7.04    Affiliates; Pooling; Tax Treatment.

                  (a) The  Company  shall use all  reasonable  efforts to obtain
         from any Person who may be deemed to have  become an  Affiliate  of the
         Company after the date of this Agreement and on or prior to the Closing
         Date a written agreement substantially in the form of Annex B hereto as
         soon as practicable after attaining such status.

                  (b) The Parent shall use all reasonable efforts to obtain from
         any Person who may be deemed to have become an  Affiliate of the Parent
         after the date of this  Agreement and on or prior to the Closing Date a
         written  agreement  substantially in the form of Annex C hereto as soon
         as practicable after attaining such status.


                          AGREEMENT AND PLAN OF MERGER
                                      -41-



                  (c) The Parent Companies shall not be required to maintain the
         effectiveness of the  Registration  Statement for the purpose of resale
         by  stockholders  of the Company who may be  Affiliates  of the Company
         pursuant to Rule 145 under the Securities Act.

                  (d) Each  party  hereto  shall use all  reasonable  efforts to
         cause the Merger to be treated for financial  accounting  purposes as a
         Pooling  Transaction,  and shall not take, and shall use all reasonable
         efforts to prevent any Affiliate of such party from taking, any actions
         that  could  prevent  the  Merger  from  being  treated  for  financial
         accounting purposes as a Pooling Transaction.

                  (e) Each  party  hereto  shall use all  reasonable  efforts to
         cause the  Merger  to  qualify,  and shall not take,  and shall use all
         reasonable  efforts to prevent any Affiliate of such party from taking,
         any  actions  that could  prevent  the  Merger  from  qualifying,  as a
         reorganization under the provisions of Section 368(a) of the Code.

         SECTION  7.05 Public  Announcements.  The Parent and the Company  shall
consult with each other before issuing any press release or otherwise making any
public  statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation.

         SECTION 7.06 NYSE Listing.  The Parent shall use all reasonable efforts
to cause the shares of the Parent  Common Stock to be issued in the Merger to be
approved for listing  (subject to official notice of issuance) on the NYSE prior
to the Effective Time.

         SECTION 7.07 Rights  Agreement;  State Takeover  Statutes.  The Company
shall take all action (including, if necessary, redeeming all of the outstanding
rights  issued  pursuant  to  the  Company  Rights   Agreement  or  amending  or
terminating  the Company Rights  Agreement) so that the execution,  delivery and
performance of this Agreement and the  consummation  of the Merger and the other
transactions  contemplated hereby do not and will not result in the grant of any
rights to any Person under the Company Rights Agreement or enable or require any
outstanding rights to be exercised,  distributed or triggered.  The Company will
take all  steps  necessary  to  exempt  the  transactions  contemplated  by this
Agreement from Section 203 of the GCL.

         SECTION 7.08       Comfort Letters.

                  (a) The  Company  shall use all  reasonable  efforts  to cause
         Price Waterhouse LLP, the Company's independent accountants, to deliver
         a letter dated as of the date of the Joint Proxy  Statement/Prospectus,
         and  addressed  to the Company and the  Parent,  in form and  substance
         reasonably  satisfactory  to the  Parent  and  customary  in scope  and
         substance for agreed upon procedures  letters  delivered by independent
         public accountants in connection with registration statements and proxy
         statements  similar to the  Registration  Statement and the Joint Proxy
         Statement/Prospectus.


                          AGREEMENT AND PLAN OF MERGER
                                      -42-



                  (b) The  Parent  shall  use all  reasonable  efforts  to cause
         Arthur Andersen LLP, the Parent's independent accountants, to deliver a
         letter  dated as of the date of the Joint  Proxy  Statement/Prospectus,
         and  addressed  to the Parent and the  Company,  in form and  substance
         reasonably  satisfactory  to the  Company  and  customary  in scope and
         substance for agreed upon procedures  letters  delivered by independent
         public accountants in connection with registration statements and proxy
         statements  similar to the  Registration  Statement and the Joint Proxy
         Statement/Prospectus.

         SECTION 7.09   Assumption of Obligations to Issue Stock and Obligations
                        of Employee Benefit Plans; Employees.

                  (a) At the  Effective  Time,  automatically  and  without  any
         action on the part of the  holder  thereof,  each  outstanding  Company
         Stock  Option shall be assumed by the Parent and shall become an option
         to purchase that number of shares of the Parent  Common Stock  obtained
         by  multiplying  the number of shares of Company  Common Stock issuable
         upon the exercise of such option by the Common Stock  Exchange Ratio at
         an exercise  price per share equal to the per share  exercise  price of
         such option  divided by the Common Stock  Exchange  Ratio and otherwise
         upon the same  terms  and  conditions  as such  outstanding  option  to
         purchase Company Common Stock;  provided,  however, that in the case of
         any option to which Section 421 of the Internal Revenue Code applies by
         reason of the qualifications under Section 422 or 423 of such Code, the
         exercise  price,  the  number of shares  purchasable  pursuant  to such
         option and the terms and conditions of exercise of such option shall be
         determined in a manner that complies with Section 424(a) of the Code.

                  (b) On or prior to the Effective  Time, the Company shall take
         or cause to be taken all such actions,  reasonably  satisfactory to the
         Parent,  as may be necessary  or  desirable  in order to authorize  the
         transactions contemplated by subsection (a) of this Section.

                  (c) The Parent shall take all corporate  actions  necessary to
         reserve for  issuance a  sufficient  number of shares of Parent  Common
         Stock for delivery upon  exercise of the Company Stock Options  assumed
         by the Parent  pursuant to Section  7.09(a)  above and shares of Parent
         Common Stock otherwise to be issued under other Company Stock Plans.

                  (d) As promptly as practicable  after the Effective  Time, the
         Parent shall file one or more  Registration  Statements on Form S-8 (or
         any successor or other  appropriate form) with respect to the shares of
         Parent  Common Stock  subject to the Company Stock Options or otherwise
         issuable  under other Company Stock Plans and shall use its  reasonable
         efforts to maintain the effectiveness of such registration statement or
         registration  statements  (and  maintain  the  current  status  of  the
         prospectus  or  prospectuses  contained  therein)  for so  long as such
         options  remain   outstanding  and  to  comply  with  applicable  state
         securities and blue sky laws.


                          AGREEMENT AND PLAN OF MERGER
                                      -43-



                  (e) Except as provided herein or as otherwise agreed to by the
         parties,  each of the Company Stock Plans providing for the issuance or
         grant of Company Stock Options or Company Common Stock shall be assumed
         as of the Effective Time by the Parent with such amendments  thereto as
         may be required to reflect the Merger.

                  (f)  Provided  that the  Parent  shall not be  obligated  with
         respect to any action  taken by the  Company or its  Subsidiaries  with
         respect to the  Benefit  Plans of the  Company or its  Subsidiaries  in
         violation  of the  provisions  of Section  6.02(a),  the Parent  hereby
         agrees to guarantee  from and after the Effective Time and to cause the
         Surviving  Corporation and each Subsidiary of the Surviving Corporation
         to honor and perform all  obligations of the Surviving  Corporation and
         each Subsidiary of the Surviving Corporation under all Benefit Plans of
         the  Company  and  such   Subsidiaries   and  under  any  agreement  or
         arrangement  implemented as provided in the Company's Disclosure Letter
         or as  otherwise  contemplated  by this  Agreement  and  the  Company's
         Disclosure Letter.

                  (g) The Parent shall and shall cause the Surviving Corporation
         and each Subsidiary of the Surviving  Corporation to take all corporate
         action necessary to:

                           (i) maintain  with  respect to eligible  participants
                  (as of the Effective Time) the Company's retiree medical plan,
                  except  to the  extent  that  any  modifications  thereto  are
                  consistent  with changes in the medical plans  provided by the
                  Parent and its  subsidiaries  for  similarly  situated  active
                  employees;

                           (ii) maintain the "pension  equalizer"  contributions
                  to  the  Company   Retirement   Savings   Plan,   the  related
                  nonqualified  savings  plan or a  successor  plan  that  would
                  provide at least the same level of  benefits  as the  "pension
                  equalizer"  arrangement,  with  respect to  employees  who are
                  eligible  participants as of the Effective Time,  after taking
                  into  account  any  retirement   benefits   provided  to  such
                  participants  by any plans or programs of the Parent or any of
                  its Subsidiaries after the Effective Time;

                           (iii)   maintain  the  Company   Executive   Deferred
                  Compensation   Plan,   except  that  no  additional   employee
                  deferrals  shall be made under  such plan after the  Effective
                  Time and valuation with respect to stock deferrals existing at
                  such time shall  thereafter  be based  upon the Parent  Common
                  Stock;

                           (iv) maintain the Company's  Executive Life Insurance
                  Program,  except that after the  Effective  Time no additional
                  participants shall be covered by such program;

                           (v) maintain  the  Company's  Supplemental  Executive
                  Retirement  Plan with respect to  employees  that are eligible
                  participants  as of the Effective  Time,  but the offset under
                  such  plan  shall  take into  account  any  employer  provided
                  retirement

                          AGREEMENT AND PLAN OF MERGER
                                      -44-



                  benefits under any plans or  programs  of the Parent or any of
                  its Subsidiaries after the Effective Time;

                           (vi)  administer the  Performance  Stock Unit Program
                  and the Incentive Stock Unit Plan of the Company in accordance
                  with their terms,  with such  adjustments  in the  performance
                  targets as may be necessary to reflect the Merger,  but no new
                  grants of awards shall be made under such plans; and

         The  Company  represents  that true and  complete  copies of all of the
         plans  and  programs  referred  to in this  Section  7.09(g)  have been
         delivered to the Parent.

                  (h) Subject to Section 7.09(g), until the third anniversary of
         the Effective Time (the "Benefits Maintenance Period") the Parent shall
         and shall cause the Surviving  Corporation  and each  Subsidiary of the
         Surviving Corporation to provide each employee of the Company or any of
         its  Subsidiaries at the Effective Time ("Company  Participants")  with
         employee  benefits and  compensation  after the Effective Time that are
         substantially  comparable to similarly situated employees of the Parent
         and its Subsidiaries. At the Effective Time, the Parent shall adopt the
         severance  program  described  in  Section  7.09(h)  of  the  Company's
         Disclosure  Letter and shall  maintain  such program for the period set
         forth in such description.

