CROMPTON & KNOWLES CORP, S-1, 1996-08-01

CROMPTON & KNOWLES CORP
S-1, 1996-08-01
INDUSTRIAL ORGANIC CHEMICALS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 1996

REGISTRATION NO. 333-

================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------
CROMPTON & KNOWLES CORPORATION
(Exact name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
MASSACHUSETTS 2860 04-1218720
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)

ONE STATION PLACE, METRO CENTER
STAMFORD, CONNECTICUT 06902
(203) 353-5400
</TABLE>

(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-------------------

VINCENT A. CALARCO
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
CROMPTON & KNOWLES CORPORATION
ONE STATION PLACE, METRO CENTER
STAMFORD, CONNECTICUT 06902
(203) 353-5400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
-------------------

WITH COPY TO:
EDWARD D. HERLIHY, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NY 10019-6150
(212) 403-1000
-------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / / _______

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
-------------------

CALCULATION OF REGISTRATION FEE

[CAPTION]
<TABLE>

TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(2) OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, $0.10 par
value(1)................... 1,000,000 shares $14.63 $14,630,000 $5,045
</TABLE>

(1) Includes one attached Preferred Share Purchase Right per share. Rights
initially will trade together with the Common Stock. The value attributable
to the Rights, if any, is reflected in the market price of the Common Stock.
(2) Pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended, and estimated solely for purposes of calculating the registration
fee, the proposed maximum aggregate offering price is $14,630,000, which
equals the product of (x) $14.63, the average of the high and low prices of
the common stock, $0.10 par value, of Crompton & Knowles Corporation
(together with the attached Preferred Share Purchase Rights of Crompton &
Knowles Corporation, "Crompton Common Stock") as reported on the New York
Stock Exchange Composite Tape on July 25, 1996, and (y) 1,000,000, the total
number of shares of Crompton Common Stock to be offered hereunder. The
proposed maximum offering price per share is equal to the proposed maximum
aggregate offering price determined in the manner described in the preceding
sentence divided by 1,000,000, the total number of shares of Crompton Common
Stock to be offered hereunder.
-------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================

<PAGE>
CROMPTON & KNOWLES CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)

<TABLE>
<CAPTION>
FORM S-1 ITEM NO. PROSPECTUS HEADING
----------------- ------------------
<S> <C> <C>

1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page; Cross Reference Sheet; Outside
Front Cover Page of Prospectus

2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Available Information; Table of Contents

3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Risk Factors; Market
Price and Dividend Data; The Company;
Historical and Unaudited Pro Forma Combined
Capitalization; Unaudited Pro Forma
Combined Financial Information

4. Use of Proceeds............................ Use of Proceeds

5. Determination of Offering Price............ Plan of Distribution

6. Dilution................................... Not Applicable

7. Selling Security Holders................... Not Applicable

8. Plan of Distribution....................... Oustide Front Cover Page; Plan of
Distribution

9. Description of Securities to be
Registered................................. Description of Crompton Capital Stock

10. Interests of Named Experts and Counsel..... Legal Matters; Experts

11. Information With Respect to the
Registrant................................. Prospectus Summary; Risk Factors; Market
Price and Dividend Data; The Company;
Recent Developments; Selected Historical
Financial Data of Crompton; Management's
Discussion and Analysis of Financial
Condition and Results of Operations of
Crompton; Historical and Unaudited Pro
Forma Combined Capitalization; Unaudited
Pro Forma Combined Financial Information;
Index to Financial Statements of Crompton &
Knowles Corporation

12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities............................ Not Applicable
</TABLE>

<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 1, 1996

PROSPECTUS

1,000,000 SHARES [LOGO]

CROMPTON & KNOWLES CORPORATION

COMMON STOCK
($0.10 PAR VALUE)

All of the 1,000,000 shares of common stock, $0.10 par value per share (together
with the attached preferred share purchase rights, the "Common Stock" or
"Crompton Common Stock"), of Crompton & Knowles Corporation ("Crompton" or the
"Company") offered hereby are being offered by Crompton (the "Offering").

Crompton Common Stock is quoted on the New York Stock Exchange ("NYSE") under
the trading symbol "CNK." On August , 1996, the closing price of Crompton
Common Stock as reported on the NYSE Composite Tape was $ .

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN RISK AND OTHER FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

<TABLE>
<CAPTION>
PRICE TO PLACEMENT FEE PROCEEDS TO
PUBLIC OR DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share(3)...................... $ $ $
Total............................. $ $ $
</TABLE>

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

(1) The Company has agreed to indemnify the Placement Agent against certain
liabilities in connection with the Offering, including liabilities under the
Securities Act of 1933, as amended.

(2) Before deducting estimated expenses of $ .

(3) Each share will have attached one Preferred Share Purchase Right which will
initially trade together with the share.

SALOMON BROTHERS INC
Placement Agent

The date of this Prospectus is August , 1996.

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

<PAGE>

AVAILABLE INFORMATION

Crompton is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by Crompton with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission at its principal
office at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048, and Chicago Regional Office,
Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates, or through the World Wide Web (http://www.sec.gov). Crompton Common Stock
is listed on the NYSE, and such reports, proxy statements and other information
concerning Crompton are available for inspection and copying at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.

Crompton has filed with the Commission a Registration Statement on Form S-1
under the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Securities Act"), with respect to the
shares of Crompton Common Stock to be offered hereby (the "Registration
Statement"). This Prospectus does not contain all of the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and related exhibits for further information with
respect to Crompton and the securities offered hereby. Statements contained
herein concerning the provisions of any document are necessarily summaries of
such documents and not complete, and in each instance, reference is made to the
copy of such document attached hereto or filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.

ii
<PAGE>

PROSPECTUS SUMMARY

The following is a summary of certain information contained elsewhere in
this Prospectus. This summary is not intended to be complete and is qualified in
its entirety by the more detailed information and financial statements appearing
elsewhere in this Prospectus. Prospective investors are urged to read and
consider carefully all of the information contained in this Prospectus. As used
herein, the terms "Crompton" and "the Company" refer to Crompton & Knowles
Corporation and its consolidated subsidiaries, unless the context otherwise
requires.

THE COMPANY

Crompton is engaged in the manufacture and sale of specialty chemicals and
specialty process equipment and controls which are marketed throughout the
world. Crompton's line of specialty value-added chemicals includes textile and
industrial dyes and auxiliary chemicals, reaction flavors, specialty sweeteners,
food colors and inactive pharmaceutical additives and coatings. Crompton's
specialty process equipment and controls business consists primarily of the
manufacture and sale of plastics and rubber extrusion equipment and integrated
extrusion systems, industrial blow molding equipment and electronic controls.
The principal executive offices of Crompton are located at One Station Place,
Metro Center, Stamford, Connecticut 06902, and its telephone number is (203)
353-5400. See "The Company."

RECENT DEVELOPMENTS

Pursuant to an Agreement and Plan of Merger, dated as of April 30, 1996 (the
"Merger Agreement"), Crompton has agreed to the merger (the "Merger") of Tiger
Merger Corp., a Delaware corporation and a wholly owned subsidiary of Crompton
("Subcorp"), with and into Uniroyal Chemical Corporation, a Delaware corporation
("Uniroyal"), subject to the approval of the transaction by the stockholders of
each of Uniroyal and Crompton at special meetings thereof currently scheduled to
be held on August 21, 1996. The Board of Directors of Crompton has fixed the
close of business on July 9, 1996, as the record date for determination of
holders of Crompton Common Stock entitled to notice of and to vote at such
meeting of Crompton stockholders. Accordingly, purchasers of the shares of
Crompton Common Stock offered hereby will not be entitled to vote such shares at
such special meeting.

The Merger will be consummated on the terms and subject to the conditions
set forth in the Merger Agreement (which was filed by Crompton with the
Commission as an exhibit to Crompton's Quarterly Report on Form 10-Q for the
quarter ended March 30, 1996), pursuant to which, among other things, (i)
Subcorp will be merged with and into Uniroyal as a result of which Uniroyal will
become a wholly owned subsidiary of Crompton, (ii) each issued and outstanding
share (other than shares, if any, held in the treasury of Uniroyal or held by
Crompton or any of its subsidiaries, which will be cancelled) of common stock,
$0.01 par value per share (together with the attached preferred stock purchase
rights, "Uniroyal Common Stock"), of Uniroyal will be converted into 0.9577
shares of Crompton Common Stock (with cash in lieu of fractional shares), and
(iii) each issued and outstanding share (other than shares, if any, held in the
treasury of Uniroyal or held by Crompton or any of its subsidiaries, which will
be cancelled, and other than shares as to which dissenters' appraisal rights
have been perfected) of Series A Cumulative Redeemable Preferred Stock, par
value $0.01 per share ("Series A Preferred Stock"), of Uniroyal and of Series B
Preferred Stock, par value $0.01 per share ("Series B Preferred Stock," and
together with the Series A Preferred Stock, "Uniroyal Preferred Stock"), of
Uniroyal will be converted into 6.3850 shares of Crompton Common Stock (with
cash in lieu of fractional shares). It is currently anticipated that the Merger
will be consummated shortly after the special meetings of Crompton and Uniroyal
stockholders, assuming the Merger Agreement and the Merger are approved at such
meetings and all other conditions to the Merger have been satisfied or waived.

1
<PAGE>

intend to make any material changes to the general operating activities of
Uniroyal following consummation of the Merger. The principal executive offices
of Uniroyal are located at Benson Road, Middlebury, Connecticut 06749, and its
telephone number is (203) 573-2000. Uniroyal is subject to the informational
requirements of the Exchange Act, and in accordance therewith files reports,
proxy statements and other information with the Commission. Prospective
investors are urged to read and consider carefully such reports, proxy
statements and other information. Uniroyal Common Stock is quoted on the Nasdaq
National Market (the "NASDAQ/NM").

Crompton is effecting the Offering in order for the Merger to qualify as a
pooling-of-interests for accounting and financial reporting purposes. See
"Recent Developments."

<TABLE>
THE OFFERING

<S> <C>
Common Stock offered by Crompton............. 1,000,000 shares
Common Stock to be outstanding immediately
after the Offering........................... 49,039,309 shares(1)
NYSE Symbol.................................. CNK
Use of Proceeds.............................. The net proceeds to Crompton from the
Offering will be used to partially offset
the estimated merger costs discussed
elsewhere herein. See "Use of Proceeds."
Risk Factors................................. See "Risk Factors."
</TABLE>

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

(1) Calculated based on 48,039,309 shares of Common Stock outstanding on July
30, 1996, and not giving effect to the up to approximately 26,089,206 shares
of Common Stock expected to be issued in connection with the Merger.

2
<PAGE>

SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

Selected Historical Financial Data

The selected financial data presented below for Crompton as of December 31,
1994 and December 30, 1995 and for the years ended December 25, 1993, December
31, 1994 and December 30, 1995, and Uniroyal as of October 2, 1994 and October
1, 1995 and for the three years ended September 30, 1993, October 2, 1994 and
October 1, 1995, have been derived from and are qualified in their entirety by,
and should be read in conjunction with, the respective audited financial
statements and notes thereto contained herein or otherwise filed with the
Commission. See "Index to Financial Statements of Crompton & Knowles
Corporation."

Crompton's statement of operations data for the years ended December 28,
1991 and December 26, 1992 and the balance sheet data as of December 28, 1991,
December 26, 1992 and December 25, 1993 are derived from audited Crompton
consolidated financial statements that are neither included nor incorporated by
reference herein. Uniroyal's statement of operations data for the fiscal years
ended September 30, 1991 and 1992 and the balance sheet data as of September 30,
1991, 1992 and 1993 are derived from audited Uniroyal financial statements which
are neither included nor incorporated by reference herein.

The unaudited financial data presented below for the interim periods ended
April 1, 1995 and March 30, 1996, and April 2, 1995 and March 31, 1996, are
derived from the unaudited consolidated financial statements of Crompton and
Uniroyal, respectively, that are contained herein or otherwise filed with the
Commission. In the opinion of Crompton, such unaudited financial data have been
prepared on the same basis as the audited financial statements contained herein
or otherwise filed with the Commission and include all adjustments (consisting
only of normal recurring adjustments) necessary to fairly state the information
set forth herein. Operating results for the interim periods ended March 30, 1996
and March 31, 1996 are not necessarily indicative of the results that may be
expected for the year or for any other interim period.

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
------------------------------------------------------------------------ --------------------
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1991 1992 1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------ -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Crompton & Knowles
Corporation
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales................. $450,228 517,718 558,348 589,757 665,513 168,193 164,840
Income before
extraordinary charges and
cumulative effect of
accounting changes....... $ 35,941 43,265 51,958 50,916 40,493 13,196 9,468
Net income................ $ 35,941 34,465 51,958 50,916 40,493 13,196 9,468
Income per common share
before extraordinary
charges and cumulative
effect of accounting
changes.................. $ 0.73 0.87 1.00 1.00 0.84 0.27 0.20
Net income per common
share..................... $ 0.73 0.69 1.00 1.00 0.84 0.27 0.20
Weighted average number of
shares outstanding..... 49,317 49,967 52,176 51,152 48,448 48,921 48,318
CONSOLIDATED BALANCE SHEET
DATA:
Total assets.............. $308,562 350,715 363,246 432,328 484,138 521,518
Long-term debt............ $ 76,118 24,000 14,000 54,000 64,000 74,000
Cash dividends declared
per common share......... $ 0.25 0.31 0.38 0.46 0.525 0.12 0.135
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
------------------------------------------------------------------------- ----------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, OCTOBER 2, OCTOBER 1, APRIL 2, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
------------- ------------- ------------- ---------- ---------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Uniroyal Chemical
Corporation
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA:
Net sales............ $ 832,302 856,591 907,862 946,454 1,079,321 485,963 527,108
Income (loss) before
extraordinary
charges and
cumulative effect of
accounting changes.. $ (23,648) (27,790) (24,792) (213,843)(3) 99,429(4) 83,300(4) 3,318
Net income (loss).... $ (23,648) (27,790) (236,733) (213,843)(3) 91,150(4) 75,021(4) 3,014
Income (loss) per
common share before
extraordinary
charges and
cumulative effect of
accounting changes
(1)(2)............ $ (2.15) (2.54) (2.31) (20.31)(3) 5.37(4) 6.71(4) 0.12
Net income (loss) per
common share (1)(2). $ (2.15) (2.54) (21.85) (20.31)(3) 4.92(4) 6.04(4) 0.11
Weighted average
number of shares
outstanding(2)...... 11,167 11,038 10,847 10,543 18,461 12,385 24,542
CONSOLIDATED BALANCE
SHEET DATA (5):
Total assets......... $ 1,253,370 1,228,569 1,225,438 1,056,017 1,171,707 1,197,502
Long-term debt....... $ 854,619 880,343 1,034,799 1,048,225 910,156 898,564
</TABLE>

- ------------
(1) Calculated based on income (loss) available to common shareholders after
preferred dividends earned of $375, $262, $267, $292, $395, $194 and $210
for the years ended September 30, 1991, 1992 and 1993, October 2, 1994, and
October 1, 1995, and the six-month periods ended April 2, 1995 and March 31,
1996, respectively.

