CHAPARRAL STEEL CO, DEFM14A, 1997-11-28

CHAPARRAL STEEL CO
DEFM14A, 1997-11-28
STEEL WORKS, BLAST FURNACES & ROLLING MILLS (COKE OVENS)

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

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Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12

CHAPARRAL STEEL COMPANY
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(Name of Registrant as Specified in its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

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(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[X] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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NOVEMBER 28, 1997

Dear Fellow Stockholder:

You are cordially invited to attend a Special Meeting of Stockholders of
Chaparral Steel Company (the "Special Meeting") to be held at 1341 West
Mockingbird Lane, Suite 700, Dallas, Texas 75247, on Wednesday, December 31,
1997, at 9:00 a.m., local time.

At the Special Meeting you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of July
30, 1997 (the "Merger Agreement"), pursuant to which Texas Industries
Acquisition Inc. ("TXI Acquisition"), a Delaware corporation and a wholly-owned
subsidiary of Texas Industries, Inc., a Delaware corporation ("TXI"), will be
merged (the "Merger") with and into Chaparral Steel Company (the "Company"). The
Company will be the surviving corporation in the Merger and immediately
following the Merger the entire equity interest in the Company then will be
owned by TXI. If the Merger is consummated, each outstanding common share, par
value $.10 per share, of the Company (the "Common Shares"), except those shares
owned by TXI (the "Public Shares," and the holders thereof, the "Public
Stockholders") or by stockholders who perfect their appraisal rights in
accordance with the Delaware General Corporation Law ("DGCL"), will be converted
into the right to receive $15.50 per share in cash, without interest.

Enclosed with this letter is a Notice of Special Meeting, Proxy Statement,
Proxy Card and return envelope. Also enclosed is a copy of the Company's Annual
Report on Form 10-K and Form 10-K/A for the fiscal year ended May 31, 1997 and a
copy of the Company's Quarterly Report on Form 10-Q and Form 10-Q/A for the
period ended August 31, 1997. I urge you to read the enclosed material
carefully.

YOUR BOARD OF DIRECTORS, BASED UPON THE UNANIMOUS RECOMMENDATION OF A
SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS CONSISTING OF TWO PERSONS WHO ARE NOT
DIRECTORS, OFFICERS OR EMPLOYEES OF TXI OR OFFICERS OR EMPLOYEES OF THE COMPANY
(THE "SPECIAL COMMITTEE"), HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, AND
RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.

In arriving at its recommendation, your Board of Directors gave careful
consideration to a number of factors described in the accompanying Proxy
Statement, including, among other things, the unanimous recommendation of the
Special Committee and the opinion of The Robinson-Humphrey Company, LLC, the
financial advisor to the Special Committee, that the $15.50 in cash per Public
Share to be received by the Public Stockholders pursuant to the Merger Agreement
is fair from a financial point of view to such Public Stockholders.
Robinson-Humphrey has reaffirmed in writing its fairness opinion as of the date
of this Proxy Statement. THE FULL TEXT OF SUCH OPINION, DATED THE DATE OF THIS
PROXY STATEMENT, IS ATTACHED AS ANNEX C TO THE PROXY STATEMENT AND STOCKHOLDERS
ARE URGED TO READ IT IN ITS ENTIRETY.

Pursuant to the DGCL, the affirmative vote of at least a majority of all of
the outstanding Common Shares is required to approve and adopt the Merger
Agreement. TXI, which owns approximately 84.4% of the outstanding Common Shares,
has advised the Company that it will vote its Common Shares in favor of the
approval and adoption of the Merger Agreement. Accordingly, approval and
adoption of the Merger Agreement is assured regardless of the vote of any other
stockholder of the Company.

YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Special
Meeting, please complete, sign and date the accompanying Proxy Card and return
it in the enclosed prepaid envelope as soon as possible. If you attend the
Special Meeting, you may vote your shares in person, even if you have previously
submitted a Proxy Card.

Sincerely,

/s/ GORDON R. FORWARD

Gordon E. Forward
President
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CHAPARRAL STEEL COMPANY

300 WARD ROAD
MIDLOTHIAN, TEXAS 76065-9651

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON DECEMBER 31, 1997

To the Stockholders of Chaparral Steel Company:

Notice is hereby given that a Special Meeting of Stockholders of Chaparral
Steel Company (the "Company") will be held at 1341 West Mockingbird Lane, Suite
700, Dallas, Texas 75247, on Wednesday, December 31, 1997, at 9:00 a.m., Dallas,
Texas time (the "Special Meeting"), for the following purposes:

1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of July 30, 1997 (the "Merger
Agreement"), pursuant to which Texas Industries Acquisition Inc. ("TXI
Acquisition"), a Delaware corporation and a wholly-owned subsidiary of
Texas Industries, Inc., a Delaware corporation ("TXI"), will be merged with
and into the Company (the "Merger"). The Company will be the surviving
corporation in the Merger and immediately following the Merger the entire
equity interest in the Company then will be owned by TXI. As a result of
the Merger, each outstanding common share, par value $.10 per share, of the
Company (the "Common Shares"), except those shares owned by TXI and by
stockholders who perfect their appraisal rights in accordance with the
Delaware General Corporation Law (the "DGCL"), will be converted into the
right to receive $15.50 in cash, without interest, all as more fully
described in the accompanying Proxy Statement. Each Common Share owned by
the Company and held by it as a treasury share will be cancelled, and no
consideration will be delivered with respect to such shares. A copy of the
Merger Agreement is included as Annex A to the accompanying Proxy
Statement.

2. To transact such other business as may be properly brought before
the Special Meeting or any adjournments or postponements thereof.

Only holders of Common Shares of record at the close of business on
November 26, 1997 are entitled to notice of and to vote at the Special Meeting.
Each Common Share outstanding on such date is entitled to one vote at the
Special Meeting. A list of stockholders entitled to notice of and to vote at the
Special Meeting will be available for inspection during ordinary business hours
at the principal place of business of the Company, 300 Ward Road, Midlothian,
Texas 76065-9651, for the 10-day period prior to the Special Meeting.

If the Merger is consummated, the stockholders of the Company who dissent
from the proposed Merger and comply with the requirements of Section 262 of the
DGCL will have the right to receive payment in cash of the fair value of their
Common Shares. See "The Merger -- Appraisal Rights" in the accompanying Proxy
Statement and Annex B thereto for a statement of the rights of dissenting
stockholders and a description of the procedures required to be followed to
obtain the fair value of the Common Shares.

YOUR VOTE IS IMPORTANT REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING AND REGARDLESS OF THE NUMBER OF COMMON SHARES YOU OWN. WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE WITHOUT DELAY.
ANY STOCKHOLDER PRESENT AT THE SPECIAL MEETING MAY VOTE IN PERSON ON EACH MATTER
BROUGHT BEFORE THE SPECIAL MEETING AND ANY PROXY GIVEN BY A STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
<PAGE> 4

THE COMPANY'S BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE RECOMMEND THAT
YOU VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.

By Order of the Board of Directors,

/s/ ROBERT C. MOORE

ROBERT C. MOORE
Secretary

Dallas, Texas

November 28, 1997

PLEASE DO NOT SEND ANY CERTIFICATES FOR YOUR COMMON SHARES AT THIS TIME.
<PAGE> 5

PROXY STATEMENT

CHAPARRAL STEEL COMPANY
300 WARD ROAD
MIDLOTHIAN, TEXAS 76065-9651

SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON DECEMBER 31, 1997

This Proxy Statement is being furnished to the stockholders of Chaparral
Steel Company, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") from holders of outstanding shares of common stock, par value $.10
per share, of the Company (the "Common Shares"), for use at a Special Meeting of
Stockholders of the Company to be held on Wednesday, December 31, 1997 at 9:00
a.m., Dallas, Texas time, at 1341 West Mockingbird Lane, Suite 700, Dallas,
Texas 75247, and at any adjournments or postponements thereof (the "Special
Meeting"). This Proxy Statement and the related proxy card are first being
mailed to stockholders on or about December 1, 1997.

At the Special Meeting, holders of the Common Shares on November 26, 1997,
the record date for stockholders entitled to notice of and to vote at the
Special Meeting, will consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of July 30, 1997 (the "Merger
Agreement"), pursuant to which: (a) Texas Industries Acquisition Inc. ("TXI
Acquisition"), a Delaware corporation and a wholly-owned subsidiary of Texas
Industries, Inc., a Delaware corporation ("TXI"), will be merged with and into
the Company (the "Merger"), and immediately following the Merger the entire
equity interest in the Company, as the surviving corporation in the Merger, then
will be owned by TXI; and (b) each Common Share that is outstanding at the
effective time of the Merger owned by stockholders other than TXI or Common
Shares in respect of which appraisal rights have been perfected in accordance
with the Delaware General Corporation Law ("DGCL"), will be converted into the
right to receive $15.50 in cash, without interest (the "Merger Consideration").
As a result of the Merger, current stockholders of the Company (other than TXI)
will no longer have any equity interest in the Company. Each Common Share owned
by the Company and held by it as a treasury share will be cancelled, and no
consideration will be delivered with respect to such shares. The Common Shares
owned by stockholders of the Company other than TXI are herein referred to as
the "Public Shares" and the holders of the Public Shares are herein referred to
as the "Public Stockholders."

Pursuant to the DGCL, the affirmative vote of holders of at least a
majority of all of the outstanding Common Shares is required to approve and
adopt the Merger Agreement. TXI, which owns approximately 84.4% of the
outstanding Common Shares, has advised the Company that it will vote such Common
Shares in favor of the approval and adoption of the Merger Agreement.
Accordingly, approval and adoption of the Merger Agreement is assured regardless
of the vote of any other stockholder of the Company. For additional information
concerning the terms and conditions of the Merger, see "The Merger -- General."

On November 26, 1997, the closing sales price of the Common Shares as
reported on the New York Stock Exchange ("NYSE") was $15.3125 per share.

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN CONNECTION
WITH THE SOLICITATION OF PROXIES MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OTHER PERSON.

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A copy of the Company's Annual Report on Form 10-K and Form 10-K/A for the
fiscal year ended May 31, 1997 and a copy of the Company's Quarterly Report on
Form 10-Q and Form 10-Q/A for the period ended August 31, 1997 accompany this
Proxy Statement.

All information contained in this Proxy Statement relating to TXI, TXI
Acquisition and their affiliates (other than the Company) has been supplied by
TXI for inclusion herein and has not been independently verified by the Company.
The Company makes no representation or warranty as to the accuracy or
completeness of any such information.

The Board of Directors of the Company knows of no additional matters that
will be presented for consideration at the Special Meeting. Execution of the
accompanying proxy, however, confers on the designated proxies discretionary
authority to vote the Common Shares covered thereby in accordance with their
best judgment on such other matters, if any, that properly may come before, and
all matters incident to the conduct of, the Special Meeting or any adjournments
or postponements thereof.

The date of this Proxy Statement is November 28, 1997.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 4
Introduction................................................ 10
The Parties................................................. 11
Special Factors............................................. 12
The Merger.................................................. 33
Market Prices And Dividends................................. 40
Selected Consolidated Financial Data of the Company......... 41
Ownership of Common Shares.................................. 41
Management of TXI, TXI Acquisition and the Company.......... 44
Independent Public Accountants.............................. 45
Incorporation of Certain Documents by Reference............. 45
Available Information....................................... 46
Stockholder Proposals....................................... 47
Miscellaneous............................................... 47
Annex A -- Agreement and Plan of Merger..................... A-1
Annex B -- Appraisal Rights................................. B-1
Annex C -- Opinion of The Robinson-Humphrey Company, LLC.... C-1
</TABLE>

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SUMMARY

The following is a brief summary of certain information contained elsewhere
in this Proxy Statement. This Summary is not intended to be a complete
description of the matters contained in this Proxy Statement and is subject to
and qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement, including the Annexes hereto and
the documents incorporated by reference herein. Capitalized terms used but not
defined in this Summary shall have the meanings ascribed to them elsewhere in
this Proxy Statement. Stockholders are urged to read carefully the entire Proxy
Statement, including the Annexes.

THE PARTIES

The Company. The Company owns and operates a steel mill which produces bar
and structural steel products by recycling scrap steel. The Company's steel
products include beams, reinforcing bars, special bar quality rounds, channels
and merchant quality rounds. These products are sold principally to the
construction industry and to the railroad, defense, automotive, mobile home and
energy industries. The Company's steel mill is located in Midlothian, Texas and
its principal customers are steel service centers, steel fabricators, cold
finishers, forgers and original equipment manufacturers. The Company distributes
its products primarily to markets in North America, and under certain market
conditions, to Europe and Asia. In April 1997, the Board of Directors of the
Company authorized the commencement of preliminary engineering work for a steel
mill to be located in the Southeast portion of the United States. If
constructed, the mill will combine the Company's patented near net shape casting
technology with a multi-purpose section mill manufactured by SMS
Schloeman-Siemag A.G., Dusseldorf, Germany, a steel mill equipment manufacturer,
and will utilize state-of-the-art melting technology. The mill, with a planned
capacity of approximately 1,000,000 tons per annum, will be designed to
manufacture a full range of structural beams up to 36 inches in depth, extending
the Company's current range of 4 to 24 inches, North American and European sheet
pile sections, "H" pile sections and other structural shapes. Construction of
the mill is subject to approval of the Board of Directors of the Company, based
on engineering estimates of the total cost of the mill and the obtaining of a
suitable site. The Company was incorporated in 1973, its principal place of
business is located at 300 Ward Road, Midlothian, Texas 76065-9651, and its
telephone number is (972) 775-8241.

TXI. TXI, a Delaware corporation, produces construction materials,
including cement, aggregates and concrete and also engages in real estate
activities. The business of TXI is concentrated in Texas, Louisiana and
California, and it is the largest producer of cement in the State of Texas.
TXI's principal executive offices are located at 1341 West Mockingbird Lane,
Suite 700, Dallas, Texas 75247, and its telephone number is (972) 647-6700.

TXI Acquisition. TXI Acquisition is a Delaware corporation recently
organized by TXI for the purpose of effecting the Merger pursuant to which TXI
Acquisition will be merged with and into the Company. TXI Acquisition has no
assets and has not engaged in any activities except in connection with the
Merger. TXI Acquisition is wholly-owned by TXI. The address of TXI Acquisition
is 1341 West Mockingbird Lane, Suite 700, Dallas, Texas 75247, and its telephone
number is (972) 647-6700.

THE SPECIAL MEETING

Time, Date and Place. A Special Meeting of stockholders of the Company will
be held on Wednesday, December 31, 1997 at 9:00 a.m., Dallas, Texas time, at
1341 West Mockingbird Lane, Suite 700, Dallas, Texas 75247.

Purpose of the Special Meeting. The purpose of the Special Meeting is to
consider and vote upon a proposal to approve and adopt the Merger Agreement. A
copy of the Merger Agreement is attached to this Proxy Statement as Annex A. See
"Introduction -- The Special Meeting."

Record Date; Quorum. The close of business on November 26, 1997 (the
"Record Date") has been fixed as the record date for determining holders of
Common Shares entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof. Each Common Share outstanding on such
date is

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entitled to one vote at the Special Meeting. As of the Record Date, 28,453,963
Common Shares were outstanding and held of record by 832 stockholders. The
presence, in person or by proxy, of the holders of a majority of the Common
Shares entitled to vote at the Special Meeting is necessary to constitute a
quorum for the transaction of business at the Special Meeting. See
"Introduction -- Record Date; Quorum; Required Vote."

Required Vote. Pursuant to the DGCL, the affirmative vote of the holders of
at least a majority of all of the outstanding Common Shares is required to
approve and adopt the Merger Agreement. TXI, which is the owner of approximately
84.4% of the outstanding Common Shares, has advised the Company that it will
vote in favor of the approval and adoption of the Merger Agreement. Accordingly,
approval and adoption of the Merger Agreement is assured regardless of the vote
of any other stockholder of the Company. See "Introduction -- Record Date;
Quorum; Required Vote"; "The Merger -- General"; and "The Merger --
General -- Conditions to the Merger; Amendment, Waiver and Termination."

Proxies. A proxy card is enclosed for use at the Special Meeting. A proxy
may be revoked at any time prior to its exercise at the Special Meeting. Common
Shares represented by properly executed proxies received at or prior to the
Special Meeting and which have not been revoked will be voted in accordance with
the instructions indicated therein. If no instructions are indicated on a
properly executed proxy, such proxy will be voted FOR the approval and adoption
of the Merger Agreement. See "Introduction -- Proxies."

SPECIAL FACTORS

Background of the Merger. For a description of the events leading to the
approval and adoption of the Merger Agreement by the Board of Directors of the
Company ("Board of Directors"), see "Special Factors -- Background of the
Merger."

Purpose and Structure of the Merger. The purpose for the Merger is the
acquisition of the Public Shares by TXI, which represent all of the remaining
equity interest in the Company not currently owned by TXI. The reasons for such
acquisition by TXI are described in "Special Factors -- Purpose and Structure of
the Merger." The acquisition of the equity interest represented by the Public
Shares outstanding as of the Effective Time (as hereinafter defined) from the
Public Stockholders is structured as a cash merger in order to transfer
ownership of that equity interest to TXI in a single transaction. See "Special
Factors -- Purpose and Structure of the Merger."

Recommendation of the Special Committee and of the Board of Directors;
Fairness of the Merger. A special committee (the "Special Committee") of two
directors of the Company who are not directors, officers or employees of TXI or
officers or employees of the Company concluded that the terms of the Merger are
fair to, and in the best interests of, the Public Stockholders. Therefore, the
Board of Directors, based upon the unanimous recommendation of the Special
Committee, has unanimously approved and adopted the Merger Agreement. The
Special Committee and the Board of Directors recommend a vote FOR approval and
adoption of the Merger Agreement. For a discussion of the factors considered by
the Special Committee and the Board of Directors in making their
recommendations, see "Special Factors -- Recommendation of the Special Committee
and Board of Directors of the Company; Fairness of the Merger."

Opinion of Financial Advisor. On July 30, 1997, The Robinson-Humphrey
Company, LLC ("Robinson-Humphrey") delivered its written opinion to the Special
Committee that as of such date the $15.50 per Public Share to be received by the
Public Stockholders in the Merger is fair to the Public Stockholders from a
financial point of view. Robinson-Humphrey has reaffirmed in writing its
fairness opinion as of the date of this Proxy Statement. The full text of the
written opinion of Robinson-Humphrey, dated the date of this Proxy Statement,
which sets forth the assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached hereto as Annex C
and is incorporated herein by reference. Holders of Public Shares are urged to
read such opinion carefully and in its entirety. See "Special Factors -- Opinion
of Robinson-Humphrey; Summary of Financial Analyses."

Plans for the Company after the Merger. Except as indicated in this Proxy
Statement, TXI has represented that it does not have any present plans or
proposals which relate to or would result in an
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extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries or affiliates, or
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries or affiliates, or any material change in the Company's
capitalization. See "Special Factors -- Plans for the Company after the Merger."

Interests of Certain Persons in the Merger. As of the date of this Proxy
Statement, TXI owned an aggregate of 24,000,000 Common Shares, representing
approximately 84.4% of the outstanding Common Shares on that date. As of June
30, 1997, the directors and executive officers of the Company beneficially owned
an aggregate of 675,515 Public Shares (including Common Shares subject to
options exercisable within 60 days of June 30, 1997), constituting approximately
2.4% of the Common Shares then outstanding, and an aggregate of 869,783 shares
of common stock of TXI, constituting approximately 4.1% of the shares of common
stock of TXI then outstanding. See "Special Factors -- Interests of Certain
Persons in the Merger -- Ownership of Public Shares by Directors and Executive
Officers of the Company" and "Ownership of Common Shares -- Security Ownership
of Directors and Executive Officers of the Company."

For a discussion of certain agreements by TXI with respect to
indemnification of directors and officers of the Company, see "The
Merger -- General -- Indemnification."

For a description of current relationships and certain transactions among
TXI and the Company, see "Special Factors -- Interests of Certain Persons in the
Merger -- Tax Sharing Agreement."

Certain Effects of the Merger. Upon consummation of the Merger, each Public
Share, other than Public Shares as to which appraisal rights have been perfected
under the DGCL ("Dissenting Shares"), will be converted into the right to
receive $15.50 in cash, without interest, and the Public Stockholders will cease
to have any ownership interest in the Company or rights as stockholders. The
Public Stockholders will no longer benefit from any increases in the value of
the Company and will no longer bear the risk of any decreases in the value of
the Company. Following the Merger, TXI, which currently owns approximately 84.4%
of the outstanding Common Shares, will own 100% of the surviving corporation's
outstanding common shares.

As a result of the Merger, the Company will be privately held and there
will be no public market for the Common Shares. Upon consummation of the Merger,
the Common Shares will cease to be quoted on the NYSE, the registration of the
Common Shares under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), will be terminated and the Common Shares no longer will
constitute "margin securities" under the rules of the Board of Governors of the
Federal Reserve System. See "Special Factors -- Certain Effects of the Merger."

Certain Litigation. On May 29, 1997, a lawsuit was filed against the
Company by a Public Stockholder in the Delaware Court of Chancery. This action,
purportedly brought as a class action on behalf of all Public Stockholders,
named the Company, its directors and TXI as defendants. In this lawsuit, the
plaintiff alleges that the defendants breached their fiduciary duties to the
plaintiff and the Company's other Public Stockholders in connection with TXI's
original proposal to acquire the Public Shares for $14.25 per share in cash,
without interest. The defendants intend to vigorously defend this lawsuit. See
"Special Factors -- Certain Litigation."

Certain U.S. Federal Income Tax Consequences. The receipt of cash for
Public Shares pursuant to the Merger will be a taxable transaction for United
States federal income tax purposes and may be a taxable transaction for foreign,
state and local income tax purposes as well. Public Stockholders should consult
their own tax advisors regarding the United States federal income tax
consequences of the Merger, as well as any tax consequences under the laws of
any state or other jurisdiction. The Company will not recognize any gain or loss
as a result of the Merger for United States federal income tax purposes. See
"Special Factors -- Certain U.S. Federal Income Tax Consequences."

Certain Relationships. Locke Purnell Rain Harrell (A Professional
Corporation) ("Locke Purnell"), counsel to TXI, represents the Company on
certain routine litigation matters from time to time. See "Special
Factors -- Certain Relationships."
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THE MERGER

General. Upon consummation of the Merger, TXI Acquisition will be merged
with and into the Company, and the Company will be the surviving corporation
(the "Surviving Corporation"). The Surviving Corporation will succeed to all the
rights and obligations of TXI Acquisition. See "The Merger -- General."

Effective Time of Merger. Pursuant to the Merger Agreement, the effective
time of the Merger (the "Effective Time") will occur upon the filing of a
Certificate of Merger with the Secretary of State of Delaware. See "The
Merger -- General -- Effective Time of Merger."

Treatment of Public Shares in the Merger. At the Effective Time, each
Public Share outstanding immediately prior to the Effective Time, except for
Dissenting Shares, will be converted into the right to receive $15.50 in cash,
payable to the holder thereof, without interest thereon, upon surrender of the
certificate representing such Public Share.

Exchange of Share Certificates. Promptly after the Effective Time, the
Surviving Corporation shall cause ChaseMellon Shareholder Services, as Paying
Agent (the "Paying Agent"), to mail to each Public Stockholder of record as of
the Effective Time, a letter of transmittal and instructions for use in
effecting the surrender of Public Share certificates for payment in accordance
with the Merger Agreement. Upon surrender to the Paying Agent of a Public Share
certificate, together with a duly executed letter of transmittal, the holder
thereof shall be entitled to receive cash in an amount equal to the product of
the number of Public Shares represented by such certificate and $15.50 in cash,
without interest (the "Merger Consideration"), less any applicable withholding
tax, and such certificate shall then be canceled.

Until surrendered pursuant to the procedures described above, each Public
Share certificate (other than certificates representing shares for which
appraisal rights have been perfected), shall represent for all purposes solely
the right to receive the Merger Consideration multiplied by the number of Public
Shares evidenced by such certificate. See "The Merger -- General -- Exchange of
Share Certificates." STOCKHOLDERS OF THE COMPANY SHOULD NOT SEND ANY PUBLIC
SHARE CERTIFICATES WITH THEIR PROXY CARDS.

Conditions to the Merger; Amendment, Waiver and Termination. Pursuant to
the Merger Agreement, the obligations of each of TXI, TXI Acquisition and the
Company to effect the Merger are subject to the condition that the proposal to
approve and adopt the Merger Agreement at the Special Meeting shall have
received the affirmative vote of the holders of at least a majority of all of
the outstanding Common Shares and to certain additional conditions set forth in
the Merger Agreement. Each party to the Merger Agreement may, pursuant to the
terms of the Merger Agreement, waive satisfaction of any of the conditions to
its respective obligations under the Merger Agreement; provided, however, that
any waiver by the Company must be approved by the Special Committee. The Company
has made no determination as to whether it would waive any condition; any such
determination, if necessary, would be made on behalf of the Company by the
Special Committee based on the facts and circumstances existing at the time such
waiver is requested. The Merger Agreement may be amended at any time by written
agreement of the parties; provided, that any amendment must be approved on
behalf of the Company by the Special Committee. In certain circumstances the
Merger Agreement may be terminated at any time prior to the Effective Time,
either before or after approval by the stockholders of the Company. See "The
Merger -- General -- Conditions to the Merger; Amendment, Waiver and
Termination." If the Merger is not consummated due to the failure to satisfy or
waive a condition to consummation of the Merger or to the termination of the
Merger Agreement, the Company's Board of Directors currently intends to continue
to conduct the Company's operations in the normal course, consistent with past
practice.