                  (i) If Company  Participants are included in any benefit plan,
         including  provision  for  vacation,   of  the  Parent,  the  Surviving
         Corporation  or their  Subsidiaries,  the  Company  Participants  shall
         receive credit for service prior to the Effective Time with the Company
         and its  Subsidiaries to the same extent such service was counted under
         similar  Benefit  Plans of the  Company  for  purposes  of  determining
         eligibility to  participate,  vesting,  eligibility for retirement and,
         with respect to vacation, disability and severance, benefit accrual. If
         Company  Participants or their  dependents are included in any medical,
         dental or health plan (a "Successor Plan") other than the plan or plans
         they  participated in at the Effective Time (a "Predecessor  Plan") any
         such   Successor   Plan  shall  not  include   pre-existing   condition
         exclusions,  except to the extent such exclusions were applicable under
         the   applicable   Predecessor   Plan  and  shall  credit  co-pays  and
         deductibles to the same extent credited under the Predecessor Plan.

                  (j) Except as otherwise  specifically set forth above, nothing
         contained herein shall be construed as requiring Parent to continue any
         specific  Benefit Plan,  or to continue the  employment of any specific
         person.

         SECTION 7.10   Indemnification of Directors and Officers.

                  (a) To the extent,  if any, not provided by an existing  right
         of  indemnification  or other  agreement or policy,  from and after the
         Effective Time, the Surviving  Corporation shall, to the fullest extent
         permitted by applicable law, indemnify, defend and hold harmless

                          AGREEMENT AND PLAN OF MERGER
                                      -45-



         each  person  who is now,  or has  been at any  time  prior to the date
         hereof,  or who  becomes  prior to the  Effective  Time,  an officer or
         director  of  the  Company  or  any  of  its   Subsidiaries   (each  an
         "Indemnified  Party"  and  collectively,   the  "Indemnified  Parties")
         against (i) all losses,  expenses (including reasonable attorney's fees
         and  expenses),  claims,  damages  or  liabilities  or,  subject to the
         proviso of the next  succeeding  sentence,  amounts paid in settlement,
         arising  out of actions or  omissions  occurring  at or prior to, at or
         after the Effective Time (and whether  asserted or claimed prior to, at
         or after the Effective Time) that are, in whole or in part, based on or
         arising  out of the fact  that  such  person  is or was a  director  or
         officer  of such party (the  "Indemnified  Liabilities"),  and (ii) all
         Indemnified Liabilities to the extent they are based on or arise out of
         or pertain to the transactions  contemplated by this Agreement.  In the
         event of any such loss,  expense,  claim,  damage or liability  arising
         before the Effective Time, (i) the Surviving  Corporation shall pay the
         reasonable  fees and  expenses of counsel  selected by the  Indemnified
         Parties,  which  counsel  shall  be  reasonably   satisfactory  to  the
         Surviving Corporation,  promptly after statements therefor are received
         and  otherwise   advance  to  such   Indemnified   Party  upon  request
         reimbursement of documented  expenses  reasonably  incurred,  in either
         case to the extent not  prohibited  by the GCL, (ii) the Parent and the
         Surviving  Corporation will cooperate in the defense of any such matter
         and (iii) any determination required to be made with respect to whether
         an Indemnified  Party's  conduct  complies with the standards set forth
         under the GCL and the  certificate of  incorporation  or by-laws of the
         Surviving  Corporation  shall be made by independent  counsel  mutually
         acceptable to the Parent and the Indemnified Party; provided,  however,
         that the Parent and the Surviving  Corporation  shall not be liable for
         any settlement  affected  without their written  consent (which consent
         shall not be unreasonably withheld). The Indemnified Parties as a group
         may retain only one law firm with respect to each related matter except
         to the extent  there is, in the  opinion  of counsel to an  Indemnified
         Party, under applicable  standards of professional  conduct, a conflict
         on any significant  issue between  positions of such Indemnified  Party
         and any other Indemnified Party or Indemnified Parties.

                  (b)  The  Parent  agrees  to  guarantee   unconditionally  the
         performance  of  the  Surviving  Corporation's  obligations pursuant to
         Section 7.10(a).

                  (c) For a period of six years after the  Effective  Time,  the
         Surviving  Corporation  shall cause to be maintained in effect policies
         of  directors  and  officers'  liability  insurance  maintained  by the
         Company for the benefit of those persons who are  currently  covered by
         such policies on terms no less favorable than the terms of such current
         insurance coverage;  provided,  however, that the Surviving Corporation
         shall not be required to expend in any year an amount in excess of 200%
         of the annual aggregate premiums currently paid by the Company for such
         insurance;  and provided,  further, that if the annual premiums of such
         insurance coverage exceed such amount, the Surviving  Corporation shall
         be obligated to obtain a policy with the best  coverage  available,  in
         the reasonable  judgment of the Board of Directors of the Parent, for a
         cost not exceeding such amount.


                          AGREEMENT AND PLAN OF MERGER
                                      -46-



                  (d) If the  Parent or any of its  successors  or  assigns  (i)
         consolidates  with or merges into any other  person or entity and shall
         not be the  continuing  or  surviving  corporation  or  entity  of such
         consolidation or merger or (ii) transfers all of  substantially  all of
         its properties  and assets to any person or entity,  then and in either
         such case,  proper  provisions shall be made so that the successors and
         assigns of the Parent  shall assume the  obligations  set forth in this
         Section 7.10.

                  (e) To the fullest extent permitted by law, from and after the
         Effective Time, all rights to  indemnification as of the date hereof in
         favor of the employees,  agents,  directors and officers of the Company
         and its Subsidiaries  with respect to their activities as such prior to
         the Effective  Time, as provided in their  respective  certificates  of
         incorporation  and by-laws in effect on the date thereof,  or otherwise
         in  effect on the date  hereof,  shall  survive  the  Merger  and shall
         continue  in full  force and  effect  for a period of not less than six
         years from the Effective Time.

                  (f) The provisions of this Section 7.10 are intended to be for
         the benefit of, and shall be enforceable  by, each  Indemnified  Party,
         his or her heirs and his or her representatives.

         SECTION  7.11  Newco.  Prior to the  Effective  Time,  Newco  shall not
conduct  any  business  or make  any  investments  other  than  as  specifically
contemplated  by this  Agreement  and will not have any assets  (other  than the
minimum  amount of cash  required to be paid to Newco for the valid  issuance of
its stock to the Parent).

         SECTION 7.12 Event  Notices.  From and after the date of this Agreement
until the  Effective  Time,  each party hereto shall  promptly  notify the other
party hereto of the occurrence or  nonoccurrence  of any event the occurrence or
nonoccurrence of which would be likely to cause any condition to the obligations
of the latter party to effect the Merger and the other transactions contemplated
by this  Agreement  not to be satisfied.  No delivery of any notice  pursuant to
this Section 7.12 shall cure any breach of any representation or warranty of the
party  giving such notice  contained in this  Agreement  or  otherwise  limit or
affect the remedies available hereunder to the party receiving such notice.

         SECTION 7.13  Parent Board of Directors; Committees.

                  (a) The Parent's  Board of Directors  will take such action as
         may be necessary to cause the number of directors  comprising the Board
         of Directors of the Parent at the Effective Time to be 14 persons, nine
         of whom  shall be  current  members  of the Board of  Directors  of the
         Parent  including  Richard B.  Cheney and five of whom shall be current
         members of the Board of Directors of the Company  including  William B.
         Bradford.  The specific members of the Parent's Board of Directors will
         be chosen by a committee  consisting  of Richard B. Cheney,  William E.
         Bradford and the current  chairman or the Nominating  Committee of each
         of the Parent and the Company.

                          AGREEMENT AND PLAN OF MERGER
                                      -47-



                  (b) At or promptly  after the Closing,  the Parent's  Board of
         Directors will take such action as may be necessary so that one or more
         of such designees of the Company will be added to each committee of the
         Parent's Board of Directors on an approximate proportional basis.

         SECTION 7.14  Transition  Management.  As soon as practicable after the
date of this Agreement, the parties shall create a special transition management
task  force (the "Task Force"), which shall be comprised of William E. Bradford,
Richard B. Cheney, David J. Lesar  and  Donald C.Vaughn.  The  Task  Force shall
examine  various alternatives regarding the manner in which to best organize the
business of the Combined Companies after the Effective Time.

         SECTION 7.15 Employment Contracts.  The Parent shall, as of or prior to
the Effective Time, enter into employment contracts with William E. Bradford and
Donald C. Vaughn on terms reasonably acceptable to the parties pursuant to which
William  E.  Bradford  shall  hold the  position  of  Chairman  of the  Board of
Directors  of the  Parent  and  Donald C.  Vaughn  shall hold the office of Vice
Chairman of the Parent and at the  Effective  Time each of Messrs.  Bradford and
Vaughn  shall be  appointed to the  Parent's  Executive  Committee,  a non-board
committee  comprised  of  executive  officers  of the  Parent,  which  after the
Effective Time shall  initially  consist of such persons and Messrs.  Cheney and
Lesar.

         SECTION  7.16 Waiver by Company  Joint  Venture  Partners.  The Company
shall not amend or modify the written  waivers it has received  from each of the
Company Joint  Venture  Partners of any and all rights such partners may have to
purchase any interest of the Company in any of the Company  Joint  Ventures that
arise as a result of the execution of this Agreement or the  consummation of any
of the transactions contemplated hereby.

         SECTION 7.17 Transfer Taxes. The Company and the Parent shall cooperate
in  the  preparation,  execution  and  filing  of all  returns,  questionnaires,
applications or other documents  regarding any real property  transfer or gains,
sales, use, transfer and stamp taxes, any transfer, recording,  registration and
other fees and any similar  taxes that  become  payable in  connection  with the
transactions  contemplated  by this Agreement  ("Transfer  Taxes").  The Company
shall pay or cause to be paid any such Transfer Taxes.

                                  ARTICLE VIII

                               CLOSING CONDITIONS

         SECTION  8.01  Conditions  to  Obligations  of Each  Party  Under  This
Agreement. The respective obligations of each party to effect the Merger and the
other transactions  contemplated  hereby shall be subject to the satisfaction at
or prior to the Closing of the following conditions,  any or all of which may be
waived by the parties  hereto,  in whole or in part, to the extent  permitted by
applicable Law:


                          AGREEMENT AND PLAN OF MERGER
                                      -48-



                  (a)   Effectiveness   of  the  Registration   Statement.   The
         Registration  Statement  shall  have  been  declared  effective  by the
         Commission  under  the  Securities  Act,  and the pro  forma  financial
         statements  contained in the  Registration  Statement at the  effective
         date thereof shall reflect the Merger for financial accounting purposes
         as a Pooling Transaction. No stop order suspending the effectiveness of
         the Registration Statement shall have been issued by the Commission and
         no  proceedings  for that  purpose  shall  have been  initiated  by the
         Commission.