(2) During the second quarter of fiscal 1995, Uniroyal completed an initial
public offering. Upon consummation of the offering, certain redeemable
common stock owned by Uniroyal management was converted into a single class
of common stock. Weighted average number of shares outstanding reflects the
conversion on a retroactive basis for all periods presented.

(3) Includes an after-tax write-off of $163 million for impairment of certain
intangible assets.

(4) Includes a gain of $78.9 million related to a deferred tax asset reserve.
(See note 10 under "Unaudited Pro Forma Combined Financial
Information--Notes To Unaudited Pro Forma Combined Financial Information")

(5) Uniroyal has not declared any dividends on its common stock during the
periods indicated above.

4
<PAGE>

UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA

The unaudited selected pro forma combined financial data shown below gives
effect to the Merger using the pooling-of-interests basis of accounting. The pro
forma statement of operations data reflects the combination of statement of
operations data of Crompton for each of the years ended December 25, 1993,
December 31, 1994 and December 30, 1995, and the three-month periods ended April
1, 1995 and March 30, 1996, with statement of operations data of Uniroyal for
each of the years ended September 30, 1993, October 2, 1994 and October 1, 1995,
and the three-month periods ended April 2, 1995 and March 31, 1996. The pro
forma balance sheet data reflects the combination of balance sheet data of
Crompton as of December 25, 1993, December 31, 1994, December 30, 1995 and March
30, 1996 with balance sheet data of Uniroyal as of September 30, 1993, October
2, 1994, October 1, 1995 and March 31, 1996. The selected pro forma combined
financial data should be read in conjunction with the unaudited pro forma
combined financial information and notes thereto, which are included elsewhere
in this Prospectus. These pro forma data do not purport to be indicative of the
results that would have actually been obtained if the Merger had been in effect
for the above-mentioned periods and on the dates indicated or that may be
obtained in the future.

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
--------------------------------------------- ---------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 AND 1994 AND 1995 AND 1995 AND 1996 AND
SEPTEMBER 30, OCTOBER 2, OCTOBER 1, APRIL 2, MARCH 31,
1993 1994 1995 1995 1996(4)
------------- ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA STATEMENT OF
OPERATIONS DATA: (2)
Net sales................ $ 1,466,210 1,536,211 1,744,834 442,515 460,468
Operating income......... $ 187,372 1,417(5) 218,122 71,708 63,792
Income (loss) before
extraordinary charges
and cumulative effect
of accounting
changes................ $ 27,166 (162,927)(5) 139,922(6) 107,032(6) 21,154
Income (loss) per common
share before
extraordinary charges
and cumulative effect
of accounting changes
(1).................... $ 0.43 (2.65)(5) 2.11(6) 1.72(6) 0.29(7)
Weighted average number
of shares outstanding
(1).................... 63,689 61,515 66,394 62,202 72,104
PRO FORMA BALANCE SHEET
DATA:
Total assets............. $ 1,588,684 1,488,345 1,655,845 1,719,020
Long-term debt........... $ 1,048,799 1,102,225 974,156 1,012,614(3)
Cash dividends declared
per common share (8).. $ 0.38 0.46 0.525 0.12 0.135
</TABLE>

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

(1) Common and common equivalent shares outstanding were calculated assuming a
conversion rate of 0.9577 shares of Crompton Common Stock for each share of
Uniroyal Common Stock, and 6.3850 shares of Crompton Common Stock for each
share of Uniroyal Preferred Stock as provided for in the Merger Agreement.

(2) The Pro Forma Statement of Operations Data does not include an estimated $55
million of after tax costs associated with the Merger, as such costs are
non-recurring and will be reflected in the statement of operations of the
combined company in its first reporting period.

5
<PAGE>

(3) Long-term debt includes the financing of the estimated costs of the Merger
(see notes 1, 2 and 6 under "Historical and Unaudited Pro Forma Combined
Capitalization--Notes to Historical and Unaudited Pro Forma Combined
Capitalization"), net of proceeds from the issuance from treasury stock of
1,000,000 shares of Crompton Common Stock to be issued in an offering to
take place prior to the consummation of the Merger.

(4) After the consummation of the Merger, Uniroyal will change its fiscal
year-end to conform with that of Crompton. Results of operations for
Uniroyal's quarter ended December 31, 1995 were a net loss of $8.4 million
which will be reflected as a one-time adjustment to stockholders' equity in
the combined company's 1996 financial statements.

(5) Includes an after-tax write-off of $163 million for impairment of certain
intangible assets.

(6) Includes a gain of $78.9 million related to a deferred tax asset reserve.
(See note 10 under "Unaudited Pro Forma Combined Financial
Information--Notes To Unaudited Pro Forma Combined Financial Information.")

(7) The calculation of pro forma income (loss) per common share before
extraordinary charges and cumulative effect of accounting changes does not
reflect as outstanding 1,000,000 shares of Crompton Common Stock to be
issued in an offering prior to the consummation of the Merger, as such
amounts are not reflective of historical trends for the combined company.
Assuming the issuance of 1,000,000 shares of treasury stock (see note 3
above) had taken place at the beginning of the year, income per common share
before extraordinary charges and cumulative effect of accounting changes for
the three months ended 1996 would have been unchanged at $0.29.

(8) Represents Crompton's historical dividends per share. Uniroyal has not
declared any dividends on its common stock during the periods presented.

6
<PAGE>

RISK FACTORS

Purchasers of shares of Common Stock should carefully consider and evaluate
all of the information set forth in this Prospectus, including the risk factors
listed below. See "The Company," "Recent Developments" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Crompton" for a discussion of other factors generally affecting Compton's
business.

ENVIRONMENTAL CONSIDERATIONS

Crompton's operations are subject to numerous laws and regulations relating
to the protection of human health and the environment in the U.S. and abroad.

Chemical companies are subject to extensive environmental laws and
regulations concerning, among other things, emissions to the air, discharges to
land, surface, subsurface strata, and water and the generation, handling,
storage, transportation, treatment and disposal of waste and other materials and
are also subject to federal, state and local laws and regulations regarding
health and safety matters.

The ongoing operations of chemical manufacturing plants entail risks in
these areas, and there can be no assurance that material costs or liabilities
will not be incurred. In addition, future developments, such as increasingly
strict requirements of environmental and health and safety laws and regulations
and enforcement policies thereunder, could bring into question the handling,
manufacture, use, emission or disposal of substances or pollutants at facilities
owned, used or controlled by Crompton or the manufacture, use, emission or
disposal of certain products or wastes by Crompton and could involve potentially
material expenditures for Crompton. To meet changing permitting and regulatory
standards, Crompton may be required to make significant site or operational
modifications, potentially involving substantial expenditures and reductions or
suspensions of certain operations.

Crompton is involved in claims, litigation, administrative proceedings and
investigations of various types in a number of jurisdictions. Several of such
matters involve claims for a material amount of damages and relate to or allege
environmental liabilities, including clean-up costs associated with hazardous
waste disposal sites, natural resource damages, property damage and personal
injury. Crompton and an inactive subsidiary have been identified by the United
States Environmental Protection Agency (the "EPA"), state or local governmental
agencies, and other potentially responsible parties (each a "PRP"), as PRPs for
costs associated with waste disposal sites at various locations in the United
States. Because these regulations have been construed to authorize joint and
several liability, the EPA could seek to recover all costs involving a waste
disposal site from any one of the PRPs for such site, including Crompton or its
subsidiary, despite the involvement of other PRPs. In each such case, Crompton
or its subsidiary is one of a large number of PRPs so identified. In certain
instances, a number of other financially responsible PRPs are also involved, and
Crompton expects that any ultimate liability resulting from such matters will be
apportioned between Crompton or its subsidiary and such other parties.

While Crompton believes it is unlikely, the resolution of these matters
could have a material adverse effect on Crompton's consolidated results of
operations if a significant number of these matters is resolved unfavorably. See
"The Company -- Environmental Matters," "-- Environmental Matters Following the
Merger," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Crompton."

VOLATILITY OF STOCK PRICE

The trading price of the Common Stock after the Offering could be subject to
significant fluctuations in response to variations in quarterly operating
results, the gain or loss of significant contracts, changes in management or new
products or services by Crompton or its competitors, general trends in the
industry and other events or factors. In addition, the stock market has
experienced extreme price and volume fluctuations which have affected the market
price for many companies in similar

7
<PAGE>

industries and which have often been unrelated to the operating performance of
these companies. These broad market fluctuations may adversely affect the market
price of Crompton Common Stock.

EFFECT OF CERTAIN ANTITAKEOVER PROVISIONS

The Crompton Articles of Organization (the "Crompton Articles") and Crompton
By-Laws contain certain provisions that would likely have an effect of delaying
or deterring a change in control of Crompton. Such provisions require, among
other things, (i) a classified Board of Directors, with each class containing as
nearly as possible one-third of the whole number of members of the Board of
Directors and the members of each class serving for three-year terms, (ii) a
vote of at least 80% of the holders of Crompton's voting securities to approve
certain business combination transactions with a stockholder who is the
beneficial owner of 10% or more of Crompton's outstanding voting securities,
(iii) a vote of a least 80% of Crompton's voting securities to amend certain of
the Crompton Articles and Crompton By-Laws, (iv) advance notice procedures with
respect to nominations of directors other than by or at the direction of the
Board of Directors, and (v) a vote of two-thirds ( 2/3) of Crompton's
outstanding voting securities to approve certain merger and consolidation
agreements involving Crompton. The preferred share purchase rights of Crompton
that trade with the Crompton Common Stock would likely have a similar delaying
or deterring effect. In addition, Crompton's Board of Directors has the
authority to issue up to 250,000 shares of Preferred Stock, without par value,
in one or more series and to fix the voting powers, designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof without stockholder
approval. See "Description of Crompton Capital Stock."

OPERATING HAZARDS

Crompton's revenues are dependent on the continued operation of its various
manufacturing facilities. The operation of chemical manufacturing plants
involves many risks, including the breakdown, failure or substandard performance
of equipment, natural disasters and the need to comply with directives of
government agencies. The occurrence of material operational problems, including
but not limited to the above events, may have a material adverse effect on the
productivity and profitability of a particular manufacturing facility, or with
respect to certain facilities, Crompton as a whole, during the period of such
operational difficulties.

Crompton's operations are also subject to various hazards incident to the
production of industrial chemicals, including the use, handling, processing,
storage and transportation of certain hazardous materials. These hazards can
cause personal injury and loss of life, severe damage to and destruction of
property and equipment, environmental damage and suspension of operations.
Claims arising from any future catastrophic occurrence may result in Crompton
being named as a defendant in lawsuits asserting potentially large claims.

GENERAL LITIGATION EXPENSE

In addition to the matters discussed above, because the production of
certain chemicals involves the use, handling, processing, storage and
transportation of hazardous materials, and because certain of Crompton's
products constitute or contain hazardous materials, Crompton has been subject to
claims of injury from direct exposure to such materials and from indirect
exposure when such materials are incorporated into other companies' products.
There can be no assurance that as a result of past or future operations, there
will not be additional claims of injury by employees or members of the public
due to exposure, or alleged exposure, to such materials. Furthermore, Crompton
also has exposure to present and future claims with respect to workplace
exposure, workers' compensation and other matters, arising from events both
prior to and after the Offering. There can be no assurance as to the actual
amount of these liabilities or the timing thereof. See "The Company -- Legal
Proceedings."

8
<PAGE>

DEPENDENCE UPON KEY PERSONNEL

Crompton is dependent upon the efforts of its executive officers and
scientific staff. The loss of certain of these key employees could materially
and adversely affect Crompton's business. Crompton's success will depend on its
ability to retain key employees, and, if any depart, to replace them with
personnel of comparable scientific and management capability.

NEED FOR ADDITIONAL CAPITAL

Crompton presently expects that the net proceeds of this Offering, together
with existing working capital, anticipated cash flows from operations, and funds
available from existing bank lines of credit and commitments will be sufficient
to meet its capital and liquidity needs through at least 1997. However,
Crompton's capital needs may increase depending upon several factors, including
future acquisitions, changes to planned research and development activities,
expanded manufacturing and commercialization programs, additional technological,
regulatory and competitive developments and timing of regulatory approvals for
new products. As a result, Crompton may need to raise additional funds. There
can be no assurance that additional financing would be available and, if
available, that the terms would be acceptable to Crompton.

LEVERAGE OF UNIROYAL

Uniroyal and its subsidiaries had approximately $898.6 million of long-term
debt at March 31, 1996. Following the Merger, the ability of Uniroyal and its
subsidiaries to meet their respective debt service obligations and to reduce
their respective total debt will be dependent upon the future performance of
Crompton and Uniroyal and its subsidiaries, which, in turn, will be subject to
general economic conditions and to financial, business and other factors,
including factors beyond their control.

If Crompton, through Uniroyal, is unable to generate sufficient cash flow
from operations in the future, Crompton may be required to refinance all or a
portion of Uniroyal's existing debt or to obtain additional financing. There can
be no assurance that any such refinancing would be possible or that any
additional financing could be obtained, particularly in view of Uniroyal's high
levels of debt, the fact that assets have been given as collateral to secure
indebtedness of Uniroyal, and the debt incurrence restrictions under existing
debt arrangements. If no such refinancing or additional financing were
available, Uniroyal or its subsidiaries could be forced to default on their
respective debt obligations and, as an ultimate remedy, seek protection under
the federal bankruptcy laws.