Sources of Funds. The total amount of funds required by TXI to consummate
the Merger and to pay related fees and expenses (including the cost of acquiring
options under the Company's Stock Option Plan as they become exercisable) is
estimated to be approximately $76.3 million. Such funds are expected to be
furnished from a portion of the proceeds of a contemplated private placement of
term notes which are expected to aggregate approximately $200 million in
principal amount, bear interest at 7.23% per annum and have an average maturity
of 12 years. It is anticipated that the notes will be purchased by a group of
7
<PAGE> 12

15 insurance companies, of which Teachers Insurance and Annuity Association and
USAA Investment Management are expected to purchase the largest amounts. The
financing is subject to a number of conditions, including the negotiation and
execution of definitive documents. Consummation of the transactions contemplated
by the Merger Agreement is not subject to TXI obtaining financing of the Merger
Consideration. See "The Merger -- Payment for Public Shares; Sources of Funds"
and "Special Factors -- Fees and Expenses."

Accounting Treatment. The Merger will be accounted for as a "purchase" as
such term is used under generally accepted accounting principles for accounting
and financial reporting purposes. See "The Merger -- Accounting Treatment."

Regulatory Approvals. No federal or state regulatory approvals are required
to be obtained, nor any regulatory requirements complied with, in connection
with consummation of the Merger by any party to the Merger Agreement, except for
the requirements of the DGCL in connection with stockholder approvals of the
Merger Agreement and the requirements of federal securities laws. See "The
Merger -- General -- Representations and Warranties."

Appraisal Rights. In connection with the Merger, the Public Stockholders
will be entitled to seek payment in cash of the fair value of their Common
Shares under Section 262 of the DGCL ("Section 262"), subject to satisfaction of
the conditions for appraisal rights established by Section 262. Section 262 is
set forth in full in Annex B hereto. See "The Merger -- Appraisal Rights."

MARKET PRICES OF AND DIVIDENDS ON THE COMMON SHARES

The Common Shares are traded on the NYSE under the symbol "CSM."

The following table sets forth, for the quarterly periods indicated, the
high and low sales prices per Common Share, as quoted on the NYSE, and dividends
declared on the Common Shares.

<TABLE>
<CAPTION>
QUARTERLY PERIODS HIGH LOW DIVIDENDS
----------------- ---- --- ---------
<S> <C> <C> <C>
FISCAL 1996 (ENDED MAY 31, 1996)
First Quarter........................................... $11 3/4 $ 9 1/8 $.05
Second Quarter.......................................... $11 7/8 $ 9 1/8 $.05
Third Quarter........................................... $16 3/4 $10 1/2 $.05
Fourth Quarter.......................................... $15 7/8 $13 $.05
FISCAL 1997 (ENDED MAY 31, 1997)
First Quarter........................................... $14 1/2 $10 1/2 $.05
Second Quarter.......................................... $14 1/2 $12 1/2 $.05
Third Quarter........................................... $13 $11 1/8 $.05
Fourth Quarter.......................................... $15 1/4 $11 3/8 $.05
FISCAL 1998
First Quarter........................................... $15 3/8 $14 7/8 $.05
Second Quarter (through November 26, 1997).............. $15 5/8 $15 1/16 --
</TABLE>

On May 21, 1997, the day prior to the public announcement of TXI's original
$14.25 per share merger proposal, the closing price of the Common Shares on the
NYSE was $12.875 per share. On July 24, 1997, the day prior to the public
announcement of TXI's revised $15.50 per share merger proposal, the closing
price of the Common Shares on the NYSE was $14.9375 per share. On July 29, 1997,
the day before the Merger Agreement was publicly announced, the closing price of
the Common Shares on the NYSE was $15.25 per share. On November 26, 1997, the
closing price of the Common Shares on the NYSE was $15.3125 per share. HOLDERS
OF COMMON SHARES ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THEIR SHARES
PRIOR TO MAKING ANY DECISION WITH RESPECT TO THE MERGER AGREEMENT.

8
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY

Certain selected consolidated historical financial data of the Company
derived from the audited financial statements of the Company are set forth below
and under "Selected Consolidated Financial Data of the Company." The selected
financial data should be read in conjunction with the Consolidated Financial
Statements of the Company, related notes and other financial information
incorporated by reference into this Proxy Statement.

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales................................. $420,210 $462,275 $531,811 $607,656 $616,676
Gross profit (exclusive of depreciation
and amortization)...................... 58,624 81,777 94,761 130,050 132,309
Employee bonus programs................... -- 1,896 2,933 6,116 8,856
Interest expense.......................... 14,650 13,439 12,082 10,007 8,099
Net income (loss)......................... (2,051) 11,919 19,607 41,977 40,182
PER SHARE INFORMATION
Net income (loss)......................... $ (.06) $ .41 $ .67 $ 1.43 $ 1.41
Dividends................................. .20 .20 .20 .20 .20
FOR THE YEAR
Net cash provided by operating
activities............................. $ 25,087 $ 10,603 $ 72,723 $ 52,618 $ 47,536
Capital expenditures...................... 7,424 7,805 16,234 20,630 33,776
YEAR END POSITION
Total assets.............................. $480,811 $488,307 $469,827 $475,337 $494,210
Net working capital....................... 80,901 95,225 113,745 136,723 155,252
Long-term debt............................ 113,997 96,219 81,065 66,697 52,554
Stockholders' equity...................... 259,598 265,623 269,868 294,965 326,260
</TABLE>

9
<PAGE> 14

INTRODUCTION

GENERAL

This Proxy Statement is being furnished to holders of the outstanding
Common Shares of the Company in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the Special Meeting to be held
on Wednesday, December 31, 1997, at 9:00 a.m., Dallas, Texas time, at 1341 West
Mockingbird Lane, Suite 700, Dallas, Texas 75247, including any adjournments or
postponements thereof.

THE SPECIAL MEETING

At the Special Meeting, holders of Common Shares will consider and vote
upon a proposal to approve and adopt the Merger Agreement. Approval and adoption
of the Merger Agreement will constitute approval and adoption of the Merger.
Acting on the unanimous recommendation of the Special Committee, the Board of
Directors has unanimously approved and adopted the Merger Agreement.

The Special Committee and the Board of Directors unanimously recommend that
stockholders vote FOR approval and adoption of the Merger Agreement.

RECORD DATE; QUORUM; REQUIRED VOTE

The close of business on November 26, 1997 has been fixed as the record
date for determining holders of Common Shares entitled to vote at the Special
Meeting and any adjournments or postponements thereof. Each Common Share
outstanding on such date is entitled to one vote at the Special Meeting. As of
the Record Date, 28,453,963 Common Shares were outstanding and held of record by
832 stockholders. The presence, in person or by proxy, of the holders of a
majority of the outstanding Common Shares entitled to vote at the Special
Meeting is necessary to constitute a quorum for the transaction of business at
the Special Meeting. Pursuant to the DGCL, the affirmative vote of holders of at
least a majority of the outstanding Common Shares is required to approve and
adopt the Merger Agreement. TXI, which is the owner of approximately 84.4% of
the outstanding Common Shares, has advised the Company that it will vote its
Common Shares in favor of the approval and adoption of the Merger Agreement.
Accordingly, approval and adoption of the Merger Agreement is assured regardless
of the vote of any other stockholder of the Company.

Under the rules of the NYSE, the proposal to approve and adopt the Merger
Agreement is considered a "non-discretionary item" as to which brokerage firms
may not vote in their discretion on behalf of their clients if such clients have
not furnished voting instructions. Abstentions and broker non-votes will (a) be
considered in determining the presence of a quorum at the Special Meeting, and
(b) will have the practical effect of a vote against approval and adoption of
the Merger Agreement for purposes of the vote required by the DGCL since it
would be one less vote for such approval and adoption.

PROXIES

Common Shares represented by properly executed proxies received at or prior
to the Special Meeting and which have not been revoked will be voted in
accordance with the instructions indicated thereon. If no instructions are
indicated on a properly executed proxy, such proxy will be voted FOR approval
and adoption of the Merger Agreement.

A stockholder who has given a proxy may revoke such proxy at any time prior
to its exercise at the Special Meeting by (i) giving written notice of
revocation to the Secretary of the Company, (ii) properly submitting to the
Company a duly executed proxy bearing a later date or (iii) attending the
Special Meeting and voting in person. Attendance at the Special Meeting will not
in and of itself revoke a proxy. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed as
follows: Chaparral Steel Company, 300 Ward Road, Midlothian, Texas 76065-9651,
Attention: Robert C. Moore, Secretary.

If the Special Meeting is adjourned or postponed for any purpose, at any
subsequent reconvening of the Special Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the

10
<PAGE> 15

original convening of the meeting (except for any proxies which have theretofore
effectively been revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous meeting.

STOCKHOLDERS SHOULD NOT SEND ANY SHARE CERTIFICATES WITH THEIR PROXY CARDS.
IF THE MERGER IS CONSUMMATED, THE PROCEDURE FOR THE EXCHANGE OF CERTIFICATES
REPRESENTING COMMON SHARES WILL BE AS SET FORTH IN THIS PROXY STATEMENT. SEE
"THE MERGER -- GENERAL -- EXCHANGE OF SHARE CERTIFICATES."

SOLICITATION OF PROXIES

The cost of solicitation of the stockholders of the Company will be paid by
the Company. Such cost will include the reimbursement of banks, brokerage firms,
nominees, fiduciaries and custodians for the expenses of forwarding solicitation
materials to beneficial owners of shares. In addition to the solicitation of
proxies by use of mail, the directors, officers and employees of the Company may
solicit proxies personally or by telephone, telegraph or facsimile transmission.
Such directors, officers and employees will not be additionally compensated for
such solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. No proxy solicitation agent will be engaged.

THE PARTIES

THE COMPANY

The Company owns and operates a steel mill which produces bar and
structural steel products by recycling scrap steel. The Company's steel products
include beams, reinforcing bars, special bar quality rounds, channels and
merchant quality rounds. These products are sold principally to the construction
industry and to the railroad, defense, automotive, mobile home and energy
industries. The Company's steel mill is located in Midlothian, Texas and its
principal customers are steel service centers, steel fabricators, cold
finishers, forgers and original equipment manufacturers. The Company distributes
its products primarily to markets in North America, and under certain market
conditions, to Europe and Asia. In April 1997, the Board of Directors of the
Company authorized the commencement of preliminary engineering work for a steel
mill to be located in the Southeast portion of the United States. If
constructed, the mill will combine the Company's patented near net shape casting
technology with a multi-purpose section mill manufactured by SMS
Schloeman-Siemag A.G., Dusseldorf, Germany, a steel mill equipment manufacturer,
and will utilize state-of-the-art melting technology. The mill, with a planned
capacity of approximately 1,000,000 tons per annum, will be designed to
manufacture a full range of structural beams up to 36 inches in depth, extending
the Company's current range of 4 to 24 inches, North American and European sheet
pile sections, "H" pile sections and other structural shapes. Construction of
the mill is subject to approval of the Board of Directors of the Company, based
on engineering estimates of the total cost of the mill and the obtaining of a
suitable site. The Company was incorporated in 1973, its principal place of
business is located at 300 Ward Road, Midlothian, Texas 76065-9651, and its
telephone number is (972) 775-8241.

TXI

TXI, a Delaware corporation, produces construction materials, including
cement, aggregates and concrete and also engages in real estate activities. The
business of TXI is concentrated in Texas, Louisiana and California, and it is
the largest producer of cement in the State of Texas. TXI's principal executive
offices are located at 1341 West Mockingbird Lane, Suite 700, Dallas, Texas
75747, and its telephone number is (972) 647-6700.

TXI ACQUISITION

TXI Acquisition is a Delaware corporation recently organized by TXI for the
purpose of effecting the Merger pursuant to which TXI Acquisition will be merged
with and into the Company. TXI Acquisition has no assets and has not engaged in
any activities except in connection with the Merger. TXI Acquisition is

11
<PAGE> 16

wholly-owned by TXI. The address of TXI Acquisition is 1341 West Mockingbird
Lane, Suite 700, Dallas, Texas 75247, and its telephone number is (972)
647-6700.

SPECIAL FACTORS

BACKGROUND OF THE MERGER

TXI formed the Company in 1973 as a joint venture with Co-Steel, Inc., a
Canadian corporation ("Co-Steel"), with TXI and Co-Steel each owning 50% of the
Company. In 1985, TXI purchased Co-Steel's 50% interest in the Company, and the
Company subsequently sold approximately 19.8% of its then outstanding common
stock to the public in order to gain separate access to capital, realize full
value for the steel business, raise needed expansion capital and have a publicly
traded stock for acquisition currency. TXI is deemed to control the Company.

TXI, from time to time, has evaluated strategic options with regard to the
Company, which included a tax-free spin-off of the Company, purchase of the
remaining interest and sale of the Company. As a result of its evaluations, TXI
concluded that the ownership of all of the outstanding Common Shares of the
Company would facilitate the integration of the Company's operations with those
of TXI, eliminate potential conflicts of interest and eliminate the costs
associated with the Company's status as a public company. See "-- Purpose and
Structure of the Merger."

In April 1997, TXI's management retained SBC Warburg Dillon Read Inc. ("SBC
Warburg Dillon Read") to render financial advisory and investment banking advice
in connection with TXI's evaluation of a possible acquisition of the Public
Shares and, in the event TXI determined to make an acquisition of the Public
Shares, to assist in conducting negotiations with the Company. At a special
meeting of the Board of Directors of TXI held on May 22, 1997, TXI's management,
assisted by SBC Warburg Dillon Read, made a presentation in which TXI's
management recommended the acquisition of the Public Shares representing all of
the remaining equity in the Company not currently owned by TXI. The trading
performance of the Common Shares over the past several years as well as the
potential advantages to be gained in integrating the operations of the two
companies was emphasized during such presentation. After discussing management's
recommendation, TXI's Board of Directors approved a proposal that TXI acquire,
in a cash merger, all of the outstanding Public Shares at a per share price of
$14.25 and directed the President of TXI to deliver the proposal to the
Company's Board of Directors.

Following the special meeting of the TXI Board of Directors, a special
meeting of the Company's Board of Directors was held at which a letter was
delivered by TXI's President to the Company's Board of Directors, the text of
which was as follows:

"Board of Directors of Chaparral Steel Company

Gentlemen:

Texas Industries, Inc. ("TXI") hereby offers to acquire the
outstanding shares of Common Stock of Chaparral Steel Company ("Chaparral")
not currently owned by TXI (the "Public Stock"). The transaction would be
in the form of a merger in which the holders of the Public Stock would
receive $14.25 cash for each share of Public Stock outstanding. Upon
consummation of the merger, Chaparral would become a wholly-owned
subsidiary of TXI.

It is anticipated that, upon completion of the cash merger, TXI will
seek to cause the shares of Common Stock of Chaparral to be delisted from
trading on the New York Stock Exchange and to cause the deregistration of
the shares with the Securities and Exchange Commission.

We understand that you may wish to deliberate on this offer through a
Special Committee of disinterested directors and that such Committee may
wish to retain its own advisors to assist in those deliberations. Following
such deliberations, TXI invites your representatives to meet with its
advisors to discuss this offer. TXI reserves the right, in its discretion,
to amend or withdraw this offer."

12
<PAGE> 17

After receiving the TXI proposal, the Directors formed a Special Committee,
consisting of Messrs. John M. Belk and Eugenio Clariond Reyes, two members of
the Board who are not employed by the Company and are not officers, directors or
employees of TXI, to consider the fairness to the Company's stockholders of the
proposed merger and to report its determination regarding the fairness of the
TXI offer to the full Board of Directors. The Special Committee was further
authorized to establish such procedures, review such information and engage such
financial advisors and legal counsel as it deemed reasonable and necessary to
fully and adequately make such determination and to conduct negotiations with
TXI regarding the terms of the proposed merger. Upon the formation of the
Special Committee, the Company issued a press release announcing that the
Special Committee would not immediately respond to the offer.

Shortly after its formation, the Special Committee retained King & Spalding
as its legal counsel. Thereafter, the Special Committee and its legal counsel
discussed the procedures to be followed in analyzing the offer from TXI to
acquire the Public Shares. As part of this discussion, King & Spalding advised
the Special Committee as to the Special Committee's legal responsibilities and
the legal principles applicable to, and the legal consequences of, actions taken
by the Special Committee with respect to the offer by TXI.

The Special Committee then requested three nationally recognized investment
banking firms to make proposals to serve as financial advisor to the Special
Committee. The Special Committee received written proposals from three
investment banking firms and the members of the Special Committee reviewed those
proposals. After a review and discussion of the proposals, the Special Committee
met on June 5, 1997 and unanimously selected Robinson-Humphrey to serve as its
financial advisor for the purpose of advising the Special Committee and
assisting the Special Committee in negotiations with TXI. Prior to its retention
by the Special Committee, Robinson-Humphrey had not rendered financial advisory
or underwriting services to TXI, the Company or any of their affiliates. The
Special Committee instructed Robinson-Humphrey to commence its investigation and
analysis of the value of the Public Shares. Because TXI owned approximately 85%
of the outstanding Common Shares and had represented that it was unwilling to
sell its interest in the Company, the Special Committee concluded that finding
an alternative acquirer was unlikely, and that an all cash transaction proposed
by TXI, provided an acceptable price could be achieved, would be the best option
for the Company and the Public Stockholders.

During June 1997, Robinson-Humphrey reviewed certain financial and other
information concerning the Company and TXI, and spent time on site at the
Company's headquarters in Midlothian, Texas. On June 20, 1997, Robinson-Humphrey
met with the Special Committee to discuss the results of its analyses and to
obtain further direction from the Special Committee. Representatives of
Robinson-Humphrey discussed with the Special Committee the analyses they had
performed to produce a range of implied values for the Public Shares. The
Special Committee also discussed with Robinson-Humphrey its findings in
connection with Robinson-Humphrey's investigation of the Company and questioned
Robinson-Humphrey concerning the assumptions made in connection with its
analyses and the facts on which these analyses were based. Robinson-Humphrey
explained to the Special Committee the assumptions and relative limits of its
analyses.

At the June 20 meeting, Robinson-Humphrey provided the Special Committee
with presentation materials outlining its valuation analyses. A copy of the
written materials provided by Robinson-Humphrey and distributed to the Special
Committee at the June 20 meeting has been filed as an exhibit to the Schedule
13E-3 Transaction Statement filed (the "Schedule 13E-3") with the Securities and
Exchange Commission ("SEC") in connection with the Merger and is available for
inspection and copying at the principal executive offices of the Company during
its regular business hours by any stockholder or any representative of a
stockholder who has been so designated in writing. A copy of such materials
shall be provided to any stockholder or any representative of a stockholder who
has been so designated in writing upon written request and at the expense of the
requesting stockholder or representative.

Robinson-Humphrey presented its analyses and advised the Special Committee
that the $14.25 per share offer did not, in Robinson-Humphrey's opinion, give
appropriate emphasis to valuation factors considered by it to be most relevant,
including the following: (i) market price of the Company to the Company's
projected 1998 earnings; (ii) market price of the Company to the Company's book
value; (iii) a valuation of the Company based on annual tons capacity; and (iv)
premiums paid for minority interest acquisitions in recent

13
<PAGE> 18

"going private" transactions. The Special Committee then concluded that it could
not recommend to the Board of Directors the original offer of $14.25 per share.
In reaching its decision, the Special Committee took into account the fact that
Robinson-Humphrey stated that it did not believe it would be able to render a
fairness opinion as to the proposed $14.25 per share price. The Special
Committee concluded not to respond with a specific price counteroffer to the TXI
proposal at this time. Instead, the Special Committee concluded that it would be
advisable for Robinson-Humphrey to meet with SBC Warburg Dillon Read, the
financial advisor to TXI, to discuss Robinson-Humphrey's analyses in support of
a higher price.

On July 1, 1997, Robinson-Humphrey met with SBC Warburg Dillon Read in
Atlanta to discuss the original offer of $14.25 per share in cash. SBC Warburg
Dillon Read informed Robinson-Humphrey that it did not have authority to
negotiate a higher price per share, but would report the Special Committee's
views to TXI and would explain Robinson-Humphrey's position to TXI.
Robinson-Humphrey summarized the various valuation methodologies it had employed
to assess the value of the Public Shares and the issues that the Special
Committee had expressed to Robinson-Humphrey during the June 20 meeting. In
particular, Robinson-Humphrey focused on the following factors: (i) shares of
the Company currently traded above the $14.25 per share offer; (ii) the Company
had not increased per share value relative to comparable companies and broader
market indexes since its initial public offering, suggesting that TXI should
offer a premium over the trading price for shares of Common Stock; (iii) the
fact that TXI was offering cash instead of some other form of consideration
limited the flexibility of the Special Committee in negotiating with TXI; (iv)
comparable minority buy-out transactions typically had larger premiums over the
pre-announcement stock price; and (v) comparable company analyses showed that
the Public Shares were worth more than the $14.25 per share offer.

Subsequent to the July 1 meeting, SBC Warburg Dillon Read and
Robinson-Humphrey had several telephone conversations in which SBC Warburg
Dillon Read responded to the Special Committee's and Robinson-Humphrey's
valuation analyses and methodologies. SBC Warburg Dillon Read suggested that the
comparable company group used by Robinson-Humphrey may contain some companies
that had characteristics not readily applicable to the Company. In addition, SBC
Warburg Dillon Read and Robinson-Humphrey discussed the various valuation
methodologies used by Robinson-Humphrey, in particular the assumptions used by
Robinson-Humphrey to assess the impact of the Company's capital spending plan
involving a new steel mill, in order to better understand the position of the
Special Committee. Robinson-Humphrey then reiterated that the Special Committee
felt the $14.25 per share offer was too low and that the Special Committee felt
TXI should make another offer instead of the Special Committee making a
counteroffer.

Robinson-Humphrey and SBC Warburg Dillon Read continued to have discussions
during the first two weeks in July centered primarily on valuation
methodologies. At the regular meeting of the Board of Directors of the Company
held July 16, 1997, the Chairman of the Special Committee outlined the actions
of the Special Committee taken up to that time with respect to its consideration
of TXI's merger proposal and the status of the negotiations. He concluded his
presentation by informing the Board that it was the opinion of the Committee
that the TXI proposal, in its present form, was not in the best interests of the
Public Stockholders. He stated that the Committee looked forward to further
discussion with TXI regarding the proposal and would consider any other offer
that TXI would propose to make. Also at the meeting, the Board approved the
Company's financial results for its 1997 fiscal year and authorized the public
release of these financial results. On July 15, the day prior to the public
announcement of the Company's 1997 fiscal year earnings, the closing price per
Common Share on the NYSE was $15.00. On July 16, the day on which the Company's
1997 fiscal year financial results were released, the closing price per Common
Share on the NYSE was $15.0625 and on July 17, the day after the Company's 1997
fiscal year financial results were released, the closing price per Common Share
on the NYSE was $15.1875.

At the direction of the Special Committee, Robinson-Humphrey engaged in
further discussions with SBC Warburg Dillon Read on a number of occasions during
the week of July 21. Throughout these discussions, Robinson-Humphrey's
representatives briefed Mr. Belk, the Chairman of the Special Committee, as to
the status and nature of these discussions, and SBC Warburg Dillon Read briefed
TXI's management regarding the discussions.

14
<PAGE> 19

In these discussions, Robinson-Humphrey and SBC Warburg Dillon Read
compared their respective valuation methodologies and discussed their respective
views regarding the $14.25 per share offer. Robinson-Humphrey reiterated that
the $14.25 per share price was too low, noting that following the earnings
release issued by the Company on July 16, the Common Shares continued to trade
at a price well above $14.25 per share. Robinson-Humphrey also restated its view
that, among other things, (i) the premium over the pre-announcement stock price
implied by the $14.25 per share price was lower than the typical premiums paid
in comparable minority buyout transactions, (ii) its comparable company analyses
suggested a price higher than the $14.25 per share, and (iii) the other
valuation methodologies summarized in "-- Opinion of Robinson-Humphrey; Summary
of Financial Analyses" below suggested a price in excess of $14.25 per share.

The investment bankers continued their discussions through July 24, and
Robinson-Humphrey continued to attempt to negotiate a higher price.
Robinson-Humphrey, after further discussions, suggested that it would be
prepared to discuss a per share price in the range of $16.00 with the Special
Committee. SBC Warburg Dillon Read stated that it did not believe TXI would be
willing to offer $16.00 per share, but indicated that, while it did not have
authority to negotiate another offer from TXI for the Public Shares, it may be
prepared to discuss a per share price for the Public Shares in the range of
$15.00 with TXI.

Robinson-Humphrey argued that such price continued to be slightly below the
recent trading price of the Common Shares and that such price again was below
the price range suggested by Robinson-Humphrey's various valuation methodologies
discussed below in "-- Opinion of Robinson-Humphrey; Summary of Financial
Analyses." In response, SBC Warburg Dillon Read suggested the possibility that
TXI could decide not to pursue the transaction if TXI believed that the price
being demanded by the Special Committee was excessive. Finally, after further
discussions, the investment bankers agreed that they would each discuss with
their respective principals whether a per share price of $15.50 would be
acceptable.

Based on these negotiations, Robinson-Humphrey concluded that it believed
that the $15.50 per share offer was the best offer available. Because such price
was consistent with and supported by Robinson-Humphrey's valuation methodologies
as a whole, Robinson-Humphrey indicated that it would discuss the offer with the
Special Committee if TXI was prepared to formally increase its offer to the
Company to $15.50 per share.