                  (b) Stockholder Approval.  This Agreement and the Merger shall
         have  been  approved  and  adopted  by  the   requisite   vote  of  the
         stockholders  of the  Company  as  required  by the  GCL.  The  Charter
         Amendment and the Share  Issuance  shall have been approved and adopted
         by the requisite vote of the  stockholders of the Parent as required by
         the GCL and the rules of the NYSE.

                  (c) No Order.  No Court or  Governmental  Authority shall have
         enacted, issued,  promulgated,  enforced or entered any Law, Regulation
         or Order  (whether  temporary,  preliminary  or  permanent)  that is in
         effect and has the effect of making  the  Merger  illegal or  otherwise
         prohibiting consummation of the Merger.

                  (d) HSR Act.  The waiting period under the HSR Act applicable
         to the Merger shall have expired or been terminated.

                  (e) Foreign Governmental  Authorities.  The applicable waiting
         period under any  competition  Laws,  Regulations and Orders of foreign
         Governmental  Authorities,  as set  forth  in the  Parent's  Disclosure
         Letter and the Company's  Disclosure Letter, shall have expired or been
         terminated.

                  (f) Pooling of  Interests.  The Parent and the  Company  shall
         have been  advised in writing by Arthur  Andersen  LLP on the date upon
         which the  Effective  Time is to occur that, in reliance in part on the
         concurrent  opinion of Price  Waterhouse  LLP or its successor that the
         Company is a  "poolable  entity,"  the  Merger  should,  for  financial
         accounting purposes, be treated as a Pooling Transaction.

                  (g) The  shares  of  Parent  Common  Stock to be issued in the
         Merger shall have been listed,  subject to official notice of issuance,
         on the NYSE.

         SECTION  8.02  Additional  Conditions  to  Obligations  of  the  Parent
Companies.  The obligations of the Parent Companies to effect the Merger and the
other transactions  contemplated  hereby shall be subject to the satisfaction at
or prior to the Closing of the following conditions,  any or all of which may be
waived by the Parent Companies,  in whole or in part, to the extent permitted by
applicable Law:


                          AGREEMENT AND PLAN OF MERGER
                                      -49-



                  (a)    Representations    and   Warranties.    Each   of   the
         representations  and  warranties  of  the  Company  contained  in  this
         Agreement  that is  qualified  as to  materiality  shall  be  true  and
         correct, and each of such representations and warranties that is not so
         qualified shall be true and correct in all material respects, as of the
         date of this  Agreement and as of the Closing Date as though made again
         on and as of the Closing Date. The Parent Companies shall have received
         a certificate of the Chief  Executive  Officer and the Chief  Financial
         Officer of the Company, dated the Closing date, to such effect.

                  (b) Agreements and Covenants. The Company shall have performed
         or complied in all material  respects with all agreements and covenants
         required by this Agreement to be performed or complied with by it on or
         prior to the Closing Date. The Parent  Companies  shall have received a
         certificate  of the  President and the Chief  Executive  Officer of the
         Company, dated the Closing date, to such effect.

                  (c) Tax Opinion.  The Parent  shall have  received the opinion
         dated as of the Closing  Date of Vinson & Elkins  L.L.P.  to the effect
         that (i) the Merger will  constitute  a  reorganization  under  section
         368(a) of the Code, (ii) the Parent, the Company and Newco will each be
         a party  to that  reorganization,  and  (iii)  no gain or loss  will be
         recognized by the Parent, the Company or Newco by reason of the Merger.
         In rendering such opinion, Vinson & Elkins L.L.P. shall receive and may
         rely upon representations  contained in certificates of the Company and
         the Parent substantially in the form of Annexes D and E hereto.

         SECTION 8.03 Additional  Conditions to Obligations of the Company.  The
obligations  of the  Company to effect  the  Merger  and the other  transactions
contemplated  hereby  shall be  subject to the  satisfaction  at or prior to the
Closing of the  following  conditions,  any or all of which may be waived by the
Company, in whole or in part, to the extent permitted by applicable Law:

                  (a)    Representations    and   Warranties.    Each   of   the
         representations   and  warranties  of  the  Parent  contained  in  this
         Agreement  that is  qualified  as to  materiality  shall  be  true  and
         correct, and each of such representations and warranties that is not so
         qualified shall be true and correct in all material respects, as of the
         date of this  Agreement and as of the Closing Date as though made again
         on and as of the  Closing  Date.  The  Company  shall  have  received a
         certificate  of the  Chairman of the Board,  the  President or any Vice
         President  and the  Chief  Financial  Officer  of  each  of the  Parent
         Companies, dated the Closing date, to such effect.

                  (b) Agreements and Covenants.  The Parent Companies shall have
         performed or complied in all material  respects with all agreements and
         covenants  required by this  Agreement to be performed or complied with
         by them on or  prior  to the  Closing  Date.  The  Company  shall  have
         received a certificate  of the Chairman of the Board,  the President or
         any Vice  President  and the  Chief  Financial  Officer  of each of the
         Parent Companies, dated the Closing Date, to such effect.


                          AGREEMENT AND PLAN OF MERGER
                                      -50-



                  (c) Tax Opinion.  The Company  shall have received the opinion
         dated as of the  Closing  Date of  Weil,  Gotshal  & Manges  LLP to the
         effect  that (i) the Merger  will  constitute  a  reorganization  under
         section 368(a) of the Code, (ii) the Parent, the Company and Newco will
         each be a party to that reorganization,  and (iii) no gain or loss will
         be  recognized by the  stockholders  of the Company upon the receipt of
         shares of the Parent  Common  Stock in  exchange  for shares of Company
         Common  Stock  pursuant to the Merger  except with  respect to any cash
         received in lieu of  fractional  share  interests.  In  rendering  such
         opinion, Weil, Gotshal & Manges LLP shall receive and may rely upon the
         representations contained in certificates of the Company and the Parent
         substantially in the form of Annexes D and E hereto.

                                   ARTICLE IX

                        TERMINATION, AMENDMENT AND WAIVER

         SECTION 9.01 Termination.  This Agreement may be terminated at any time
prior to the Effective Time,  whether before or after approval of this Agreement
and the Merger by the  stockholders  of the Company and before or after approval
of the  Charter  Amendment  and the Share  Issuance by the  stockholders  of the
Parent:

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

                  (b)  by  the  Parent,  upon a  breach  of any  representation,
         warranty, covenant or agreement on the part of the Company set forth in
         this  Agreement  or if any  representation  or  warranty of the Company
         shall have become  untrue,  in either case such that the conditions set
         forth in Section  8.02(a) or Section 8.02(b) would not be satisfied and
         such breach or untruth would result in a Material Adverse Effect on the
         Company  (a  "Terminating  Company  Breach");  provided  that,  if such
         Terminating  Company  Breach is  curable  by the  Company  through  the
         exercise  of its  reasonable  efforts  and for so  long as the  Company
         continues  to  exercise  such  reasonable  efforts,  the Parent may not
         terminate this Agreement under this Section 9.01(b);

                  (c)  by the  Company,  upon a  breach  of any  representation,
         warranty, covenant or agreement on the part of the Parent Companies set
         forth in this  Agreement  or if any  representation  or warranty of the
         Parent  Companies  shall have become untrue,  in either case, such that
         the  conditions set forth in Section  8.03(a) or Section  8.03(b) would
         not be satisfied  and such breach or untruth would result in a Material
         Adverse Effect on the Parent (a "Terminating Parent Breach");  provided
         that,  if such  Terminating  Parent  Breach is  curable  by the  Parent
         Companies  through the exercise of their reasonable  efforts and for so
         long as the Parent  Companies  continue  to  exercise  such  reasonable
         efforts,  the  Company  may not  terminate  this  Agreement  under this
         Section 9.01(c);


                          AGREEMENT AND PLAN OF MERGER
                                      -51-



                  (d) by either the Parent or the Company, if there shall be any
         final and  nonappealable  Order that prevents the  consummation  of the
         Merger,  unless the party  relying on such Order has not complied  with
         its obligations under Section 7.03;

                  (e) by either the Parent or the  Company,  if the Merger shall
         not have been consummated before December 31, 1998; provided,  however,
         that this  Agreement  may be extended  by written  notice of either the
         Parent or the Company to a date not later than March 31,  1999,  if the
         Merger  shall not have been  consummated  as a result of the Company or
         the Parent  Companies having failed by December 31, 1998 to receive all
         required  Authorizations  and Orders with respect to the Merger or as a
         result  of  the  entering  of  an  Order  by a  Court  or  Governmental
         Authority;  and provided,  further,  that,  prior to March 31, 1999, no
         party shall be entitled to terminate  this  Agreement  pursuant to this
         Section   9.01(e)  if  such  party  is  in   Material   breach  of  any
         representation,  warranty,  covenant or  agreement  on the part of such
         party set forth in this Agreement;

                  (f) by  either  the  Parent  or the Company, if this Agreement
         shall fail to receive the Required Company Vote by the stockholders of
         the Company at the Company Stockholders' Meeting;

                  (g) by  either  the  Parent  or the  Company,  if the  Charter
         Amendment  and the Share  Issuance  shall fail to receive the  Required
         Parent  Vote  by  the   stockholders   of  the  Parent  at  the  Parent
         Stockholders' Meeting;

                  (h) by the  Company,  at any  time  prior  to  receipt  of the
         Required  Company  Vote,  upon 72 hours  prior  written  notice  to the
         Parent,  if (i) the  Board  of  Directors  of the  Company  shall  have
         concluded  in good faith based on advice of outside  counsel  that such
         action is necessary to act in a manner  consistent  with its  fiduciary
         duties under  applicable law and (ii) the Parent does not make,  within
         72  hours of  receipt  of the  Company's  written  notification  of its
         intention  to  terminate  this  Agreement,  an offer  that the Board of
         Directors of the Company  determines,  in good faith after consultation
         with its financial advisors, is at least as favorable, from a financial
         point of view,  to the  stockholders  of the  Company  as any  Superior
         Proposal   considered   by  the  Board  of   Directors  in  making  its
         determination under clause (i). The Company agrees (x) that it will not
         enter into a binding  agreement  referred to in clause (ii) above until
         at least 72  hours  after it has  provided  the  notice  to the  Parent
         required thereby and (y) to notify the Parent promptly if its intention
         to enter into a written agreement referred to in its notification shall
         change at any time after giving such notification;