See "Historical and Unaudited Pro Forma Combined Capitalization" and
"Unaudited Pro Forma Combined Financial Information."

INTERNATIONAL OPERATIONS

Crompton operates on a worldwide basis and is therefore affected by foreign
currency exchange rate fluctuations. Crompton operates manufacturing facilities
in Europe which serve primarily the European market. Exchange rate disruptions
between the United States and European currencies, and among European
currencies, are not expected to have a material effect on year-to-year
comparisons of Crompton's earnings. Cash deposits, borrowings and forward
exchange contracts are used to hedge fluctuations between the U.S. and European
currencies, and among European currencies, if such fluctuations are earnings
related. Such hedging activities are not significant in total.

Political and economic uncertainties in certain of the countries in which
Crompton operates may expose it to risk of loss. Crompton does not believe that
there is currently any likelihood of material loss through political or economic
instability, seizure, nationalization or similar event. Crompton cannot predict,
however, whether events of this type in the future could have a material adverse
effect on its operations.

9
<PAGE>

HOLDING COMPANY STRUCTURE

Crompton conducts a substantial portion of its operations through
subsidiaries, and is dependent on the cash flow of its subsidiaries in order to
pay dividends. Following the Merger, certain agreements governing indebtedness
of Uniroyal's subsidiaries and applicable state laws may restrict the payment of
distributions and the making of loans and advances by such subsidiaries to
Crompton.

CONSUMMATION OF THE MERGER

The Merger will be consummated on the terms and subject to the conditions
set forth in the Merger Agreement. It is currently anticipated that the Merger
will be consummated shortly after the special meetings of Crompton and Uniroyal
stockholders, assuming the Merger Agreement and the Merger are approved at such
meetings and all other conditions to the Merger have been satisfied or waived.
There can be no assurances that the Merger will be consummated, whether or not
approved by the Crompton and Uniroyal stockholders, or as to the effect of the
Merger on the results of operations and performance of Crompton on a going
forward basis. See "Recent Developments."

LITIGATION RELATING TO MERGER

Crompton, Uniroyal and the Directors of Uniroyal have been named as
defendants in a purported class action lawsuit (the "Stockholder Action") filed
in connection with the proposed Merger in the Court of Chancery, County of New
Castle, State of Delaware. Fassbender v. Mazaika, C.A. No. 14980. The
Stockholder Action alleges, among other things, that defendant directors
breached their fiduciary duties by pursuing the Merger at an allegedly unfair
and inadequate price; by agreeing to the proposed Merger without having
conducted an "auction process or active market check" or a full and thorough
investigation; and by agreeing to the allegedly unfair terms of the Merger. The
Stockholder Action is brought on behalf of a purported class of persons
consisting of the stockholders of Uniroyal other than defendants. As relief, the
Stockholder Action seeks, among other things, an order enjoining consummation of
the proposed Merger, or, in the event it is consummated, rescission of the
Merger, or an award of "rescissory or compensatory damages" in an unspecified
amount. Defendants believe that the Stockholder Action is without merit.

PATENTS AND PROPRIETARY RIGHTS

Crompton's success depends in large part on its ability to obtain patents,
maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. Crompton owns patents, trade names, and
trademarks and uses know-how, trade secrets, formulae, and manufacturing
techniques which assist in maintaining the competitive position of certain of
its products. Patents, expiring in 1999 and thereafter, formulae, and know-how
are of particular importance in the manufacture of a number of the dyes and
flavor ingredients sold in Crompton's specialty chemicals business, and patents
and know-how are also significant in the manufacture of certain wire insulating
and plastics processing machinery product lines. Crompton is also licensed to
use certain patents and technology owned by foreign companies to manufacture
products complementary to its own products, for which it pays royalties in
amounts not considered material to the consolidated results of the enterprise.
Products to which Crompton has such rights include certain dyes, plastics
machinery and flavored ingredients.

There can be no assurance that any of Crompton's patent applications will be
approved, that Crompton will develop additional proprietary products that are
patentable, that any patents issued to Crompton will provide Crompton with
competitive advantages or will not be challenged by any third parties or that
the patents of others will not prevent the commercialization of products
incorporating Crompton's technology. Furthermore, there can be no assurance that
others will not independently develop similar products, duplicate any of
Crompton's products or, if patents are issued to Crompton, design around
Crompton's patents. Any of the foregoing results could have a material adverse
effect on Crompton.

10
<PAGE>

The commercial success of Crompton also depends, in part, on its ability to
avoid infringing patents issued to others. If Crompton were determined to be
infringing any third-party patent, Crompton would be required to pay damages,
alter its products or processes, obtain licenses or cease certain activities. In
addition, if patents are issued to others which contain claims that compete or
conflict with those of Crompton and such competing or conflicting claims are
ultimately determined to be valid, Crompton may be required to pay damages, to
obtain licenses to these patents, to develop or obtain alternative technology or
to cease using such technology. If Crompton is required to obtain any licenses,
there can be no assurance that Crompton will be able to do so on commercially
favorable terms, if at all. Crompton's failure to obtain a license to any
technology that it may require to commercialize its products may have a material
adverse impact on Crompton.

Litigation, which could result in substantial costs to Crompton, may also be
necessary to enforce any patents issued or licensed to Crompton or to determine
the scope and validity of third-party proprietary rights. If competitors of
Crompton prepare and file patent applications in the United States that claim
technology also claimed by Crompton, Crompton may have to participate in
interference proceedings declared by the U.S. Patent and Trademark Office to
determine priority of invention, which could result in substantial cost to
Crompton, even if the eventual outcome is favorable to Crompton. An adverse
outcome of any such litigation or interference proceeding could subject Crompton
to significant liabilities to third parties, require disputed rights to be
licensed from third parties or require Crompton to cease using such technology.

Crompton also relies on trade secrets, proprietary know-how and
technological advances which it seeks to protect, in part, by confidentiality
agreements with its collaborators, employees and consultants. There can be no
assurance that these agreements will not be breached, that Crompton would have
adequate remedies for any breach, or that Crompton's trade secrets and
proprietary know-how will not otherwise become known or be independently
discovered by others. See "The Company -- Patents and Licenses."

11
<PAGE>
USE OF PROCEEDS

The net proceeds to Crompton from the Offering are estimated to be
approximately $15 million after deducting estimated costs, assuming a price to
the public of $15 1/8 per share. Such proceeds will be used to partially offset
the estimated merger costs discussed elsewhere herein. Crompton is effecting the
Offering in order for the Merger to qualify as a pooling-of-interests for
accounting and financial reporting purposes.

MARKET PRICE AND DIVIDEND DATA

The following table reflects the range of the reported high and low prices
of Crompton Common Stock on the NYSE Composite Tape and the per share dividends
paid thereon. The information in the table has been adjusted to reflect
retroactively all applicable stock splits.

<TABLE>
<CAPTION>
CROMPTON
COMMON STOCK
---------------
CALENDAR QUARTERS HIGH LOW DIVIDENDS
- ------------------------------------------------------ --------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1993:
First quarter..................................... $24 3/4 $21 3/8 $ 0.08
Second quarter.................................... 27 1/4 21 0.10
Third quarter..................................... 23 1/4 19 0.10
Fourth quarter.................................... 23 7/8 17 5/8 0.10
1994:
First quarter..................................... $24 1/8 $19 5/8 $ 0.10
Second quarter.................................... 23 5/8 17 3/8 0.12
Third quarter..................................... 18 1/2 15 7/8 0.12
Fourth quarter.................................... 16 5/8 13 7/8 0.12
1995:
First quarter..................................... $17 3/8 $15 7/8 $ 0.12
Second quarter.................................... 20 13 3/8 0.135
Third quarter..................................... 15 3/4 13 5/8 0.135
Fourth quarter.................................... 14 7/8 12 0.135
1996:
First quarter..................................... 15 1/2 13 0.135
Second quarter.................................... 18 3/8 13 7/8 0.135
Third quarter (through August , 1996)............
</TABLE>

On August , 1996, the most recent practicable date prior to the date of
this Prospectus, the closing price of the Common Stock was $ per share as
reported on the NYSE Composite Tape.

Crompton anticipates that it will pay an annual cash dividend of $0.05 per
share. However, the timing and amount of any future dividends remain within the
discretion of the Crompton Board of Directors and will depend on Crompton's
future earnings, financial condition, capital requirements and other factors.

12
<PAGE>
THE COMPANY

GENERAL

Crompton was incorporated in Massachusetts in 1900. Crompton has engaged in
the manufacture and sale of specialty chemicals since 1954 and, since 1961, in
the manufacture and sale of specialty process equipment and controls. Crompton
expanded its specialty chemical business in 1988 with the acquisitions of
Ingredient Technology Corporation, a leading supplier of ingredients for the
food and pharmaceutical industries, and Townley Dyestuffs Auxiliaries Company,
Ltd., one of the largest independent suppliers of dyes for Great Britain's
textile and paper industries. Crompton made two acquisitions in calendar year
1990, acquiring the business and certain assets and liabilities of Atlantic
Industries, Inc., a domestic dye manufacturer, and APV Chemical Machinery, Inc.,
which manufactured the Sterling line of extruders, extrusion systems and
industrial blow molding equipment for the plastics industry. In 1991, Crompton
acquired a wire and cable equipment business from Clipper Machines, Inc. In
1992, Crompton acquired a pre-metallized dyes business and facility located in
Oissel, France. Crompton made two acquisitions in 1994, the Egan Machinery
plastics extrusion, precision coating and cast and blown film equipment business
and the plastics and rubber extrusion machinery and parts and after-market
services business of McNeil & NRM, Inc. Effective January 1, 1995, Crompton's
textile dyes and chemicals business and its specialty process equipment and
controls business have been conducted by Crompton & Knowles Colors Incorporated
and Davis-Standard Corporation, respectively, wholly owned subsidiaries of
Crompton. In 1995, Crompton acquired the plastics and rubber extrusion business
of McNeil Akron Repiquet SARL, including a manufacturing facility located in
Dannemarie, France, and Killion Extruders, Inc., a producer of precision
laboratory and small scale extrusion systems. In January 1996, Crompton acquired
Klockner ER-WE-PA GmbH, a manufacturer of extrusion coating, cast film and
plastic extrusion equipment located in Erkrath, Germany, and retained Salomon
Brothers to assist in exploring strategic alternatives to maximize shareholder
value with respect to the Ingredient Technology Corporation business, which
Crompton currently intends to retain. In April 1996, Crompton announced the
acquisition of the Hartig product line of industrial blow molding systems.

Information as to the sales, operating profit, and identifiable assets
attributable to each of Crompton's business segments during each of its last
three fiscal years is set forth in the Notes to Consolidated Financial
Statements contained elsewhere in this Prospectus. See "Index to Financial
Statements of Crompton & Knowles Corporation."

PRODUCTS AND SERVICES

The principal products and services offered by Crompton are described below.

Specialty Chemicals. Textile dyes manufactured and sold by Crompton are used
on both synthetic and natural fibers for knit and woven garments, home
furnishings such as carpets, draperies, and upholstery, and automotive
furnishings including carpeting, seat belts, and upholstery. Industrial dyes and
chemicals are marketed to the paper, leather, and ink industries for use on
stationery, tissue, towels, shoes, apparel, luggage, and other products and for
transfer printing inks. Crompton also markets organic chemical intermediates and
a line of chemical auxiliaries for the textile industry, including leveling
agents, dye fixatives, and scouring agents. Sales of this class of products
accounted for 43%, 50%, and 57% of the total revenues of Crompton in 1995, 1994,
and 1993, respectively.

Crompton manufactures and sells reaction and compounded flavor ingredients
for the food processing, bakery, beverage and pharmaceutical industries; colors
certified by the Food & Drug Administration for sale to domestic producers of
food and pharmaceuticals; and inactive ingredients for the pharmaceutical
industry. Crompton is also a leading supplier of specialty sweeteners, including
edible molasses, molasses blends, malt extracts, and syrups for the bakery,
confectionery and food processing industries and a supplier of seasonings and
seasoning blends for the food processing industry. Sales of this class of
products accounted for 15%, 17%, and 16% of the total revenues of Crompton in
1995, 1994, and 1993, respectively.

13
<PAGE>

Domestically, Crompton sells specialty chemicals predominantly through its
own dedicated sales force. Outside the United States, as much as one-half of
Crompton's sales of specialty chemicals are made through distributors.

Specialty Process Equipment and Controls. Crompton manufactures and sells
plastics and rubber extrusion equipment, industrial blow molding equipment,
electronic controls, and integrated extrusion systems and offers specialized
service and modernization programs for in-place extrusion systems. Sales of this
class of products accounted for 42%, 33%, and 27% of the total revenues of
Crompton in 1995, 1994, and 1993, respectively.

Integrated extrusion systems, which include extruders in combination with
controls and other accessory equipment, are used to process plastic resins and
rubber into various products such as plastic sheet used in appliances,
automobiles, home construction, sports equipment, and furniture; cast and blown
film used to package many consumer products; and extruded shapes used as house
siding, furniture trim, and substitutes for wood molding. Integrated extrusion
systems are also used to compound engineered plastics, to recycle and reclaim
plastics, to coat paper, cardboard and other materials used as packaging, and to
apply plastic or rubber insulation to high voltage power cable for electrical
utilities and to wire for the communications, construction, automotive, and
appliance industries.

Industrial blow molding equipment produced by the Corporation is sold to
manufacturers of non-disposable plastic items such as tool cases and beverage
coolers.

Crompton's HES unit produces electrical and electronic controls primarily
for use with extrusion systems. Crompton is a major user of such controls.

In the United States, most of Crompton's sales of specialty process
equipment and controls are made by its own dedicated sales force. In other parts
of the world, and for export sales from the United States, Crompton's sales of
such equipment and controls are made largely through agents.

SOURCES OF RAW MATERIALS

Chemicals, steel, castings, parts, machine components, edible molasses,
spices, and other raw materials required in the manufacture of Crompton's
products are generally available from a number of sources, some of which are
foreign. Substantial sales of the dyes and auxiliary chemicals business consist
of dyes manufactured from intermediates purchased from foreign sources. Crompton
has not experienced significant interruptions or other significant problems in
obtaining raw materials.