After consultation with SBC Warburg Dillon Read, on July 25, 1997, TXI's
Board of Directors considered and approved a revised offer to the Company,
consisting of cash consideration of $15.50 per share and issued a press release
announcing the revised offer. Also on July 25, 1997, Locke Purnell, legal
counsel to TXI, provided King & Spalding with a draft merger agreement with
respect to a proposed merger transaction. On July 28, 1997, King & Spalding
provided Locke Purnell and TXI with comments regarding the Merger Agreement and
entered into negotiations on behalf of the Special Committee with Locke Purnell
and TXI regarding the terms of the Merger Agreement. King & Spalding suggested a
number of changes to the Merger Agreement. Among other requested changes, King &
Spalding indicated that because TXI has controlled the Company for a number of
years, the Company's representations and warranties in the Merger Agreement
should be limited in number and fundamental in nature. In addition, King &
Spalding sought to provide that as a condition to closing the Special Committee
and the Company must receive a reaffirmation by Robinson-Humphrey of its
fairness opinion relating to the transaction.

On July 29, 1997, the Special Committee, together with representatives of
Robinson-Humphrey and King & Spalding, met to consider the revised $15.50 per
share cash offer by TXI. Representatives of King & Spalding reviewed again with
the members of the Special Committee their legal duties in connection with the
consideration of the offer. King & Spalding also reviewed with the Special
Committee the terms of the proposed Merger Agreement. At the meeting,
Robinson-Humphrey then presented an analysis of the $15.50 offer and concluded
that it was prepared to give an opinion that such offer was fair, from a
financial point of view, to the Public Stockholders. The Special Committee
discussed the $15.50 per share offer in detail, and questioned Robinson-Humphrey
regarding certain aspects of its valuation methodologies and analyses. The
Special Committee also examined the advantages and disadvantages of continuing
to urge TXI to make a yet even higher offer, including TXI's ability to decline
to proceed with the transaction if the Special Committee insisted on a higher
price, with the result that the Public Stockholders would not receive a

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<PAGE> 20

substantial premium for the Public Shares as compared to the Company's
pre-announcement stock price. Based on the Robinson-Humphrey opinion and the
valuation analysis presented by Robinson-Humphrey to the Special Committee
during the July 29 meeting, the Special Committee's belief that the $15.50 per
share price was the best offer available and the other factors described below
in "-- Recommendation of the Special Committee and Board of Directors of the
Company; Fairness of the Merger," the Special Committee unanimously decided to
recommend the approval and adoption of the $15.50 per share offer. Following the
July 29 Special Committee meeting, representatives of King & Spalding and
representatives of Locke Purnell and TXI held telephone conferences to resolve
the remaining terms of the proposed Merger Agreement, resulting in a Merger
Agreement mutually satisfactory to TXI and the Special Committee.

On July 30, 1997, the Board of Directors of the Company met to receive the
report of the Special Committee. At this meeting, Mr. Belk, Chairman of the
Special Committee, gave the report of the Special Committee in which the Special
Committee unanimously recommended to the Board of Directors of the Company that
the Board accept the $15.50 offer and approve and adopt the Merger Agreement. At
the July 30 meeting, Robinson-Humphrey also summarized its presentation given to
the Special Committee on July 29 for the full Board of Directors of the Company.
Following the Robinson-Humphrey presentation and after further discussion, the
Board of Directors unanimously approved the Merger Agreement.

At the conclusion of the July 30, 1997 meeting, the Company issued a press
release announcing that based on the recommendation of the Special Committee the
Board of Directors had approved the TXI merger proposal based on TXI's revised
offer of $15.50 per share.

A copy of the written materials provided by Robinson-Humphrey and
distributed to the Special Committee at the July 29, 1997 meeting has been filed
as an exhibit to the Schedule 13E-3 and is available for inspection and copying
at the principal executive offices of the Company during its regular business
hours by any stockholder or any representative of a stockholder who has been so
designated in writing. A copy of such materials shall be provided to any
stockholder or any representative of a stockholder who has been so designated in
writing upon written request and at the expense of the requesting stockholder or
representative. Robinson-Humphrey has reaffirmed in writing its fairness opinion
dated the date of this Proxy Statement, the full text of which is attached as
Annex C to this Proxy Statement.

PURPOSE AND STRUCTURE OF THE MERGER

The purpose of the Merger is for TXI to acquire all of the equity interest
in the Company represented by the Public Shares for the reasons described below.
TXI has advised the Company that, in connection with its proposal of the Merger,
TXI did not consider any alternatives that would have allowed the Public
Stockholders to maintain an equity interest in the Company. The Board of
Directors has, pursuant to the Merger Agreement, called the Special Meeting for
stockholders to consider whether to vote to approve and adopt the Merger
Agreement. In the Merger, each Public Share will be converted into the right to
receive an amount in cash equal to $15.50, without interest.

In determining to acquire the Public Shares at this time, TXI focused on a
number of factors including: (i) integration of the operations of the two
companies; (ii) facilitation of financings for the two companies; (iii)
elimination of potential conflicts of interest with the Company's minority
Public Shares; and (iv) elimination of compliance costs associated with the
Company's status as a publicly-owned company.

If consummated, the Merger will terminate the Company's public status,
which TXI believes has not provided benefits that justify, as a business matter,
maintenance of that status. Moreover, TXI does not believe that the Company
needs independent access to the capital markets, because sufficient funding, if
and when required, is available through TXI, which is a public company whose
common stock is traded on the NYSE. TXI also believes that delisting of the
Common Shares may improve overall access to the capital markets for TXI by
providing a single focus for public investment.

Terminating the Company's public status will eliminate significant
compliance costs (estimated at approximately $445,000 per year) associated with
such status (including stock exchange listing fees and the costs of preparing
reports and other information required pursuant to the Exchange Act), thereby
furthering

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<PAGE> 21

the Company's on-going cost-cutting efforts. Following consummation of the
Merger, the Company will be able to eliminate the time, expense and energy
incurred in connection with stock transfers, dividends, proxy notices, annual
reports, compliance with the Exchange Act and attendant legal issues. The
acquisition of the Public Shares has been structured as a cash merger in order
to provide a prompt and orderly transfer of ownership of the equity interest
represented by the Public Shares to TXI.

RECOMMENDATION OF THE SPECIAL COMMITTEE AND BOARD OF DIRECTORS OF THE COMPANY;
FAIRNESS OF THE MERGER

The Special Committee. The Company's Board of Directors established the
Special Committee, which consists of only directors of the Company who are not
employed by, or otherwise affiliated with the Company, TXI or TXI Acquisition or
any of their subsidiaries or affiliates (except in their capacity as directors
of the Company), to act solely on behalf of the Public Stockholders for purposes
of evaluating the fairness to the Public Stockholders of the TXI merger offer
and negotiating the price and terms of the proposed Merger. The Special
Committee retained King & Spalding, as its independent legal counsel, and
Robinson-Humphrey, as its independent financial advisor, to assist it in
evaluating the proposed Merger and in negotiating and determining the fairness
of the Merger on behalf of the Public Stockholders. Following a presentation by
Robinson-Humphrey as to its opinion that the offered price of $15.50 per share,
on the terms set forth in the Merger Agreement, was fair to the Public
Stockholders from a financial point of view, at a meeting of the Special
Committee on July 29, 1997, the Special Committee concluded that the Merger and
the Merger Consideration are fair to, and in the best interests of, the Public
Stockholders. At a full Board of Directors meeting on July 30, 1997,
Robinson-Humphrey summarized the previous day's presentation and the Special
Committee gave a report in which the Special Committee recommended to the Board
of Directors of the Company that it accept the offer of $15.50 in cash per share
and approve and adopt the Merger Agreement. Based on the recommendation of the
Special Committee and considering the written fairness opinion received from
Robinson-Humphrey, the Board of Directors of the Company: (i) determined that
the Merger is fair to, and in the best interests of, the Public Stockholders;
(ii) approved and adopted the Merger Agreement and the transactions contemplated
thereby and authorized the execution, delivery and performance thereof by the
Company; and (iii) resolved to recommend that the stockholders of the Company
approve the Merger Agreement and the transactions contemplated thereby.

The Board of Directors of the Company believes that the terms of the Merger
Agreement are fair to, and in the best interests of, the Public Stockholders. In
reaching its conclusion, the Board of Directors of the Company adopted the
recommendation of the Special Committee as set forth below. The Public
Stockholders should be aware in considering the recommendation of the Special
Committee that was adopted by the Board of Directors of the Company, that
certain members of the Board of Directors of the Company are also members of
management or of the Board of Directors of TXI and/or TXI Acquisition. Such
relationships could present such members of the Board of Directors of the
Company with potential conflicts of interest. The Board of Directors of the
Company and the Special Committee were aware of such conflicts and considered
them both in making their recommendation and in approving the Merger Agreement.
The Special Committee was formed to address these conflicts and to act on behalf
of the Public Stockholders in relation to the Merger.

The Special Committee, in reaching its conclusion that the Merger is fair
to, and in the best interests of, the Public Stockholders, and in determining to
recommend approval of the Merger Agreement to the Board of Directors of the
Company, considered a number of factors, including, without limitation, the
following:

(i) the Special Committee's knowledge of the business, financial condition,
results of operations and prospects of the Company. The members of the Special
Committee were knowledgeable about the Company's affairs, including the present
and possible future economic and competitive environment in which the Company
operates its business. In evaluating the business and prospects of the Company,
the Special Committee noted that the Company's revenues are tied in general to
the production capacity of the Company and that large capital expenditures are
necessary to increase production capacity while at the same time the risk of
competition from other steel producers increases the potentially adverse
exposure in using capital to increase production. The Merger will allow the
Public Stockholders to shift this risk entirely to TXI. The Special Committee
also noted that the Company's status as a publicly-held company imposed
additional

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<PAGE> 22

regulatory burdens and expenses on the Company, as well as potential liability
associated with public disclosure requirements applicable to publicly held
companies generally;

(ii) the terms of the Merger Agreement, including without limitation, the
amount and form of consideration; the nature of the parties' representations,
warranties, covenants and agreements; and the conditions to the obligations of
TXI and the Company. In this regard, the Special Committee viewed favorably the
fact that the Merger Agreement required a limited number of representations and
warranties by the Company and imposed no significant conditions to the closing
of the Merger, thus making consummation of the transaction more likely than one
in which the agreement imposes more significant conditions to consummation. The
Special Committee also considered as favorable to its determination that the
Merger Agreement could be terminated without making any payment to TXI if the
Special Committee withdrew its recommendation of the Merger Agreement or the
Merger;

(iii) the Special Committee's conclusion, based on the course of the
negotiations, that the Merger Consideration was the highest price obtainable,
particularly in light of the fact that, as discussed in (ix) below, TXI was
unwilling to consider any third party transaction for the Company and thus the
Special Committee did not conduct any process to determine potential interest in
such a transaction. This conclusion was the result of the Special Committee's
and its financial advisor's substantial negotiations with TXI and its advisors
in an attempt to obtain the highest possible price;

(iv) the fact that the Merger Consideration represented (i) a 20.3% premium
over the last reported sales price of the Common Shares on May 21, 1997, the day
immediately preceding the public announcement of the $14.25 offer; (ii) a 25.2%
premium over the last reported sales price of the Common Shares on May 14, the
day one week preceding the public announcement of the $14.25 offer; and (iii) a
33.3% premium over the last reported sales price of the Common Shares on April
21, the day four weeks prior to the public announcement of the $14.25 offer.
Although Robinson-Humphrey's analysis of similar minority interest buy-out
transactions found that premiums paid in comparable transactions were slightly
higher than the premiums at such points in time for the Merger (22.1% at one day
prior to announcement; 25.9% at one week; and 33.3% at one month), the Special
Committee concluded that the implied values suggested by these premiums were
only slightly higher than the $15.50 per share offer for the Public Shares and
that the analyses prepared by Robinson-Humphrey as a whole supported the Special
Committee's recommendation of the $15.50 per share offer to the Public
Stockholders;

(v) the oral and written presentations of Robinson-Humphrey to the Special
Committee on June 20, 1997 and July 29, 1997, and the written opinion of
Robinson-Humphrey dated July 30, 1997 to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated in such opinion,
the Merger Consideration was fair, from a financial point of view, to the Public
Stockholders. See "-- Opinion of Robinson-Humphrey; Summary of Financial
Analyses." Robinson-Humphrey reaffirmed in writing its fairness opinion as of
the date of this Proxy Statement. The opinion of Robinson-Humphrey, dated the
date of this Proxy Statement, is attached as Annex C to this Proxy Statement.
The stockholders of the Company are urged to read such opinion carefully in its
entirety;

(vi) the stock price and trading volume history of the Common Shares and
the fact that such shares are thinly traded;

(vii) as set forth in the section "-- Opinion of Robinson-Humphrey; Summary
of Financial Analyses," the Merger Consideration represents a 1.35x multiple of
the Company's book value which exceeds the average multiple of the Comparable
Companies (as such term is defined in such section);

(viii) the fact that the Merger Consideration represents an approximate
15.9% premium over the highest price paid by the Company for Common Shares in
the previous two fiscal years pursuant to the Company's publicly announced stock
repurchase program;

(ix) the unwillingness of TXI to consider a sale of the Company, to spin
off its ownership interest in the Company or to engage in other alternative
transactions with respect to the Company (as a result of which the Special
Committee did not solicit third party bids for the Company); and

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<PAGE> 23

(x) the availability of appraisal rights under the DGCL to dissenting
Public Stockholders in the Merger.

In light of the number and variety of factors the Special Committee
considered in connection with its evaluation of the Merger, the Special
Committee did not quantify or otherwise attempt to assign relative weights to
the foregoing factors. The Special Committee collectively made its determination
with respect to the Merger Agreement based on the unanimous conclusion reached
by its members that the Merger Agreement, in light of the factors that each of
them individually considered as appropriate, is fair to, and in the best
interests of, the Company and the Public Stockholders.

Although the Special Committee did consider historical trading prices of
the Common Shares, the Special Committee did not consider trading prices of the
Common Shares for the period following the announcement of the proposed Merger
because it believed that such prices reflected anticipation of the possibility
of the purchase of the Public Shares by TXI. In addition, the Special Committee
did not consider the Merger Consideration as compared to any implied liquidation
value because the Company is not in a liquidation mode and will be operated by
TXI as a going concern business.

The Special Committee believes that the Merger is procedurally fair
because: (i) the Special Committee consisted of disinterested directors
appointed to represent the interests of, and to negotiate on an independent
basis with TXI (as if TXI were an unaffiliated third party) on behalf of, the
Company and the Public Stockholders; (ii) the Special Committee retained and was
advised by independent legal counsel; (iii) the Special Committee retained
Robinson-Humphrey as its independent financial advisor to assist it in
evaluating the proposed Merger; and (iv) because the $15.50 per Public Share
price and the other terms and conditions of the Merger resulted from
arm's-length bargaining between the Special Committee and TXI. Although the
Special Committee considered conditioning the Merger upon approval of a majority
of the votes entitled to be cast by the Public Stockholders (a "Majority of the
Minority Vote"), the Special Committee determined that in light of the foregoing
factors, the Merger is procedurally fair to the Public Stockholders without a
Majority of the Minority Vote. In addition, because of the small number of
Public Shares outstanding, conditioning the Merger upon a Majority of the
Minority Vote could enable a holder with relatively few Public Shares to block
the Merger.

The Board of Directors of the Company. The Board of Directors has
considered the unanimous recommendation of the Special Committee, as well as the
factors considered by the Special Committee, and has unanimously determined that
the Merger Agreement is fair to, and in the best interests of, the Company and
its Public Stockholders, has approved and adopted the Merger Agreement, and
recommends the Public Stockholders vote to approve and adopt the Merger
Agreement.

TXI and TXI Acquisition. Neither TXI nor TXI Acquisition had any
involvement in the Special Committee's evaluation of the fairness of the Merger
to the Company and the Public Stockholders and did not undertake any formal
evaluation of their own as to the fairness to the Company and the Public
Stockholders. However, TXI and TXI Acquisition considered the advice of SBC
Warburg Dillon Read, TXI's financial advisor, regarding, among other things,
historical market prices for the Common Shares (and the fact that the Merger
Consideration is more than the trading prices of the Common Shares before TXI
proposed the Merger), valuations of other selected companies and the range of
premiums paid in selected minority buy-outs since 1992. TXI and TXI Acquisition
have adopted the SBC Warburg Dillon Read analysis. TXI and TXI Acquisition
believe that these factors, when considered together, provide a reasonable basis
for TXI and TXI Acquisition to believe, as they do, that the Merger is fair to
the Company and the Public Stockholders and recommend approval of the Merger
Agreement by the Public Stockholders. TXI and TXI Acquisition did not attach
specific relative weights to the factors considered in reaching their views as
to fairness.

CERTAIN FINANCIAL ASSUMPTIONS

The Company developed four alternative scenarios (case(s)), as the
financial extension of its general corporate planning process, for the purpose
of evaluating the financial effect on the Company of the possible construction
of additional steel capacity from a steel mill to be located in the Southeast
portion of the United States. See "-- Discounted Cash Flow Analysis" and
"-- Steel Production Capacity Analysis." The Company

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<PAGE> 24

does not, as a matter of course, publicly disclose projections as to future
revenues or earnings. The different scenarios include assumptions pertaining to
a number of factors, including rate of production and product pricing, which
together determine product sales, and depict the wide range of outcomes based on
these assumptions, none of which was relied on by the Company. The scenarios
were provided to TXI's management and representatives of SBC Warburg Dillon Read
as financial advisor to TXI and subsequently to members of the Special Committee
and to Robinson-Humphrey, its financial advisor. The following summary of the
alternative cases is included in this Proxy Statement solely because such data
was made available to such parties. The case summaries do not reflect any of the
effects of the Merger or other changes that in the future may be deemed
appropriate with respect to the Company and its assets, business, operations,
properties, policies, corporate structure, capitalization and management.
Accordingly, the cases and their differing financial effects on the Company do
not reflect the Company's or management's view of the Company's expected results
of the Merger.

Each case assumed that the steel mill to be located in the Southeast
portion of the United States ("Chaparral East") would be operational in the
Company's fiscal year 2000, and that the Company's steel mill located in
Midlothian, Texas ("Chaparral Midlothian") produced bar and structural steel
products at a constant rate for all cases. Each case assumed total capital
expenditures for fiscal years 1998 through 2003 to be $637 million with
approximately two-thirds attributable to Chaparral East. The first scenario
("Case One") assumed product volume at the high end of the product volume range
with a price at the middle of the price range. The second scenario ("Case Two")
assumed product volume at the low end of the product volume range with a
substantially similar price assumption as Case One. The third scenario ("Case
Three") assumed product volume and price at the upper end of the respective
product volume and price ranges, and the fourth scenario ("Case Four") assumed
product volume and price at the lower end of the respective product volume and
price ranges.

Case One. The Case One scenario was prepared with the following material
assumptions: (i) Chaparral Midlothian structural and bar product volume
increased from approximately 1.7 million tons in fiscal year 1998 to
approximately 1.9 million tons in fiscal year 2003; (ii) product volume for
Chaparral East increased from 500,000 tons in fiscal year 2000 to 1 million tons
in fiscal year 2003; (iii) Chaparral Midlothian structural prices were flat at
an average of $400 per ton for fiscal year 1998 through fiscal year 2003; (iv)
Chaparral Midlothian bar product prices increased from an average of $352 per
ton in fiscal year 1998 to an average of $377 per ton in fiscal year 2003; and
(v) as a result of a change in product mix, Chaparral East product prices
increased from an average of $398 per ton in fiscal year 2000 to an average of
$414 per ton in fiscal year 2003. Considering these product volume and price
assumptions, and including revenue from other products, estimated total revenues
increased from approximately $706 million in fiscal year 1998 to approximately
$1.2 billion in fiscal year 2003. The foregoing assumptions resulted in
estimated consolidated net income for the Company of approximately $62 million
in fiscal year 1998 increasing to approximately $134 million in fiscal year
2003.

Case Two. The Case Two scenario was prepared with the following material
assumptions: (i) Chaparral Midlothian structural and bar product volume
increased from approximately 1.7 million tons in fiscal year 1998 to
approximately 1.9 million tons in fiscal year 2003; (ii) product volume for
Chaparral East increased from approximately 257,000 tons in fiscal year 2000 to
approximately 728,000 tons in fiscal year 2003; (iii) Chaparral Midlothian
structural prices were flat at an average of $380 per ton for fiscal year 1998
through fiscal year 2003; (iv) Chaparral Midlothian bar product prices increased
from an average of $352 per ton in fiscal year 1998 to an average of $377 per
ton in fiscal year 2003; and (v) as a result of a change in product mix,
Chaparral East product prices increased from an average of $398 per ton in
fiscal year 2000 to an average of $414 per ton in fiscal year 2003. Considering
these product volume and price assumptions, and including revenue from other
products, estimated total revenues increased from approximately $681 million in
fiscal year 1998 to approximately $1.09 billion in fiscal year 2003. The
foregoing assumptions resulted in estimated consolidated net income for the
Company of approximately $48 million in fiscal year 1998 increasing to
approximately $93 million in fiscal year 2003.

Case Three. The Case Three scenario was prepared with the following
material assumptions: (i) Chaparral Midlothian structural and bar product volume
increased from approximately 1.7 million tons in

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<PAGE> 25

fiscal year 1998 to approximately 1.9 million tons in fiscal year 2003; (ii)
product volume for Chaparral East increased from 500,000 tons in fiscal year
2000 to 1.1 million tons in fiscal year 2003; (iii) Chaparral Midlothian
structural prices were flat at an average of $400 per ton for fiscal year 1998
through fiscal year 2003; (iv) Chaparral Midlothian bar product prices increased
from an average of $352 per ton in fiscal year 1998 to an average of $377 per
ton in fiscal year 2003; and (v) as a result of a change in product mix,
Chaparral East product prices increased from an average of $427 per ton in
fiscal year 2000 to an average of $444 per ton in fiscal year 2003. Considering
these product volume and price assumptions, and including revenue from other
products, estimated total revenues increased from approximately $706 million in
fiscal year 1998 to approximately $1.3 billion in fiscal year 2003. The
foregoing assumptions resulted in estimated consolidated net income for the
Company of approximately $62 million in fiscal year 1998 increasing to
approximately $171 million in fiscal year 2003.

Case Four. The Case Four scenario was prepared with the following material
assumptions: (i) Chaparral Midlothian structural and bar product volume
increased from approximately 1.7 million tons in fiscal year 1998 to
approximately 1.9 million tons in fiscal year 2003; (ii) product volume for
Chaparral East increased from approximately 257,000 tons in fiscal year 2000 to
approximately 728,000 tons in fiscal year 2003; (iii) Chaparral Midlothian
structural prices were flat at an average of $350 per ton for fiscal year 1998
through fiscal year 2003; (iv) Chaparral Midlothian bar product prices increased
from an average of $352 per ton in fiscal year 1998 to an average of $377 per
ton in fiscal year 2003; and (v) as a result of a change in product mix,
Chaparral East product prices increased from an average of $368 per ton in
fiscal year 2000 to an average of $384 per ton in fiscal year 2003. Considering
these product volume and price assumptions, and including revenue from other
products, estimated total revenues increased from approximately $644 million in
fiscal year 1998 to approximately $1.02 billion in fiscal year 2003. The
foregoing assumptions resulted in estimated consolidated net income for the
Company of approximately $28 million in fiscal year 1998 increasing to
approximately $59 million in fiscal year 2003.

THE FOREGOING INFORMATION WAS NOT PREPARED WITH A VIEW TOWARD COMPLIANCE
WITH PUBLISHED GUIDELINES OF THE SEC OR THE AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS REGARDING FORWARD-LOOKING INFORMATION OR GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, AND WAS NOT REVIEWED BY INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE COMPANY OR TXI. THE CASE MATERIAL WAS BASED UPON A VARIETY OF ESTIMATES
AND ASSUMPTIONS, SOME (BUT NOT ALL) OF WHICH ARE SET FORTH ABOVE. THE ESTIMATES
AND ASSUMPTIONS UNDERLYING THE CASE MATERIAL INVOLVED JUDGMENTS WITH RESPECT TO,
AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND REGULATORY CONDITIONS AND
FUTURE BUSINESS DECISIONS WHICH, THOUGH CONSIDERED BY MANAGEMENT OF THE COMPANY
TO BE REASONABLE AT THE TIME MADE, MAY NOT BE REALIZED AND ARE INHERENTLY
SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE AND REGULATORY
UNCERTAINTIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE
BEYOND THE CONTROL OF THE COMPANY. THE INCLUSION OF THE CASE MATERIAL HEREIN
SHOULD NOT BE REGARDED AS AN INDICATION THAT TXI, THE COMPANY, THEIR RESPECTIVE
FINANCIAL ADVISORS OR ANYONE WHO RECEIVED THIS INFORMATION CONSIDERED OR
CONSIDERS IT A RELIABLE PREDICTOR OF FUTURE OPERATING RESULTS, AND THIS
INFORMATION SHOULD NOT BE RELIED ON AS SUCH. ADDITIONALLY, THE CASE MATERIAL
DOES NOT REFLECT REVISED PROSPECTS FOR THE COMPANY'S BUSINESSES, CHANGES IN
GENERAL BUSINESS AND ECONOMIC CONDITIONS, OR ANY OTHER TRANSACTION OR EVENT THAT
HAS OCCURRED OR THAT MAY OCCUR AND THAT WAS NOT ANTICIPATED AT THE TIME SUCH
INFORMATION WAS PREPARED. THE COMPANY DOES NOT INTEND TO UPDATE OR SUPPLEMENT
THIS INFORMATION TO REFLECT CHANGING CIRCUMSTANCES EXISTING AFTER THE
PREPARATION OF THE CASE MATERIAL INCLUDED HEREIN OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS THAT MAY HAVE OCCURRED.