                  (i) by the  Parent,  at  any  time  prior  to  receipt  of the
         Required  Parent  Vote,  upon 72  hours  prior  written  notice  to the
         Company,  if (i) the  Board  of  Directors  of the  Parent  shall  have
         concluded  in good faith based on advice of outside  counsel  that such
         action is necessary to act in a manner  consistent  with its  fiduciary
         duties under applicable law and (ii) the Company does not make,  within
         72 hours of receipt of the Parent's written notification of

                          AGREEMENT AND PLAN OF MERGER
                                      -52-



         its intention to terminate this  Agreement,  an offer that the Board of
         Directors of the Parent  determines,  in good faith after  consultation
         with its financial advisors, is at least as favorable, from a financial
         point  of view,  to the  stockholders  of the  Parent  as any  Superior
         Proposal   considered   by  the  Board  of   Directors  in  making  its
         determination  under clause (i). The Parent agrees (x) that it will not
         enter into a binding  agreement  referred to in clause (ii) above until
         at least 72 hours  after it has  provided  the  notice  to the  Company
         required  thereby  and  (y)  to  notify  the  Company  promptly  if its
         intention  to  enter  into  a  written  agreement  referred  to in  its
         notification  shall change at any time after giving such  notification;
         or

                  (j) by the  Parent,  upon two  Business  Days'  prior  written
         notice to the  Company,  if the Board of  Directors  of the Company (A)
         shall  withdraw  or modify in any  manner  adverse  to the  Parent  the
         Board's  approval or  recommendation  of this Agreement and the Merger,
         (B) shall  approve or  recommend  any  Superior  Proposal  or (C) shall
         resolve to take any of the actions specified in clause (A) or (B).

                  (k) by the  Company,  upon two  Business  Days' prior  written
         notice to the Parent, if the Board of Directors of the Parent (A) shall
         withdraw  or modify in any manner  adverse to the  Company  the Board's
         approval  or  recommendation  of the  Charter  Amendment  and the Share
         Issuance,  (B) shall approve or recommend any Superior  Proposal or (C)
         shall  resolve to take any of the  actions  specified  in clause (A) or
         (B).

         The right of any party hereto to terminate this  Agreement  pursuant to
this Section 9.01 shall remain operative and in full force and effect regardless
of any  investigation  made by or on  behalf  of any party  hereto,  any  Person
controlling  any  such  party or any of their  respective  officers,  directors,
representatives  or  agents,  whether  prior to or after the  execution  of this
Agreement.

         SECTION 9.02 Effect of Termination.  Except as provided in Section 9.05
or Section  10.01 of this  Agreement,  in the event of the  termination  of this
Agreement  pursuant to Section 9.01, this Agreement shall forthwith become void,
there shall be no liability  on the part of the Parent  Companies or the Company
or any of their respective officers or directors to the other and all rights and
obligations  of any party hereto shall cease,  except that nothing  herein shall
relieve  any party from  liability  for any  misrepresentation  or breach of any
covenant or agreement under this Agreement.

         SECTION 9.03  Amendment.  This  Agreement may be amended by the parties
hereto by action  authorized by their respective Boards of Directors at any time
prior to the Effective  Time;  provided,  however,  that,  after approval of the
Merger by the stockholders of the Company,  or approval of the Charter Amendment
and Share Issuance by the  stockholders of the Parent,  no amendment may be made
that would reduce the amount or change the type of consideration into which each
share of Company Common Stock shall be converted pursuant to this Agreement upon
consummation of the Merger or that would  otherwise  require the approval of the
stockholders  of the Company or the Parent under the GCL. This Agreement may not
be amended except by an instrument in writing signed by the parties hereto.

                          AGREEMENT AND PLAN OF MERGER
                                      -53-



         SECTION 9.04 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the  performance of any of the obligations or
other  acts of the  other  party  hereto,  (b)  waive  any  inaccuracies  in the
representations  and  warranties of the other party  contained  herein or in any
document  delivered  pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an  instrument  in writing  signed by
the party or parties to be bound thereby. For purposes of this Section 9.04, the
Parent Companies shall be deemed to be one party.

         SECTION 9.05 Fees, Expenses and Other Payments.

                  (a) Except as  provided in this  Section  9.05,  all  Expenses
         incurred by the parties  hereto  shall be borne  solely and entirely by
         the party which has incurred such Expenses; provided, however, that the
         allocable share of the Parent  Companies as a group and the Company for
         all Expenses  related to printing,  filing and mailing the Registration
         Statement,   the   Joint   Proxy   Statement   and  the   Joint   Proxy
         Statement/Prospectus  and all  Commission and other  regulatory  filing
         fees incurred in connection with the Registration Statement,  the Joint
         Proxy  Statement  and the  Joint  Proxy  Statement/Prospectus  shall be
         one-half  each;  and  provided,  further,  that the Parent  may, at its
         option, but subject to Section 7.04(e), pay any Expenses of the Company
         that are solely and directly related to the Merger.

                  (b) If this Agreement is terminated by the Parent  pursuant to
         Section 9.01(j) (change of recommendation),  then the Company shall pay
         to the Parent a termination fee equal to $50 million.

                  (c) If this Agreement is terminated by the Company pursuant to
         Section 9.01(k) (change of  recommendation),  then the Parent shall pay
         to the Company a termination fee equal to $50 million.

                  (d)  If (i)  this  Agreement  is  terminated  pursuant  to (A)
         Section  9.01(b)  (breach),  (B) Section 9.01(h)  (fiduciary  out), (C)
         Section  9.01(f)  (failure  to  obtain  stockholder  approval),  or (D)
         Section  9.01(j) (change of  recommendation),  (ii) at the time of such
         termination  (or in the  case of  clause  (i)(C)  above,  prior  to the
         Company  Stockholders'  Meeting),  there shall have been an Acquisition
         Proposal  involving the Company or any of its Subsidiaries that, at the
         time of such  termination (or such meeting,  as the case may be), shall
         not have been (x) rejected by the Company and its Board of Directors or
         (y) withdrawn by the Person making such Acquisition  Proposal and (iii)
         within twelve months of any such termination, the Company or any of its
         Subsidiaries accepts a written offer or enters into a written agreement
         to  consummate an  Acquisition  Proposal with such Person or any of its
         Affiliates  and (iv)  the  Company  or such  Subsidiary  is  thereafter
         acquired, through merger, consolidation, share exchange, sale of assets
         or  otherwise,  by such  Person or any of its  Affiliates  (a  "Company
         Acquisition"),  then  the  Company  (jointly  and  severally  with  its
         Subsidiaries) shall at the closing (and as a condition of such closing)
         of such Company

                          AGREEMENT AND PLAN OF MERGER
                                      -54-



         Acquisition or of such Acquisition Proposal, pay the Parent immediately
         a termination fee of $175 million.

                  (e)  If (i)  this  Agreement  is  terminated  pursuant  to (A)
         Section  9.01(c)  (breach),  (B) Section 9.01(i)  (fiduciary  out), (C)
         Section  9.01(g)  (failure  to  obtain  stockholder  approval),  or (D)
         Section  9.01(k) (change of  recommendation),  (ii) at the time of such
         termination (or in the case of clause (i)(C) above, prior to the Parent
         Stockholders'  Meeting),  there shall have been an Acquisition Proposal
         involving  the Parent or any of its  Subsidiaries  that, at the time of
         such termination (or such meeting,  as the case may be), shall not have
         been (x)  rejected  by the  Parent  and its Board of  Directors  or (y)
         withdrawn  by the Person  making such  Acquisition  Proposal  and (iii)
         within twelve months of any such termination,  the Parent or any of its
         Subsidiaries accepts a written offer or enters into a written agreement
         to  consummate an  Acquisition  Proposal with such Person or any of its
         Affiliates  and  (iv)  the  Parent  or such  Subsidiary  is  thereafter
         acquired, through merger, consolidation, share exchange, sale of assets
         or  otherwise,  by such  Person  or any of its  Affiliates  (a  "Parent
         Acquisition"),   then  the  Parent  (jointly  and  severally  with  its
         Subsidiaries) shall at the closing (and as a condition of such closing)
         of such Parent  Acquisition or of such  Acquisition  Proposal,  pay the
         Company immediately a termination fee of $175 million.

                  (f) If either  party shall fail to pay the other party any fee
         or other amount due  hereunder,  the failing  party shall pay the costs
         and expenses  (including legal fees and expenses) of the other party in
         connection  with any  action,  including  the filing of any  lawsuit or
         other legal action, taken to collect payment, together with interest on
         the amount of any unpaid fee at the publicly  announced  prime interest
         rate of Citibank N.A., in effect from time to time,  from the date such
         fee or other payment was required to be paid until payment in full.

                  (g)  Notwithstanding  anything  herein  to the  contrary,  the
         aggregate  amount payable to the Parent  pursuant to Section 9.05 shall
         not exceed  $175  million  exclusive  of any amounts  paid  pursuant to
         Section 9.05(f).

                  (h)  Notwithstanding  anything  herein  to the  contrary,  the
         aggregate  amount payable to the Company pursuant to Section 9.05 shall
         not exceed  $175  million  exclusive  of any amounts  paid  pursuant to
         Section 9.05(f).

                  (i) Subject to the following sentences,  the payments required
         by this Section 9.05 shall  constitute  liquidated  damages in full and
         complete satisfaction of, and shall be the sole and exclusive remedy of
         the  Parent  or the  Company,  as the  case  may  be,  for,  any  loss,
         liability,  damage or claim arising out of or in  conjunction  with the
         transactions contemplated by this Agreement,  including any termination
         of this  Agreement  pursuant to Section 9.01 and shall not constitute a
         penalty.  Notwithstanding the foregoing sentence, if (i) this Agreement
         is  terminated  by the  Parent as a result  of a willful  breach of any
         representation,  warranty,  covenant or agreement by the Company and no
         termination fee is required to be paid

                          AGREEMENT AND PLAN OF MERGER
                                      -55-



         pursuant  to Section  9.05(d),  the  Parent  may  pursue  any  remedies
         available  to it at law or in equity and shall be  entitled  to recover
         such additional amounts as the Parent may be entitled to receive at law
         or in equity or (ii) this  Agreement is  terminated by the Company as a
         result of a willful breach of any representation, warranty, covenant or
         agreement by the Parent and no  termination  fee is required to be paid
         pursuant  to Section  9.05(e),  the  Company  may  pursue any  remedies
         available  to it at law or in equity and shall be  entitled  to recover
         such additional amounts as the Parent may be entitled to receive at law
         or in equity.