PATENTS AND LICENSES

Crompton owns patents, trade names, and trademarks and uses know-how, trade
secrets, formulae, and manufacturing techniques which assist in maintaining the
competitive position of certain of its products. Patents, expiring in 1999 and
thereafter, formulae, and know-how are of particular importance in the
manufacture of a number of the dyes and flavor ingredients sold in Crompton's
specialty chemicals business, and patents and know-how are also significant in
the manufacture of certain wire insulating and plastics processing machinery
product lines. Crompton believes that no single patent, trademark, or other
individual right is of such importance, however, that expiration or termination
thereof would materially affect its business. Crompton is also licensed to use
certain patents and technology owned by foreign companies to manufacture
products complementary to its own products, for which it pays royalties in
amounts not considered material to the consolidated results of the enterprise.
Products to which Crompton has such rights include certain dyes, plastics
machinery and flavored ingredients.

SEASONAL BUSINESS

No material portion of any segment of the business of Crompton is seasonal.

14
<PAGE>

CUSTOMERS
Crompton does not consider any segment of its business dependent on a single
customer or a few customers, the loss of any one or more of whom would have an
adverse effect on the segment. No one customer's business accounts for more than
ten percent of Crompton's gross revenues nor more than ten percent of its
earnings before taxes.

BACKLOG
Because machinery production schedules range from about 60 days to 10
months, backlog is important to Crompton's specialty process equipment and
controls business. Firm backlog of customers' orders for this business at
December 30, 1995, totalled approximately $72 million compared with $66 million
at December 31, 1994. The increase in the backlog was attributable to the $9
million of backlog acquired in the Killion and Repiquet acquisitions in 1995. It
is expected that all of the December 30, 1995 backlog will be shipped during
1996. Orders for specialty chemicals and equipment repair parts are filled
primarily from inventory stocks and thus are excluded from backlog.

COMPETITIVE CONDITIONS
Crompton has many competitors in each of its business segments. Crompton is
among the largest suppliers of dyes in the United States and is a leading
domestic producer of specialty dyes for nylon, polyester, acrylics, and cotton.
Crompton is less of a factor in other segments of the domestic dyes industry and
in the European market. Crompton is also a major United States and Canadian
supplier of edible molasses, a major United States supplier of malt extracts,
and a significant supplier of other sugar-based specialty products. As a
supplier of flavors and seasonings, Crompton has many competitors in the United
States and abroad.

Crompton is a leading producer of extrusion machinery for the plastics
industry and a leading domestic producer of industrial blow molding equipment
and competes with domestic and foreign producers of such products. Crompton is
one of a number of producers of other types of plastics processing machinery.

No one competitor or small number of competitors is believed to be dominant
in any of Crompton's major markets.

Product performance, service, and competitive prices are all important
factors in competing in the specialty chemicals and specialty process equipment
and controls product lines. Crompton has gained leadership positions in its
chosen markets by providing quality products, technical service and performance
know-how to solve problems and add value to customers' products. Crompton often
develops new products in response to a customer's specific needs. Crompton's
success as a producer of specialty process equipment and controls has been
augmented by its strength as a supplier of aftermarket systems and services,
including maintenance, parts and systems upgrade support.

RESEARCH AND DEVELOPMENT
Crompton employs about 285 engineers, draftsmen, chemists, and technicians
responsible for developing new and improved chemical products and process
equipment systems for the industries served by Crompton. Often, new products are
developed in response to specific customer needs. Crompton's process of
developing and commercializing new products and product improvements is ongoing
and involves many products, no one of which is large enough to significantly
impact Crompton's results of operations from year to year. Research and
development expenditures totalled $14.0 million for the year 1995, $12.1 million
for the year 1994, and $11.2 million for the year 1993.

ENVIRONMENTAL MATTERS
Crompton's manufacturing facilities are subject to various federal, state
and local requirements with respect to the discharge of materials into the
environment or otherwise relating to the protection of the environment. Although
precise amounts are difficult to define, in 1995, Crompton spent approximately
$15.8 million to comply with those requirements, including approximately $4.9
million in capital expenditures. Such capital expenditures are estimated to be
$3.5 million in 1996.

Crompton has been designated, along with others, as a potentially
responsible party under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, or comparable

15
<PAGE>

state statutes, at two waste disposal sites; and an inactive subsidiary has been
designated, along with others, as a potentially responsible party at two other
sites.

While the cost of compliance with existing environmental requirements is
expected to increase, based on the facts currently known to Crompton, management
expects that those costs, including the cost to Crompton of remedial actions at
the waste disposal sites where it has been named a potentially responsible
party, will not have a material effect on Crompton's liquidity and financial
condition and that the cost to Crompton of any remedial actions will not be
material to the results of Crompton's operations in any given year.

EMPLOYEES
Crompton had 2,761 employees on December 30, 1995.

FINANCIAL INFORMATION CONCERNING FOREIGN OPERATIONS AND EXPORT SALES
The information with respect to sales, operating profit, and identifiable
assets attributable to each of the major geographic areas served by Crompton and
export sales, for each of Crompton's last three fiscal years, is set forth in
the Notes to Consolidated Financial Statements contained elsewhere in this
Prospectus. See "Index to Financial Statements of Crompton & Knowles
Corporation."

Crompton considers that the risks relating to operations of its foreign
subsidiaries are comparable to those of other U.S. companies which operate
subsidiaries in developed countries. All of Crompton's international operations
are subject to fluctuations in the relative values of the currencies in the
various countries in which its activities are conducted.

PROPERTIES
The following table sets forth information as to the principal operating
properties of Crompton and its subsidiaries:

<TABLE>
<CAPTION>
OWNERSHIP
BUSINESS SEGMENT DATES OR LEASE
AND LOCATION PRODUCTS BUILT EXPIRATION
- ---------------------------------- ---------------------------------- ---------- -----------
<S> <C> <C> <C>
Specialty Chemicals:
Carrollton, TX office and plant Seasonings 1982 1997
Des Plaines, IL office and plant Flavors 1968 Owned
Elyria, OH office and plant Seasonings 1978 2001
Gibraltar, PA office, laboratory Textile and other dyes 1964-1980 Owned
and chemical plant
Lowell, NC chemical plant Textile dyes, organic chemicals 1961 Owned
Mahwah, NJ office, laboratory and Flavors and Seasonings 1984-1989 2004
plant
Newark, NJ chemical plant Textile dyes, organic chemicals 1949-1985 Owned
Nutley, NJ office, laboratory and Textile and other dyes 1949-1977 Owned
chemical plant
Oissel, France office, laboratory Textile and other dyes 1946-1992 Owned
and chemical plant
Reading, PA chemical plant Textile dyes, organic chemicals 1910-1979 Owned
and food colors
Tertre, Belgium office, laboratory Textile and other dyes 1970 Owned
and chemical plant
Vineland, NJ office and plant Food and pharmaceutical 1995 Owned
ingredients and colors
Specialty Process Equipment and
Controls:
Cedar Grove, NJ office and machine Precision Laboratory extrusion 1929 1996
shop equipment and extrusion systems
Dannemarie, France office and Extrusion systems 1967-1980 Owned
machine shop
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
OWNERSHIP
BUSINESS SEGMENT DATES OR LEASE
AND LOCATION PRODUCTS BUILT EXPIRATION
- ---------------------------------- ---------------------------------- ---------- -----------
<S> <C> <C> <C>
Edison, NJ office and machine shop Blow molding and extrusion 1974-1979 2000
equipment
Erkrath, Germany office and Extrusion systems 1954-1991 Owned
machine shop
Pawcatuck, CT office and machine Plastics and rubber extrusion and 1965-1985 Owned
shop electronic control equipment and
systems
Pawcatuck, CT office and machine Extrusion systems 1968 1998
shop
Somerville, NJ office and machine Extrusion systems 1966-1994 Owned
shop
</TABLE>

All plants are built of brick, tile, concrete, or sheet metal materials and
are of one-floor construction except parts of the plants located in Reading and
Gibraltar, Pennsylvania, Nutley, Cedar Grove, and Somerville, New Jersey, Oissel
and Dannemarie, France, Erkrath, Germany, and Tertre, Belgium. All are
considered to be in good operating condition, well maintained, and suitable for
Crompton's requirements.

LEGAL PROCEEDINGS
In the normal course of its business, Crompton is subject to investigations,
claims and legal proceedings, some of which concern environmental matters,
involving both private and governmental parties. In some cases, the remedies
sought or damages claimed may be substantial. While each of these matters is
subject to various uncertainties as to outcome, and some of them may be decided
unfavorably to Crompton, based on the facts known to Crompton and on
consultation with legal counsel, management of Crompton believes that there are
no such matters pending or threatened which will have a material effect on the
financial position of Crompton or the results of Crompton's operations in any
given year.

OPERATIONS FOLLOWING THE MERGER
Following the Merger, the operating activities of the combined company will
consist of the following:

<TABLE>
<CAPTION>
1995 SALES
(% OF TOTAL)
------------
<S> <C>
Chemicals and Polymers......................................... 27%
Crop Protection................................................ 19%
Dyes and Auxiliary Chemicals................................... 16%
Equipment and Controls......................................... 16%
Specialties.................................................... 16%
Food and Pharmaceutical Ingredients............................ 6%
---
100%
---
---
</TABLE>

The food and pharmaceutical ingredients business, which Crompton had considered
selling, will be retained and Crompton has no current intention to sell the
business.

Upon completion of the Merger, the Chemicals and Polymers, Crop Protection,
and Specialties businesses of Uniroyal and the existing businesses of Crompton
will all report directly to Vincent A. Calarco. The managements of all of the
operating businesses and the nature and scope of their activities will remain
essentially the same following the Merger.

During the past three years, Crompton's dyes and auxiliary chemicals
business has been adversely affected primarily by external factors including a
retail apparel recession in the United States, slow economic growth in Europe,
fashion trends favoring lighter colors which require less dyes, and lower
pricing resulting from aggressive marketing on the part of competitors. Although
there has been some recent improvement with regard to these external factors,
further improvement is required in order for Crompton to regain earlier sales
and profitability levels for the business.

17
<PAGE>

In the first quarter of 1996, Crompton's specialty equipment business
reported a 29% decrease in operating profit primarily attributable to lower unit
volume in its more profitable domestic business. Domestic equipment orders
weakened industry-wide during the second half of 1995 and have not recovered. An
improvement in domestic orders is necessary for the business to regain earlier
profitability levels.

Crompton currently anticipates capital spending during the next several
years at a level of approximately $60 million annually and debt repayment at a
level of approximately $75 million annually. This should be possible as a result
of anticipated cash flows and the planned reduction of Crompton's annual
dividend payments on its common stock from $0.54 to $0.05 per share, to be paid
annually rather than quarterly as in the past. The change in the dividend should
make available an additional $24 million annually for debt reduction.

Crompton has repurchased shares of its common stock in 1994 (2,954,700
shares) and 1995 (272,800 shares), but has no current intention of making
further repurchases, and the Board of Directors of Crompton rescinded an
outstanding authorization to repurchase shares in July 1996.

ENVIRONMENTAL MATTERS FOLLOWING THE MERGER

The ongoing operations of chemical manufacturing plants entail risks in
these areas, and there can be no assurance that material costs or liabilities
will not be incurred. In addition, future developments, such as increasingly
strict requirements of environmental and health and safety laws and regulations
and enforcement policies thereunder, could bring into question the handling,
manufacture, use, emission or disposal of substances or pollutants at facilities
owned, used or controlled by Crompton or Uniroyal or the manufacture, use,
emission or disposal of certain products or wastes by Crompton or Uniroyal and
could involve potentially material expenditures for Crompton or Uniroyal. To
meet changing permitting and regulatory standards, Crompton and Uniroyal may be
required to make significant site or operational modifications, potentially
involving substantial expenditures and reductions or suspensions of certain
operations.

Crompton and Uniroyal are involved in claims, litigation, administrative
proceedings and investigations of various types in a number of jurisdictions. A
number of such matters involve claims for a material amount of damages and
relate to or allege environmental liabilities, including clean-up costs
associated with hazardous waste disposal sites, natural resource damages,
property damage and personal injury. Crompton and Uniroyal have been identified
by the EPA, state or local governmental agencies, and other PRPs, as a PRP for
costs associated with waste disposal sites at various locations in the United
States. Because these regulations have been construed to authorize joint and
several liability, the EPA could seek to recover all costs involving a waste
disposal site from any one of the PRPs for such site, including Crompton or
Uniroyal, despite the involvement of other PRPs. In many cases, Crompton or
Uniroyal is one of several hundred PRPs so identified. In a few instances,
Uniroyal is one of only a handful of PRPs. In certain instances, a number of
other financially responsible PRPs are also involved, and Crompton and Uniroyal
expect that any ultimate liability resulting from such matters will be
apportioned between Crompton or Uniroyal and such other parties.

The combined companies intend to assert all meritorious legal defenses and
all other equitable factors which are available with respect to the above
matters. Neither company is assuming any environmental liability of the other as
a result of the Merger. While Crompton and Uniroyal believe it is unlikely, the
resolution of these matters could have material adverse effect on the combined
companies' consolidated results of operations if a significant number of these
matters is resolved unfavorably.

18
<PAGE>

RECENT DEVELOPMENTS

MERGER WITH UNIROYAL CHEMICAL CORPORATION

Pursuant to the Merger Agreement, Crompton has agreed to the merger of
Subcorp with and into Uniroyal, subject to the approval of the transaction by
the stockholders of each of Uniroyal and Crompton at special meetings thereof
currently scheduled to be held on August 21, 1996. The Board of Directors of
Crompton has fixed the close of business on July 9, 1996, as the record date for
determination of holders of Crompton Common Stock entitled to notice of and to
vote at such meeting of Crompton stockholders. Accordingly, purchasers of the
shares of Crompton Common Stock offered hereby will not be entitled to vote such
shares at such special meeting.