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OPINION OF ROBINSON-HUMPHREY; SUMMARY OF FINANCIAL ANALYSES

On July 30, 1997, Robinson-Humphrey delivered its written opinion to the
Special Committee and the Board of Directors of the Company that as of the date
of such opinion the Merger Consideration is fair to the Public Stockholders from
a financial point of view. Robinson-Humphrey has reaffirmed in writing its
opinion as of the date of this Proxy Statement.

The full text of the opinion of Robinson-Humphrey, dated the date of this
Proxy Statement, which sets forth the assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is attached
hereto as Annex C. Stockholders are urged to read the opinion carefully and in
its entirety. Robinson-Humphrey's opinion is directed only to the consideration
to be received by the Public Stockholders in the Merger and does not constitute
a recommendation to any stockholder as to how such stockholder should vote.
Robinson-Humphrey's opinion does not address the likely tax consequences of the
Merger to any Public Stockholder. No limitations were imposed by the Special
Committee, the Company or TXI with respect to the investigations made or
procedures followed by Robinson-Humphrey in rendering its opinion.
Robinson-Humphrey conducted valuation analyses of the Common Shares and
evaluated the Merger Consideration, but was not asked to and did not recommend a
specific per share price to be paid by TXI for the minority interest in the
Company. The summary of the opinion of Robinson-Humphrey, dated the date of this
Proxy Statement, set forth in this Proxy Statement is qualified in its entirety
by reference to the full text of such opinion.

In connection with its opinion, Robinson-Humphrey conducted, among other
analyses, (i) a review of the industry and the competitive climate in which the
Company operates, and its competitive position therein; (ii) a review of the
business, historical financial performance and prospects of the Company; (iii) a
review of the historical and current market prices and trading patterns of the
Common Shares; (iv) an analysis of the Merger Consideration in relation to the
market prices of securities of, and financial data of, other companies engaged
in similar businesses as the Company; (v) a review and analysis of prices and
premiums paid in, and other terms of, other recent "going private" acquisition
transactions; (vi) a discounted cash flow analysis of the Company; and (vii) a
review and analysis of consideration paid for capacity additions in the
industry. Robinson-Humphrey also held discussions with members of the senior
management of the Company regarding the Company's past and current business
operations, financial condition and future prospects.

Robinson-Humphrey relied without independent verification upon the accuracy
and completeness of all of the financial and other information reviewed by it
for purposes of its opinion. In that regard, with respect to the Company's
internal financial forecasts, which the Special Committee instructed
Robinson-Humphrey to use for purposes of its analyses, Robinson-Humphrey assumed
that such forecasts were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the Company's senior management
as to the future financial performance of the Company. In addition,
Robinson-Humphrey was not requested or authorized to solicit, and did not
solicit, interest from any party with respect to an acquisition of all or any
portion of the outstanding Common Shares, the Company or its constituent
businesses. Finally, Robinson-Humphrey has been informed by TXI, and has relied
with the Special Committee's permission on such information, that TXI does not
currently intend to pursue a sale or recapitalization of the Company or its
subsidiaries after consummating the Merger.

The following is a summary of the presentations by Robinson-Humphrey to the
Special Committee on July 29, 1997 and to the Board of Directors of the Company
(including the members of the Special Committee) on July 30, 1997 in connection
with its July 30, 1997 fairness opinion:

Analysis of the Company

Historical Stock Price Analysis. Robinson-Humphrey analyzed the prices at
which shares of the Company traded over the last three years. In calendar 1994,
the high price was $12.25 and the low price was $6.50. In calendar 1995, the
high price was $16.75 and the low price was $7.50. In calendar 1996, the high
price was $16.50 and the low price was $10.50. In calendar 1997, as of July 29,
1997, the high price was $15.38 and the low price was $11.13. Over the period
from December 31, 1993 to the announcement of the transaction, Robinson-Humphrey
observed that more than 50% of the outstanding shares were traded in a

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price range of $8.60 to $11.00. The average trade over this period was at a
price of $9.80. Additionally, since the initial public offering of the stock,
95% of all trades have been below the Merger Consideration of $15.50.

Valuation Summary of Selected Comparable Publicly-Traded Companies.
Robinson-Humphrey reviewed and compared certain financial, operating and stock
market information of the Company and the following publicly traded companies in
the steel industry: Birmingham Steel Corporation, Commercial Metals Company,
IPSCO, Inc., Kentucky Electric Steel, Lukens, Inc., NS Group, Inc., Northwestern
Steel & Wire, Nucor Corporation, Oregon Steel Mills, Inc., Quanex Corporation,
Roanoke Electric Steel, Schnitzer Steel Industries, Steel Company of West
Virginia and Steel Dynamics, Inc. (the "Comparable Companies"). This group was
selected because they are publicly traded mini-mill steel companies.
Robinson-Humphrey calculated, among other things, current market price as a
multiple of book value and as a multiple of estimated earnings per share ("EPS")
for calendar year 1998. The EPS estimates were based on the mean of publicly
available earnings estimates made by research analysts as provided by First Call
Investor Service. Robinson-Humphrey averaged the multiples of the Comparable
Companies in order to apply these multiples to the Company's values. To
accurately reflect average values for statistical purposes, Robinson-Humphrey
excluded certain outlying values that differed from the relative groupings of
the other values. Robinson-Humphrey believes that these outlying values for
certain companies reflect temporary market aberrations that can skew mean
values.

With respect to the Comparable Companies, the estimated calendar year 1998
price/earnings ratios ranged from 8.4x to 14.1x with an average of 11.0x. Based
on the Merger Consideration of $15.50 per share and using earnings estimates for
the Company from the First Call Research Network dated July 25, 1997,
Robinson-Humphrey calculated a multiple for the Company of 10.5x for calendar
year 1998. Robinson-Humphrey noted that the 1998 multiple was in line with the
multiples of the Comparable Companies.

Robinson-Humphrey also considered the current market value to book value
multiples of the Comparable Companies, which ranged from values of 0.5x to 1.8x,
with an average of 1.3x. Robinson-Humphrey noted that the Merger Consideration
implied a multiple of 1.35x, which was above the average multiple of the
Comparable Companies.

Robinson-Humphrey also considered the implied values for the Company based
on multiples of historical or last twelve months ("LTM") performance including
LTM revenues, LTM earnings before interest, taxes, depreciation and amortization
("EBITDA"), LTM earnings before interest and taxes ("EBIT") and LTM net income.
However, Robinson-Humphrey placed relatively little weight on these measures due
to its belief that these measures are based on a period in which the Company's
profitability was inflated to above industry-average levels by recent record
high prices for structural steel products, as compared to other steel products.
Robinson-Humphrey believes that these conditions are not permanently
sustainable. Therefore, Robinson-Humphrey believes that these historical values
do not reflect the likely future performance of the Company.

Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis using alternative scenarios (case(s)) developed by the
Company, as the financial extension of its general corporate planning process,
for the purpose of evaluating the financial effect on the Company of the
possible construction of additional steel production capacity from a steel mill
to be located in the Southeast portion of the United States. See "-- Certain
Financial Assumptions" and "-- Steel Production Capacity Analysis."
Robinson-Humphrey estimated the present value of the future cash flows of the
Company using certain of the information presented in such alternative financial
cases. See "Certain Financial Assumptions." Robinson-Humphrey calculated a net
present value of free cash flows (defined as earnings before interest after
taxes plus depreciation and amortization less capital expenditures and any
increase in net working capital) for the years 1998 through 2003 using discount
rates ranging from 19% to 23%. Robinson-Humphrey calculated the Company's
terminal values in the year 2003 based on multiples of year 2003 projected
EBITDA, with a midpoint of 4.5x and ranging from 3.0x to 6.0x. Robinson-Humphrey
observed that the valuation based on EBITDA produced a midpoint value of $14.98,
which was lower than the Merger Consideration of $15.50.

Minority Interest Buy-Out Analysis. Robinson-Humphrey prepared an analysis
of the premiums paid in 23 completed minority interest acquisitions by majority
interest holders occurring since January 1992. Such transactions were: (i) Kay
Holdings/Kay Industries, Inc.; (ii) Investor Group/Fretter, Inc.; (iii) Investor

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<PAGE> 28

Group/United Medical Corp.; (iv) National Mutual Insurance Co./Celina Financial
Corp.; (v) REMED, Inc./Humphrey, Inc.; (vi) Investor Group/Enquirer/Star Group,
Inc.; (vii) Investor Group/LDB Corp.; (viii) Freeman Spogli & Co./Koll
Management Services; (ix) LinPac Mouldings Ltd./Ropak Corp.; (x) BIC SA/Bic
Corp.; (xi) Berkshire Hathaway, Inc./GEICO Corp.; (xii) Investor Group/Syms
Corp.; (xiii) SCOR/SCOR US Corp.; (xiv) Investor Group/NPC International, Inc.;
(xv) Equity Holdings Ltd./ Great American Management & Investments, Inc.; (xvi)
Novartis AG/SyStemix, Inc.; (xvii) Seaboard Acquisition Partners/Seaboard Oil
Co.; (xviii) Electromagnetic Sciences, Inc./LXE Inc.; (xix) Renco Group,
Inc./WCI Steel, Inc.; (xx) Andrews Group, Inc./Toy Biz, Inc.; (xxi) JW Childs
Equity Partners, LP/Central Tractor Farm & Country; (xxii) Mafco Holdings,
Inc./Mafco Consolidated Group; and (xxiii) Gold Kist/Golden Poultry Company.

Robinson-Humphrey considered, among other factors, the percentage of the
target's shares held by the acquirer at the time of the announcement, and the
premiums paid based on the closing price of the target's shares at one day, one
week and four weeks prior to the announcement. Robinson-Humphrey calculated
median premiums of 22.1%, 25.9% and 33.3% at one day, one week and four weeks
prior to announcement, respectively. These premiums, based on the announcement
date of May 22, 1997, imply per share equity values for the Company of $15.72,
$15.58 and $15.50 respectively.

Adjusted Book Value Analysis. Robinson-Humphrey considered the book value
per share of the Company and compared this to the Merger Consideration.
Robinson-Humphrey noted that the Company's assets had been depreciated rapidly
over time and believed that in order to properly value the assets, it was
appropriate to consider the true economic value of the assets by adjusting the
assets for previous depreciation. This analysis resulted in book values ranging
from $14.84 to $17.57 after adding back 50% to 75% of accumulated depreciation,
respectively. Robinson-Humphrey noted that the Merger Consideration of $15.50
was slightly higher than the average adjusted book value of $15.40 after adding
back 55% of accumulated depreciation.

Steel Production Capacity Analysis. Robinson-Humphrey conducted an analysis
of five investments in steel production capacity within the industry. Of these
five additions, one is in the planning stage by the Company for construction in
the Southeast portion of the United States. The others are as follows: Steel
Dynamics, Butler, Indiana; IPSCO, Muscatine, Iowa; Nucor Berkeley, Berkeley,
South Carolina; and Gallatin Steel, Ghent, Kentucky. These additions reflect the
capital expenditures or investments that the Company and other steel producers
have committed or plan to commit in order to expand capacity. Robinson-Humphrey
calculated implied values for the Company using new mill construction costs as
an estimate of replacement cost. The equity value of the Company can be
calculated by subtracting the net debt of the Company from the implied
replacement cost estimate. Based on the capital required to be committed and the
additional capacity to be realized, such additional capacity will result in a
range of $207.14 per ton of steel produced per year to $390.00 per ton of steel
produced per year with an average of $301.48 per ton of steel produced per year.
This implies a per share equity value of $15.25 for the Company's current
1,605,000 tons per year capacity. Robinson-Humphrey noted that this analysis
implied values for the Company's shares slightly lower than the Merger
Consideration.

Summary

The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying Robinson-Humphrey's opinion. In arriving at its fairness
determination, Robinson-Humphrey considered the results of all such analyses.
Robinson-Humphrey did not separately consider the extent to which any one of the
analyses supported or did not support the Robinson-Humphrey fairness opinion. No
company or transaction used in the above analyses as a comparison is identical
to the Company or TXI or the company resulting from the contemplated merger. The
analyses were prepared solely for purposes of Robinson-Humphrey in providing its
opinion to the Special Committee as to the fairness of the $15.50 per share
Merger Consideration to be received by the Public Stockholders in the Merger and
do not purport to be appraisals or necessarily reflect the

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<PAGE> 29

prices at which businesses or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of the Company, TXI, Robinson-Humphrey or any
other person assumes responsibility if future results are materially different
from those forecast.

As described above, Robinson-Humphrey's opinion to the Special Committee
was one of the factors taken into consideration by the Special Committee in
making its determination to approve the Merger Agreement. The foregoing summary
does not purport to be a complete description of all of the analyses performed
by Robinson-Humphrey, but does include a summary description of all material
analyses, and is qualified by reference to the written opinion of
Robinson-Humphrey, dated the date of this Proxy Statement, set forth in Annex C
hereto.

Robinson-Humphrey, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and other valuation services. The Special Committee selected
Robinson-Humphrey as financial advisor to the Special Committee because it is a
nationally recognized investment banking firm that has substantial experience in
transactions similar to the Merger. As compensation for its services, the
Company has paid Robinson-Humphrey a total fee of $250,000. The Company will
also reimburse Robinson-Humphrey for its reasonable out-of-pocket expenses
incurred in performing its services.

TXI'S FINANCIAL ADVISOR

TXI engaged SBC Warburg Dillon Read to act as TXI's financial advisor in
connection with the proposed Merger. SBC Warburg Dillon Read's engagement was
formalized in an engagement letter dated July 7, 1997. SBC Warburg Dillon Read
was retained by TXI to act as TXI's financial advisor to assist TXI in analyzing
the value of the Company and to advise TXI with respect to and assist it in
negotiating the terms of the proposed Merger. SBC Warburg Dillon Read was not
retained to, and was not expected to, render any advice or opinion as to the
fairness, from a financial point of view, to the Public Stockholders of the
consideration to be received by them in the proposed Merger.

In connection with its engagement as TXI's financial advisor, SBC Warburg
Dillon Read made a written and oral presentation to the TXI Board of Directors
on May 22, 1997. SBC Warburg Dillon Read did not address TXI's underlying
business decision to proceed with the proposed Merger and did not make any
recommendation to the TXI Board of Directors, or the Company's Board of
Directors or the Public Stockholders, with respect to any approval of the
proposed Merger.

The Company had no role in TXI's selection of SBC Warburg Dillon Read or in
formulating any of the terms under which SBC Warburg Dillon Read was to prepare
its presentation to the TXI Board of Directors. Neither the Company nor TXI
imposed any limitation upon SBC Warburg Dillon Read with respect to the
investigations made, or the procedures followed, by SBC Warburg Dillon Read in
formulating its presentations and advice, except that SBC Warburg Dillon Read
was not requested or authorized to solicit, and did not solicit, other potential
purchasers of the Company or TXI's position in the Company.

In formulating its written and oral presentations, SBC Warburg Dillon Read,
among other things: (i) reviewed certain publicly available business and
historical financial information relating to TXI and the Company; (ii) reviewed
certain financial forecasts, pro forma financial statements giving effect to the
proposed Merger and certain other data provided to SBC Warburg Dillon Read by
TXI and the Company relating to the business and prospects of the Company; (iii)
conducted discussions with members of senior management of TXI and the Company
with respect to, among other things, the business and prospects of TXI and the
Company; (iv) reviewed the historical market trading prices and volumes of the
Common Shares; (v) reviewed publicly available financial and stock market data
with respect to certain other companies in lines of business that SBC Warburg
Dillon Read believed were generally comparable to those of the Company; (vi)
compared the proposed financial terms of the proposed Merger with the financial
terms of

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<PAGE> 30

certain other mergers and acquisitions that SBC Warburg Dillon Read believed
were generally comparable to the proposed Merger; (vii) considered the pro forma
financial effects of the proposed Merger on TXI; and (viii) conducted such other
financial studies, analyses and investigations, and considered such other
information, as SBC Warburg Dillon Read deemed relevant.

SBC Warburg Dillon Read also considered such financial and other factors as
it deemed appropriate under the circumstances and took into account its
assessment of general economic, market and financial conditions and its
experience in other merger and acquisition transactions. SBC Warburg Dillon
Read's written and oral presentations were necessarily based upon conditions as
they existed and could be evaluated on the date thereof and the information made
available to SBC Warburg Dillon Read through the date thereof.

In conducting its review and preparing its presentations, as contemplated
under the terms of its engagement by TXI, SBC Warburg Dillon Read relied upon
the accuracy and completeness of all financial and other information provided to
it or publicly available, and did not assume any responsibility in any respect
for the accuracy, completeness or reasonableness of, or any obligation to
verify, the same or to conduct any appraisal of assets. Without limiting the
generality of the foregoing, SBC Warburg Dillon Read relied upon the management
of TXI and the management of the Company as to the reasonableness of the pro
forma financial statements (including the underlying assumptions, the
adjustments giving effect thereto and the allocation of such adjustments)
provided to SBC Warburg Dillon Read, and SBC Warburg Dillon Read assumed that
the forecasts and projections provided to it reflected the best currently
available estimates and judgments of the management of TXI and the management of
the Company and that such projections and forecasts would be realized in the
amounts and in the time periods estimated by the managements of TXI and the
Company. In connection with preparing its presentations, SBC Warburg Dillon Read
did not make or seek to obtain appraisals of all or any part of the Company's or
TXI's assets.

At the May 22, 1997 meeting of the TXI Board of Directors, SBC Warburg
Dillon Read made a written and oral presentation to the TXI Board of Directors
in which SBC Warburg Dillon Read presented an overview of the current situation,
presented a preliminary valuation discussion, generally analyzed premiums
payable in "going private" transactions and analyzed the pro forma impact to TXI
of the purchase of the shares held by the Public Stockholders. SBC Warburg
Dillon Read was not requested to, and did not, offer any opinion as to the
fairness of the consideration to the stockholders of TXI or the Public
Stockholders. SBC Warburg Dillon Read's presentation did not constitute a
recommendation to the TXI Board of Directors and does not constitute a
recommendation to the Public Stockholders to vote in favor of the proposed
Merger. The preliminary valuation ranges discussed with the TXI Board of
Directors reflect theoretical values for the Company and do not purport to
represent an appraisal of the fair value of the Company.

Prior to making its oral presentation to the TXI Board of Directors, SBC
Warburg Dillon Read distributed copies of its written presentation to the Board.
SBC Warburg Dillon Read discussed certain financial and comparative analyses
contained in its written presentation and other matters it deemed relevant. The
various topics discussed with the TXI Board were:

Overview of Current Situation. SBC Warburg Dillon Read reviewed with
the TXI Board the proposal to repurchase the minority 15% interest in the
Company held by the public. SBC Warburg Dillon Read noted that it
understood that the purchase of the 15% interest not already owned by TXI
would eliminate management distractions related to governance and investor
relations issues and simplify cash flow accounting. SBC Warburg Dillon Read
also noted that the transaction, if properly financed, would be modestly
accretive to TXI by eliminating the minority interest from TXI's income
statement without increasing the number of outstanding shares of TXI common
stock, provided that the after-tax interest attributable to any such
financing was less than the amount of such minority interest. SBC Warburg
Dillon Read did not quantify the estimated amount of such modest accretion.
In addition, SBC Warburg Dillon Read noted that there was little benefit to
valuation for either TXI or the Company under the current structure.

SBC Warburg Dillon Read analyzed the historical stock prices of TXI
and the Company as compared to the S&P 500 Stock Index, observing that TXI
has delivered substantial share appreciation

26
<PAGE> 31

to investors over the past five years, but the Company has not. SBC Warburg
Dillon Read also observed that the current configuration of 15% minority
interest does not appear to enhance the valuation, credit standing or
capital raising capabilities of either company. From TXI's perspective, SBC
Warburg Dillon Read noted that the proposed Merger would enable TXI to
consolidate debt at the parent company level and to capture 100% of the
Company's cash flow, which is substantially greater than the amount TXI has
received in dividends. The proposed Merger also would make TXI's cash flows
available to the Company and would eliminate minority interest accounting
from the consolidated financial statements. Finally, SBC Warburg Dillon
Read discussed the effects of the elimination of the pure "steel" play
opportunity for investors and the capital to be expended by TXI in the
proposed Merger.

Preliminary Valuation Discussion. SBC Warburg Dillon Read analyzed the
Company's current stock price, noting that the Company then was valued on
an equity basis at $340.6 million, determined by multiplying the 28.4
million outstanding shares of Common Stock by the current stock price of
$12.00 per share. SBC Warburg Dillon Read noted that, since its initial
public offering on July 7, 1988, the Company has traded in a range of
$16.75 to $6.00 per share.

SBC Warburg Dillon Read discussed comparable company valuations with
the TXI Board of Directors. The comparable companies analyzed by SBC
Warburg Dillon Read were Commercial Metals, Steel of West Virginia, NS
Group, Birmingham and Oregon Steel (the "Tier I Steel Index") and
Birmingham Steel, Oregon Steel and NW Steel (the "Tier II Steel Index").
SBC Warburg Dillon Read noted that investors tend to value steel companies
based upon their prospects for future growth, the price and business cycle
of steel products in respective markets, their cost structure and the
individual characteristics of each company. Other factors that affect a
stock's value are research analyst coverage (where the Company ranks fifth
out of eight public companies), the public float (where the Company ranks
eighth out of eight public companies) and average trading volume (where the
Company ranks seventh out of eight public companies) and aggregate equity
market capitalization (where the Company ranks fourth out of eight public
companies).

SBC Warburg Dillon Read presented a chart of stock prices showing that
the Company's stock performance since its initial public offering has
lagged its peers in the Tier I Steel Index. This chart showed graphically
that the Company's stock price was below the Tier I Steel Index for almost
all dates shown. SBC Warburg Dillon Read did not quantify either how far
below the Tier I Steel Index the Company's stock price has historically
traded or the amount of the discount the Company trades at compared to this
index on a forward trading basis. SBC Warburg Dillon Read presented graphs
of the respective stock prices for the period, which graphs visually
demonstrated that the Company's stock price has historically traded at a
discount to the Tier I Steel Index and that the Company's stock price
trades at a discount to the Tier I Steel Index on a forward earnings basis.
SBC Warburg Dillon Read also presented a chart showing the month-end stock
prices for the period from January 1, 1994 through April 30, 1997 of the
Company and an index composed of Birmingham Steel, Oregon Steel, Commercial
Metals and Steel of West Virginia divided by estimated earnings per share
one year forward. The chart showed graphically that the Company traded at a
discount compared to this index on a forward earnings basis for most
months, but traded at a premium during January 1994 through July 1994,
March 1995 through June 1995 and December 1996. The forward earnings
estimates for each month end during the period were calculated from I/B/E/S
estimates in effect at the time. Based on these future earnings estimates,
SBC Warburg Dillon Read calculated an implied average equity value for the
Tier I Steel Index companies of $323 million and an implied average equity
value for the Tier II Steel Index companies of $370 million. SBC Warburg
Dillon Read also calculated the Company's actual equity value of $341
million, and concluded that the Company is reasonably valued compared to
its peers.

Premiums Payable in Minority Buy-In Programs. SBC Warburg Dillon Read
generally discussed with the TXI Board of Directors the financial aspects
of minority buy-in programs, and discussed average premiums paid over
target stock prices before the date of announcement of a proposed
transaction. SBC Warburg Dillon Read noted that the average premium (for
transaction values of $10 million or greater) over the past five years were
22.2% one day prior to announcement and 32.3% four weeks prior to
announcement of a proposed transaction.

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<PAGE> 32

Pro Forma Impact of the Proposed Merger. SBC Warburg Dillon Read
analyzed TXI's pro forma balance sheet at February 28, 1997 giving effect
to the proposed Merger, and analyzed TXI's projected 1997 income statement
giving pro forma effect to the proposed Merger, in each case assuming a
price of $12.00 per share of Common Stock. SBC Warburg Dillon Read reviewed
the following balance sheet items at February 28, 1997: cash, current
assets, property, plant and equipment, net, other assets,
acquisition-related goodwill, total assets, current liabilities, total
debt, debt acquisitions-related, total debt, minority interest, common
stock and total liabilities and equity. SBC Warburg Dillon Read reviewed
the following income statement items for the 12 months ended February 28,
1997: earnings before interest and taxes, interest expense, earnings before
taxes, tax expense, minority interest, pre-acquisition net income,
acquisition-related adjustments (goodwill, minority interest and interest
expense), pro forma net income, pre-acquisition earnings per share, pro
forma earnings per share, fully-diluted shares outstanding,
acquisition-related shares outstanding and pro forma shares outstanding.
SBC Warburg Dillon Read considered all of these items to be important to
this analysis. SBC Warburg Dillon Read noted that, assuming a closing stock
price of $12.00 per share, the transaction would result in creation of
$17.6 million of acquisition-related goodwill and $52.8 million of
acquisition-related debt, and would eliminate $35.3 million of minority
interest, on a pro forma February 28, 1997 balance sheet. SBC Warburg
Dillon Read also noted that, based on the same assumptions, the transaction
would increase goodwill by $0.5 million, would decrease minority interest
by $6.6 million and would increase interest expense by $3.4 million, on a
pro forma income statement for the 12 months ended February 28, 1997. SBC
Warburg Dillon Read's analysis was presented to the TXI Board of Directors
on May 22, 1997, more than two months prior to the negotiation of the
$15.50 per share transaction price, and SBC Warburg Dillon Read did not
make any presentation to the TXI Board of the pro forma impact of the
transaction at any price other than the $12.00 per share assumed closing
price noted above.