                                    ARTICLE X

                               GENERAL PROVISIONS

         SECTION 10.01   Effectiveness   of   Representations,   Warranties  and
         Agreements.

                  (a) Except as set forth in Section 10.01(b) of this Agreement,
         the representations, warranties, covenants and agreements of each party
         hereto shall remain  operative and in full force and effect  regardless
         of any  investigation  made by or on behalf of any other party  hereto,
         any  Person  controlling  any  such  party  or any of  their  officers,
         directors,  representatives  or  agents  whether  prior to or after the
         execution of this Agreement.

                  (b) The representations and warranties in this Agreement shall
         terminate at the Effective  Time and the  representations,  warranties,
         covenants and agreements of each of the parties hereto shall  terminate
         upon the termination of this Agreement pursuant to Section 9.01, except
         that the covenants and agreements set forth in Sections 6.05,  9.02 and
         9.05 and in Article X hereof  shall  survive such  termination  of this
         Agreement.

         SECTION 10.02 Notices.  All notices and other  communications  given or
made  pursuant  hereto shall be in writing and shall be deemed to have been duly
given if delivered  personally,  mailed by registered or certified mail (postage
prepaid,  return receipt requested) to the parties at the following addresses or
sent by electronic transmission to the telecopier number specified below:

                  (a)      If to any of the Parent Companies, to:

                           Halliburton Company
                           3600 Lincoln Plaza
                           500 North Akard
                           Dallas, Texas  75201-3391
                           Attention:  Lester L. Coleman
                                          Executive Vice President
                                                     and General Counsel
                           Telecopier No.:  (214) 978-2658


                          AGREEMENT AND PLAN OF MERGER
                                      -56-



                  with a copy to:

                           Vinson & Elkins L.L.P.
                           First City Tower
                           1001 Fannin
                           Houston, Texas  77002-6760
                           Attention:  William E. Joor III
                           Telecopier No.:  (713) 758-2346

                  (b)      If to the Company, to:

                           Dresser Industries, Inc.
                           2001 Ross Avenue
                           Dallas, Texas  75221
                           Attention:  Clint Ables
                       Vice President and General Counsel
                         Telecopier No.: (214) 740-6904

                  with a copy to:

                           Weil, Gotshal & Manges LLP
                           767 Fifth Avenue
                           New York, New York  10153
                           Attention:  Dennis J. Block
                           Telecopier No.:  (212) 310-8007

or to such other  address or  telecopier  number as any party may,  from time to
time,  designate in a written  notice  given in a like  manner.  Notice given by
telecopier shall be deemed  delivered on the day the sender receives  telecopier
confirmation  that such  notice was  received  at the  telecopier  number of the
addressee. Notice given by mail as set out above shall be deemed delivered three
days after the date the same is postmarked.

         SECTION 10.03  Headings.  The headings  contained in this Agreement are
for  reference  purposes  only and shall not  affect in any way the  meaning  or
interpretation of this Agreement.

         SECTION  10.04  Severability.  If any term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect so long as the  economic  or legal
substance of the transactions  contemplated hereby is not affected in any manner
materially  adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall  negotiate  in good  faith to modify  this  Agreement  so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that  transactions  contemplated  hereby  are  fulfilled  to the  extent
possible.

                          AGREEMENT AND PLAN OF MERGER
                                      -57-



         SECTION  10.05 Entire  Agreement.  This  Agreement  (together  with the
Annexes,  the Company's Disclosure Letter and the Parent's Disclosure Letter and
the Stock Option  Agreements)  constitutes the entire  agreement of the parties,
and supersedes all prior  agreements  and  undertakings,  both written and oral,
among the parties,  with respect to the subject  matter  hereof  (including  the
Confidentiality Agreement).

         SECTION 10.06   Assignment.   This  Agreement  shall not be assigned by
operation of Law or otherwise.

         SECTION 10.07 Parties in Interest. This Agreement shall be binding upon
and inure  solely to the  benefit  of each  party  hereto,  and  nothing in this
Agreement,  express or implied, other than Section 7.09(f) (to the extent of and
only with  respect to the  individuals  named in Section  4.13 of the  Company's
Disclosure  Letter in response to the  representation  and warranty set forth in
Section  4.13(k) as parties to the severance  agreements  therein  disclosed and
their  heirs and  representatives)  and Section  7.10 which is intended  also to
benefit  the  Indemnified  Persons  therein  referenced,  and  their  heirs  and
representatives, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Notwithstanding the foregoing and any other provision of this Agreement,  and in
addition to any other required  action of the Board of Directors of the Parent a
majority  of the  directors  (or  their  successors)  serving  on the  Board  of
Directors of the Parent who are  designated  by the Company  pursuant to Section
7.13 shall be entitled during the three year period  commencing at the Effective
Time (the "Three Year  Period") to enforce the  provisions  of Sections 7.09 and
7.13 on behalf of the Company's officers,  directors and employees,  as the case
may be. Such  directors'  rights and remedies  under the preceding  sentence are
cumulative  and are in addition to any other rights and  remedies  that they may
have at law or in equity,  but in no event shall this Section 10.07 be deemed to
impose any additional duties on any such directors. The Parent shall pay, at the
time they are incurred,  all costs, fees and expenses of such directors incurred
in  connection  with the  assertion  of any rights on behalf of the  persons set
forth above pursuant to this Section 10.07.

         SECTION 10.08 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party  hereto in the  exercise  of any right
hereunder  shall  impair  such  right  or be  construed  to be a waiver  of,  or
acquiescence  in,  any  breach  of any  representation,  warranty,  covenant  or
agreement  herein,  nor shall any single or partial  exercise  of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies  existing under this  Agreement are cumulative  with, and not exclusive
of, any rights or remedies otherwise available.

         SECTION 10.09  Governing Law. This Agreement  shall be governed by, and
construed in accordance  with, the Laws of the State of Delaware,  regardless of
the Laws that might otherwise govern under applicable principles of conflicts of
law; provided, however, that any matter involving the internal corporate affairs
of any party hereto shall be governed by the provisions of the GCL.

         SECTION 10.10  Specific  Performance.   The  parties hereby acknowledge
and  agree  that  the  failure  of  any  party  to this Agreement to perform its
agreements and covenants hereunder,

                          AGREEMENT AND PLAN OF MERGER
                                      -58-



including  its failure to take all actions as are  necessary  on its part to the
consummation of the Merger,  will cause irreparable  injury to the other parties
to this Agreement for which damages, even if available,  will not be an adequate
remedy. Accordingly,  each of the parties hereto hereby consents to the granting
of equitable relief (including  specific  performance and injunctive  relief) by
any  court  of  competent   jurisdiction  to  enforce  any  party's  obligations
hereunder.  The parties  further agree to waive any requirement for the securing
or posting of any bond in connection  with the  obtaining of any such  equitable
relief and that this  Section is without  prejudice to any other rights that the
parties hereto may have for any failure to perform this Agreement.

         SECTION 10.11 Counterparts.  This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed  shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.


                          AGREEMENT AND PLAN OF MERGER
                                      -59-



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

                                     HALLIBURTON COMPANY


                                     By:  /s/  David J. Lesar
                                        --------------------------------


                                     HALLIBURTON N.C., INC.


                                     By:  /s/  Lester L. Coleman
                                        --------------------------------


                                     DRESSER INDUSTRIES, INC.


                                     By:  /s/  W. E. Bradford
                                        --------------------------------




                          AGREEMENT AND PLAN OF MERGER
                                      -60-


                                                                   ANNEX A


                            SCHEDULE OF DEFINED TERMS

         The following  terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:

         "Acquisition Proposal" shall mean any proposal or offer with respect to
a merger, consolidation,  share exchange, business combination,  reorganization,
recapitalization,  liquidation, dissolution or similar transaction involving, or
any purchase or sale of all or any  significant  portion of the assets or 30% or
more of the Equity Securities of, the Company or the Parent,  as applicable,  or
any Significant Subsidiary of the Company or the Parent, as applicable, that, in
any case, could be reasonably expected to interfere with the consummation of the
Merger or the other transactions contemplated by this Agreement.

         "Affiliate" shall, with respect to any specified Person, mean any other
Person that  controls,  is  controlled  by or is under  common  control with the
specified Person.

         "Agreement"  shall  mean  the  Agreement  and Plan of  Merger  made and
entered  into as of February  25, 1998 among the Parent,  Newco and the Company,
including any  amendments  thereto and each Annex  (including  this Annex A) and
Schedule  thereto  (including the Parent's  Disclosure  Letter and the Company's
Disclosure Letter).

         "Authorization"   shall   mean   any   and   all   permits,   licenses,
authorizations,  orders, certificates,  registrations or other approvals granted
by any Governmental Authority.

         "Benefit  Plans" shall mean,  with respect to a specified  Person,  any
employee  pension  benefit plan (whether or not insured),  as defined in Section
3(2) of ERISA,  any employee  welfare  benefit plan  (whether or not insured) as
defined in Section  3(1) of ERISA,  any plans  that  would be  employee  pension
benefit plans or employee  welfare  benefit plans if they were subject to ERISA,
such as foreign plans and plans for directors, any stock bonus, stock ownership,
stock  option,  stock  purchase,   stock  appreciation  rights,  phantom  stock,
severance, employment, change-in-control, deferred compensation and any bonus or
incentive compensation plan, agreement,  program or policy (whether qualified or
nonqualified,  written or oral) sponsored,  maintained, or contributed to by the
specified  Person  or any of its  Subsidiaries  for  the  benefit  of any of the
present or former directors,  officers,  employees, agents, consultants or other
similar representatives providing services to or for the specified Person or any
of its  Subsidiaries  in  connection  with such services or any such plans which
have been so sponsored,  maintained or  contributed to within six years prior to
the date of this Agreement;  provided, however, that such term shall not include
(a) routine  employment  policies and  procedures  developed  and applied in the
ordinary course of business and consistent  with past practice,  including wage,
vacation,  holiday and sick or other leave  policies,  (b) workers  compensation
insurance and (c) directors and officers liability insurance.