The Merger will be consummated on the terms and subject to the conditions
set forth in the Merger Agreement (which was filed by Crompton with the
Commission as an exhibit to Crompton's Quarterly Report on Form 10-Q for the
quarter ended March 30, 1996), pursuant to which, among other things, (i)
Subcorp will be merged with and into Uniroyal as a result of which Uniroyal will
become a wholly owned subsidiary of Crompton, (ii) each issued and outstanding
share (other than shares, if any, held in the treasury of Uniroyal or held by
Crompton or any of its subsidiaries, which will be cancelled) of Uniroyal Common
Stock will be converted into 0.9577 shares of Crompton Common Stock (with cash
in lieu of fractional shares), and (iii) each issued and outstanding share
(other than shares, if any, held in the treasury of Uniroyal or held by Crompton
or any of its subsidiaries, which will be cancelled, and other than shares as to
which dissenters' appraisal rights have been perfected) of Uniroyal Preferred
Stock will be converted into 6.3850 shares of Crompton Common Stock (with cash
in lieu of fractional shares). It is currently anticipated that the Merger will
be consummated shortly after the special meetings of Crompton and Uniroyal
stockholders, assuming the Merger Agreement and the Merger are approved at such
meetings and all other conditions to the Merger have been satisfied or waived.

Uniroyal, through its subsidiaries, is a major multinational manufacturer of
a wide variety of specialty chemical products, including specialty elastomers,
rubber chemicals, crop protection chemicals and additives for the plastics and
lubricants industries. Uniroyal produces high value added products which are
currently marketed in approximately 120 countries. Crompton does not currently
intend to make any material changes to the general operating activities of
Uniroyal following consummation of the Merger. The principal executive offices
of Uniroyal are located at Benson Road, Middlebury, Connecticut 06749, and its
telephone number is (203) 573-2000. Uniroyal is subject to the informational
requirements of the Exchange Act, and in accordance therewith files reports,
proxy statements and other information with the Commission. Prospective
investors are urged to read and consider carefully such reports, proxy
statements and other information. Uniroyal Common Stock is quoted on the
NASDAQ/NM.

Crompton is effecting the Offering in order for the Merger to qualify as a
pooling-of-interests for accounting and financial reporting purposes.

CERTAIN LITIGATION

Crompton, Uniroyal and the directors of Uniroyal have been named as
defendants in a purported class action lawsuit filed in connection with the
proposed Merger in the Court of Chancery, County of New Castle, State of
Delaware. Fassbender v. Mazaika, C.A. No. 14980. The Stockholder Action alleges,
among other things, that the defendant directors breached their fiduciary duties
by pursuing the Merger at an allegedly unfair and inadequate price; by agreeing
to the proposed Merger without having conducted an "auction process or active
market check" or a full and thorough investigation; and by agreeing to the
allegedly unfair terms of the Merger. The Stockholder Action is brought on
behalf of a purported class of persons consisting of the stockholders of
Uniroyal other than defendants. As relief, the Stockholder Action seeks, among
other things, an order enjoining consummation of the proposed Merger, or, in the
event it is consummated, rescission of the Merger, or an award of "rescissory or

19
<PAGE>

compensatory damages" in an unspecified amount. Defendants believe that the
Stockholder Action is without merit.

DESCRIPTION OF CERTAIN INDEBTEDNESS

Crompton has obtained a commitment letter from Citicorp USA, Inc. and
Citicorp Securities, Inc. in connection with credit facilities in the aggregate
amount of $600 million to be extended to Crompton and Uniroyal Chemical Company,
Inc., a wholly owned subsidiary of Uniroyal ("Uniroyal Chemical"), immediately
prior to the Effective Time (i) to replace certain bank credit facilities of
Crompton and Uniroyal Chemical that would otherwise be in default and subject to
acceleration as a result of the consummation of the Merger, (ii) to redeem or
repurchase public debt of Uniroyal and Uniroyal Chemical (including in
connection with the Merger), (iii) to pay transaction costs relating to the
Merger and (iv) for general corporate purposes, including, without limitation,
to make acquisitions and capital expenditures and to provide working capital for
Crompton and Uniroyal Chemical following the Merger.

The credit facilities to be extended to Crompton and Uniroyal Chemical upon
the completion of the proposed Merger are revolving facilities with five year
terms. Of the total amount of the facilities, $300 million will be extended to
Crompton and its operating subsidiaries and $300 million will be extended to
Uniroyal Chemical. The Crompton facility is secured by a pledge of the stock of
its operating subsidiaries and the Uniroyal Chemical facility by a pledge of the
stock of its operating subsidiaries and by a security interest in the accounts
receivable and inventory of Uniroyal Chemical. Interest rates payable include
several options including a spread over LIBOR that varies based on the
Debt/EBITDA ratio for the trailing four fiscal quarters and will be set
initially at .875% over LIBOR.

Approximately $42 million of Uniroyal Chemical debt and $140 million of
Crompton debt outstanding under existing bank credit facilities at the date of
the Merger will be repaid at no penalty with funds from the new credit
facilities. In addition, if holders of some or all of the 9% Senior Notes Due
2000 of Uniroyal Chemical accept its offer to purchase the 9% Notes at 101% of
their principal amount under the terms of the governing indenture (as described
below), additional debt repayment of up to $253 million will result. The
extraordinary loss associated with such repayment, including 1% of the amount
repaid and the write-off of unamortized financing fees, would be a maximum of
$4.8 million, net of tax, if all $253 million of the 9% Notes are repaid.

Assuming none of the 9% Notes are repaid, the $600 million credit facilities
may be reduced, at the election of Crompton, to $450 million. Of the $450
million, $182 million will be used to repay debt under outstanding bank credit
facilities, as explained above, and the balance of $268 million will be
available for general corporate purposes, including the payment of an estimated
$62 million ($55 million after tax) in merger related expenses.

In addition, Uniroyal has three series of public debt outstanding, comprised
of $283 million principal amount of 10 1/2% Senior Notes Due 2002, $232 million
principal amount of 11% Senior Subordinated Notes Due 2003 and $127 million
principal amount at maturity of 12% Subordinated Discount Notes Due 2005, and
Uniroyal Chemical has one series outstanding of 9% Senior Notes Due 2000 in the
principal amount of $253 million (collectively, the "Notes"), which in the
aggregate comprises $895 million in indebtedness. The Notes contain a
requirement that, within 30 days after a change of control of Uniroyal (which
will occur upon consummation of the Merger), Uniroyal or Uniroyal Chemical, as
the case may be, must make an offer to purchase all outstanding Notes at 101% of
the principal amount thereof. Waivers of this requirement have been obtained
from the holders of a majority in principal amount (as required under the
governing indentures) of each of the 10 1/2%, 11% and 12% Notes of Uniroyal.
Supplemental indentures have been executed by Uniroyal and the respective
trustees for such Notes giving effect to such waivers, which are binding on all
holders of such Notes whether or not such holders consented to the waiver. In
consideration for receipt of waivers from holders of such Notes, Uniroyal has
agreed to pay, promptly following consummation of the Merger, to

20
<PAGE>

each such holder who delivered to the respective trustee prior to 5:00 p.m.,
Eastern Time, on June 27, 1996 a properly completed, executed and dated consent
to such waiver (provided such consent was not revoked) a one-time cash payment
in the amount of $3.75 for each $1,000 principal amount (at maturity) of such
Notes to which the consent relates. The aggregate amount that will become
payable by Uniroyal in consideration for such waivers upon consummation of the
Merger is approximately $2.4 million ($1.4 million after tax). With respect to
the 9% Notes of Uniroyal Chemical, no such waivers have been sought; instead,
Crompton and Uniroyal Chemical expect to have adequate capacity under the
aforementioned $600 million new credit facilities to fund the purchase of any 9%
Notes that are tendered pursuant to the offer.

CROMPTON SECOND QUARTER EARNINGS

On July 17, 1996, Crompton issued a press release relating to its second
quarter earnings. Crompton announced that, for the second quarter ended June 29,
1996, sales decreased five percent to $167.6 million from $175.6 million last
year. Earnings for the quarter were $9.7 million, or 20 cents per share,
compared with $12.1 million, or 25 cents per share, last year. Specialty
chemical segment sales in the quarter declined four percent to $96.9 million
from $101.2 million last year. Operating profit for the segment was $13.0
million, compared with $13.1 million in 1995. Domestic dye sales were five
percent below the prior year, including a four percent decline in price from the
second quarter of 1995. International dye sales were twelve percent lower, while
specialty ingredients sales rose seven percent. The specialty process equipment
and controls segment posted sales of $70.7 million in the second quarter, five
percent lower than the prior year's sales of $74.4 million. Operating profit was
$6.4 million, compared with $11.1 million in the second quarter of 1995. The
decline in operating profits was primarily attributable to lower U.S. demand for
extrusion equipment. The equipment backlog at the end of the second quarter was
$89 million, compared with $92 million at the end of the first quarter.

UNIROYAL THIRD QUARTER EARNINGS

On July 23, 1996, Uniroyal issued a press release reporting its earnings for
the third fiscal quarter ending June 30, 1996. Uniroyal announced that for the
third quarter, sales increased one percent to $302.1 million from $298.6 million
last year. Net income before extraordinary charges was $14.7 million, or 59
cents per share, compared with $12.4 million, or 50 cents per share, last year.
An extraordinary charge of 1 cent per share in the current fiscal quarter
related to early retirement of debt. Sales for the chemicals and polymers
division increased 2.6% in the third quarter to $125.3 million compared to
$122.2 million in the third quarter of fiscal 1995. The increase was due
primarily to higher selling prices in rubber chemicals, partially offset by
lower EPDM sales. In the third quarter of fiscal 1996, sales for the crop
protection division decreased 2.9% to $104.3 million from $107.4 million in the
same period last year. The primary factors contributing to the decrease were
lower infestation levels and adverse weather conditions in the U.S. The
shortfall was somewhat offset by the continuing success of the new GauchoTM seed
treatment insecticide. Sales for the specialties division increased 4.8% to
$70.5 million from $67.3 million in the third quarter of fiscal 1995. The
increase was primarily due to higher Vibrathane sales, stronger demand for
lubricant additives and market share gains in certain other specialties.
Operating income increased by 8.3% to $51.5 million as gross margin increased to
35.7% of net sales versus 34.4% in last year's third quarter. The increase in
gross margin was primarily a result of the improved margin percentage in the
chemical and polymers division as well as increased contribution from the crop
protection division due primarily to lower raw material and production costs.
Selling, general and administrative costs rose less than 2% compared to last
year's quarter, despite increased spending in new product development and
promotion.

21
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA OF CROMPTON

The selected financial data presented below for Crompton as of December 31,
1994 and December 30, 1995 and for the years ended December 25, 1993, December
31, 1994 and December 30, 1995, have been derived from and are qualified in
their entirety by, and should be read in conjunction with, the audited financial
statements and notes thereto contained herein. See "Index to Financial
Statements of Crompton & Knowles Corporation."

The unaudited financial data presented below for the interim periods ended
April 1, 1995 and March 30, 1996 are derived from the unaudited consolidated
financial statements of Crompton contained herein. In the opinion of Crompton,
such unaudited financial data have been prepared on the same basis as the
audited financial statements contained herein and include all adjustments
(consisting only of normal recurring adjustments) necessary to fairly state the
information set forth herein. Operating results for the interim period ended
March 30, 1996 are not necessarily indicative of the results that may be
expected for the year or for any other interim period.
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
------------------------------------------------------------------------ --------------------
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1991 1992 1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------ -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Crompton & Knowles
Corporation
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales................. $450,228 517,718 558,348 589,757 665,513 168,193 164,840
Income before
extraordinary charges and
cumulative effect of
accounting changes....... $ 35,941 43,265 51,958 50,916 40,493 13,196 9,468
Net income................ $ 35,941 34,465 51,958 50,916 40,493 13,196 9,468
Income per common share
before extraordinary
charges and cumulative
effect of accounting
changes.................. $ 0.73 0.87 1.00 1.00 0.84 0.27 0.20
Net income per common
share.................... $ 0.73 0.69 1.00 1.00 0.84 0.27 0.20
Weighted average number of
shares outstanding....... 49,317 49,967 52,176 51,152 48,448 48,921 48,318
CONSOLIDATED BALANCE SHEET
DATA:
Total assets.............. $308,562 350,715 363,246 432,328 484,138 521,518
Long-term debt............ $ 76,118 24,000 14,000 54,000 64,000 74,000
Cash dividends declared
per common share......... $ 0.25 0.31 0.38 0.46 0.525 0.12 0.135
</TABLE>

22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF CROMPTON

The following should be read in conjunction with the year-end consolidated
financial statements and quarterly financial statements of Crompton contained
elsewhere in this Prospectus. See "Index to Financial Statements of Crompton &
Knowles Corporation."

FINANCIAL CONDITION AND LIQUIDITY

Acquisitions

In January 1995, Crompton acquired the business and certain assets of McNeil
Akron Repiquet S.a.r.l. in France. In March 1995, Crompton acquired Killion
Extruders, Inc. Costs of these acquisitions were accounted for based on the
purchase method and, accordingly, the results of operations of these businesses
have been included in the Consolidated Statements of Earnings since their dates
of acquisition.

Liquidity and Capital Resources

The December 30, 1995 working capital balance of $126.2 million increased
$4.6 million from the December 31, 1994 balance of $121.6 million, while the
current ratio declined to 1.8 from 1.9 at the end of 1994. The decline in the
current ratio is primarily attributable to the increase in notes payable. Days
sales in receivables increased slightly to 55 days in 1995 from 54 days in 1994.
Inventory turnover averaged 2.8 in 1995, compared to 3.0 in 1994.

Cash flow from operating activities of $26.7 million increased $4.9 million
from $21.8 million in 1994 and was used with cash reserves and increased
borrowings to finance acquisitions, fund capital expenditures, pay cash
dividends and repurchase 272,800 shares of Crompton's outstanding common shares.
Dividends paid in 1995 of $25.2 million represent a payout ratio of 62% of
earnings. Crompton's debt-to-capital ratio increased to 34% from 29% at year-end
1994.

Capital expenditures of $18.2 million decreased $3.5 million from $21.7
million in 1994. Capital expenditures are expected to approximate $16 million in
1996 primarily for expansion and improvement of operating facilities in the
United States and Europe. Crompton's long-term liquidity needs including such
items as capital expenditures and dividends are expected to be financed through
operations. Crompton has available uncommitted short-term lines of credit of
$115 million that are unsecured, and a revolving credit agreement providing for
unsecured borrowings up to $125 million through September 1998. At year-end,
there were $60.4 million of short-term borrowings outstanding under Crompton's
uncommitted short-term lines of credit and $60 million outstanding under the
revolving credit agreement.