The summary set forth above discusses all of the analyses presented to the
Board of Directors by SBC Warburg Dillon Read. This summary is a summary only.
The analyses performed by SBC Warburg Dillon Read must be considered as a whole
and selecting portions of those analyses and the factors considered by SBC
Warburg Dillon Read, without considering all of the factors and analyses, could
create an incomplete view of the processes underlying SBC Warburg Dillon Read's
presentations.

The preparation of such presentations is a complex process and not
necessarily susceptible to partial analyses of summary description. In
performing its analyses, SBC Warburg Dillon Read made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of TXI or the Company. The
analyses performed by SBC Warburg Dillon Read are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than that suggested by such analyses. The analyses do not purport to
be appraisals or reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the current time or at any time
in the future. In addition, SBC Warburg Dillon Read may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions so that the ranges of
valuations resulting from any particular analysis described above should not be
taken to be SBC Warburg Dillon Read's view of the actual value of the shares of
Common Stock.

TXI retained SBC Warburg Dillon Read as its financial advisor based upon
SBC Warburg Dillon Read's reputation as a leading investment banking firm and
SBC Warburg Dillon Read's depth of experience in merger and acquisition
transactions. SBC Warburg Dillon Read is an internationally recognized
investment banking and advisory firm. SBC Warburg Dillon Read, as part or its
investment banking and advisory business, is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. SBC Warburg Dillon Read has
performed and continues to perform investment banking services for TXI and the
Company, for which it has received customary fees. In addition, in the ordinary
course of its business, SBC Warburg Dillon Read trades the securities of TXI and
the Company and at any time may hold a long or short position in such
securities.

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<PAGE> 33

Pursuant to its engagement letter with the Company, SBC Warburg Dillon Read
for its work in connection with the Merger will be entitled to a fee of $750,000
upon the closing of the proposed Merger and to reimbursement for its reasonable
expenses, including the fees and disbursements of its counsel. In addition, TXI
has agreed to indemnify SBC Warburg Dillon Read against certain liabilities,
including liabilities under the federal securities laws.

A copy of the written presentation by SBC Warburg Dillon Read to the TXI
Board of Directors at the May 22, 1997 meeting has been filed as an exhibit to
the Schedule 13E-3 and is available for inspection and copying at the principal
executive offices of the Company during its regular business hours by any
stockholder or any representative of a stockholder who has been so designated in
writing. A copy of such presentation shall be provided to any stockholder or any
representative of a stockholder who has been so designated in writing upon
written request and at the expense of the requesting stockholder or
representative. References contained in such presentation to the "Company" are
to TXI and not to Chaparral Steel Company.

PLANS FOR THE COMPANY AFTER THE MERGER

Except as indicated in this Proxy Statement, TXI does not have any present
plans or proposals which relate to or would result in an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries or affiliates or a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries or
affiliates.

Upon consummation of the Merger, TXI intends to retain the Company as a
wholly-owned subsidiary of TXI. TXI anticipates that the assets, business and
operations of the Company and its subsidiaries and affiliates will be continued
substantially as they are currently being conducted. Management of TXI may,
however, cause the Company to make such changes as are deemed appropriate and
intends to continue to review the Company and its assets, businesses,
operations, properties, policies, corporate structure, capitalization and
management and consider if any changes would be desirable in light of the
circumstances then existing.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Ownership of Public Shares by Directors and Executive Officers of the
Company. The following table sets forth, as of June 30, 1997, the number of
Public Shares beneficially owned by, and the aggregate amounts to be received
by, each executive officer and director of the Company who owns any Public
Shares. Other than the individuals named below, no executive officer or director
of the Company beneficially owns any Public Shares. Except as otherwise noted,
each individual has sole power to vote and sole power to dispose of all of his
Public Shares.

<TABLE>
<CAPTION>
NUMBER OF
PUBLIC SHARES
DIRECTOR/ BENEFICIALLY AMOUNT TO BE
EXECUTIVE OFFICER OWNED(1) RECEIVED(2)
----------------- ------------- ------------
<S> <C> <C>
Robert Alpert(4)............................................ 5,000 $ 87,060
Dennis E. Beach(3).......................................... 7,857 $ 125,234
John M. Belk(4)............................................. 12,000 $ 195,560
Larry L. Clark(3)........................................... 38,081 $ 290,306
Gordon E. Forward(3)........................................ 149,100 $1,152,800
David A. Fournie(3)......................................... 50,100 $ 353,150
Richard M. Fowler(3)........................................ 58,700 $ 371,175
Gerald R. Heffernan(4)...................................... 4,000 $ 71,560
H. Duff Hunt(3)............................................. 32,877 $ 198,544
Richard T. Jaffre(3)........................................ 48,700 $ 327,425
Robert C. Moore(3).......................................... 26,800 $ 145,050
Eugenio Clariond Reyes(4)................................... 4,000 $ 71,560
Robert D. Rogers(4)(5)...................................... 150,800 $1,363,150
Libor F. Rostik(3).......................................... 39,900 $ 255,688
Peter H. Wright(3).......................................... 47,600 $ 310,375
Directors and Executive Officers as a group (15 persons).... 675,515 $5,318,638
</TABLE>

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<PAGE> 34

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

(1) Includes, with respect to such person, Common Shares subject to options
exercisable within 60 days of June 30, 1997, as follows: Robert Alpert,
4,000 shares; Dennis E. Beach, 6,600 shares; John M. Belk, 4,000 shares;
Larry L. Clark, 37,600 shares; Gordon E. Forward, 134,000 shares; David A.
Fournie, 50,100 shares; Richard M. Fowler, 57,600 shares; Gerald R.
Heffernan, 4,000 shares; H. Duff Hunt, 32,800 shares; Richard T. Jaffre,
47,600 shares; Robert C. Moore, 26,200 shares; Eugenio Clariond Reyes, 4,000
shares; Robert D. Rogers, 106,000 shares; Libor F. Rostik, 39,900 shares;
Peter H. Wright, 47,600 shares; and all directors and executive officers as
a group, 602,000 shares.

(2) Includes amounts to be received by such person relating to the cancellation
of options as follows: Robert Alpert, $71,560; Dennis E. Beach, $105,750;
John M. Belk, $71,560; Larry L. Clark, $282,850; Gordon E. Forward,
$919,800; David A. Fournie, $353,150; Richard M. Fowler, $354,125; Gerald R.
Heffernan, $71,560; H. Duff Hunt, $197,350; Richard T. Jaffre, $310,375;
Robert C. Moore, $135,125; Eugenio Clariond Reyes, $71,560; Robert D.
Rogers, $668,750; Libor F. Rostik, $255,688; and Peter H. Wright, $310,375.
A portion of such consideration will be paid to such persons during
subsequent years as the options mature.

(3) Indicates that such person is an executive officer of the Company.

(4) Indicates that such person is a director of the Company.

(5) Includes 4,000 Public Shares owned by Mr. Rogers' wife as separate property
as to which Mr. Rogers disclaims beneficial ownership.

Ownership of Common Stock of TXI by Directors and Executive Officers of the
Company. The following table sets forth, as of June 30, 1997, the number of
shares of TXI common stock beneficially owned by each executive officer and
director of the Company. Except as otherwise noted, each individual has sole
power to vote and sole power to dispose of all of his shares of TXI common
stock.

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF TXI
COMMON STOCK
DIRECTOR/ BENEFICIALLY PERCENT OF
EXECUTIVE OFFICER OWNED(1) CLASS(2)
----------------- ------------- ----------
<S> <C> <C>
Robert Alpert(4)............................................ 12,110 *
Dennis E. Beach(3).......................................... 189 *
John M. Belk(4)............................................. None *
Larry L. Clark(3)........................................... 206 *
Gordon E. Forward(3)........................................ 41,140 *
David A. Fournie(3)......................................... 110 *
Richard M. Fowler(3)........................................ 125,264 *
Gerald R. Heffernan(4)(5)................................... 255,000 1.2%
H. Duff Hunt(3)............................................. None *
Richard T. Jaffre(3)........................................ None *
Robert C. Moore(3).......................................... 52,844 *
Eugenio Clariond Reyes(4)................................... None *
Robert D. Rogers(4)......................................... 382,906 1.8%
Libor F. Rostik(3).......................................... 14 *
Peter H. Wright(3).......................................... None *
Directors and Executive Officers as a group (15 persons).... 869,783 4.1%
</TABLE>

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

* Represents less than one percent (1%) of the total number of shares
outstanding.

(1) Includes, with respect to such person shares of TXI common stock subject to
options exercisable within 60 days of June 30, 1997, as follows: Robert
Alpert, 6,000 shares; Richard M. Fowler, 43,200 shares; Gerald R. Heffernan,
14,000 shares; Robert C. Moore, 32,000 shares; Robert D. Rogers, 82,000
shares; and all directors and executive officers as a group, 387,174 shares.

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<PAGE> 35

(2) Based on the sum of (i) 20,900,375 shares of TXI common stock, which on June
30, 1997, was the approximate number of shares outstanding, and (ii) the
number of shares subject to options exercisable by such person within 60
days of such date.

(3) Indicates that such person is an executive officer of the Company.

(4) Indicates that such person is a director of the Company.

(5) Includes 8,000 shares of TXI common stock owned by the wife of Mr.
Heffernan, as to which Mr. Heffernan disclaims beneficial ownership.

The Merger Agreement provides that at the Effective Time each holder of a
currently exercisable option to purchase Common Shares will become entitled to
receive cash in an amount equal to the product of (i) the excess, if any, of the
Merger Consideration over the applicable exercise price of the option and (ii)
the number of Common Shares subject to such option that are then currently
exercisable. After the Effective Time, the portion of the option that is not
currently exercisable at the Effective Time will be carried forward and will,
upon becoming exercisable, confer the right to receive for each Common Share
subject thereto, upon payment of the applicable exercise price per share, the
Merger Consideration, in cash, without interest. See "The
Merger -- General -- Treatment of Stock Options."

Directors and Officers. Pursuant to the Merger Agreement, the directors and
officers of the Company initially will remain the directors and officers,
respectively, of the Surviving Corporation.

Each member of the Special Committee received $14,000 in the Company's
fiscal year ended May 31, 1997 for his service as a director.

Indemnification. TXI agreed in the Merger Agreement, that the Company, in
its capacity as the Surviving Corporation, shall provide with respect to each
present or former director and officer of the Company and its subsidiaries and
affiliates (both present and past) (the "Indemnified Parties") the
indemnification rights (including any rights to advancement of expenses) which
such Indemnified Parties had, from the Company, or such subsidiary or affiliate,
immediately prior to the Effective Time of the Merger, whether under the DGCL or
the Company's certificate of incorporation, the Company's bylaws or the bylaws
of such subsidiary or affiliate or otherwise. Such indemnification rights
include indemnification of any Indemnified Party who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company), including proceedings
involving alleged violations of the federal securities laws, provided the
Indemnified Party acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, provided such Indemnified Party had no
reasonable cause to believe his or her conduct was unlawful. Any such
indemnification (unless ordered by a court) must be made only as authorized in
the specific case upon a determination that the indemnification of the
Indemnified Party is proper in the circumstances because the person has met the
applicable standard of conduct. Insofar as indemnification for liabilities
arising under the federal securities laws may be permitted to an Indemnified
Party, the Company has been advised that in the opinion of the SEC such
indemnification is against public policy and is, therefore, unenforceable. See
"The Merger -- General -- Indemnification."

Tax Sharing Agreement. TXI and the Company are parties to a tax sharing
agreement whereby the Company and its subsidiaries are included in the
consolidated income tax return of TXI. The agreement provides that the Company
will account for income taxes on a stand-alone basis. Accordingly, the Company
makes payments to or receives payments from TXI in amounts equal to the income
taxes it would have otherwise paid or received as a stand-alone company.

CERTAIN EFFECTS OF THE MERGER

As a result of the Merger, the entire equity interest of the Company will
be owned by TXI. Therefore, following the Merger the Public Stockholders will no
longer benefit from any increases or bear the risk of any decreases in the value
of the Company. The Public Stockholders will have no continuing interest in the
Company following the Merger. As a result, the Common Shares will no longer meet
the requirements of the

31
<PAGE> 36

NYSE for continued listing and will, therefore, be delisted from the NYSE. The
Common Shares are currently registered as a class of securities under the
Exchange Act. Registration of the Common Shares under the Exchange Act will be
terminated upon application of the Company to the SEC upon consummation of the
Merger.

CERTAIN LITIGATION

On May 29, 1997, a lawsuit was filed in the Delaware Court of Chancery by a
stockholder of the Company. This action was purportedly brought as a class
action on behalf of all Public Stockholders and named the Company, its directors
and TXI as defendants alleging that they breached their fiduciary duties to the
plaintiff and the other Public Stockholders in connection with TXI's original
proposal to acquire the Public Shares for $14.25 per share in cash, without
interest. The defendants intend to vigorously defend this lawsuit.

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a general summary of the material federal income tax
consequences of the Merger to the holders of the Public Shares and to the
Company under the law in effect as of the date hereof. The following discussion
is for general information only, and may not apply to particular categories of
holders, such as financial institutions, broker-dealers and tax-exempt entities.
ALL HOLDERS OF THE PUBLIC SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
TAX CONSEQUENCES OF THE MERGER TO THEM WITH SPECIFIC REFERENCE TO THEIR
PARTICULAR TAX SITUATIONS, INCLUDING SUCH TAX CONSEQUENCES UNDER STATE, LOCAL
AND FOREIGN TAX LAWS.

The exchange of Public Shares for cash in connection with the Merger will
be a taxable transaction to the Public Stockholders for federal income tax
purposes. In general, a Public Stockholder will recognize gain or loss in an
amount equal to the difference between the cash received and such Public
Stockholder's tax basis in such Public Shares. Such gain or loss will be a
capital gain or loss if such Public Stockholder has held such Public Shares as
capital assets within the meaning of section 1221 of the Internal Revenue Code
of 1986, as amended. Capital gain or loss will be a long-term capital gain or
loss if such Public Stockholder has held Public Shares for more than one year as
of the date of exchange. There are certain limitations on the deductibility of
capital losses. Public Stockholders who also own, directly or by attribution,
stock of TXI as of the date of exchange should consult their own tax advisors
regarding the possibility that the cash received will be treated as a dividend.

Pursuant to the Taxpayer Relief Act of 1997, the maximum rate of tax on the
net capital gain of individuals was reduced from 28% to 20%. The lower rate does
not apply to sales or exchanges of capital assets held for 18 months or less.
The 28% maximum rate continues to apply to individuals making sales or exchanges
of capital assets held for more than one year but not more than 18 months.
Corporations do not benefit from a tax rate preference with respect to net
capital gains.

Cash received in exchange for Public Shares in the Merger may be subject to
a backup withholding tax at a rate of 31% unless the relevant Public Stockholder
is an exempt recipient or complies with certain identification procedures.

The Company will not recognize gain or loss for federal income tax purposes
as a result of the Merger.

CERTAIN RELATIONSHIPS

Locke Purnell, counsel for TXI, represents the Company on certain routine
litigation matters from time to time.

32
<PAGE> 37

FEES AND EXPENSES

Estimated fees and expenses incurred or to be incurred by the Company in
connection with the Merger are approximately as follows:

<TABLE>
<S> <C>
Investment banking fees and expenses........................ $275,000
Legal fees and expenses..................................... $ 87,500
SEC filing fee.............................................. $ 15,260
Printing and mailing fees................................... $ 80,000
Paying Agent fees........................................... $ 10,000
Miscellaneous expenses...................................... $ 20,240
Total............................................. $488,000
</TABLE>

For information regarding Robinson-Humphrey's engagement by the Special
Committee, see "-- Opinion of Robinson-Humphrey; Summary of Financial Analyses."

Estimated fees and expenses incurred or to be incurred by TXI in connection
with the Merger are investment banking fees and expenses of $750,000, legal fees
and expenses of $100,000, and miscellaneous fees of $10,000. For information
regarding SBC Warburg Dillon Read's engagement by TXI, see "-- TXI's Financial
Advisor."

Neither TXI nor the Company will pay any fees or commissions to any broker
or dealer or any other person (other than Robinson-Humphrey, SBC Warburg Dillon
Read and the Paying Agent) for soliciting Public Shares pursuant to the Merger.
Brokers, dealers, commercial banks and trust companies will, upon request, be
reimbursed by the Company for reasonable and necessary costs and expenses
incurred by them in forwarding materials to their customers.

THE MERGER

GENERAL

The following is a summary of the material provisions of the Merger
Agreement. A copy of the Merger Agreement is attached hereto as Annex A.

The Merger. The Merger Agreement provides for the merger of TXI Acquisition
with and into the Company. The Company will be the Surviving Corporation and it
will continue its corporate existence under the laws of the State of Delaware.
At the Effective Time, the separate corporate existence of TXI Acquisition shall
cease. The Surviving Corporation shall possess all the rights, privileges,
immunities, powers and purposes of TXI Acquisition, and the Company shall assume
and become liable for all liabilities and obligations of TXI Acquisition.

Effective Time of Merger. The Effective Time will occur upon the filing of
a Certificate of Merger with the Secretary of State of Delaware. The Certificate
of Merger will be filed as soon as practicable after requisite approval and
adoption of the Merger Agreement by the stockholders of the Company at the
Special Meeting and the satisfaction of the other conditions precedent to the
consummation of the Merger. See "-- Conditions of the Merger; Amendments,
Waiver, and Termination."

Treatment of Public Shares in the Merger. At the Effective Time, each
Public Share outstanding immediately prior to the Effective Time, except for
Dissenting Shares, shall by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive the Merger
Consideration, upon surrender of the certificate representing such Public Share.

Holders of Public Shares who do not vote in favor of the Merger at the
Special Meeting and who shall have properly elected to dissent in the manner
provided in Section 262 of the DGCL shall be entitled to payment of the fair
value of their Public Shares in accordance with the provisions of Section 262.
See "-- Appraisal Rights."

33
<PAGE> 38

The outstanding shares of common stock of TXI Acquisition immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and exchangeable for one
fully-paid and non-assessable Common Share of the Surviving Corporation.

Treatment of Stock Options. At the Effective Time, each holder of an option
to purchase Common Shares issued pursuant to the Company's 1989 Stock Option
Plan, as amended ("Stock Option Plan"), will become entitled to receive for each
option held as of the Effective Time, an amount in cash equal to the product of
(i) the excess, if any, of the Merger Consideration over the applicable exercise
price of such option and (ii) the number of Common Shares subject to such option
that are then currently exercisable in accordance with the provisions of the
Stock Option Plan immediately prior to the Effective Time. After the Effective
Time, the portion of the option that is not currently exercisable at the
Effective Time will be carried forward and will, upon becoming exercisable, (i)
confer the right to receive, for each Common Share subject thereto, upon payment
of the applicable exercise price per share, the Merger Consideration, in cash,
without interest, and (ii) remain subject to all of the terms and conditions
(including with respect to the exercisability thereof) applicable thereto
pursuant to the related option agreement and the Stock Option Plan.

Exchange of Share Certificates. TXI has designated ChaseMellon Shareholder
Services to act as the Paying Agent under the Merger Agreement. Prior to the
Effective Time, TXI shall, or TXI shall cause TXI Acquisition to, deposit in
trust with the Paying Agent, cash in an aggregate amount equal to the product
of: (i) the number of Public Shares outstanding immediately prior to the
Effective Time (other than Dissenting Shares); and (ii) the Merger Consideration
(such amount being hereinafter referred to as the "Exchange Fund"). The Paying
Agent shall, pursuant to irrevocable instructions, make the payments provided
for under the Merger Agreement out of the Exchange Fund.

Promptly after the Effective Time, the Surviving Corporation shall cause
the Paying Agent to mail to each holder of record as of the Effective Time of an
outstanding certificate or certificates for Public Shares (the "Certificates"),
a letter of transmittal and instructions for use in effecting the surrender of
such Certificates for payment in accordance with the Merger Agreement. Upon the
surrender to the Paying Agent of a Certificate, together with a duly executed
letter of transmittal, the holder thereof shall be entitled to receive cash in
an amount equal to the product of the number of Public Shares represented by
such Certificate and the Merger Consideration, less any applicable withholding
tax, and such Certificate shall then be canceled.

Until surrendered pursuant to the procedures described above, each
Certificate (other than Certificates representing Dissenting Shares) shall
represent for all purposes solely the right to receive the Merger Consideration
in cash multiplied by the number of Public Shares evidenced by such Certificate,
without interest thereon.

After the Effective Time, there shall be no transfers on the stock transfer
books of the Surviving Corporation of Public Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for an amount in cash equal to the Merger Consideration multiplied
by the number of Public Shares evidenced by such Certificate, without any
interest thereon.

Any portion of the Exchange Fund which remains unclaimed by the Public
Stockholders for one year after the Effective Time (including any interest,
dividends, earnings or distributions received with respect thereto) shall be
repaid to the Surviving Corporation, upon demand. Any Public Stockholders who
have not complied with the procedures set forth above shall look only to the
Surviving Corporation for payment of their claim for the Merger Consideration
per Public Share, without interest thereon, but shall have no greater rights
against the Surviving Corporation than may be accorded to general creditors of
the Surviving Corporation under Delaware law. Notwithstanding the foregoing,
neither the Paying Agent nor any party to the Merger Agreement shall be liable
to any holder of Certificates formerly representing Public Shares for any amount
to be paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.

Withholding Rights. Pursuant to the Merger Agreement, TXI, TXI Acquisition,
the Surviving Corporation and the Paying Agent are entitled to deduct and
withhold from the amounts payable to any holder of

34
<PAGE> 39

Public Shares such amounts as TXI, TXI Acquisition, the Surviving Corporation or
the Paying Agent is required to deduct and withhold with respect to the making
of such payment under applicable tax law. To the extent that amounts are so
deducted and withheld by TXI, TXI Acquisition, the Surviving Corporation or the
Paying Agent, such amounts shall be treated for all purposes of the Merger
Agreement as having been paid to the relevant holder of Public Shares.

Conditions to the Merger; Amendment, Waiver and Termination. Pursuant to
the Merger Agreement, the obligations of each of TXI, TXI Acquisition and the
Company to effect the Merger are subject to the following conditions: (i) the
proposal to approve and adopt the Merger Agreement at the Special Meeting shall
have received the affirmative vote of the holders of at least a majority of all
of the outstanding Common Shares; (ii) the absence of any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) enacted, issued, promulgated, enforced or
entered prohibiting the consummation of the Merger; (iii) the receipt of all
other required authorizations, consents and approvals by third parties; (iv) the
performance of and compliance with, in all material respects, all agreements and
obligations contained in the Merger Agreement and required to be performed or
complied with at or prior to the Effective Time by the respective parties to the
Merger Agreement; (v) the material truth and correctness of all representations
and warranties of the parties to the Merger Agreement; and (vi)
Robinson-Humphrey shall have reaffirmed in writing its fairness opinion as of
the date of mailing this Proxy Statement and again at the Effective Time and
shall not have withdrawn its written fairness opinion.

TXI may waive the satisfaction of any obligation, covenant, agreement or
condition under the Merger Agreement on behalf of TXI or TXI Acquisition. The
waiver by the Company of any of its rights under the Merger Agreement requires
the prior approval of the Special Committee. The Company has made no
determination as to whether it would waive any condition, and any such
determination would be made on behalf of the Company by the Special Committee
based on the facts and circumstances existing at the time such waiver is
requested. The Merger Agreement may be amended by written agreement of TXI, TXI
Acquisition and the Company with the approval of the Special Committee, at any
time prior to the Effective Time.

The Merger Agreement may be terminated at any time prior to the Effective
Time, either before or after approval by the stockholders of the Company by: (i)
mutual written consent duly authorized by the Boards of Directors of TXI, TXI
Acquisition and the Company; (ii) any of TXI, TXI Acquisition or the Company if
any court of competent jurisdiction or administrative agency, commission,
governmental or regulatory authority, domestic or foreign, shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; (iii) any of TXI, TXI Acquisition or
the Company if the Effective Time shall not have occurred on or before December
31, 1997; provided, however, that the right to terminate the Merger Agreement
under this provision shall not be available to any party whose failure to
fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
(iv) TXI or TXI Acquisition, if, consistent with the terms of the Merger
Agreement, the Board of Directors of the Company or the Special Committee
withdraws, modifies or changes its recommendation of the Merger Agreement or the
Merger in a manner adverse to TXI or TXI Acquisition or shall have resolved to
do any of the foregoing or the Board of Directors of the Company or the Special
Committee shall have recommended to the stockholders of the Company any
competing transaction; or (v) the Company (such determination to be made on
behalf of the Company by the Special Committee in its sole discretion), if,
consistent with the terms of the Merger Agreement, the Board of Directors of the
Company or the Special Committee withdraws its recommendation of the Merger
Agreement or the Merger or shall have resolved to do either of the foregoing or
the Board of Directors of the Company or the Special Committee shall have
recommended to the stockholders of the Company any competing transaction.