         "Benefits  Maintenance  Period" shall have the meaning ascribed to such
term in Section 7.09(h).


                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-1



         "Business  Day"  means  any  day other than a day on which banks in the
State of Texas are authorized or obligated to be closed;

         "Certificate of Merger" shall have the meaning ascribed to such term in
Section 2.02.

         "Charter Amendment" shall mean an amendment to the Restated Certificate
of  Incorporation  of the Parent to increase the number of authorized  shares of
Parent Common Stock to be issued in the Merger.

         "Closing" shall mean a meeting,  which shall be held in accordance with
Section 3.03, of representatives of the parties to the Agreement at which, among
other things,  all documents deemed necessary by the parties to the Agreement to
evidence  the  fulfillment  or  waiver  of  all  conditions   precedent  to  the
consummation of the transactions  contemplated by the Agreement are executed and
delivered.

         "Closing  Date"  shall  mean  the  date  of  the  Closing as determined
pursuant to Section 3.03.

         "Code" shall mean the Internal  Revenue Code of 1986,  as amended,  and
the rules and regulations promulgated thereunder.

         "Combined  Companies" shall mean the Parent, the Surviving  Corporation
and their Subsidiaries after giving effect to the Merger.

         "Commission" shall mean the Securities and Exchange Commission.

         "Common  Stock  Exchange  Ratio" shall mean the ratio of  conversion of
Company Common Stock into Parent Common Stock pursuant to the Merger as provided
in Section 3.01(a).

         "Company  Acquisition"  shall have the meaning ascribed to such term in
Section 9.05(d).

         "Company  Annual  Report"  shall mean the Annual Report on Form 10-K of
the Company for the year ended October 31, 1997 filed with the Commission.

         "Company  Benefit  Plans" shall mean Benefit  Plans with respect to the
Company and its Subsidiaries.

         "Company Common Stock" shall mean the common stock, par value $0.25 per
share, of the Company.

         "Company   Joint   Venture   Partners"   shall  mean  the  partners  or
participants in the Company Joint Ventures other than the Company.


                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-2



         "Company  Joint   Ventures"   shall  mean   Dresser-Rand   Company,   a
partnership, and Ingersoll-Dresser Pump Company, a partnership.

         "Company  Participants" shall have the meaning ascribed to such term in
Section 7.09(h).

         "Company Stock Option  Agreement"  shall mean that certain Stock Option
Agreement of even date herewith  between the Company (as grantor) and the Parent
(as grantee).

         "Company Stock Options"  shall mean stock options  granted  pursuant to
the Company Stock Plans.

         "Company Stock Plans" shall mean the plans described in Section 4.03(b)
of the Company's Disclosure Letter.

         "Company Stockholders' Meeting" shall have the meaning ascribed to such
term in Section 7.01(a).

         "Company's Audited  Consolidated  Financial  Statements" shall mean the
consolidated  balance sheets of the Company and its  Subsidiaries  as of October
31,  1996 and 1997 and the  related  consolidated  and  combined  statements  of
operations and cash flows for the fiscal years ended October 31, 1995,  1996 and
1997,  together with the notes thereto,  all as audited by Price Waterhouse LLP,
independent accountants,  under their report with respect thereto dated November
26, 1997 and included in the Company Annual Report.

         "Company's  Consolidated  Balance  Sheet"  shall mean the  consolidated
balance  sheet of the Company as of October 31, 1997  included in the  Company's
Audited Consolidated Financial Statements.

         "Company's Disclosure Letter" shall mean a letter of even date herewith
delivered by the Company to the Parent Companies concurrently with the execution
of the Agreement,  which, among other things,  shall identify  exceptions to the
Company's  representations  and  warranties  contained in Article IV by specific
section and subsection references.

         "Company's  Representatives"  shall  have  the meaning ascribed to such
term in Section 6.05.

         "Company's  Rights  Agreement" shall mean that certain Rights Agreement
dated  as of  August  16,  1990  between  the  Company  and  Bank of New York as
successor to Harris Trust Company of New York, as rights agent.

         "Competing  Transaction"  shall mean any merger,  consolidation,  share
exchange,  business  combination or similar transaction  involving the specified
Person or any of its Subsidiaries or the acquisition in any manner,  directly or
indirectly, of a Material equity interest in any voting securities

                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-3



of, or a substantial  portion of the assets of, the  specified  Person or any of
its Significant  Subsidiaries,  other than the transactions contemplated by this
Agreement.

         "Confidentiality  Agreement"  shall mean that  certain  confidentiality
agreement between the Parent and the Company dated February 2, 1998.

         "Constituent Corporations" shall mean the Company and Newco.

         "control" (including the terms "controlled," "controlled by" and "under
common  control  with") means  (except  where  another  definition  is expressly
indicated) the possession,  directly or indirectly or as trustee or executor, of
the power to direct or cause the  direction of the  management  or policies of a
Person,  whether  through the  ownership of stock or as trustee or executor,  by
contract or credit arrangement or otherwise.

         "Court"  shall  mean any court or  arbitration  tribunal  of the United
States,  any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.

         "Current  Company  Benefit  Plans"  shall mean  Benefit  Plans that are
sponsored,   maintained  or  contributed  to  by  the  Company  or  any  of  its
Subsidiaries as of the date of this Agreement.

         "Current  Parent  Benefit  Plans"  shall  mean  Benefit  Plans that are
sponsored, maintained or contributed to by the Parent or any of its Subsidiaries
as of the date of this Agreement.

         "Effective  Time" shall mean the date and time of the completion of the
filing of the  Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with Section 2.02.

         "Environmental  Law or Laws"  shall  mean any and all  laws,  statutes,
ordinances,   rules,  regulations,  or  orders  of  any  Governmental  Authority
pertaining to health or the environment  currently in effect and applicable to a
specified Person and its Subsidiaries,  including the Clean Air Act, as amended,
the Comprehensive Environmental,  Response,  Compensation,  and Liability Act of
1980  ("CERCLA"),  as  amended,  the Federal  Water  Pollution  Control  Act, as
amended,  the  Occupational  Safety  and  Health Act of 1970,  as  amended,  the
Resource  Conservation and Recovery Act of 1976 ("RCRA"),  as amended,  the Safe
Drinking Water Act, as amended,  the Toxic  Substances  Control Act, as amended,
the Hazardous & Solid Waste  Amendments  Act of 1984, as amended,  the Superfund
Amendments and Reauthorization Act of 1986, as amended,  the Hazardous Materials
Transportation  Act,  as  amended,  the Oil  Pollution  Act of 1990,  as amended
("OPA"),  any state or local Laws  implementing the foregoing  federal Laws, and
all other  environmental  conservation  or protection  Laws. For purposes of the
Agreement,  the terms  "hazardous  substance"  and  "release"  have the meanings
specified  in CERCLA;  provided,  however,  that,  to the extent the Laws of the
state or  locality  in which the  property  is located  establish  a meaning for
"hazardous substance" or "release" that is broader than that specified in either
CERCLA, such broader meaning

                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-4



shall apply,  and the term "hazardous  substance"  shall include all dehydration
and treating  wastes,  waste (or spilled) oil, and waste (or spilled)  petroleum
products,  and (to the  extent  in  excess  of  background  levels)  radioactive
material,  even if such are specifically exempt from classification as hazardous
substances  pursuant  to  CERCLA  or  RCRA  or  the  analogous  statutes  of any
jurisdiction  applicable to the specified  Person or its  Subsidiaries or any of
their respective properties or assets.

         "Equity Securities" shall mean, with respect to a specified Person, any
shares of capital stock of, or other equity interests in, or any securities that
are  convertible  into or  exchangeable  for any shares of capital  stock of, or
other equity  interests  in, or any  options,  warrants or rights of any kind to
acquire  any shares of capital  stock of, or other  equity  interests  in,  such
Person.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the Regulations promulgated thereunder.

         "Exchange  Act"  shall mean the  Securities  Exchange  Act of 1934,  as
amended, and the Regulations promulgated thereunder.

         "Exchange Agent" shall mean ChaseMellon Shareholder Services, L.L.C.

         "Exchange  Fund" shall mean the fund of Parent  Common  Stock,  cash in
lieu of fractional share interests and dividends and distributions, if any, with
respect to such shares of Parent Common Stock  established at the Exchange Agent
pursuant to Section 3.02(a).

         "executive  officer" shall mean each "officer," as such term is defined
in Rule 16a-1(f) of the Commission, of the specified Person.

         "Expenses" shall mean all reasonable  out-of-pocket expenses (including
all reasonable fees and expenses of counsel,  accountants,  investment  bankers,
experts and  consultants  to a party  hereto and its  Affiliates)  incurred by a
party or on its  behalf in  connection  with or  related  to the  authorization,
preparation,  negotiation,  execution and  performance  of this  Agreement,  the
preparation,  printing,  filing and mailing of the Registration  Statement,  the
Joint Proxy Statement/Prospectus and the Joint Proxy Statement, the solicitation
of stockholder  approvals and all other matters  related to the  consummation of
the transactions contemplated hereby.

         "GAAP"  shall mean  accounting  principles  generally  accepted  in the
United States as in effect from time to time consistently applied by a specified
Person.

         "GCL" shall mean the General Corporation Law of the State of Delaware.

         "Governmental   Authority"  shall  mean  any  governmental   agency  or
authority (other than a Court) of the United States, any foreign country, or any
domestic or foreign  state,  and any political  subdivision  thereof,  and shall
include any multinational  authority having  governmental or  quasi-governmental
powers.

                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-5



         "HSR Act" shall mean the Hart-Scott-Rodino  Antitrust  Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.

         "IRS" shall mean the Internal Revenue Service.

         "Joint Proxy  Statement/Prospectus"  shall have the meaning ascribed to
such term in Section 7.02(a).

         "Joint Proxy Statement" shall have the meaning ascribed to such term in
Section 7.02(a).

         "Knowledge"  shall  mean,  with  respect to either  the  Company or the
Parent, the actual knowledge of the chief executive officer, the chief operating
officer, the chief financial officer or the general counsel of such party.

         "Law"  shall  mean all laws,  statutes  and  ordinances  of the  United
States, any state of the United States,  any foreign country,  any foreign state
and any political subdivision thereof,  including all decisions of Courts having
the effect of law in each such jurisdiction.