Inflation

During the last three years, inflation has not been a significant factor in
the net earnings of Crompton. The LIFO method of accounting is used for a major
portion of Crompton's inventories. Under this method, the cost of products sold
approximates current costs and thus reduces possible distortion of reported
earnings due to rising costs. Crompton continually emphasizes cost controls and
efficient management of resources to mitigate the influence of inflation.

International Operations

The lower U.S. dollar exchange rate versus primarily the Belgian Franc and
the French Franc accounted for the favorable adjustment of $4.5 million in the
accumulated translation adjustment account since year-end 1994. Changes in the
balance of this account are primarily a function of fluctuations in exchange
rates and do not necessarily reflect either enhancement or impairment of the net
asset values or the earnings potential of Crompton's foreign operations. The net
asset value of

23
<PAGE>
foreign operations amounting to $81.4 million, representing primarily Belgian
Francs and French Francs, is not currently being hedged with respect to
translation into U.S. dollars.

Crompton operates manufacturing facilities in Europe which serve primarily
the European market. Exchange rate disruptions between the United States and
European currencies, and among European currencies, are not expected to have a
material effect on year-to-year comparisons of Crompton's earnings. Cash
deposits, borrowings and forward exchange contracts are used to hedge
fluctuations between the U.S. and European currencies, and among European
currencies, if such fluctuations are earnings related. Such hedging activities
are not significant in total.

Research and Development

Crompton employs about 285 engineers, draftsmen, chemists, and technicians
responsible for developing new and improved chemical products and process
equipment systems for the industries served by Crompton. Often, new products are
developed in response to specific customer needs. Crompton's process of
developing and commercializing new products and product improvements is ongoing
and involves many products, no one of which is large enough to significantly
impact Crompton's results of operations from year to year. Research and
development expenditures totaled $14.0 million, $12.1 million and $11.2 million
in the fiscal years 1995, 1994 and 1993, respectively.

Environmental Matters

Crompton's manufacturing facilities are subject to various federal, state
and local requirements with respect to the discharge of materials into the
environment or otherwise relating to the protection of the environment. Although
precise amounts are difficult to define, Crompton spent approximately $15.8
million in 1995 to comply with those requirements, including approximately $4.9
million in capital expenditures. Such capital expenditures are estimated to be
$3.5 million in 1996.

Crompton has been designated, along with others, as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, or comparable state statutes, at two waste disposal
sites; and an inactive subsidiary has been designated, along with others, as a
potentially responsible party at two other sites.

While the cost of compliance with existing environmental requirements is
expected to increase, based on the facts currently known to Crompton, management
of Crompton expects that those costs, including the cost to Crompton of remedial
actions at the waste disposal sites where it has been named a potentially
responsible party, will not be material to the results of Crompton's operations
in any given year.

OPERATING RESULTS--1995 AS COMPARED TO 1994

Overview

Consolidated net sales increased 13% to $665.5 million from $589.8 million
in 1994. Net earnings declined 20% to $40.5 million from $50.9 million in 1994.
Earnings per common share declined 16% to $.84 from $1.00 in the prior year.
Average shares outstanding decreased 2.7 million to 48.5 million primarily as a
result of Crompton's share repurchase program, which was discontinued in July
1996 in connection with the Merger.

The gross margin percentage decreased to 28.8% from 31.5% in 1994 primarily
from lower margins in the specialty chemicals segment. Consolidated operating
profit of $72.3 million was 11% lower than 1994 as the specialty process
equipment and controls segment increased 29% while the specialty chemicals
segment decreased 30%.

Specialty Chemicals

Crompton's specialty chemicals segment reported sales of $385.6 million
representing a decline of 2% from 1994. The decrease was attributable to lower
selling prices (-4%), offset in part primarily by

24
<PAGE>
foreign currency translation. The proportion of sales outside the United States
increased slightly to 26% from 25% in 1994.

Domestic dyes sales declined 8% reflecting lower selling prices (-5%) and
lower unit volume (-3%) as weak demand primarily for apparel dyes continued to
negatively affect the business. International dyes sales increased by 3% versus
1994 due primarily to foreign currency translation (6%) and unit volume (4%),
offset by lower selling prices (-7%). Sales of specialty ingredients increased
5% reflecting primarily increased unit volume.

Operating profit declined 30% to $42.6 million from $60.8 million in 1994.
The decline was primarily due to domestic and international dyes. Domestic dyes
declined primarily due to lower pricing. International dyes declined primarily
due to lower pricing and exchange rate fluctuations among European currencies.
The percentage of operating profit outside the United States decreased to 13%
from 21% in 1994.

Specialty Process Equipment and Controls

Crompton's specialty process equipment and controls segment reported sales
of $279.9 million representing an increase of 43% from $196.2 million in 1994.
Approximately 27% was attributable to the incremental impact of acquisitions
with the balance primarily from increased unit volume. International sales of
$71 million increased 48% from 1994 and accounted for 25% of total segment sales
versus 24% in 1994. Operating profit increased 29% to $40.2 million from $31.2
million in 1994. Approximately 11% was attributable to the incremental impact of
acquisitions with the balance primarily attributable to unit volume, offset in
part by a lower-margin product mix. The equipment order backlog totaled $72
million at the end of 1995 compared to $66 million at the end of 1994. The
increase in the backlog was attributable to the $9 million of backlog acquired
in the Killion and Repiquet acquisitions in 1995.

Other

Selling, general and administrative expenses increased 14% primarily due to
the impact of acquisitions. Depreciation and amortization increased 13% over
1994 primarily as a result of a higher fixed asset base including acquisitions.
Interest expense increased $6.2 million over 1994 reflecting the increased
levels of borrowings in 1995. Other income declined $876 thousand versus 1994
primarily due to lower foreign exchange gains. Crompton's effective tax rate of
36.8% was up slightly from the prior year level of 36.3%.

OPERATING RESULTS--1994 AS COMPARED TO 1993

Overview

Consolidated net sales of $589.8 million increased 6% from $558.3 million in
1993. Net earnings of $50.9 million declined 2% from $52 million in 1993.
Earnings per common share of $1.00 were unchanged from the prior year. Average
shares outstanding decreased 1 million to 51.2 million primarily as a result of
Crompton's share repurchase program, which was discontinued in July 1996 in
connection with the Merger.

The gross margin percentage of 31.5% decreased slightly from 31.8% in 1993.
Consolidated operating profit of $81.1 million was 2% lower than 1993 as profit
of the specialty process equipment and controls segment increased 20% while the
specialty chemicals segment decreased 11%.

Specialty Chemicals

Crompton's specialty chemicals segment reported sales of $393.6 million
representing a decline of 3% from 1993. The decrease was primarily attributable
to lower selling prices (-2%) and unit volume (-1%). The proportion of sales
outside the United States was 25% in 1994, unchanged from 1993.

25
<PAGE>
Domestic dyes sales declined 6% reflecting lower selling prices (-4%) and
lower unit volume (-2%) as demand for apparel dyes remained weak. International
dyes sales were 5% lower than 1993 due primarily to lower unit volume under a
long-term supply agreement. Specialty ingredients sales increased 5% reflecting
increased unit volume in all major product groups.

Operating profit declined 11% to $60.8 million from $68 million in 1993 due
primarily to lower pricing and unit volume offset in part by lower dye
intermediate costs. The percentage of operating profit outside the United States
was 21% in 1994, unchanged from 1993.

Specialty Process Equipment and Controls

Crompton's specialty process equipment and controls segment reported sales
of $196.2 million representing an increase of 30% from $151 million in 1993.
Approximately 21% was attributable to the acquisition of Egan Machinery with the
balance attributable equally between pricing and unit volume. Export sales of
$48 million increased 18% from 1993 and accounted for 24% of total segment sales
versus 27% in 1993. Operating profit increased 20% to $31.2 million from $26
million in 1993. Approximately 7% was attributable to the acquisition of Egan
Machinery with the balance attributable primarily to unit volume and improved
pricing offset in part by higher manufacturing costs. The equipment order
backlog totalled $66 million at the end of 1994 compared to $38 million at the
end of 1993.

Other

Selling, general and administrative expenses increased 10% primarily due to
the acquisition of Egan Machinery and the impact of inflation. Depreciation and
amortization increased 10% over 1993 primarily as a result of the Egan Machinery
acquisition and a higher fixed asset base. Interest expense of $2.2 million was
double the amount in 1993 reflecting the increased level of borrowings in 1994.
Other income declined $163 thousand versus 1993. Crompton's effective tax rate
of 36.3% was slightly lower than the prior year level of 37%.

FIRST QUARTER RESULTS

Overview

Consolidated net sales of $164.8 million for the first quarter of 1996
declined 2% from the comparable 1995 period. Net earnings of $9.5 million
declined 28% versus the first quarter of 1995. Net earnings per common share of
$.20 were 26% lower than the $.27 reported last year.

Gross margin as a percentage of net sales decreased to 29.1% from 30.7% in
the first quarter of 1995 as a result of lower margins in both of Crompton's
segments. Consolidated operating profit of $16.8 million declined 25% from the
first quarter of 1995 as the specialty chemicals segment decreased 18% and the
specialty process equipment and controls segment decreased 29%.

Specialty Chemicals

Crompton's specialty chemicals segment reported sales of $96.1 million which
represents a decline of 6% from the first quarter of 1995. The decrease was
attributable to the impact of lower unit volume (4%) and lower selling prices
(2%).

Domestic dyes sales of $46.5 million declined 11% from the comparable 1995
quarter primarily due to lower unit volume (8%) and lower selling prices (3%).
International dyes sales of $23.5 million declined 4% versus the first quarter
of 1995 primarily as a result of lower selling prices. Specialty ingredients
sales of $26.1 million rose 1% primarily as a result of increased unit volume.
The percentage of sales outside the United States was 26%, versus 25% in the
comparable 1995 period.

Operating profit of $12.8 million for the first quarter of 1996 decreased
18% from 1995. The decrease was attributable primarily to the impact of lower
unit volume and pricing. The percentage of operating profit outside the United
States declined to 11% from 17% in 1995.

26
<PAGE>
Specialty Process Equipment and Controls

Crompton's specialty process equipment and controls segment reported sales
of $68.7 million, which represents an increase of 5% from the first quarter of
1995. Approximately 21% was attributable to the incremental impact of
acquisitions offset partially by lower unit volume in the domestic business.
Export sales shipped from the U.S. accounted for 28% of total segment sales
versus 18% in the comparable period in 1995 as shipments to the Far East
increased significantly. International sales increased substantially as a result
of acquisitions and accounted for 16% of total segment sales versus 1% in the
first quarter of 1995.

Operating profit for the first quarter of 1996 declined 29% to $7.1 million
primarily attributable to lower unit volume in the domestic business.
International operating profit was not significant in either the first quarter
of 1996 or the first quarter of 1995. The order backlog for extruders and
related equipment at the end of the first quarter of 1996 amounted to $92
million (including ER-WE-PA backlog of $24 million) compared to $72 million at
December 30, 1995.

Other

Selling, general and administrative expenses of $27.1 million increased 7%
versus the comparable period in 1995 primarily due to the impact of
acquisitions. Depreciation and amortization of $4.0 million increased 8% versus
1995 primarily as a result of a higher fixed asset base including acquisitions.
Interest expense increased $469 thousand primarily as a result of increased
borrowings. Other income of $252 thousand approximated the level for the first
quarter of 1995. The effective tax rate of 36.9% decreased slightly versus the
comparable 1995 period.

Liquidity and Capital Resources

The March 30, 1996 working capital balance of $124.4 million decreased $1.8
million from $126.2 million at year-end 1995. The current ratio declined
slightly to 1.7 from 1.8 at the end of 1995. Days sales in receivables averaged
62 days in the first quarter of 1996, an increase from 55 days for all of 1995.
Inventory turnover averaged 2.9 for the first quarter of 1996 compared with 2.8
for all of 1995.

Cash flows from operating activities of $14.3 million increased $9.9 million
from the first quarter of 1995 primarily attributable to decreases in working
capital requirements partially offset by lower earnings. Cash provided by
operating activities and increased borrowings were used to finance the
acquisition of ER-WE-PA, fund capital expenditures and pay cash dividends.
Crompton's debt to total capital ratio increased to 35% from 34% at year-end
1995. Capital expenditures are expected to approximate $16 million in 1996
primarily for expansion and improvement of operating facilities in the United
States and Europe. Crompton's long-term liquidity needs including such items as
capital expenditures and dividends are expected to be financed from operations.

International Operations

The stronger U.S. dollar exchange rate versus the Belgian Franc and French
Franc accounted primarily for the reduction of $1.5 million in the accumulated
translation adjustment account since year-end 1995. Changes in the balance of
this account are primarily a function of fluctuations in exchange rates and do
not necessarily reflect either enhancement or impairment of the net asset values
or the earnings potential of Crompton's foreign operations.

Research and Development

Research and development expenditures totaled $3.5 million for the first
quarter of 1996 compared to $3.4 million in the comparable 1995 period.

27
<PAGE>
HISTORICAL AND UNAUDITED PRO FORMA COMBINED CAPITALIZATION

The following table sets forth the historical capitalization of Crompton and
Uniroyal as of March 30, and March 31, 1996, respectively, and the pro forma
combined capitalization as of March 30, 1996, giving effect to the Merger. The
pro forma combined information set forth below is not necessarily indicative of
what the actual combined capitalization would have been had the foregoing
transaction been consummated, nor does it give effect to (a) any transactions
other than the foregoing transaction and those discussed in the accompanying
Notes to Historical and Unaudited Pro Forma Combined Capitalization, or (b)
Crompton's results of operations since March 30, 1996, or Uniroyal's results of
operations since March 31, 1996. Accordingly, the pro forma combined information
set forth below does not purport to be indicative of the actual combined
capitalization as of the date hereof, the effective time of the Merger (the
"Effective Time"), or any future date.

The following table should be read in conjunction with the historical
financial statements of Crompton which are contained elsewhere herein, and the
unaudited pro forma combined financial information, the related notes, and the
other information contained elsewhere in this Prospectus. See "Unaudited Pro
Forma Combined Financial Information."