The Merger Agreement provides that in the event of its termination, no
party thereto will have any liability or further obligation to any other party
to the Merger Agreement; provided that any termination shall be without
prejudice to the rights of any party to the Merger Agreement arising out of any
wilful breach by any other party of any covenant or agreement contained in the
Merger Agreement. In the event the Merger Agreement is terminated, each party is
responsible for all costs and expenses incurred by such party.

35
<PAGE> 40

If the Merger is not consummated due to the failure to satisfy a condition
to consummation of the Merger or to the termination of the Merger Agreement, the
Board of Directors of the Company currently intends to continue to conduct the
Company's operations in the normal course, consistent with past practice.

Representations and Warranties. The Merger Agreement contains various
representations and warranties of the Company to TXI and TXI Acquisition,
including the following matters: (i) the due organization and valid existence of
the Company and its subsidiaries and affiliates; (ii) the capitalization of the
Company and its subsidiaries and affiliates; (iii) the due authorization,
execution and delivery of the Merger Agreement and its binding effect on the
Company; (iv) regulatory filings and approvals; (v) the absence of conflicts
between the Merger Agreement and the transactions contemplated thereby with the
Company's certificate of incorporation or bylaws, any contract to which it or
its subsidiaries or affiliates are parties or any law, rule, regulation, order,
writ, injunction or decree binding upon the Company or its subsidiaries or
affiliates; (vi) the accuracy of the information provided by the Company for
inclusion in this Proxy Statement; and (vii) the absence of any brokers or
finders (other than Robinson-Humphrey).

The Merger Agreement also contains representations and warranties of TXI
and TXI Acquisition to the Company, including the following matters: (i) the due
organization and valid existence of each of TXI and TXI Acquisition; (ii) the
due authorization, execution and delivery of the Merger Agreement by TXI and TXI
Acquisition and its binding effect on such parties; (iii) regulatory filings and
approvals, (iv) the absence of conflicts of the Merger Agreement and the
transactions contemplated thereby with the charter or bylaws (or equivalent
documents) of each of TXI and TXI Acquisition, or with any contract binding upon
TXI or TXI Acquisition, or with any law, rule, regulation, order, writ,
injunction or decree binding upon any of such parties; (v) the accuracy of the
information provided by TXI and TXI Acquisition for inclusion in this Proxy
Statement; and (vi) the absence of brokers and finders (other than SBC Warburg
Dillon Read).

Conduct of Business Pending the Merger. Pursuant to the Merger Agreement,
from the date thereof to the Effective Time, (i) the businesses of the Company
and its subsidiaries will be conducted in the ordinary course of business and in
a manner consistent with past practice; and (ii) neither the Company nor any of
its subsidiaries or affiliates, will (w) subject to certain exceptions, declare
or pay any dividend or other distribution in respect of its capital stock, (x)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any securities, (y) repurchase or otherwise acquire any
shares of its capital stock or (z) issue, deliver or sell or authorize or
propose the issuance, delivery or sale of any shares of its capital stock,
convertible securities, rights, warrants or options, other than Common Shares
issuable upon the exercise of options outstanding as of July 30, 1997 under the
Stock Option Plan.

Certain Agreements. The Merger Agreement provides that the Company will as
soon as practicable: (i) acting through its Board of Directors and subject to
the fiduciary duties thereof and applicable law, call and convene the Special
Meeting; (ii) prepare and file with the SEC a preliminary proxy statement and
mail the definitive proxy statement to its stockholders; and (iii) subject to
the fiduciary duties under applicable law of the Company's directors, use its
reasonable best efforts to obtain the necessary approvals by its Public
Stockholders of the Merger Agreement and the transactions contemplated thereby.
The Merger Agreement provides that the proxy statement will include, subject to
their fiduciary duties, the respective recommendations of the Board of Directors
and the Special Committee to the Public Stockholders for approval of the Merger
Agreement and the transactions contemplated thereby.

Pursuant to the Merger Agreement, the Company, TXI and TXI Acquisition will
together prepare and file a Schedule 13E-3 Transaction Statement under the
Exchange Act. The Company, TXI and TXI Acquisition will each furnish all
information concerning it, its affiliates and certain other persons required to
be included in the Proxy Statement and the Schedule 13E-3 and respond promptly
to any comments made by the SEC with respect thereto.

Reasonable Best Efforts. Pursuant to the Merger Agreement, each of the
parties will use its reasonable best efforts to take, or cause to be taken, all
appropriate actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable law or otherwise to consummate the Merger,
including obtaining any required consents of third parties and governmental
authorities.

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<PAGE> 41

Indemnification. TXI agreed in the Merger Agreement, that the Company, in
its capacity as the Surviving Corporation, shall provide with respect to the
Indemnified Parties the indemnification rights (including any rights to
advancement of expenses) which such Indemnified Parties had, from the Company,
or such subsidiary or affiliate, immediately prior to the Effective Time of the
Merger, whether under the DGCL or the Company's certificate of incorporation,
the Company's bylaws or the bylaws of such subsidiary or affiliate or otherwise.
Such indemnification rights include indemnification of any Indemnified Party who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Company),
including proceedings involving alleged violations of the federal securities
laws, provided the Indemnified Party acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
such Indemnified Party had no reasonable cause to believe his or her conduct was
unlawful. Any such indemnification (unless ordered by a court) must be made only
as authorized in the specific case upon a determination that the indemnification
of the Indemnified Party is proper in the circumstances because the person has
met the applicable standard of conduct. Insofar as indemnification for
liabilities arising under the federal securities laws may be permitted to an
Indemnified Party, the Company has been advised that in the opinion of the SEC
such indemnification is against public policy and is, therefore, unenforceable.

ACCOUNTING TREATMENT

The Merger will be accounted for under the "purchase" method of accounting
whereby the purchase price will be allocated among the Company's assets and
liabilities based on the fair market value of the assets acquired and
liabilities assumed.

PAYMENT FOR PUBLIC SHARES; SOURCES OF FUNDS

The total amount of funds required by TXI to consummate the Merger and to
pay related fees and expenses (including the cost of acquiring options under the
Company's Stock Option Plan as they become exercisable) is estimated to be
approximately $76.3 million. Such funds are expected to be furnished from a
portion of the proceeds of a contemplated private placement of term notes which
are expected to aggregate approximately $200 million in principal amount, bear
interest at 7.23% per annum and have an average maturity of 12 years. It is
anticipated that the notes will be purchased by a group of 15 insurance
companies, of which Teachers Insurance and Annuity Association and USAA
Investment Management are expected to purchase the largest amounts. The
financing is subject to a number of conditions, including the negotiation and
execution of definitive documents. Consummation of the transactions contemplated
by the Merger Agreement is not subject to TXI obtaining financing of the Merger
Consideration. See "Special Factors -- Fees and Expenses."

APPRAISAL RIGHTS

Stockholders who do not vote in favor of approval and adoption of the
Merger Agreement may have the right to seek payment in cash of the fair value of
their Common Shares by complying with the requirements of Section 262 of the
DGCL. Failure of a stockholder to adhere strictly to the requirements of Section
262 will result in the loss of such stockholder's appraisal rights.

If the Merger is consummated, a holder of record of Common Shares on the
date of making a demand for appraisal, as described below, who (i) continues to
hold such shares through the Effective Time; (ii) strictly complies with the
procedures set forth under Section 262; and (iii) has not voted in favor of the
approval and adoption of the Merger Agreement, will be entitled to have such
shares appraised by the Delaware Court of Chancery under Section 262 and to
receive payment for the "fair value" of such shares in lieu of the consideration
provided for in the Merger Agreement. This Proxy Statement is being sent to all
holders of record of Common Shares on the Record Date and constitutes notice of
the appraisal rights available to such holders under Section 262. THE STATUTORY
RIGHT OF APPRAISAL GRANTED BY SECTION 262 REQUIRES STRICT COMPLIANCE WITH THE
PROCEDURES SET FORTH IN SECTION 262. FAILURE TO FOLLOW ANY OF SUCH PROCEDURES
MAY RESULT IN A TERMINATION OR

37
<PAGE> 42

WAIVER OF APPRAISAL RIGHTS UNDER SECTION 262. The following is a summary of the
material provisions of Section 262 and is qualified in its entirety by reference
to the full text of Section 262, a copy of which is attached to this Proxy
Statement as Annex B.

A holder of Common Shares must not vote in favor of approval and adoption
of the Merger Agreement in order to be entitled to have such shares appraised by
the Delaware Court of Chancery under Section 262. A vote in favor of approval
and adoption of the Merger Agreement will constitute a waiver of such
stockholder's appraisal rights. If no instructions are indicated on a properly
executed proxy, such proxy will be voted for approval and adoption of the Merger
Agreement. See "Introduction -- Proxies." A holder of Common Shares electing to
exercise appraisal rights under Section 262 must deliver a written demand for
appraisal for such stockholder's shares to the Company prior to the vote on the
Merger Agreement. Such a written demand must reasonably inform of the identity
of the stockholder of record and of such stockholder's intention to demand
appraisal of his shares. All such demands should be delivered to the Company at
300 Ward Road, Midlothian, Texas 76065-9651. A proxy or vote against the
approval and adoption of the Merger Agreement will not constitute such a demand.

Only a holder of Common Shares on the date of making such written demand
for appraisal who continuously holds such shares through the Effective Time is
entitled to seek appraisal. Demand for appraisal must be executed by or for the
holder of record, fully and correctly, as such holder's name appears on the
holder's stock certificates representing Common Shares. If Common Shares are
owned of record in a fiduciary capacity, such as by a trustee, guardian or
custodian, the demand should be made in that capacity, and if Common Shares are
owned of record by more than one person, as in a joint tenancy or tenancy in
common, the demand should be made by or for all owners of record. An authorized
agent, including one or more joint owners, may execute the demand for appraisal
for a holder of record; such agent, however, must identify the record owner or
owners and expressly disclose in such demand that the agent is acting as agent
for the record owner or owners of such shares.

A record holder such as a broker who holds Common Shares as a nominee for
beneficial owners, some of whom desire to demand appraisal, must exercise
appraisal rights on behalf of such beneficial owners with respect to the Common
Shares held for such beneficial owners. In such case, the written demand for
appraisal should set forth the number of Common Shares covered by it. Unless a
demand for appraisal specifies a number of shares, such demand will be presumed
to cover all Common Shares held in the name of such record owner.

Beneficial owners who are not record owners and who intend to exercise
appraisal rights should instruct the record owner to comply with the statutory
requirements with respect to the exercise of appraisal rights before the date of
the Special Meeting.

Within 10 days after the Effective Time, the Company is required to send
notice of the effectiveness of the Merger to each stockholder who prior to the
Effective Time complied with the requirements of Section 262.

Within 120 days after the Effective Time, the Company or any stockholder
who has complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
Common Shares held by all stockholders seeking appraisal. A dissenting
stockholder must serve a copy of such petition on the Company. If no petition is
filed by either the Company or any dissenting stockholders within such 120-day
period, the rights of all dissenting stockholders to appraisal shall cease.
Stockholders seeking to exercise appraisal rights should not assume that the
Company will file a petition with respect to the appraisal of the fair value of
their shares or that the Company will initiate any negotiations with respect to
the fair value of such shares. A timely, valid petition filed by a stockholder
who has properly demanded appraisal is sufficient to continue appraisal rights
for non-petitioning stockholders who have properly demanded appraisal. The
Company is under no obligation to and has no present intention to take any
action in this regard. Accordingly, stockholders who wish to seek appraisal of
their shares should initiate all necessary action with respect to the perfection
of their appraisal rights within the time periods and in the manner prescribed
in Section 262. If no petition is filed on a timely basis all dissenting
stockholders' rights to an appraisal cease.

38
<PAGE> 43

Within 120 days after the Effective Time, any stockholder who has complied
with subsections (a) and (d) of Section 262 is entitled, upon written request,
to receive from the Company a statement setting forth the aggregate number of
Common Shares not voted in favor of the Merger Agreement with respect to which
demands for appraisal have been received by the Company and the number of
holders of such shares. Such statement must be mailed within 10 days after the
written request therefor has been received by the Company or within 10 days
after expiration of the time for delivery of demands for appraisal under
subsection (d) of Section 262, whichever is later.

If a petition for an appraisal is filed in a timely manner, at the hearing
on such petition, the Delaware Court of Chancery will determine which
stockholders are entitled to appraisal rights and will appraise the Common
Shares owned by such stockholders, determining the fair value of such shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger Agreement, together with a fair rate of interest, to be paid, if
any, upon the amount determined to be the fair value. In determining fair value,
the court is to take into account all relevant factors. The Delaware Supreme
Court has stated that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings. The
Delaware Supreme Court has stated that, in making this determination of fair
value, the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts that were known or
that could be ascertained as of the date of the merger that throw any light on
future prospects of the merged corporation. The Delaware Supreme Court also held
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenter's exclusive remedy and a stockholder may, under
appropriate circumstances, be able to pursue an action challenging the Merger on
the grounds of an asserted breach of fiduciary duty.

Stockholders considering seeking appraisal should consider that the fair
value of their shares determined under Section 262 could be more, the same or
less than the value of the Merger Consideration without the exercise of
appraisal rights, and that investment banking opinions as to fairness from a
financial point of view are not necessarily opinions as to fair value as
determined under Section 262. The cost of the appraisal proceeding may be
determined by the Court of Chancery and assessed against the parties as the
Court deems equitable in the circumstances. Upon application of a dissenting
stockholder, the court may order that all or a portion of the expenses incurred
by any dissenting stockholder in connection with the appraisal proceeding
(including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts) be charged pro rata against the value of all Common Shares
entitled to appraisal. In the absence of such a determination or assessment,
each party bears its own expenses, including fees of attorneys and expert
witnesses.

Any stockholder who has qualified for appraisal in compliance with Section
262 will not receive the Merger Consideration but instead will receive the fair
value of his shares plus interest when and as determined by the Court of
Chancery or if such determination is appealed to the Delaware Supreme Court by
any party, after such appeal. After the Effective Time, any such stockholder
will not be entitled to receive payment of dividends or other distributions on
the Common Shares, except for dividends or distributions payable to stockholders
of record at a date prior to the Effective Time. The Company has no intention of
declaring or paying any dividends on the Common Shares prior to the consummation
of the Merger.

A stockholder may withdraw a demand for appraisal and accept the Merger
Consideration at any time within 60 days after the Effective Time, or thereafter
may withdraw such demand with the written approval of the Company. In the event
an appraisal proceeding is properly instituted, such proceeding may not be
dismissed as to any stockholder without the approval of the Delaware Court of
Chancery, and any such approval may be conditioned on the terms the Court of
Chancery deems just. If after the Effective Time a holder of Common Shares who
had demanded appraisal for such shares fails to perfect or loses his right to
appraisal, such shares will be treated under the Merger Agreement as if they had
been converted as of the Effective Time into the Merger Consideration.

39
<PAGE> 44

The foregoing does not purport to be a complete statement of the provisions
of Section 262 and is qualified in its entirety by reference to such Section,
which is reproduced in full as Annex B to this Proxy Statement.

THE PROVISIONS OF SECTION 262 ARE COMPLEX AND TECHNICAL. STOCKHOLDERS
DESIRING TO EXERCISE APPRAISAL RIGHTS MAY WISH TO CONSULT THEIR OWN LEGAL
COUNSEL, SINCE THE FAILURE TO COMPLY STRICTLY WITH THESE PROVISIONS WILL RESULT
IN THE LOSS OF THEIR APPRAISAL RIGHTS.

MARKET PRICES AND DIVIDENDS

The Common Shares are traded on the NYSE under the symbol "CSM." The
Company paid quarterly cash dividends totaling $5,935,000 in its fiscal year
ended May 31, 1993, $5,936,000 in fiscal 1994, $5,936,000 in fiscal 1995,
$5,859,000 in fiscal 1996 and $5,675,000 in fiscal 1997.

The following table sets forth, for the quarterly periods indicated, the
high and low sales prices per Common Share, as quoted on the NYSE, and dividends
declared on the Common Shares.

<TABLE>
<CAPTION>
QUARTERLY PERIODS HIGH LOW DIVIDENDS
----------------- ---- ---- ---------
<S> <C> <C> <C>
FISCAL 1996 (ENDED MAY 31, 1996)
First Quarter............................................ $11 3/4 $ 9 1/8 $.05
Second Quarter........................................... $11 7/8 $ 9 1/8 $.05
Third Quarter............................................ $16 3/4 $10 1/2 $.05
Fourth Quarter........................................... $15 7/8 $13 $.05
FISCAL 1997 (ENDED MAY 31, 1997)
First Quarter............................................ $14 1/2 $10 1/2 $.05
Second Quarter........................................... $14 1/2 $12 1/2 $.05
Third Quarter............................................ $13 $11 1/8 $.05
Fourth Quarter........................................... $15 1/4 $11 3/8 $.05
FISCAL 1998
First Quarter............................................ $15 3/8 $14 7/8 $.05
Second Quarter (through November 26, 1997)............... $15 5/8 $15 1/16 --
</TABLE>

On May 21, 1997, the last full trading day prior to the public announcement
of the original proposal by TXI to acquire the Public Shares for $14.25 per
share, the closing price per Common Share on the NYSE was $12.875. On July 24,
1997, the last full trading day prior to the public announcement of TXI's
revised $15.50 per share merger proposal, the closing price per Common Shares on
the NYSE was $14.9375 per share. On July 29, 1997, the last full trading day
prior to the public announcement that the parties had entered into the Merger
Agreement providing for the Merger Consideration of $15.50 per Public Share, the
closing price per Common Share on the NYSE was $15.25. On November 26, 1997, the
closing price per Common Share on the NYSE was $15.3125.

HOLDERS OF COMMON SHARES ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR
THE COMMON SHARES PRIOR TO MAKING ANY DECISION WITH RESPECT TO THE MERGER
AGREEMENT.

40
<PAGE> 45

SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY

The following table sets forth selected consolidated historical financial
data of the Company. The selected financial data should be read in conjunction
with the Consolidated Financial Statements of the Company, related notes and
other financial information incorporated by reference into this Proxy Statement.

The following summary is qualified in its entirety by reference to such
financial statements, related notes and other financial information.

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales............................. $420,210 $462,275 $531,811 $607,656 $616,676
Gross profit (exclusive of
depreciation and amortization)..... 58,624 81,777 94,761 130,050 132,309
Employee bonus programs............... -- 1,896 2,933 6,116 8,856
Interest expense...................... 14,650 13,439 12,082 10,007 8,099
Net income (loss)..................... (2,051) 11,919 19,607 41,977 40,182
PER SHARE INFORMATION
Net income (loss)..................... $ (.06) $ .41 $ .67 $ 1.43 $ 1.41
Dividends............................. .20 .20 .20 .20 .20
FOR THE YEAR
Net cash provided by operating
activities......................... $ 25,087 $ 10,603 $ 72,723 $ 52,618 $ 47,536
Capital expenditures.................. 7,424 7,805 16,234 20,630 33,776
YEAR END POSITION
Total assets.......................... $480,811 $488,307 $469,827 $475,337 $494,210
Net working capital................... 80,901 95,225 113,745 136,723 155,252
Long-term debt........................ 113,997 96,219 81,065 66,697 52,554
Stockholders' equity.................. 259,598 265,623 269,868 294,965 326,260
</TABLE>

OWNERSHIP OF COMMON SHARES

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information as of the date of this
Proxy Statement concerning the beneficial ownership of Common Shares by each
person known by the Company to own more than 5% of its Common Shares.

<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------------- -----------------
<S> <C> <C>
Texas Industries, Inc.
1341 W. Mockingbird Lane, Suite 700
Dallas, Texas 75247 24,000,000 84.4%
</TABLE>

41
<PAGE> 46

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information as of June 30, 1997,
with respect to the number of Public Shares of the Company beneficially owned by
each director, the Chief Executive Officer and the four most highly compensated
executive officers of the Company and all directors and executive officers as a
group. Except as otherwise noted, each individual has sole power to vote and
sole power to dispose of all of his Public Shares.

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS(2)
------------------------ ----------------- -------------------
<S> <C> <C>
Robert Alpert(4)................................... 5,000 *
John M. Belk(4).................................... 12,000 *
Gordon E. Forward(3)(4)............................ 149,100 *
David A. Fournie(3)................................ 50,100 *
Gerald R. Heffernan(4)............................. 4,000 *
H. Duff Hunt(4).................................... 32,877 *
Eugenio Clariond Reyes(4).......................... 4,000 *
Robert D. Rogers(4)(5)............................. 150,800 *
Libor F. Rostik(3)................................. 39,900 *
Peter H. Wright(3)................................. 47,600 *
Directors and Executive Officers as a group (15
persons)......................................... 675,515 2.4%
</TABLE>

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

* Represents less than one percent (1%) of the total number of shares
outstanding.

(1) Includes, with respect to such person Common Shares subject to options
exercisable within 60 days of June 30, 1997, as follows: Robert Alpert,
4,000 shares; John M. Belk, 4,000 shares; Gordon E. Forward, 134,000 shares;
David A. Fournie, 50,100 shares; Gerald R. Heffernan, 4,000 shares; H. Duff
Hunt, 32,800 shares; Eugenio Clariond Reyes, 4,000 shares; Robert D. Rogers,
106,000 shares; Libor F. Rostik, 39,900 shares; Peter H. Wright, 47,600
shares; and all directors and executive officers as a group, 602,000 shares.

(2) Based on the sum of (i) 28,443,963 Common Shares, which on June 30, 1997,
was the approximate number of shares outstanding, and (ii) the number of
shares subject to options exercisable by such person within 60 days of such
date.

(3) Indicates that such person is an executive officer of the Company.

(4) Indicates that such person is a director of the Company.

(5) Includes 4,000 Public Shares owned by Mr. Rogers' wife as separate property
as to which Mr. Rogers disclaims beneficial ownership.

42
<PAGE> 47

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF TXI AND TXI
ACQUISITION

The following table sets forth certain information as of June 30, 1997,
with respect to the number of Public Shares of the Company beneficially owned by
each director, the Chief Executive Officer and the four most highly compensated
executive officers of each of TXI and TXI Acquisition, respectively, and all
such directors and executive officers of each of TXI and TXI Acquisition as a
group, respectively. Except as otherwise noted, each individual has sole power
to vote and sole power to dispose of all of his or her Public Shares.

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS(2)
------------------------ ----------------- -------------------
<S> <C> <C>
Robert Alpert(3)................................... 5,000 *
Melvin G. Brekhus(4)............................... None *
Gordon E. Forward(3)(4)............................ 149,100 *
Richard M. Fowler(4)(5)(6)......................... 58,700 *
Richard I. Galland(3).............................. None *
Gerald R. Heffernan(3)............................. 4,000 *
James M. Hoak, Jr.(3).............................. None *
Robert C. Moore(4)(5)(6)........................... 26,800 *
Ralph B. Rogers(3)................................. 5,000 *
Robert D. Rogers(3)(4)(5)(6)(7).................... 150,800 *
Tommy A. Valenta(4)................................ None *
Ian Wachtmeister(3)................................ None *
Elizabeth C. Williams(3)........................... None *
Directors and Executive Officers of TXI as a group
(25 persons)(8).................................. 406,403 1.4%
Directors and Executive Officers of TXI Acquisition
as a group (3 persons)........................... 327,300 1.2%
</TABLE>

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

* Represents less than one percent (1%) of the total number of shares
outstanding.

(1) Includes, with respect to such person Common Shares subject to options
exercisable within 60 days of June 30, 1997, as follows: Robert Alpert,
4,000 shares; Gordon E. Forward, 134,000 shares; Richard M. Fowler, 57,600
shares; Gerald R. Heffernan, 4,000 shares; Robert C. Moore, 26,200 shares;
Robert D. Rogers, 106,000 shares; all directors and executive officers of
TXI as a group, 338,000 shares; and all directors and executive officers of
TXI Acquisition as a group, 189,800.

(2) Based on the sum of (i) 28,443,963 Common Shares which on June 30, 1997, was
the approximate number of shares outstanding, and (ii) the number of shares
subject to options exercisable by such person within 60 days of such date.

(3) Indicates that such person is a director of TXI.

(4) Indicates that such person is an executive officer of TXI.

(5) Indicates that such person is a director of TXI Acquisition.

(6) Indicates that such person is an executive officer of TXI Acquisition.

(7) Includes 4,000 Public Shares owned by Mr. Rogers' wife as separate property
as to which Mr. Rogers disclaims beneficial ownership.

(8) The following executive officers of the Company were elected as executive
officers of TXI at the annual meeting of TXI's Board of Directors held on
October 22, 1997: Dennis E. Beach, Larry L. Clark, David A. Fournie, H. Duff
Hunt, Richard T. Jaffre, Libor F. Rostik and Peter H. Wright. These persons
are employed by the Company, are compensated by the Company and participate
in the Company's incentive and benefit programs. The beneficial ownership of
directors and executive officers of TXI as a group includes the beneficially
ownership of such persons in the Public Shares of the Company.