         "Lien" shall mean any  mortgage,  pledge,  security  interest,  adverse
claim, encumbrance,  lien or charge of any kind (including any agreement to give
any of the foregoing),  any conditional sale or other title retention agreement,
any  lease in the  nature  thereof  or the  filing of or  agreement  to give any
financing statement under the Laws of any jurisdiction.

         "Material"  shall  mean  material  to the  (a)  consolidated  business,
condition (financial and other), results of operations,  properties or prospects
of a specified Person and its  Subsidiaries,  if any, taken as a whole or (b) to
the specified  Person's ability to perform its obligations  under this Agreement
or fulfill the conditions to Closing;  provided,  however, that, as used in this
definition the word "material"  shall have the meaning accorded thereto pursuant
to Section 11 of the Securities Act.

         "Material Adverse Effect" shall mean any change or effect that would be
material and adverse (a) to the consolidated  business,  condition (financial or
otherwise), results of operations, properties or prospects of a specified Person
and its  Subsidiaries,  if any,  taken as a whole,  except  for such  changes or
effects  resulting  from changes in general  economic,  regulatory  or political
conditions  or changes  that affect  generally  the energy  services and related
construction and engineering  industry or (b) to the specified  Person's ability
to perform its  obligations  under this  Agreement or fulfill the  conditions to
Closing; provided, however, that, as used in this definition the word "material"
shall have the meaning accorded thereto pursuant to Section 11 of the Securities
Act.

         "Merger"  shall mean the  merger of Newco  with an into the  Company as
provided in Article II of this Agreement.


                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-6



         "Newco" shall mean Halliburton N.C., Inc., a Delaware corporation and a
wholly owned Subsidiary of the Parent.

         "Noncompete  Agreement"  shall mean any agreement or  arrangement  that
materially  restricts  or limits  the  specified  Person's  ability to engage or
participate in any line of business that is Material to such specified Person.

         "NYSE" shall mean the New York Stock Exchange, Inc.

         "Order"  shall  mean any  judgment,  order or  decree  of any  Court or
Governmental  Authority,   federal,   foreign,  state  or  local,  of  competent
jurisdiction.

         "PBGC" shall mean the Pension Benefit Guaranty Corporation.

         "Parent  Acquisition"  shall have the meaning  ascribed to such term in
Section 9.05(e).

         "Parent Annual Report" shall mean the Annual Report on Form 10-K of the
Parent for the year ended December 31, 1997 filed with the Commission.

         "Parent  Benefit  Plans" shall mean  Benefit  Plans with respect to the
Parent and its Subsidiaries.

         "Parent Common Stock" shall mean the common stock,  par value $2.50 per
share, of the Parent.

         "Parent  Stock Option  Agreement"  shall mean that certain Stock Option
Agreement of even date herewith  between the Parent (as grantor) and the Company
(as grantee).

         "Parent  Restricted Stock" shall mean the Parent Common Stock issued in
restricted stock awards pursuant to the Parent Stock Plans.

         "Parent Stock Options" shall mean stock options granted pursuant to the
Parent Stock Plans.

         "Parent Stock Plans" shall mean the plans  described in Section 5.03(b)
of the Parent's Disclosure Letter.

         "Parent Stockholders'  Meeting" shall have the meaning ascribed to such
term in Section 7.01(b).

         "Parent's  Audited  Consolidated  Financial  Statements" shall mean the
consolidated  balance sheets of the Parent and its  Subsidiaries  as of December
31,  1997 and  December  31,  1996 and the related  consolidated  statements  of
operations and cash flows for the fiscal years ended December 31, 1995, 1996 and
1997, together with the notes thereto, all as audited by Arthur Andersen LLP,

                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-7



independent  accountants,  under their report with respect thereto dated January
22, 1998 and included in the Parent Annual Report.

         "Parent's  Consolidated  Balance  Sheet"  shall  mean the  consolidated
balance  sheet of the Parent as of December  31, 1997  included in the  Parent's
Audited Consolidated Financial Statements.

         "Parent's  Disclosure Letter" shall mean a letter of even date herewith
delivered  by the Parent to the Company  with the  execution  of the  Agreement,
which,   among  other  things,   shall  identify   exceptions  to  the  Parent's
representations  and warranties  contained in Article V by specific  section and
subsection references.

         "Parent's Representatives" shall have the meaning ascribed to such term
in Section 6.05.

         "Parent's  Rights  Agreement"  shall mean the Restated Rights Agreement
dated December 1, 1996 between the Parent and ChaseMellon  Shareholder Services,
L.L.C., as Rights Agent.

         "Person" shall mean (i) an individual,  partnership,  limited liability
company,  corporation,  joint  stock  company,  trust,  estate,  joint  venture,
association  or  unincorporated  organization,  or any other form of business or
professional entity, but shall not include a Court or Governmental Authority, or
(2) any "person" for purposes of Section 13(d)(3) of the Exchange Act.

         "Pooling Transaction" shall mean a business combination that is treated
for financial accounting purposes as a "pooling of interests" in accordance with
GAAP and the Regulations of the Commission.

         "Predecessor  Plan"  shall  have  the  meaning ascribed to such term in
Section 7.09(i).

         "Registration  Statement"  shall have the meaning ascribed to such term
in Section 7.02(a).

         "Regulation"  shall  mean any rule or  regulation  of any  Governmental
Authority  having  the  effect  of Law  or of  any  rule  or  regulation  of any
self-regulatory organization, such as the NYSE.

         "Reports" shall mean, with respect to a specified Person,  all reports,
registrations,  filings and other documents and instruments required to be filed
by  the  specified  Person  or any of its  Subsidiaries  with  any  Governmental
Authority (other than the Commission).

         "Representatives"    shall    mean,    collectively,    the   Company's
Representatives and the Parent's Representatives.

         "Required  Parent Vote" shall have the meaning ascribed to such term in
Section 7.01(b).

         "Required Company Vote" shall have the meaning ascribed to such term in
Section 7.01(a).


                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-8



         "SEC Reports"  shall mean (1) all Annual  Reports on Form 10-K, (2) all
Quarterly Reports on Form 10-Q, (3) all proxy statements relating to meetings of
stockholders  (whether  annual or special),  (4) all Current Reports on Form 8-K
and (5) all other reports, schedules, registration statements or other documents
required to be filed  during a specified  period by a specified  Person with the
Commission pursuant to the Securities Act or the Exchange Act.

         "Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

         "Share Issuance" shall mean the issuance of shares of the Parent Common
Stock to be issued in the Merger.

         "Significant  Subsidiary"  means any  Subsidiary  of the Company or the
Parent,  as the case may be, that  constitutes a significant  subsidiary of such
party as such term is defined in Rule 1-02 of Regulation S-X of the Commission.

         "Stock Option Agreements" shall mean the Company Stock Option Agreement
and the Parent Stock Option Agreement.

         A  "Subsidiary"  of  a  specified  Person  shall  be  any  corporation,
partnership,  limited liability company,  joint venture or other legal entity of
which the specified  Person  (either alone or through or together with any other
Subsidiary)  owns,  directly  or  indirectly,  50% or more of the stock or other
equity or partnership  interests the holders of which are generally  entitled to
vote for the election of the board of directors or other  governing body of such
corporation or other legal entity or of which the specified  Person controls the
management.

         "Successor  Plan"  shall  have  the  meaning  ascribed  to such term in
Section 7.09(i).

         "Superior  Proposal"  means a bona fide  Acquisition  Proposal that the
Board of Directors of the specified Person determines in its good faith judgment
(after  consultation  with its financial  advisers and legal  counsel) (i) would
result  in a  transaction  that  is more  favorable  to the  specified  Person's
stockholders, from a financial point of view, than the transactions contemplated
by this Agreement and (ii) is reasonably  capable of being completed;  provided,
however,  that,  for the  purposes  of this  definition,  the term  "Acquisition
Proposal" shall have the meaning ascribed to it herein except that the reference
therein  to 30% shall be deemed to be a  reference  to 50% and the  proposal  or
offer therein described shall be deemed only to refer to a transaction involving
the  Company  or  the  assets  of  the  Company  (including  the  shares  of the
Subsidiaries  of the  Company),  taken as a whole,  rather than any  transaction
relating to any of the Subsidiaries of the Company alone.

         "Surviving  Corporation"  shall  mean  the  Company  as the corporation
surviving the Merger.


                          AGREEMENT AND PLAN OF MERGER
                                    ANNEX A-9



         "Tax Returns"  shall have the meaning  ascribed to such term in Section
4.14(a) of the Agreement.

         "Taxes" shall mean all taxes, charges,  imposts,  tariffs, fees, levies
or other similar assessments or liabilities,  including income taxes, ad valorem
taxes,  excise taxes,  withholding  taxes, stamp taxes or other taxes of or with
respect to gross receipts,  premiums, real property, personal property, windfall
profits, sales, use, transfers,  licensing,  employment,  payroll and franchises
imposed by or under any Law; and such terms shall include any  interest,  fines,
penalties,  assessments or additions to tax resulting  from,  attributable to or
incurred in connection with any such tax or any contest or dispute thereof.


         "Terminated  Company  Benefit Plans" shall mean Benefit Plans that were
sponsored,   maintained  or  contributed  to  by  the  Company  or  any  of  its
Subsidiaries within six years prior to the date of this Agreement but which have
been terminated prior to the date of this Agreement.

         "Terminated  Parent  Benefit  Plans" shall mean Benefit Plans that were
sponsored,   maintained,  or  contributed  to  by  the  Parent  or  any  of  its
Subsidiaries within six years prior to the date of this Agreement but which have
been terminated prior to the date of this Agreement.

         "Terminating  Company  Breach" shall have the meaning  ascribed to such
term in Section 9.01(b).

         "Terminating  Parent  Breach"  shall have the meaning  ascribed to such
term in Section 9.10(c).

         "Transfer  Taxes"  shall  have the  meaning  ascribed  to such  term in
Section 7.17.



                          AGREEMENT AND PLAN OF MERGER
                                   ANNEX A-10



                                                                         ANNEX B
                                             Dresser Industries, Inc. Affiliates


                              AFFILIATE'S AGREEMENT

                                     [Date]


Halliburton Company
3600 Lincoln Plaza
500 North Akard
Dallas, Texas  75201-3391

Ladies and Gentlemen:

         The  undersigned  has been advised  that,  as of the date  hereof,  the
undersigned  may be deemed to be an "affiliate" of Dresser  Industries,  Inc., a
Delaware  corporation (the  "Company"),  as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the  Regulations  of the Commission  under
the Securities Act.