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------- PRO FORMA
MARCH 30, 1996 MARCH 31, 1996 --------------------------------
CROMPTON UNIROYAL ADJUSTMENTS COMBINED
-------------- -------------- ----------- ----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Short-term debt:
Notes payable.............. $ 57,886 69,171 -- 127,057
Current portion of long-
term debt................ -- 11,503 -- 11,503
-------------- -------------- ----------- ----------
Total short-term
debt.................. 57,886 80,674 -- 138,560
Long-term debt............... 74,000 898,564 40,050(1)(2) 1,012,614(6)
-------------- -------------- ----------- ----------
Total debt............. $131,886 979,238 40,050 1,151,174
-------------- -------------- ----------- ----------
Stockholders' equity
(deficit):
Preferred stock............ $-- 4,172 (4,172)(3) --
Common stock............... 5,336 254 2,098(3)(4) 7,688
Additional paid-in
capital.................. 59,557 177,004 (9,445)(1)(3)(4)(5) 227,116
Retained earnings
(deficit)................ 237,098 (444,446) (55,000)(2) (262,348)(7)
Pension liability
adjustment............... -- (3,617) -- (3,617)
Cumulative translation
adjustment............... 4,797 (22,038) -- (17,241)
Treasury stock............. (62,890) (10,861) 26,469(1)(5) (47,282)
Deferred compensation...... (2,040) -- -- (2,040)
-------------- -------------- ----------- ----------
Total stockholders'
equity (deficit)...... 241,858 (299,532) (40,050) (97,724)
-------------- -------------- ----------- ----------
Total capitalization... $373,744 679,706 -- 1,053,450
-------------- -------------- ----------- ----------
-------------- -------------- ----------- ----------
Ratio of total debt to total
capitalization........... 35.3% 144.1% 109.3%
-------------- -------------- ----------
-------------- -------------- ----------
</TABLE>

28
<PAGE>
NOTES TO HISTORICAL AND UNAUDITED PRO FORMA COMBINED CAPITALIZATION

(1) Reflects the issuance from treasury stock of 1,000,000 shares of Crompton
Common Stock, in an offering to take place prior to consummation of the
Merger. The issuance of such shares is required to reduce treasury share
purchases within two years of the initiation date of the Merger to less than
10 percent of the Crompton shares to be issued in exchange for all of the
outstanding shares of Uniroyal, in order to qualify for pooling-of-interests
accounting. Proceeds are calculated based on an estimated offering price of
$15 1/8 per share, net of estimated costs of $175,000. The net proceeds of
$14,950,000 will be used to partially offset the estimated merger costs
discussed in note (2).

(3) Assumes the issuance of 6.3850 shares of Crompton Common Stock for each
share of Uniroyal Preferred Stock as provided for in the Merger Agreement.

(4) Reflects the conversion of all outstanding shares of Uniroyal Common Stock
(par value .01 per share) into shares of Crompton Common Stock (par value
.10 per share) at a conversion rate of 0.9577 shares of Crompton Common
Stock for each share of Uniroyal Common Stock.

(5) Reflects the retirement of Uniroyal treasury stock, as provided for in the
Merger Agreement.

(6) Depending upon adverse movement within the credit markets, it is possible
that holders of some or all of the 9% Notes of Uniroyal Chemical will accept
Uniroyal Chemical's offer to purchase the notes at 101% of their principal
amount under the terms of the indenture (see description under the caption
"Recent Developments--Description of Certain Indebtedness"). If that should
occur, up to $253 million of the new revolving facility may be used to
redeem the 9% Notes. This would result in additional long-term debt of $1.5
million and, together with the write-off of unamortized financing fees, an
extraordinary charge of approximately $4.8 million, net of tax.

(7) The pro forma combined balance sheet excludes a one-time cash payment of
approximately $2.4 million ($1.4 million after tax) to be provided to
certain Uniroyal noteholders in consideration for waivers of certain
provisions of the indentures governing Uniroyal's notes. See "Recent
Developments--Description of Certain Indebtedness."

29
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial information gives
effect to the Merger using the pooling of interests basis of accounting. The
information is based upon the historical financial statements of Crompton and
Uniroyal and should be read in conjunction with such historical financial
statements, the related notes, and the other information contained elsewhere in
this Prospectus. Certain items derived from Crompton's and Uniroyal's historical
financial statements have been reclassified to conform to the pro forma combined
presentation.

The unaudited pro forma combined financial information is not necessarily
indicative of what the actual combined financial position or results of
operations would have been had the foregoing transaction been consummated on the
dates set forth therein, nor does it give effect to (a) any transaction other
than the Merger, (b) Crompton's results of operations since March 30, 1996 or
Uniroyal's results of operations since March 31, 1996, or (c) all of the
synergies, cost savings, and one-time charges expected to result from the
Merger. Accordingly, the pro forma combined financial information does not
purport to be indicative of the financial position or results of operations as
of the date hereof or for any period ended on the date hereof, as of the
Effective Time, for any period ending at the Effective Time, or as of or for any
other future date or period.

30
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 30, 1996 (CROMPTON) AND
MARCH 31, 1996 (UNIROYAL)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CROMPTON UNIROYAL ADJUSTMENTS COMBINED
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 2,599 21,747 -- 24,346
Accounts receivable.................. 123,779 172,392 -- 296,171
Inventories.......................... 163,210 198,464 -- 361,674
Other current assets................. 25,589 50,987 -- 76,576
-------- ---------- ----------- ---------
Total current assets............. 315,177 443,590 -- 758,767
Property, plant and equipment, net..... 135,051 385,829 -- 520,880
Intangible assets...................... 60,525 233,903 -- 294,428
Deferred income taxes.................. -- 69,833 -- 69,833(10)
Other assets........................... 10,765 64,347 -- 75,112
-------- ---------- ----------- ---------
$521,518 1,197,502 -- 1,719,020
-------- ---------- ----------- ---------
-------- ---------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable........................ $ 57,886 69,171 -- 127,057
Accounts payable..................... 60,991 99,441 -- 160,432
Current portion of long-term debt.... -- 11,503 -- 11,503
Accrued liabilities.................. 71,951 100,118 -- 172,069
-------- ---------- ----------- ---------
Total current liabilities........ 190,828 280,233 -- 471,061
Long-term debt......................... 74,000 898,564 40,050(1)(2) 1,012,614(11)
Accrued postretirement liability....... 7,635 180,590 -- 188,225
Other liabilities...................... 7,197 137,647 -- 144,844
Stockholders' equity (deficit):
Preferred stock...................... -- 4,172 (4,172)(3) --
Common stock......................... 5,336 254 2,098(3)(4) 7,688
Additional paid-in capital........... 59,557 177,004 (9,445)(1)(3)(4)(5) 227,116
Retained earnings (deficit).......... 237,098 (444,446) (55,000)(2) (262,348)(12)
Pension liability adjustment......... -- (3,617) -- (3,617)
Cumulative translation adjustment.... 4,797 (22,038) -- (17,241)
Treasury stock....................... (62,890) (10,861) 26,469(1)(5) (47,282)
Deferred compensation................ (2,040) -- -- (2,040)
-------- ---------- ----------- ---------
Total stockholders' equity
(deficit)....................... 241,858 (299,532) (40,050) (97,724)
-------- ---------- ----------- ---------
$521,518 1,197,502 -- 1,719,020
-------- ---------- ----------- ---------
-------- ---------- ----------- ---------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Information.

31
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 25, 1993 (CROMPTON)
AND SEPTEMBER 30, 1993 (UNIROYAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CROMPTON UNIROYAL ADJUSTMENTS COMBINED
-------- -------- -------------- ---------
<S> <C> <C> <C> <C>
Net sales................................. $558,348 907,862 -- 1,466,210
Operating costs and expenses:
Cost of products sold................... 380,941 616,208(7) (70,802)(6) 926,347
Selling, general and administrative..... 82,970 181,999(7) (44,479)(6) 220,490
Depreciation and amortization........... 12,076 -- 77,792(6) 89,868
Research & development.................. -- -- 42,133(6) 42,133
-------- -------- -------------- ---------
Operating profit.......................... 82,361 109,655 (4,644) 187,372
Interest expense.......................... 1,093 120,567 -- 121,660
Other expense (income).................... (1,205) 7,347 (4,644)(6) 1,498
-------- -------- -------------- ---------
Income (loss) before income taxes,
extraordinary charges and cumulative
effect of accounting changes............ 82,473 (18,259) -- 64,214
Income taxes.............................. 30,515 6,533 -- 37,048
-------- -------- -------------- ---------
Income (loss) before extraordinary charges
and cumulative effect of accounting
changes................................. $ 51,958 (24,792) -- 27,166
-------- -------- -------------- ---------
-------- -------- -------------- ---------
Income (loss) per common share before
extraordinary charges and cumulative
effect of accounting changes............ $ 1.00 (2.31) 0.43
-------- -------- ---------
-------- -------- ---------
Weighted average shares outstanding(8).... 52,176 10,847 63,689
-------- -------- ---------
-------- -------- ---------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Information.

32
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994 (CROMPTON)
AND OCTOBER 2, 1994 (UNIROYAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CROMPTON UNIROYAL ADJUSTMENTS COMBINED
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales.............................. $589,757 946,454 -- 1,536,211
Operating costs and expenses:
Cost of products sold................ 403,784 638,933(7) (69,823)(6) 972,894
Selling, general and
administrative..................... 91,581 192,754(7) (44,256)(6) 240,079
Depreciation and amortization........ 13,298 -- 72,841(6) 86,139
Research & development............... -- -- 44,682(6) 44,682
Write-off of intangibles............. -- 191,000 -- 191,000
-------- --------- ----------- ---------
Operating profit....................... 81,094 (76,233) (3,444) 1,417
Interest expense....................... 2,167 128,567 -- 130,734
Other expense (income)................. (1,042) 125 (3,444)(6) (4,361)
-------- --------- ----------- ---------
Income (loss) before income taxes...... 79,969 (204,925) -- (124,956)
Income taxes........................... 29,053 8,918 -- 37,971
-------- --------- ----------- ---------
Net income (loss)...................... $ 50,916 (213,843) -- (162,927)
-------- --------- ----------- ---------
-------- --------- ----------- ---------
Net income (loss) per common share..... $ 1.00 (20.31) (2.65)
-------- --------- ---------
-------- --------- ---------
Weighted average shares
outstanding(8)....................... 51,152 10,543 61,515
-------- --------- ---------
-------- --------- ---------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Information.

33
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 30, 1995 (CROMPTON)
AND OCTOBER 1, 1995 (UNIROYAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CROMPTON UNIROYAL ADJUSTMENTS COMBINED
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................... $665,513 1,079,321 -- 1,744,834
Operating costs and expenses:
Cost of products sold................. 473,654 718,809(7) (66,297)(6) 1,126,166
Selling, general and administrative... 104,535 212,435(7) (46,632)(6) 270,338
Depreciation and amortization......... 15,035 -- 65,083(6) 80,118
Research & development................ -- -- 50,090(6) 50,090
-------- ---------- ----------- ---------
Operating profit........................ 72,289 148,077 (2,244) 218,122
Interest expense........................ 8,364 114,034 -- 122,398
Other expense (income).................. (166) (326) (2,244)(6) (2,736)
-------- ---------- ----------- ---------
Income before income taxes and
extraordinary charge.................. 64,091 34,369 -- 98,460
Income taxes (benefit).................. 23,598 (65,060)(10) -- (41,462)
-------- ---------- ----------- ---------
Income before extraordinary charge...... $ 40,493 99,429 -- 139,922
-------- ---------- ----------- ---------
-------- ---------- ----------- ---------
Income per common share before
extraordinary charge.................. $ 0.84 5.37 2.11
-------- ---------- ---------
-------- ---------- ---------
Weighted average shares
outstanding(8)........................ 48,448 18,461 66,394
-------- ---------- ---------
-------- ---------- ---------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Information.

34
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED APRIL 1, 1995 (CROMPTON)
AND APRIL 2, 1995 (UNIROYAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CROMPTON UNIROYAL ADJUSTMENTS COMBINED
-------- -------- -------------- ---------
<S> <C> <C> <C> <C>
Net sales................................. $168,193 274,322 -- 442,515
Operating costs and expenses:
Cost of products sold................... 116,559 174,194 (15,843)(6) 274,910
Selling, general and administrative..... 25,422 50,346 (10,854)(6) 64,914
Depreciation and amortization........... 3,725 -- 15,490(6) 19,215
Research & development.................. -- -- 11,768(6) 11,768
-------- -------- ------- ---------
Operating profit.......................... 22,487 49,782 (561) 71,708
Interest expense.......................... 1,568 29,630 -- 31,198
Other expense (income).................... (228) (2,593) (561)(6) (3,382)
-------- -------- ------- ---------
Income before income taxes and
extraordinary charge.................... 21,147 22,745 -- 43,892
Income taxes (benefit).................... 7,951 (71,091)(10) -- (63,140)
-------- -------- ------- ---------
Income before extraordinary charge........ $ 13,196 93,836 -- 107,032
-------- -------- ------- ---------
-------- -------- ------- ---------
Income per common share before
extraordinary charge.................... $ 0.27 6.90 1.72
-------- -------- ---------
-------- -------- ---------
Weighted average shares outstanding (8)... 48,921 13,590 62,202
-------- -------- ---------
-------- -------- ---------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Information.

35
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 30, 1996 (CROMPTON)
AND MARCH 31, 1996 (UNIROYAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CROMPTON UNIROYAL ADJUSTMENTS(2) COMBINED(9)
-------- -------- -------------- ---------
<S> <C> <C> <C> <C>
Net sales................................... $164,840 295,628 -- 460,468
Operating costs and expenses:
Cost of products sold..................... 116,948 194,427 (16,836)(6) 294,539
Selling, general and administrative....... 27,094 53,637 (12,118)(6) 68,613
Depreciation and amortization............. 4,009 -- 16,582(6) 20,591
Research & development.................... -- -- 12,933(6) 12,933
-------- -------- ------- ---------
Operating profit............................ 16,789 47,564 (561) 63,792
Interest expense............................ 2,037 26,954 -- 28,991
Other expense (income)...................... (252) 1,133 (561)(6) 320
-------- -------- ------- ---------
Income before income taxes and
extraordinary charge...................... 15,004 19,477 -- 34,481
Income taxes................................ 5,536 7,791 -- 13,327
-------- -------- ------- ---------
Income before extraordinary charge.......... $ 9,468 11,686 -- 21,154
-------- -------- ------- ---------
-------- -------- ------- ---------
Income per common share before
extraordinary charge...................... $ 0.20 0.47 0.29
-------- -------- ---------
-------- -------- ---------
Weighted average shares outstanding(8)...... 48,318 24,559 72,104
-------- -------- ---------
-------- -------- ---------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Information.