43
<PAGE> 48

MANAGEMENT OF TXI, TXI ACQUISITION AND THE COMPANY

DIRECTORS AND EXECUTIVE OFFICERS OF TXI

Set forth below is the name and business address of each person who is a
director, the Chief Executive Officer and the four most highly compensated
executive officers of TXI, the present principal occupation or employment of
each such person and the name, principal business and address of the corporation
or other organization in which such occupation or employment of each such person
is conducted and the material occupations, positions, offices and employment and
the name, principal business and address of any corporation or other
organization in which any material occupation, position, office or employment of
each such person was held during the last five years. Unless otherwise
indicated, the address of each such person is that of TXI at 1341 West
Mockingbird Lane, Suite 700, Dallas, Texas 75247.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE-YEAR EMPLOYMENT HISTORY*
---- ------------------------------------------
<S> <C>
Robert D. Rogers............... President and Chief Executive Officer
Ian Wachtmeister............... President and Chief Executive Officer of The Empire, AB,
Stockholm, Sweden
Gerald R. Heffernan............ President, G.R. Heffernan & Associates, Ltd., Toronto,
Ontario, Canada
Robert Alpert.................. Chairman of the Board of Alpert Companies (investments)
Dallas, Texas
Richard I. Galland............. Attorney at Law since January 1991
Elizabeth C. Williams.......... Vice President for Business & Finance/Treasurer, Southern
Methodist University, Dallas, Texas
Gordon E. Forward.............. President and Chief Executive Officer of the Company
James M. Hoak, Jr.............. Chairman of Heritage Media Corporation
Richard M. Fowler.............. Vice President -- Finance
Melvin G. Brekhus**............ Vice President -- Cement
Tommy A. Valenta**............. Vice President -- Concrete
Robert C. Moore................ Vice President, General Counsel and Secretary
</TABLE>

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

* Based upon information provided to the Company as of June 30, 1997.

** Each of these executive officers has also served in other executive or
managerial positions for TXI during the last five years.

DIRECTORS AND EXECUTIVE OFFICERS OF TXI ACQUISITION

Set forth below is the name of each person who is a director or executive
officer of TXI Acquisition. The present principal occupation or employment of
each such person, their five year employment history and their business address
is the same as set forth above under "-- Directors and Executive Officers of
TXI."

<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Robert D. Rogers.................... President and Director
Richard M. Fowler................... Vice President -- Finance and Treasurer and
Director
Robert C. Moore..................... Secretary and Director
</TABLE>

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Set forth below is the name and business address of each person who is a
director or executive officer of the Company and, unless disclosed elsewhere
herein, the present principal occupation or employment of each such person and
the name, principal business and address of the corporation or other
organization in which such occupation or employment of each such person is
conducted and the material occupations, positions, offices and employment and
the name, principal business and address of any corporation or other
organization in which any material occupation, position, office or employment of
each such person was held during the last

44
<PAGE> 49

five years. Unless otherwise indicated, the business address of each such person
is that of the Company at 300 Ward Road, Midlothian, Texas 76065-9651.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE-YEAR EMPLOYMENT HISTORY*
---- ------------------------------------------
<S> <C>
Robert D. Rogers............... Chairman of the Board
Gordon E. Forward.............. President and Chief Executive Officer
Robert Alpert.................. Chairman of the Board of Alpert Companies (investments),
Dallas, Texas
John M. Belk................... Chairman of the Board of Belk Stores Services, Inc.
Gerald R. Heffernan............ President of G.R. Heffernan & Associates, Ltd., Toronto,
Ontario, Canada
Eugenio Clariond Reyes......... Director General and Chief Executive Officer of Grupo IMSA,
S.A.; President, Mexico -- U.S. Chamber of Commerce;
Director, Instituto Tecnologico y de Estudias Superiores de
Monterrey, A.C.
Kenneth R. Allen............... Director of Investor Relations
Dennis E. Beach................ Vice President Administration
Larry L. Clark**............... Vice President -- Controller and Assistant Treasurer
Richard M. Fowler.............. Vice President -- Finance and Treasurer
David A. Fournie**............. Vice President -- Structural Products Business Unit
H. Duff Hunt**................. Vice President -- Recycled Products Business Unit
Richard T. Jaffre.............. Vice President -- Raw Materials/Transportation
Robert C. Moore................ Vice President, General Counsel and Secretary
Libor F. Rostik................ Vice President -- Engineering
Peter H. Wright**.............. Vice President -- Bar Products Business Unit
</TABLE>

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

* Based upon information provided by the directors of the Company as of June
30, 1997.

** Each of these executive officers has also served in other executive or
managerial positions for the Company during the last five years.

INDEPENDENT PUBLIC ACCOUNTANTS

The consolidated financial statements and schedules included in the
Company's Annual Report on Form 10-K, incorporated by reference in this Proxy
Statement, have been audited by Ernst & Young LLP, independent public
accountants, as stated in their reports with respect thereto. It is expected
that representatives of Ernst & Young LLP will be present at the Special
Meeting, both to respond to appropriate questions of stockholders of the Company
and to make a statement if they desire.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the SEC by the Company (File No. 1-9944)
are incorporated by reference in this Proxy Statement:

1. The Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1997;

2. The Company's Annual Report on Form 10-K/A for the fiscal year ended May
31, 1997;

3. The Company's Quarterly Report on Form 10-Q for the period ended August
31, 1997, except that the information set forth under "Part II -- Other
Information" shall not be deemed filed as part of this Proxy Statement; and

4. The Company's Quarterly Report on Form 10-Q/A for the period ended
August 31, 1997, except that the information set forth under "Part II -- Other
Information" shall not be deemed filed as part of this Proxy Statement;

5. The Company's Current Report on Form 8-K filed on July 29, 1997.

45
<PAGE> 50

All documents and reports filed by the Company with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement and prior to the date of the Special Meeting shall be deemed to
be incorporated by reference in this Proxy Statement and to be a part hereof
from the respective dates of filing of such documents or reports.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein (or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein) modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.

THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
TO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS DELIVERED, ON WRITTEN OR ORAL
REQUESTS TO CHAPARRAL STEEL COMPANY, 300 WARD ROAD, MIDLOTHIAN, TEXAS
76065-9651, ATTENTION: ROBERT C. MOORE, SECRETARY, TELEPHONE: (972) 775-8241. IN
ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, REQUESTS
MUST BE RECEIVED NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE SPECIAL MEETING.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith, files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities of the SEC at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
at the regional offices of the SEC located at 7 World Trade Center, 13th Floor,
Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th
Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material
can also be obtained at prescribed rates by writing to the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. In addition, such reports, proxy statements and other information can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005,
and are available from the Edgar filings obtained through the SEC internet
website (http://www.sec.gov.)

This Proxy Statement includes information required by the SEC to be
disclosed pursuant to Rule 13E-3 under the Exchange Act, which governs so-called
"going private" transactions by certain issuers or their affiliates. In
accordance with that rule, the Company, TXI and TXI Acquisition have filed with
the SEC, under the Exchange Act, a Schedule 13E-3 with respect to the Merger.
This Proxy Statement does not contain all of the information set forth in the
Schedule 13E-3, parts of which are omitted in accordance with the regulations of
the SEC. The Schedule 13E-3, and any amendments thereto, including exhibits
filed as a part thereof, will be available for inspection and copying at the
offices of the SEC as set forth above.

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<PAGE> 51

STOCKHOLDER PROPOSALS

As of the date of this Proxy Statement, the Company's management knows of
no other matters that may properly be, or which are likely to be, brought before
the Special Meeting. However, if any other matters are properly brought before
the Special Meeting, the persons named in the enclosed proxy or their
substitutes will vote the proxies in accordance with their best judgment.

In order to be considered for inclusion in the proxy statement for the next
annual meeting, if any, of stockholders of the Company, any stockholder proposal
intended to be presented at the meeting must be received by the Company on or
before May 2, 1998.

MISCELLANEOUS

Where information contained in this Proxy Statement is particularly within
the knowledge of a person other than the Company, the Company has relied upon
information furnished by such person or contained in filings made by such person
with the SEC.

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<PAGE> 52

ANNEX A

AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 30, 1997
AMONG
CHAPARRAL STEEL COMPANY
AND
TEXAS INDUSTRIES INC.
AND
TEXAS INDUSTRIES ACQUISITION INC.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I.
THE MERGER.................................................. 4
1.1. The Merger....................................... 4
1.2. Effective Time; Closing.......................... 4
1.3. Effect of the Merger............................. 5
1.4. Conversion of Shares............................. 5
1.5 Stock Options..................................... 5
1.6. Surrender of Shares; Stock Transfer Books........ 6

ARTICLE II.
THE SURVIVING CORPORATION................................... 7
2.1. Certificate of Incorporation..................... 7
2.2. Bylaws........................................... 7
2.3. Directors and Officers........................... 7

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 7
3.1. Organization and Standing........................ 7
3.2. Capitalization................................... 7
3.3. Authority for Agreement.......................... 8
3.4. No Conflict...................................... 8
3.5. Required Filings and Consents.................... 8
3.6. Disclosure Documents............................. 8
3.7. Brokers.......................................... 9

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF TXI AND TXI ACQUISITION... 9
4.1. Organization and Standing........................ 9
4.2. Authority for Agreement.......................... 9
4.3. No Conflict...................................... 9
4.4. Required Filings and Consents.................... 9
4.5. Information for Company Disclosure Documents..... 10
4.6. Brokers.......................................... 10

ARTICLE V.
COVENANTS................................................... 10
5.1. Conduct of the Business Pending the Merger....... 10
5.2. Access to Information; Confidentiality........... 10
5.3. Further Action; Reasonable Best Efforts.......... 11
5.4. Stockholders' Meeting............................ 11
5.5. Competing Transaction............................ 11
5.6. Proxy Statement and Schedule 13E-3............... 11
5.7. Indemnification.................................. 12
5.8. Public Announcements............................. 12
5.9. Notices of Certain Events........................ 12
</TABLE>

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<PAGE> 54

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VI.
CONDITIONS.................................................. 13
6.1. Conditions to the Obligation of Each Party....... 13
6.2. Additional Conditions to the Obligations of TXI
and TXI Acquisition.............................. 13
6.3. Additional Conditions to the Obligations of the
Company.......................................... 13

ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER........................... 14
7.1. Termination...................................... 14
7.2. Effect of Termination............................ 14
7.3. Amendments....................................... 14
7.4. Waiver........................................... 14

ARTICLE VIII.
GENERAL PROVISIONS.......................................... 15
8.1. No Third Party Beneficiaries..................... 15
8.2. Entire Agreement................................. 15
8.3. Succession and Assignment........................ 15
8.4. Counterparts..................................... 15
8.5. Headings......................................... 15
8.6. Governing Law.................................... 15
8.7. Severability..................................... 15
8.8. Specific Performance............................. 15
8.9. Construction..................................... 15
8.10. Non-Survival of Representations and Warranties... 15
8.11. Certain Definitions.............................. 15
8.12. Fees and Expenses................................ 16
8.13. Notices.......................................... 16
</TABLE>

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of July 30, 1997,
among Chaparral Steel Company, a Delaware corporation (the "Company"), Texas
Industries, Inc., a Delaware corporation ("TXI"), and Texas Industries
Acquisition Inc., a Delaware corporation and wholly owned subsidiary of TXI
("TXI Acquisition").

WITNESSETH:

WHEREAS, as of the date hereof, TXI owns an aggregate of 24,000,000 shares
(the "TXI Shares") of the Common Stock, par value $.10 per share, of the Company
(the "Shares"), representing approximately 84.4% of the total number of Shares
issued and outstanding as of the date hereof;

WHEREAS, TXI has proposed to the Board of Directors of the Company that TXI
acquire the 4,453,963 Shares not owned by TXI (the "Public Shares") through a
merger (the "Merger") of TXI Acquisition with and into the Company pursuant to
the terms of this Agreement; and

WHEREAS, the Boards of Directors of each of TXI and TXI Acquisition believe
that it is in the best interest of each of TXI and TXI Acquisition and their
respective stockholders, and the Board of Directors of the Company believes that
it is in the best interests of the Company and its stockholders, to enter into
this Agreement and to consummate the Merger of TXI Acquisition with and into the
Company in accordance with the terms of this Agreement; and

WHEREAS, a Special Committee (the "Special Committee") of directors of the
Board of Directors of the Company has unanimously recommended that the Board of
Directors of the Company approve and authorize this Agreement and the Merger,
which recommendation was based in part on the opinion of The Robinson-Humphrey
Company, Inc., independent financial advisors to the Special Committee, that the
consideration to be received by the holders of Public Shares in the Merger is
fair to such holders from a financial point of view; and

WHEREAS, the Boards of Directors of the Company, TXI and TXI Acquisition
have approved this Agreement and the Merger upon the terms set forth in this
Agreement;

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

ARTICLE I.

THE MERGER

1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the General Corporation Law of the State
of Delaware ("Delaware Law"), at the Effective Time (as defined below) TXI
Acquisition shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of TXI Acquisition shall cease and the
Company shall continue as the surviving corporation of the Merger. In its
capacity as the surviving corporation of the Merger, the Company is sometimes
referred to herein as the "Surviving Corporation."

1.2. Effective Time; Closing. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VI, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as is required by, and executed in
accordance with the relevant provisions of, Delaware Law. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of the State of Delaware, or at such other time as the
parties hereto agree shall be specified in the Certificate of Merger (the date
and time the Merger becomes effective, the "Effective Time"). On the date of
such filing, a closing shall be held at the offices of the Company at 1341 W.
Mockingbird Lane, Dallas, Texas 75247, or such other place as the parties shall
agree.

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<PAGE> 56

1.3. Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of Delaware Law.

1.4. Conversion of Shares. At the Effective Time:

(a) each Share held by the Company as treasury stock or owned by TXI,
TXI Acquisition or any direct or indirect subsidiary of either of them
immediately prior to the Effective Time shall be cancelled and retired and
cease to exist and no payment shall be made with respect thereto;

(b) each Public Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in paragraph (a) or paragraph (e)
of this Section 1.4, be converted into the right to receive $15.50 in cash,
without interest (such cash amount being referred to herein as the "Merger
Consideration") payable to the holder thereof upon the surrender of the
certificate formerly representing such outstanding Public Shares;

(c) at the Effective Time, the holders of certificates representing
Public Shares shall cease to have any rights as stockholders of the
Company, except such rights, if any, as they may have pursuant to Delaware
law;

(d) each share of common stock of TXI Acquisition outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation;
and

(e) anything in this Agreement to the contrary notwithstanding, any
issued and outstanding Public Shares held by a person who objects to the
Merger (a "Dissenting Stockholder") and complies with all the provisions of
Delaware Law concerning the right of holders of Shares to dissent from the
Merger and require appraisal of their Shares ("Dissenting Shares") shall
not be converted as described in Section 1.4(b) but shall become, by virtue
of the Merger, the right to receive such consideration as may be determined
to be due to such Dissenting Stockholder pursuant to Delaware Law. If,
after the Effective Time, such Dissenting Stockholder withdraws his demand
for appraisal or fails to perfect or otherwise loses his right of
appraisal, in any case pursuant to Delaware Law, such Shares shall be
deemed to have been converted as of the Effective Time into the right to
receive the Merger Consideration. The Company shall give TXI and TXI
Acquisition (i) prompt notice of any demands for appraisal of Public Shares
received by the Company and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands.
The Company shall not, without the prior written consent of TXI, make any
payment with respect to, or settle, offer to settle or otherwise negotiate,
any such demands.

1.5. Stock Options. (a) At the Effective Time, each holder of an option to
purchase Shares issued pursuant to the Company's 1989 Stock Option Plan, as
amended ("Stock Option Plan", and each option issued thereunder, an "Option")
shall become entitled to receive (subject to any required tax withholding) from
the Surviving Corporation, for each Option held by such holder as of the
Effective Time, an amount in cash equal to the product of (i) the excess, if
any, of the Merger Consideration over the applicable exercise price of such
Option (determined on a Share by Share basis) and (ii) the number of Shares
subject to such Option that are currently exercisable in accordance with the
provisions of the Stock Option Plan immediately prior to the Effective Time
(such amount with respect to any Option, the "Option Consideration"), and
thereafter with respect to the portion of the Option that is not currently
exercisable at the Effective Time, such non-exercisable portion of the Option
will be carried forward and assumed by the Surviving Corporation pursuant to the
terms of the Stock Option Plan pursuant to which such Option was issued (each,
an "Assumed Option"). After the Effective Time, each Assumed Option shall no
longer confer the right to purchase Shares, but shall, upon becoming
exercisable, (i) confer the right to receive from the Surviving Corporation, for
each Share subject to such Assumed Option immediately prior to the Effective
Time, and upon payment of the applicable exercise price per share in effect with
respect to such Assumed Option, the Merger Consideration, in cash, and (ii)
shall otherwise remain subject to all of the terms and conditions (including
with respect to the exercisability thereof) applicable to such Assumed Option
pursuant to the

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option agreement related to such Assumed Option and to the Stock Option Plan
pursuant to which such Assumed Option was issued.

(b) Promptly after the date hereof, the Company shall cause to be mailed to
each holder of Options any notification with respect to the effect of the Merger
on such Options as may be required by the Stock Option Plan. No interest shall
accrue or be paid to the beneficial owner or holder of any Option with respect
to the Option Consideration payable upon the cancellation of any Option.

1.6. Surrender of Shares; Stock Transfer Books. (a) Prior to the Effective
Time, TXI shall designate a bank or trust company reasonably acceptable to the
Company to act as agent (the "Paying Agent") for the holders of Public Shares in
connection with the Merger to receive the funds to which holders of Public
Shares shall become entitled pursuant to Section 1.4(b). TXI Acquisition will
make available to the Paying Agent, as needed, the Merger Consideration to be
paid in respect of the Public Shares (the "Fund"). The Fund shall be invested by
the Paying Agent as directed by TXI. The Paying Agent shall make the payments
provided in Sections 1.4(b).

(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of Public Shares entitled to receive the Merger Consideration pursuant to
Section 1.4(b) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Public Shares (the "Share Certificates") shall pass, only upon
proper delivery of the Share Certificates to the Paying Agent) and instructions
for use in effecting the surrender of the Share Certificates for payment
therefor. Upon surrender to the Paying Agent of a Share Certificate, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such Share Certificate
shall be entitled to receive in exchange therefor the Merger Consideration for
each Share formerly evidenced by such Share Certificate, and such Share
Certificate shall then be cancelled. Until so surrendered, each such Share
Certificate shall, at and after the Effective Time, represent for all purposes,
only the right to receive such Merger Consideration. No interest shall accrue or
be paid to any beneficial owner of Public Shares or any holder of any Share
Certificate with respect to the Merger Consideration payable upon the surrender
of any Share Certificate. If payment of the Merger Consideration is to be made
to a person other than the person in whose name the surrendered Share
Certificate is registered on the stock transfer books of the Company, it shall
be a condition of payment that the Share Certificate so surrendered shall be
endorsed in blank or to the Paying Agent or otherwise be in proper form for
transfer and that the person requesting such payment shall have paid all
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Share
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such taxes either have been paid or are not
applicable.

(c) At any time following the one year period after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any portion of the Fund which had been made available to the Paying Agent
and not disbursed to holders of Public Shares (including, without limitation,
all interest and other income received by the Paying Agent in respect of all
amounts held in the Fund or other funds made available to it), and thereafter
each such holder shall be entitled to look only to the Surviving Corporation
(subject to abandoned property, escheat and other similar laws), and only as
general creditors thereof, with respect to any Merger Consideration that may be
payable upon due surrender of the Share Certificates held by such holder. The
foregoing notwithstanding, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Public Share for any Merger
Consideration delivered in respect of such Public Share to a public official
pursuant to any abandoned property, escheat or other similar law.

(d) After the Effective Time, the stock transfer books of the Company shall
be closed and thereafter there shall be no further registration of transfers of
Public Shares on the records of the Company. From and after the Effective Time,
the holders of Public Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Public Shares except as
otherwise provided herein or by applicable law.

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(e) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each holder of Options a check payable to such holder in
an amount equal to the Option Consideration payable with respect to all Options
held by such holder.

(f) TXI Acquisition, the Surviving Corporation and the Paying Agent, as the
case may be, shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Public Shares
and/or Options such amounts that TXI Acquisition, the Surviving Corporation or
the Paying Agent is required to deduct and withhold with respect to the making
of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), the rules and regulations promulgated thereunder or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
TXI Acquisition, the Surviving Corporation or the Paying Agent, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Public Shares and/or Options in respect of which such deduction
and withholding was made by TXI Acquisition, the Surviving Corporation or the
Paying Agent.

ARTICLE II.

THE SURVIVING CORPORATION

2.1. Certificate of Incorporation. At the Effective Time and subject to the
terms of Section 5.7, the certificate of incorporation of the Company as in
effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended in
accordance with Delaware Law, such certificate of incorporation and the bylaws
of the Surviving Corporation.

2.2. Bylaws. Subject to the terms of Section 5.7, the bylaws of the Company
in effect immediately prior to the Effective Time shall be the bylaws of the
Surviving Corporation until amended in accordance with Delaware Law, and the
certificate of incorporation and such bylaws of the Surviving Corporation.

2.3. Directors and Officers. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of the Company immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and (ii) the
officers of the Company immediately prior to the Effective Time shall continue
as the officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to TXI and TXI Acquisition as follows:

3.1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement and to carry
out the Merger. The Company is duly qualified to do business as a foreign
corporation and is in good standing in every other jurisdiction in which the
failure to so qualify would have a Material Adverse Effect (as defined below) on
the Company. The Company has furnished to TXI and TXI Acquisition true and
complete copies of its certificate of incorporation (the "Company Certificate of
Incorporation") and bylaws (the "Company Bylaws"), each as amended to date and
presently in effect. "Material Adverse Effect" shall mean, with respect to any
party hereto, any change, event or effect that, when taken together with all
other adverse changes, events or effects, is or is reasonably likely to be
materially adverse to the business, operations, properties, financial condition,
assets, or liabilities (including, without limitation, contingent liabilities)
of such party and its subsidiaries and affiliates, taken as a whole.

3.2. Capitalization. The authorized capital stock of the Company consists
of 50,000,000 shares of Common Stock, par value $.10 per Share, and 500,000
shares of Preferred Stock, par value of $.01 per share. As of July 14, 1997, (i)
28,453,963 shares of Common Stock are issued and outstanding, all of which are

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validly issued, fully paid and nonassessable; (ii) 1,546,337 shares of Common
Stock are held in the treasury of the Company; (iii) 84,000 shares of Common
Stock are authorized and reserved for future issuance pursuant to Options issued
under the Stock Option Plan; and (iv) no Preferred Shares are issued and
outstanding. The Company has previously furnished to TXI and TXI Acquisition a
detailed schedule of outstanding Options, including the exercise prices and
existing provisions therefore. Except as provided in this Section 3.2, (A) no
subscription, warrant, option, convertible security or other right (contingent
or otherwise) to purchase or acquire any shares of capital stock of the Company
is authorized or outstanding; (B) the Company has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible security or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidence of indebtedness or assets of the Company; and (C) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof.

3.3. Authority for Agreement. The execution, delivery and performance by
the Company of this Agreement has been duly authorized by all necessary
corporate action (including without limitation the unanimous recommendation of
the Special Committee), other than the approval of stockholders of the Company
to the extent required by applicable law. This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by TXI and TXI Acquisition, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms. The affirmative vote of holders of a majority of the outstanding shares
of Common Stock of the Company entitled to vote at a duly called and held
meeting of stockholders is the only vote of the Company's stockholders necessary
to approve this Agreement.

3.4. No Conflict. The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company and the
consummation of the Merger will not, (i) conflict with or violate the Company
Certificate of Incorporation or Company Bylaws or equivalent organizational
documents of any of its subsidiaries or affiliates; (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or any of its subsidiaries or affiliates or by which any property or
asset of the Company or any of its subsidiaries or affiliates is bound or
affected; or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of the Company or any of its subsidiaries or affiliates pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries or affiliates is a party or by which the Company or any of its
subsidiaries or affiliates or any property or asset of any of them is bound or
affected, except in the case of clauses (i), (ii) and (iii) for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
and its subsidiaries and affiliates taken as a whole, or prevent or materially
delay the performance by the, Company of any of its obligations under this
Agreement.

3.5. Required Filings and Consents. The execution and delivery of this
Agreement by the Company do not, and the performance of this Agreement by the
Company will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
securities or "blue sky" laws ("Blue Sky Laws") and filing and recordation of
appropriate merger documents as required by Delaware Law and (ii) where failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and its subsidiaries and affiliates taken
as a whole, or prevent or materially delay the performance by the Company of any
of its obligations under this Agreement or the consummation of the Merger.

3.6. Disclosure Documents. (a) Each document required to be filed by the
Company with the SEC in connection with the transactions contemplated by this
Agreement (the "Company Disclosure Documents"), including, without limitation,
the Proxy Statement (as defined below) to be filed with the SEC in connection

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with the Merger, and any amendments or supplements thereto will, when filed,
comply as to form in all material respects with the applicable requirements of
the Exchange Act.

(b) At the time the Proxy Statement or any amendment or supplement thereto
is first mailed to stockholders of the Company and at the time of the
Stockholders' Meeting, the Proxy Statement, as supplemented or amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading. At
the time of the filing of any Company Disclosure Document other than the Proxy
Statement and at the time of any distribution thereof, such Company Disclosure
Document will not contain any untrue statement of a material fact made therein,
in the light of the circumstances under which they were made, not misleading.
The foregoing notwithstanding, the Company makes no representation or warranty
with respect to any information supplied by TXI, TXI Acquisition or any of their
representatives which is contained in any of the Company Disclosure Documents.