         Pursuant to the terms and  subject to the  conditions  of that  certain
Agreement  and Plan of Merger  by and  among  Halliburton  Company,  a  Delaware
corporation  (the  "Parent"),  Halliburton  N.C.,  Inc., a newly formed Delaware
corporation  and a wholly  owned  Subsidiary  of the Parent  ("Newco"),  and the
Company dated as of February 25, 1998 (the "Merger  Agreement"),  providing for,
among  other  things,  the  merger  of Newco  with and  into  the  Company  (the
"Merger"),  the undersigned  will be entitled to receive shares of Parent Common
Stock in exchange for shares of Company Common Stock owned by the undersigned at
the Effective Time of the Merger as determined pursuant to the Merger Agreement.
Capitalized  terms used but not  defined  herein  are  defined in Annex A to the
Merger  Agreement and are used herein with the same meanings as ascribed to them
therein.

         The  undersigned  understands  that  the  Merger  will be  treated  for
financial  accounting  purposes as a "pooling of interests"  in accordance  with
generally  accepted  accounting  principles and that the staff of the Commission
has issued certain  guidelines that should be followed to ensure the application
of pooling of interests accounting to the transaction.

         In  consideration  of the  agreements  contained  herein,  the Parent's
reliance on this letter in connection  with the  consummation  of the Merger and
for other good and valuable consideration,  the receipt and sufficiency of which
are hereby acknowledged, the undersigned hereby represents,

                          AGREEMENT AND PLAN OF MERGER
                                    Annex B-1



warrants and agrees that the  undersigned  will not,  without the consent of the
Parent,  make any sale, gift,  transfer or other disposition  (including deposit
into a margin account with a brokerage  firm) of (i) Company Common Stock during
the period (the  "Restricted  Period")  from the  Commencement  Date (as defined
below) until the earlier of the Effective Time and the termination of the Merger
Agreement  (which  period,  if the Merger is  consummated,  will be greater than
thirty (30) days), (ii) Parent Common Stock received by the undersigned pursuant
to the  Merger or  otherwise  owned by the  undersigned  at any time  during the
Restricted  Period or thereafter  until such time as financial  statements  that
include at least thirty (30) days of combined  operations of the Company and the
Parent  after  the  Merger  shall  have  been  publicly  reported,   unless  the
undersigned  shall have delivered to the Parent,  prior to any such sale,  gift,
transfer or other  disposition,  a written  opinion  from Arthur  Andersen  LLP,
independent  public  accountants for the Parent,  or a written  no-action letter
from  the  accounting  staff  of the  Commission,  in  either  case in form  and
substance  reasonably  satisfactory to the Parent, to the effect that such sale,
transfer or other  disposition  will not cause the Merger not to be treated as a
"pooling of interests"  for  financial  accounting  purposes in accordance  with
generally accepted  accounting  principles and the Regulations of the Commission
or (iii) the Parent  Common Stock  received by the  undersigned  pursuant to the
Merger in violation of the Securities  Act or the  Regulations  thereunder.  For
purposes of this agreement,  "Commencement  Date" shall mean the date of receipt
by the  undersigned  of prior  written  notice  from  the  Parent  advising  the
undersigned of the  commencement  of the  Restricted  Period on a day that is at
least 45 days  prior  to the  Closing  Date as  estimated  in good  faith by the
Parent. The undersigned has been advised that the offering, sale and delivery of
the  shares  of  Parent  Common  Stock  pursuant  to the  Merger  will have been
registered  with the  Commission  under  the  Securities  Act on a  Registration
Statement on Form S-4. The  undersigned  has also been advised,  however,  that,
since the  undersigned  may be deemed to be an  Affiliate  of the Company at the
time the Merger is submitted for a vote of the stockholders of the Company,  the
Parent Common Stock  received by the  undersigned  pursuant to the Merger can be
sold by the undersigned only (i) pursuant to an effective registration statement
under  the  Securities  Act,  (ii) in  conformity  with  the  volume  and  other
limitations of Rule 145  promulgated by the Commission  under the Securities Act
or (iii) in reliance upon an exemption from registration that is available under
the Securities Act.

         The undersigned also understands that instructions will be given to the
transfer  agent for the Parent  Common Stock with  respect to the Parent  Common
Stock to be  received by the  undersigned  pursuant to the Merger and that there
will be placed on the  certificates  representing  such shares of Parent  Common
Stock, or any substitutions therefor, a legend stating in substance as follows:

         "These  shares  were  issued  in  a  transaction   to  which  Rule  145
         promulgated  under the  Securities  Act of 1933,  as amended,  applies.
         These shares may only be  transferred  in accordance  with the terms of
         such Rule and an Affiliate's  Agreement  between the original holder of
         such shares and  Halliburton  Company,  a copy of which agreement is on
         file at the principal offices of Halliburton Company."

It is  understood  and agreed  that the legend set forth  above shall be removed
upon  surrender of  certificates  bearing such legend by delivery of  substitute
certificates  without such legend if the undersigned shall have delivered to the
Parent an opinion of counsel, in form and substance  reasonably  satisfactory to
the  Parent,  to the  effect  that (i) the  sale or  disposition  of the  shares
represented by the surrendered certificates may be effected without registration
of the offering,  sale and delivery of such shares under the  Securities Act and
(ii) the shares to be so transferred may be

                          AGREEMENT AND PLAN OF MERGER
                                    Annex B-2



publicly  offered,   sold  and  delivered  by  the  transferee  thereof  without
compliance with the registration provisions of the Securities Act.

         By its execution hereof, the Parent agrees that it will, as long as the
undersigned  owns any  shares  of  Parent  Common  Stock to be  received  by the
undersigned pursuant to the Merger that are subject to the restrictions on sale,
transfer or other disposition  herein set forth, take all reasonable  efforts to
make timely filings with the  Commission of all reports  required to be filed by
it pursuant to the Exchange Act and will promptly  furnish upon written  request
of the undersigned a written statement confirming that such reports have been so
timely filed.

         If you are in  agreement  with the  foregoing,  please so  indicate  by
signing below and returning a copy of this letter to the  undersigned,  at which
time this letter shall become a binding agreement between us.

                                     Very truly yours,


                                     By:
                                         Name:
                                         Title:
                                         Date:
                                         Address:

ACCEPTED this       day
             ------
of           , 199
  -----------     ---
HALLIBURTON COMPANY


By:
   ---------------------------
   Name:
   Title:


                          AGREEMENT AND PLAN OF MERGER
                                    Annex B-3








                                                                         ANNEX C
                                                  Halliburton Company Affiliates


                              AFFILIATE'S AGREEMENT

                                     [Date]


Halliburton Company
3600 Lincoln Plaza
500 North Akard
Dallas, Texas   75201-3391

Ladies and Gentlemen:

         The  undersigned  has been advised  that,  as of the date  hereof,  the
undersigned  may be  deemed  to be an  "affiliate"  of  Halliburton  Company,  a
Delaware corporation (the "Parent"),  as that term is defined in the Regulations
of the Commission under the Securities Act.

         The  undertakings  contained in this  Affiliate's  Agreement  are being
given by the undersigned in connection  with that certain  Agreement and Plan of
Merger by and among the Parent,  Halliburton N.C., Inc., a newly formed Delaware
corporation and a wholly owned Subsidiary of the Parent  ("Newco"),  and Dresser
Industries,  Inc., a Delaware  Corporation  (the "Company") dated as of February
25, 1998 (the "Merger Agreement"), providing for, among other things, the merger
of Newco with and into the Company (the  "Merger").  Capitalized  terms used but
not defined  herein are defined in Annex A to the Merger  Agreement and are used
herein with the same meanings as ascribed to them therein.

         The  undersigned  understands  that  the  Merger  will be  treated  for
financial  accounting  purposes as a "pooling of interests"  in accordance  with
generally  accepted  accounting  principles and that the staff of the Commission
has issued certain  guidelines that should be followed to ensure the application
of pooling of interests accounting to the transaction.

         In  consideration  of the  agreements  contained  herein,  the Parent's
reliance on this letter in connection  with the  consummation  of the Merger and
for other good and valuable consideration,  the receipt and sufficiency of which
are hereby acknowledged, the undersigned hereby represents,  warrants and agrees
that the undersigned will not, without the consent of the Parent, make any sale,
gift,  transfer or other  disposition  (including  deposit into a margin account
with a  brokerage  firm) of (i)  Company  Common  Stock  during the period  (the
"Restricted  Period") from the  Commencement  Date (as defined  below) until the
earlier of the Effective Time and the termination of the Merger Agreement (which
period, if the Merger is consummated,  will be greater than thirty (30) days) or
(ii)  Parent  Common  Stock  owned by the  undersigned  at any time  during  the
Restricted  Period or thereafter  until such time as financial  statements  that
include at least thirty (30) days of combined

                          AGREEMENT AND PLAN OF MERGER
                                    Annex C-1



operations  of the  Company  and the  Parent  after the  Merger  shall have been
publicly  reported,  unless the undersigned  shall have delivered to the Parent,
prior to any such sale, gift,  transfer or other disposition,  a written opinion
from Arthur Andersen LLP,  independent  public  accountants for the Parent, or a
written no-action letter from the accounting staff of the Commission,  in either
case in form and substance reasonably  satisfactory to the Parent, to the effect
that such sale,  transfer or other  disposition will not cause the Merger not to
be treated as a "pooling of  interests"  for  financial  accounting  purposes in
accordance with generally accepted accounting  principles and the Regulations of
the Commission.  For purposes of this agreement,  "Commencement Date" shall mean
the date of receipt by the  undersigned  of prior written notice from the Parent
advising the undersigned of the  commencement of the Restricted  Period on a day
that is at least 45 days prior to the Closing Date as estimated in good faith by
the Parent.

         If you are in  agreement  with the  foregoing,  please so  indicate  by
signing below and returning a copy of this letter to the  undersigned,  at which
time this letter shall become a binding agreement between us.

                                       Very truly yours,


                                       By:
                                           Name:
                                           Title:
                                           Date:
                                           Address:

ACCEPTED this       day
              -----
of            , 199
   -----------     ---
HALLIBURTON COMPANY


By:
   -------------------------
   Name:
   Title:

                          AGREEMENT AND PLAN OF MERGER
                                    Annex C-2