3.7. Brokers. No broker, finder or investment banker (other than The
Robinson-Humphrey Company, Inc.) is entitled to any brokerage, finder's or other
fee or commission in connection with this Agreement or the Merger based upon
arrangements made by or on behalf of the Company. The Company has heretofore
furnished to TXI and TXI Acquisition a complete and correct copy of all
agreements between the Company and The Robinson-Humphrey Company, Inc. pursuant
to which such firm would be entitled to any payment relating to this Agreement
or the Merger.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF TXI AND TXI ACQUISITION

TXI and TXI Acquisition represent and warrant to the Company as follows:

4.1. Organization and Standing. Each of TXI and TXI Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to conduct
its business as presently conducted and to enter into and perform this Agreement
and to carry out the Merger.

4.2. Authority for Agreement. The execution, delivery and performance by
each of TXI and TXI Acquisition of this Agreement, and the consummation by each
of TXI and TXI Acquisition of the Merger, has been duly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
by TXI and TXI Acquisition and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
each of TXI and TXI Acquisition enforceable against TXI or TXI Acquisition in
accordance with its terms.

4.3. No Conflict. The execution and delivery of this Agreement by TXI and
TXI Acquisition do not, and the performance of this Agreement by TXI and TXI
Acquisition and the consummation of the Merger will not, (i) conflict with or
violate the certificate of incorporation or bylaws of TXI or TXI Acquisition or
any of their subsidiaries or affiliates; (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to TXI or TXI Acquisition
or any of their respective subsidiaries or affiliates or by which any property
or asset of TXI or TXI Acquisition or their respective subsidiaries or
affiliates is bound or affected; or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of TXI or TXI Acquisition or their
respective subsidiaries or affiliates pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which TXI or TXI Acquisition or their respective
subsidiaries or affiliates is a party or by which TXI or TXI Acquisition or
their respective subsidiaries or affiliates or any property or asset of any of
them is bound or affected, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, breaches, defaults or other occurrences which would
not, individually or in the aggregate, prevent or delay the performance by TXI
or TXI Acquisition of their respective obligations under this Agreement or the
consummation of the Merger.

4.4. Required Filings and Consents. The execution and delivery of this
Agreement by TXI and TXI Acquisition do not, and the performance of this
Agreement by TXI and TXI Acquisition will not, require any

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consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act, state securities or
Blue Sky Laws and filing and recordation of appropriate merger documents as
required by Delaware Law and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, prevent or delay the performance by
TXI and TXI Acquisition of any of their respective obligations under this
Agreement or the consummation of the Merger.

4.5. Information for Company Disclosure Documents. The information supplied
by TXI or TXI Acquisition for inclusion in the Company Disclosure Documents
shall not contain any untrue statement of material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading (i) in the case of the Proxy Statement at the time the
Proxy Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company and at the time of the Stockholders' Meeting and
(ii) in the case of any Company Disclosure Document other than the Proxy
Statement, at the time of the filing thereof and at the time of any distribution
thereof. The foregoing notwithstanding, neither TXI nor TXI Acquisition makes
any representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in any of the foregoing
documents.

4.6. Brokers. No broker, finder or investment banker (other than Dillon,
Read & Co. Inc.) is entitled to any brokerage, finder's or other fee or
commission payable by the Company in connection with this Agreement and the
Merger based upon arrangements made by or on behalf of TXI or TXI Acquisition.
TXI and TXI Acquisition have heretofore furnished to the Company a complete and
correct copy of all agreements between or among TXI, TXI Acquisition and Dillon,
Read & Co., Inc. pursuant to which such firm would be entitled to any payment
relating to this Agreement or the Merger.

ARTICLE V.

COVENANTS

5.1. Conduct of the Business Pending the Merger. (a) The Company covenants
and agrees that between the date of this Agreement and the Effective Time,
unless TXI and TXI Acquisition shall otherwise agree in writing, the businesses
of the Company and its subsidiaries shall be conducted only in, and the Company
and its subsidiaries and affiliates shall not take any action except in, the
ordinary course of business and in a manner consistent with prior practice.

(b) The Company agrees and covenants that between the date of this
Agreement and the Effective Time, the Company shall not, nor shall the Company
permit any of its subsidiaries or affiliates to, (i) declare or pay any
dividends on or make other distributions in respect of any of its capital stock,
except for dividends or distributions by a subsidiary or affiliate of the
Company to the Company or another subsidiary or affiliate of the Company; (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire or permit any subsidiary or affiliate to purchase or otherwise acquire,
any shares of its capital stock; or (iv) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock or
any securities convertible into any such shares of its capital stock, or any
rights, warrants or options to acquire any such shares or convertible
securities, other than the issuance of shares of Common Stock of the Company
upon the exercise of Options outstanding as of the date of this Agreement under
the Stock Option Plan.

5.2. Access to Information; Confidentiality. (a) From the date hereof to
the Effective Time, the Company shall, and shall cause the officers, directors,
employees, auditors and agents of the Company to, afford the officers, employees
and agents of Parent and Purchaser reasonable access at all reasonable times
during regular business hours to the officers, employees, agents, properties,
offices, plants and other facilities, books and records of the Company and its
subsidiaries and affiliates, and shall furnish TXI and TXI

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Acquisition with financial, operating and other data and information as TXI or
TXI Acquisition, through its officers, employees or agents, may reasonably
request.

(b) No investigation pursuant to this Section 5.2 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.

(c) Information afforded or furnished to TXI or TXI Acquisition by the
Company pursuant to this Section 5.2 shall be kept confidential and shall not be
disclosed to third parties except (i) with the consent of the Company; (ii) as
may be required by law, regulation or by legal process (including by deposition,
interrogatory, request for documents, subpoena, civil investigative demand or
similar process); (iii) as may be necessary in connection with the consummation
of the Merger or (iv) in connection with a Competing Transaction pursuant to
Section 5.5.

5.3. Further Action; Reasonable Best Efforts. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the Merger, including,
without limitation, using its reasonable best efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company and its
subsidiaries and affiliates as are necessary for the consummation of the Merger
and to fulfill the conditions to the Merger. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of the Company or TXI Acquisition, any deeds, bills of sale, assignments or
assurances and to take and do, in the name and on behalf of the Company or TXI
Acquisition, any other actions and things they may deem desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of the Company acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.

5.4. Stockholders' Meeting. The Company shall, in accordance with
applicable law and the Company Certificate of Incorporation and Company Bylaws,
(i) duly call, give notice of, convene and hold a special meeting of its
stockholders as promptly as practicable for the purpose of considering and
taking action on this Agreement and the Merger (the "Stockholders' Meeting") and
(ii) include in the Proxy Statement (A) the recommendation of the Board of
Directors of the Company that the stockholders of the Company approve and adopt
this Agreement, unless the Board of Directors or the Special Committee, after
consultation with counsel, determines to withdraw such recommendation in light
of their respective applicable fiduciary duties, and (B) the opinion of The
Robinson-Humphrey Company, Inc. that the consideration to be received by the
holders of Public Shares in the Merger is fair to such holders from a financial
point of view. The Company shall use its reasonable best efforts to solicit from
holders of Public Shares entitled to vote at the Stockholders' Meeting proxies
in favor of such approval. At the Stockholders' Meeting, TXI and TXI Acquisition
shall cause the shares of Common Stock of the Company owned by TXI or any of its
direct or indirect subsidiaries to be voted in favor of the approval and
adoption of this Agreement and the Merger.

5.5. Competing Transaction. The Company may participate in discussions and
negotiate with any person concerning any merger, sale of assets, sale of shares
of capital stock or similar transaction involving the Company or any subsidiary
or affiliate of the Company or division of the Company (any such transaction
being referred to herein as a "Competing Transaction"), if the Special
Committee, after consultation with counsel, determines that such action is
necessary in light of its fiduciary obligations to the stockholders of the
Company.

5.6. Proxy Statement and Schedule 13E-3. As promptly as practicable
following the execution and delivery of this Agreement by all parties hereto,
the Company shall prepare and file a proxy statement with the SEC in accordance
with the Exchange Act (the "Proxy Statement") and shall prepare and file a
Schedule 13E-3 Transaction Statement required pursuant to Section 13(e) of the
Exchange Act (the "Schedule 13E-3"), and shall use its reasonable best efforts
to have the Proxy Statement cleared by the SEC. TXI, TXI Acquisition and the
Company shall also take any action required to be taken under Blue Sky Laws or
state securities laws in connection with the Merger. TXI, TXI Acquisition and
the Company shall

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cooperate with each other in taking such action and in the preparation of the
Proxy Statement and the Schedule 13E3. TXI, TXI Acquisition and their counsel
shall be given the opportunity to review the Proxy Statement and the Schedule
13E-3 and any amendments thereto prior to dissemination of the Proxy Statement
to holders of shares of Common Stock of the Company. The Company shall provide
TXI, TXI Acquisition and their counsel with a copy of any written comments or
telephonic notification of any verbal comments the Company may receive from the
SEC or its staff with respect to the Proxy Statement and the Schedule 13E-3
promptly after the receipt thereof and shall permit TXI, TXI Acquisition and
their counsel to participate in the preparation of any written responses and
telephonic notification of any verbal responses of the Company or its counsel.
Each of the Company, TXI and TXI Acquisition agrees to use its reasonable best
efforts, after consultation with the other parties hereto, to respond promptly
to all such comments of or requests by the SEC and to cause the Proxy Statement
and the Schedule 13E-3 and all required amendments and supplements thereto to be
mailed to the holders of shares of Common Stock of the Company entitled to vote
at the Stockholders' Meeting at the earliest practicable time.

5.7. Indemnification. (a) Until such time as the applicable statute of
limitations shall have expired, the Surviving Corporation shall provide with
respect to each present or former director and officer of the Company and its
subsidiaries and affiliates (both present and past) (the "Indemnified Parties"),
the indemnification rights (including any rights to advancement of expenses)
which such Indemnified Parties had, whether from the Company or such subsidiary
or affiliate, immediately prior to the Effective Time, whether under the DGCL or
the Company Certificate of Incorporation, the Company Bylaws or the bylaws of
such subsidiary or affiliate or otherwise.

(b) This Section 5.7 shall survive the Closing and is intended to benefit
the Company, the Surviving Corporation and each of the Indemnified Parties and
his or her heirs and representatives (each of whom shall be entitled to enforce
this Section 5.7 against TXI or the Surviving Corporation to the extent
specified herein) and shall be binding on all successors and assigns of TXI and
the Surviving Corporation.

5.8. Public Announcements. TXI and the Company shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement or the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with a national securities
exchange to which TXI or the Company is a party, in which case TXI or the
Company, as applicable, shall use its reasonable best efforts to consult with
the other party before issuing such release or making any such public statement.

5.9. Notices of Certain Events. TXI and TXI Acquisition shall promptly
notify the Company of:

(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;

(b) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement.
"Governmental Authority" shall mean any federation, nation, state,
sovereign or government, any federal, regional, state or local political
subdivision, any governmental or administrative body, instrumentality,
department or agency or any court, administrative hearing body, commission
or other similar dispute resolving panel or body, and any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of a government.

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ARTICLE VI.

CONDITIONS

6.1. Conditions to the Obligation of Each Party. The respective obligations
of TXI, TXI Acquisition and the Company to effect the Merger are subject to the
satisfaction of the following conditions, unless waived in writing by all
parties:

(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of the
Company to the extent required by Delaware Law, the Company Certificate of
Incorporation and the Company Bylaws.

(b) No Order. No foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of: (i) making the acquisition
of Shares by TXI or TXI Acquisition illegal or otherwise restricting,
preventing or prohibiting consummation of the Merger; (ii) seeking to
prohibit or limit materially the ownership or operation by the Company, TXI
or any of their respective subsidiaries or affiliates of all or any
material portion of the business or assets of the Company, TXI or any of
their respective subsidiaries or affiliates as a result of the Merger; or
(iii) compelling the Company, TXI, TXI Acquisition or any of their
respective subsidiaries or affiliates to dispose of or hold separate all or
any material portion of the business or assets of the Company, TXI, TXI
Acquisition or any of their respective subsidiaries or affiliates as a
result of the Merger; provided, however, that each of the parties shall
have used its reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as practicable any
injunction or other order that may be entered.

(c) Update of Fairness Opinion. At the time of mailing of the Proxy
Statement and at the Effective Time, The Robinson-Humphrey Company, Inc.
shall have reaffirmed in writing the fairness opinion previously prepared
and delivered by it to the Special Committee and The Robinson-Humphrey
Company, Inc. shall not have withdrawn such opinion.

6.2. Additional Conditions to the Obligations of TXI and TXI
Acquisition. The obligations of TXI and TXI Acquisition to effect the Merger are
subject to the satisfaction of the following further conditions, any or all of
which may be waived by TXI and TXI Acquisition.

(a) Performance of Covenants, etc. The Company shall have performed in
all material respects all of its obligations hereunder required to be
performed by it at or prior to the Effective Time, and the representations
and warranties of the Company contained in this Agreement shall be true and
correct in all respects, except where the breach or inaccuracy thereof
would not, individually or in the aggregate, have a Material Adverse
Effect, at and as of the Effective Time as if made at and as of such time,
except that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date.

(b) Consents and Approvals. TXI and TXI Acquisition shall have
received or be satisfied that they will receive all consents and approvals
contemplated by Section 4.4 and any other consents of third parties
necessary in connection with the consummation of the Merger if the failure
to obtain any such consent would have a Material Adverse Effect.

6.3. Additional Conditions to the Obligations of the Company. The
obligations of the Company to effect the Merger are subject to the satisfaction
of the following further conditions, any or all of which may be waived only by
the Special Committee:

(a) Performance of Covenants, etc. TXI and TXI Acquisition shall have
performed in all material respects all of its obligations hereunder
required to be performed by them at or prior to the Effective Time, and the
representations and warranties of TXI and TXI Acquisition contained in this
Agreement shall be true and correct in all respects, except where the
breach or inaccuracy thereof would not,

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individually or in the aggregate, have a Material Adverse Effect, at and as
of the Effective Time as if made at and as of such time, except that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date.

(b) Consents and Approvals. The Company shall have received or be
satisfied that they will receive all consents and approvals contemplated by
Section 3.5 and any other consents of third parties necessary in connection
with the consummation of the Merger if the failure to obtain any such
consent would have a Material Adverse Effect.

ARTICLE VII.

TERMINATION, AMENDMENT AND WAIVER

7.1. Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval by the stockholders of the Company:

(a) By mutual written consent duly authorized by the Boards of
Directors of TXI, TXI Acquisition and the Company;

(b) By any of TXI, TXI Acquisition or the Company if any court of
competent jurisdiction or administrative agency, commission, governmental
or regulatory authority, domestic or foreign, shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or

(c) By any of TXI, TXI Acquisition or the Company if the Effective
Time shall not have occurred on or before December 31, 1997; provided,
however, that the right to terminate this Agreement under this Section
7.1(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date.

(d) By TXI or TXI Acquisition, if, consistent with the terms of this
Agreement, the Board of Directors of the Company or the Special Committee
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to TXI or TXI Acquisition or shall have resolved
to do any of the foregoing or the Board of Directors of the Company or the
Special Committee shall have recommended to the stockholders of the Company
any Competing Transaction.

(e) By the Company (such determination to be made on behalf of the
Company by the Special Committee in its sole discretion), if, consistent
with the terms of this Agreement, the Board of Directors of the Company or
the Special Committee withdraws its recommendation of this Agreement or the
Merger or shall have resolved to do either of the foregoing or the Board of
Directors of the Company or the Special Committee shall have recommended to
the stockholders of the Company any Competing Transaction.

7.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void,
and there shall be no liability on the part of any party hereto, except as set
forth in Section 8.12 and this Section 7.2, provided that nothing herein shall
relieve any party from liability for any wilful breach hereof.

7.3. Amendments. This Agreement may not be amended except by action of the
board of directors of each of the parties hereto (and, in the case of the
Company, with the approval of the Special Committee) set forth in an instrument
in writing signed on behalf of each of the parties hereto.

7.4. Waiver. At any time prior to the Effective Time, whether before or
after any Stockholders' Meeting, any party hereto, by action taken by its board
of directors (and, in the case of the Company, with the approval of the Special
Committee), may (i) extend the time for the performance of any of the covenants,
obligations or other acts of any other party hereto or (ii) waive compliance
with any of the agreements, covenants or conditions of any other party or with
any conditions to its own obligations. Any agreement on the part of a

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party hereto to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party by its duly authorized
officer.

ARTICLE VIII.

GENERAL PROVISIONS

8.1. No Third Party Beneficiaries. Other than the provisions of Section
5.7, nothing in this Agreement shall confer any rights or remedies upon any
person other than the parties hereto.

8.2. Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes any
prior understandings, agreements, or representations by or among the parties,
written or oral, with respect to the subject matter hereof.

8.3. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective
successors. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other party, provided, however, that TXI Acquisition may freely assign its
rights to another wholly owned subsidiary of TXI without such prior written
approval.

8.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

8.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

8.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of law thereof.

8.7. Severability. If any term or provision of this Agreement is invalid,
illegal or unenforceable, 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 Merger is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or unenforceable, 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 a mutually acceptable manner to the fullest
extent permitted by applicable law in order that the Merger may be consummated
as originally contemplated to the fullest extent possible.

8.8. Specific Performance. Each of the parties acknowledges and agrees that
the other party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the parties agrees that the other
party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the parties and the
matter, in addition to any other remedy to which it may be entitled, at law or
in equity.

8.9. Construction. The language used in this Agreement shall be deemed to
be the language chosen by the parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any party.

8.10. Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. Nothing in this
Section 8.10 shall limit any covenant or agreement of the parties which by its
terms contemplates performance after the Effective Time of the Merger.

8.11. Certain Definitions. For purposes of this Agreement, the term
"affiliate," except, as hereinafter provided, shall have the same meaning as set
forth in Rule 12b-2 of Regulation 12B of the General Rules and Regulations under
the Exchange Act, and the term "person" shall mean any individual, corporation,
partnership (general or limited), limited liability company, limited liability
partnership, trust, joint venture,

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joint-stock company, syndicate, association, entity, unincorporated organization
or government or any political subdivision, agency or instrumentality thereof.
Further, the term "affiliate" of the Company when used in this Agreement shall
not include TXI or TXI Acquisition or any controlled subsidiary or controlled
affiliate of TXI or TXI Acquisition; and the term "affiliate" of TXI or TXI
Acquisition shall not include the Company or any controlled subsidiary or
controlled affiliate of the Company.

8.12. Fees and Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the Merger
shall be paid by the party incurring such expenses.

8.13. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses, or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 8.13:

If to TXI or TXI Acquisition:

Texas Industries, Inc.
1341 W. Mockingbird Lane, 7th Floor
Dallas, Texas 75241
Facsimile: (972) 647-3220
Attn: Robert C. Moore, Vice President and General Counsel

with a copy to:

Locke Purnell Rain Harrell
(A Professional Corporation)
2200 Ross Ave., Suite 2200
Dallas, Texas 75201-6766
Facsimile: (214) 740-8800
Attn: Dan Busbee, Esq.

If to the Company:

Chaparral Steel Company
1341 W. Mockingbird Lane, 7th Floor
Dallas, Texas 75241
Facsimile: (972) 647-3220
Attn: Robert C. Moore, Vice President and General Counsel

with a copy to the Special Committee of the Board of Directors of the
Company:

c/o King & Spalding
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile: (404) 572-5145
Attn: John D. Capers, Jr., Esq.

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

TEXAS INDUSTRIES, INC.

By: /s/ ROBERT D. ROGERS
------------------------------------
Name: Robert D. Rogers
Title: President

TEXAS INDUSTRIES ACQUISITION INC.

By: /s/ ROBERT D. ROGERS
------------------------------------
Name: Robert D. Rogers
Title: President

CHAPARRAL STEEL COMPANY

By: /s/ GORDON E. FORWARD
------------------------------------
Name: Gordon E. Forward
Title: President

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ANNEX B

262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec.228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholders' shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), 252, 254, 257, 258, 263 or 264 of this title:

(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of sec.251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) at the effective date of the merger or consolidation
will be either listed on a national securities exchange or designated as
a national market system security on an interdealer quotation system by
the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a

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provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or

(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
date on which the notice is given.

(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the

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effective date of the merger or consolidation, any stockholder shall have the
right to withdraw his demand for appraisal and to accept the terms offered upon
the merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the requirements
of subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitle to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

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(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.

(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

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ANNEX C

THE ROBINSON-HUMPHREY COMPANY LOGO

November 28, 1997

Board of Directors
Chaparral Steel Company
300 Ward Road
Midlothian, Texas 76065

Gentlemen:

We understand that Chaparral Steel Company (the "Company"), Texas
Industries, Inc. ("TXI") and a subsidiary of TXI have entered into an Agreement
and Plan of Merger dated as of July 30, 1997 (the "Merger Agreement"). Pursuant
to the Merger Agreement, each share of Common Stock of the Company (the "Common
Stock") that is not presently held by TXI (the "Minority Shares"), will be
converted into the right to receive $15.50 per share in cash. We understand that
approximately 85% of the outstanding shares of Common Stock are owned by TXI.
The terms and conditions of the Merger are more fully set forth in the Merger
Agreement.

Pursuant to the Merger Agreement, we have been requested by the Special
Committee of the Board of Directors of the Company to reaffirm our opinion with
respect to the fairness, from a financial point of view, of the consideration to
be received in the Merger by the Company's stockholders other than TXI, which
was originally given to the Board of Directors and Special Committee on July 30,
1997.

In arriving at the opinion set forth below, we have, among other things:

1. Reviewed certain publicly available information concerning the Company
which we believe to be relevant to our analysis;

2. Reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;

3. Analyzed certain financial assumptions prepared by the Company;

4. Conducted discussions with members of management of the Company
concerning its business, operations and prospects;

5. Reviewed the reported prices and trading activity for the Common Stock;

6. Reviewed the historical market prices and trading activity for the
Company's shares and compared them with those of certain publicly
traded companies which we deemed to be reasonably similar to the
Company;

7. Compared the results of operations and present financial condition of
the Company with those of certain publicly traded companies which we
deemed to be reasonably similar to the Company;

8. Reviewed the financial terms, to the extent publicly available, of
certain comparable minority buy-out transactions;

9. Performed certain financial analyses with respect to the Company's
projected future operating performance, including a discounted cash
flow analysis;

10. Compared the consideration paid for capacity additions in selected
transactions within the steel industry; and

11. Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary.

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Board of Directors
Chaparral Steel Company

November 28, 1997

Page 2
- ---------------------------

We have relied upon the accuracy and completeness of the financial and
other information used by us in arriving at our opinion without independent
verification, and have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial forecasts for the years
1998 through 2003, we have assumed that the assumptions provided by management
have been reasonably prepared and reflect the best currently available estimates
and judgment of the Company's management. In arriving at our opinion, we have
not conducted an extensive physical inspection of the properties or facilities
of the Company. We have not made or obtained any evaluations or appraisals of
the assets or liabilities of the Company. Our opinion is necessarily based upon
market, economic and other conditions as they exist and can only be evaluated as
of the date of this letter.

In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company,
any of its assets or Minority Shares.

We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company in connection with this transaction and will receive a
fee for our services.

In the ordinary course of our business, we have traded in the equity
securities of the Company for the accounts of our customers.

Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the consideration to be received by the holders of Minority
Shares of Common Stock pursuant to the Merger Agreement is fair from a financial
point of view to such holders.

This opinion is for the use and benefit of the Board of Directors of the
Company and the Special Committee and may not be used for any other purpose
without our prior written consent. We hereby consent, however, to the inclusion
of this opinion as an exhibit to any proxy statement distributed in connection
with the Merger.

Very truly yours,

/s/ THE ROBINSON-HUMPHREY COMPANY, LLC

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

THE ROBINSON-HUMPHREY COMPANY, LLC

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<PAGE> 75
FOR SHARES OF COMMON STOCK

CHAPARRAL STEEL COMPANY

PROXY FOR A SPECIAL MEETING OF STOCKHOLDERS DECEMBER 31, 1997

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby appoints Robert D. Rogers, John M. Belk and
Gordon E. Forward, or any of them, attorneys and proxies, with power of
substitution and revocation, to vote, as designated on the reverse side, all
shares of stock which the undersigned is entitled to vote, with all powers
which the undersigned would possess if personally present, at the Special
Meeting (including all adjournments thereof) of stockholders of Chaparral Steel
Company (the "Company") to be held on December 31, 1997 at 9:00 A.M. at 1341
West Mockingbird Lane, Suite 700, Dallas, Texas 75247.

The Company's Board of Directors and the Special Committee recommend
that you vote for the approval and adoption of the Merger Agreement.

(THIS PROXY CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE)

- ------------------------------------------------------------------------------
o FOLD AND DETACH HERE o

<PAGE> 76
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Please mark / X /
your votes as
indicated in
this example

1. Proposal to approve and adopt the Agreement and Plan of Merger, dated as of July 30, 1997, among Texas Industries, Inc.,
Texas Industries Aquisition Inc. and the Company. For Against Abstain
[ ] [ ] [ ]

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED AND
AUTHORIZES THE ATTORNEYS AND PROXIES TO TAKE ACTION
IN THEIR DISCRETION UPON SUCH OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING. IN THE ABSENCE OF
SUCH INSTRUCTIONS, THIS PROXY WILL BE VOTED FOR THE
' PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT.

(Sign exactly as name(s) appears hereon. If shares are
held jointly each holder should sign. If signing for
estate, trust or corporation, title or capacity should
be stated.)

Please date, sign and return this Proxy in the enclosed
business envelope.

Dated: , 1997
------------------------------------------

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

- ---------------------------------------------------------------------------------------------------------------------------------
o FOLD AND DETACH HERE o

</TABLE>