36
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

(1) Reflects the issuance from treasury stock of 1,000,000 shares of Crompton
Common Stock in an offering to take place prior to consummation of the
Merger. The issuance of such shares is required to reduce treasury share
purchases within two years of the initiation date of the Merger to less
than 10 percent of the Crompton shares to be issued in exchange for all of
the outstanding shares of Uniroyal, in order to qualify for pooling of
interests accounting. Proceeds are calculated based on an estimated
offering price of $15 1/8 per share, net of estimated costs of $175,000.
The net proceeds of $14,950,000 will be used to partially offset the
estimated merger costs discussed in note (2).

(2) Estimated costs expected to be incurred as a result of the Merger comprise
principally bonus and severance $27.6 million, investment banking $12.4
million, legal $6 million, bank revolver and other debt fees $5.2 million
and other fees and costs $10.8 million, net of the expected tax benefit of
$7 million. The Unaudited Pro Forma Combined Statements of Operations do
not include such estimated costs associated with the Merger, as these costs
are non-recurring and will be reflected in the statement of operations of
the combined company in its first reporting period.

(3) Assumes the issuance of 6.3850 shares of Crompton Common Stock for each
share of Uniroyal Preferred Stock as provided for in the Merger Agreement.

(5) Reflects the retirement of Uniroyal treasury stock, as provided for in the
Merger Agreement.

(6) Reflects certain reclassifications of research and development and
depreciation and amortization expenses made to conform to Crompton's and
the combined company's intended presentations.

(7) Historical Uniroyal amounts for the fiscal years ended September 30, 1993,
October 2, 1994, and October 1, 1995 reflect certain reclassifications of
research and development and other expenses made to conform with Uniroyal's
current historical presentation.

(8) Common and common equivalent shares outstanding were calculated assuming a
conversion rate of 0.9577 shares of Crompton Common Stock for each share of
Uniroyal Common Stock, and 6.3850 shares of Crompton Common Stock for each
share of Uniroyal Preferred Stock as provided for in the Merger Agreement.

(9) After the consummation of the Merger, Uniroyal will change its fiscal
year-end to conform with that of Crompton. Results of operations for
Uniroyal's quarter ended December 31, 1995 were a net loss of $8.4 million
which will be reflected as a one-time adjustment to stockholders' equity in
the combined company's 1996 financial statements.

(10) As a result of the interest savings from Uniroyal's March 1995 IPO,
Uniroyal's previously recorded tax valuation reserve was reduced.
Accordingly, Uniroyal included a benefit of $78.9 million for this
reduction in its tax provision for fiscal 1995. Uniroyal's remaining net
deferred tax asset as of 10/1/95 of some $82 million, including NOL
carryforwards which do not expire until the year 2008, requires future
taxable income of approximately $200 million to be fully realized.
Uniroyal's 1995 pretax income was approximately $34 million. Pretax income
for the first three quarters of fiscal 1996 was approximately $30 million.

(11) Depending upon adverse movement within the credit markets, it is possible
that holders of some or all of the 9% Notes of Uniroyal Chemical will
accept Uniroyal Chemical's offer to purchase the notes at 101% of their
principal amount under the terms of the indenture (see description under
the caption "Recent Developments--Description of Certain Indebtedness"). If
that should occur,

37
<PAGE>
up to $253 million of the new revolving facility may be used to redeem the
9% Notes. This would result in additional long-term debt of $1.5 million,
and together with the write-off of unamortized financing fees, an
extraordinary charge of approximately $4.8 million, net of tax.

(12) The pro forma combined balance sheet excludes a one-time cash payment of
approximately $2.4 million ($1.4 million after tax) to be provided to
certain Uniroyal noteholders in consideration for waivers of certain
provisions of the indentures governing Uniroyal's notes. See "Recent
Developments--Description of Certain Indebtedness."

38
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF CROMPTON

DIRECTORS OF CROMPTON

Set forth below is information as of March 15, 1996 with respect to each
person who currently is, and immediately following the Merger will be, a
director of Crompton.

VINCENT A. CALARCO, 53, Chairman of the Board, President and Chief Executive
Officer of Crompton. He is former Vice President for Strategy and Development,
Uniroyal, Inc., and former President of Uniroyal Chemical Company. Mr. Calarco
has been a director since 1985. Mr. Calarco also serves as a director of
Caremark International Inc.

JAMES A. BITONTI, 65, is President and Chief Executive Officer of TCOM,
L.P., an aerostat systems manufacturer, integrator and operator, Columbia, MD.
He is a retired Vice President of International Business Machines Corporation,
where he held the positions of Assistant Group Executive of the Asia/Pacific
Group and President of the Communication Products Division. Mr. Bitonti has been
a director of Crompton since 1983 and is Chairman of the Executive Compensation
Committee. He also serves as a director of E-Systems, Inc., and as a director
and the Chief Executive Officer of KFX, Inc.

ROBERT A. FOX, 58, is President and Chief Executive Officer of Foster
Poultry Farms, a privately held, integrated poultry company, Livingston, CA. He
is former Executive Vice President of Revlon, Inc., a cosmetics, fragrances and
toiletries manufacturer, New York, NY; and former Chairman and Chief Executive
Officer of Clarke Hooper America, an international marketing services firm,
Irvine, CA. Mr. Fox has been a director of Crompton since 1990 and is a member
of the Executive Compensation Committee and Nominating Committee. He is also a
director of the American Balanced Fund, the Growth Fund of America, Inc., the
New Perspective Fund and the Income Fund of America, Inc., and a trustee of the
Euro-Pacific Growth Fund.

ROGER L. HEADRICK, 59, is President and Chief Executive Officer of the
Minnesota Vikings Football Club, Eden Prairie, MN, and President and Chief
Executive Officer of ProtaTek International, Inc., a biotechnology animal
vaccine company, St. Paul, MN. Mr. Headrick is former Executive Vice President
and Chief Financial Officer of The Pillsbury Company, a food processing and
restaurant company, Minneapolis, MN. He has been a director of Crompton since
1988 and is Chairman of the Nominating Committee and a member of the Executive
Compensation Committee. He also serves as a director of Caremark International
Inc.

LEO I. HIGDON, JR., 49, is Dean of the Darden Graduate School of Business
Administration at the University of Virginia, Charlottesville, VA. He is a
former Managing Director and member of the Executive Committee of Salomon
Brothers, an investment banking firm, New York, NY. Mr. Higdon became a director
of Crompton in 1993 and is Chairman of the Audit Committee and a member of the
Nominating Committee. He is a director of CPC International Corporation and
Newmont Mining Corp.

MICHAEL W. HUBER, 68, is retired Chairman of the Board of J. M. Huber
Corporation, a diversified manufacturing and natural resource development
company, Edison, NJ. He has been a director of Crompton since 1983 and is a
member of the Executive Compensation Committee and the Audit Committee. He also
serves as a director of Norland Medical Systems, Inc.

CHARLES J. MARSDEN, 55, Vice President-Finance and Chief Financial Officer
of Crompton. Mr. Marsden has been a director of Crompton since 1985.

C.A. (LANCE) PICCOLO, 55, is Chairman and Chief Executive Officer of
Caremark International Inc., a provider of alternate-site health-care services,
Northbrook, IL. He is former Executive Vice President of Baxter International
Inc., a supplier of health-care products, Deerfield, IL. He has been a director
of Crompton since 1988 and is a member of the Audit Committee and the Nominating
Committee. Mr. Piccolo is also a director of Caremark International Inc.

39
<PAGE>
PATRICIA K. WOOLF, PH.D., 61, is a private investor, and lecturer in the
Department of Molecular Biology, Princeton University. She has been a director
of Crompton since 1994 and is a member of the Audit Committee. Dr. Woolf is also
a director of the American Balanced Fund, the Income Fund of America, Inc., the
Growth Fund of America, Inc., Smallcap World Fund, Inc., the New Economy Fund,
the National Life Insurance Co. of Vermont, and General Public Utilities
Corporation.

BOARD MEETINGS AND COMMITTEES

The Board of Directors of Crompton held five regular meetings during 1995.
All of the directors except Mr. Bitonti attended at least 75% of the aggregate
of the meetings of the Crompton Board and of the committees on which they served
in 1995.

The Crompton Board has established three committees to assist it in the
discharge of its responsibilities. The Audit Committee, no member of which is an
employee of Crompton, meets periodically with Crompton's independent auditor to
review the scope of the annual audit and the policies relating to internal
auditing procedures and controls, provides general oversight with respect to the
accounting principles employed in Crompton's financial reporting, and reviews
Crompton's annual report on Form 10-K prior to its filing each year. The Audit
Committee also recommends to the Crompton Board each year the selection of the
auditor, has responsibility for approving professional non-audit services
provided by the independent auditor, considers the possible effect of providing
such non-audit services on the auditor's independence, and reviews the range of
fees of the auditor for both audit and non-audit services. The Audit Committee
held two meetings during 1995.

The Committee on Executive Compensation is composed of directors who are not
employees of Crompton. Its functions include approval of the level of
compensation for executive officers serving on the Crompton Board, adoption of
bonus and deferred compensation plans and arrangements for executive officers,
and administration of the Crompton & Knowles Corporation 1993 Stock Option Plan
for Non-Employee Directors, the Crompton & Knowles Corporation Restricted Stock
Plan for Directors and the Corporation's 1988 Long-Term Incentive Plan (the
"1988 Plan"). The Executive Compensation Committee held two meetings during
1995.

The Nominating Committee is also composed of directors who are not employees
of Crompton. The Committee makes recommendations with respect to the
organization, size, and composition of the Crompton Board, identifies suitable
candidates for Crompton Board membership and reviews their qualifications,
proposes a slate of directors for election by the stockholders at each annual
meeting, and assists the Crompton Board in providing for orderly succession in
the top management of Crompton. The Nominating Committee met once in 1995.

EXECUTIVE OFFICERS OF CROMPTON

Set forth below is information as of March 15, 1996 with respect to each
person who currently is, and immediately following the Merger will be, an
executive officer of Crompton.

VINCENT A. CALARCO, age 53, has served as President and Chief Executive
Officer of Crompton since 1985 and Chairman of the Board since 1986. He is
former Vice President for Strategy and Development, Uniroyal, Inc. (1984-1985),
and former President of Uniroyal Chemical Company (1979-1984). Mr. Calarco has
been a member of the Board of Directors of Crompton since 1985. Mr. Calarco also
serves as a director of Caremark International Inc.

ROBERT W. ACKLEY, age 54, has served as a Vice President of Crompton since
1986 and as President of Davis-Standard Corporation (formerly the Davis-Standard
Division) since 1983.

PETER BARNA, age 52, has served as Treasurer of Crompton since 1980 and as
Principal Accounting Officer since 1986.

40
<PAGE>
JOHN T. FERGUSON, II, age 49, has served as General Counsel and Secretary of
Crompton since 1989.

NICHOLAS FERN, PH.D., age 52, has served as President, Dyes and
Chemicals--Asia, for Crompton since 1994, as President of Crompton's
International Dyes and Chemicals Division from 1992 to 1994, and as Managing
Director of Crompton & Knowles Europe, S.A. (formerly Crompton & Knowles Tertre)
from 1978 to 1994.

GERALD H. FICKENSCHER, PH.D., age 52, has served as President, Dyes and
Chemicals--Europe, for Crompton and as Managing Director of Crompton & Knowles
Europe, S.A. since 1994. He is the former Chief Financial Officer of Uniroyal
Chemical Corporation (1986-1994).

EDMUND H. FORDING, JR., age 59, has served as Vice President of Crompton
since 1991 and as President of Crompton & Knowles Colors Incorporated (formerly
the domestic Dyes and Chemicals Division) since 1989. He is the former General
Manager of the Dyes Division of Hilton Davis Co. (1988-1989) and Director of the
Organic Department of Mobay Corporation (1980-1988).

MARVIN H. HAPPEL, age 56, has served as Vice President--Organization of
Crompton since 1986. He is the former Director of Human Resources of Uniroyal
Chemical Company (1979-1986).

CHARLES J. MARSDEN, age 55, has served as Vice President--Finance and Chief
Financial Officer and as a member of the Board of Directors of Crompton since
1985.

RUDY M. PHILLIPS, age 54, has served as President of Ingredient Technology
Corporation since January, 1996. He is a former Vice President of Ingredient
Technology Corporation (1988-1996).

The term of office of each of the above-named executive officers is until
the first meeting of the Board of Directors of Crompton following Crompton's
next annual meeting of stockholders and until the election and qualification of
his successor.

There is no family relationship between any of such officers, and there is
no arrangement or understanding between any of them and any other person
pursuant to which any such officer was selected as an officer.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS OF CROMPTON

COMPENSATION OF DIRECTORS

Directors who are employees of Crompton receive no additional compensation
for services on the Board of Directors of Crompton. Members of the Crompton
Board who are not employees receive an annual retainer of $20,000 (committee
chairmen receive an additional retainer of $2,500) and a fee of $7,500 for
meeting service, and are reimbursed for expenses incurred in attending meetings.
Crompton also provides $25,000 of term life insurance and accidental death and
travel insurance coverage for each non-employee director.

Under the Crompton & Knowles Corporation Restricted Stock Plan for
Directors, one quarter of each director's retainer and fees is paid in shares of
Crompton's common stock. A director may elect to receive any portion or all of
the remainder of the retainer and fees in common stock under the plan. All
shares issued under the plan are held by Crompton until the recipient of the
shares leaves the Crompton Board, however the directors receive all dividends on
the shares and may vote the shares.

The Crompton & Knowles Corporation 1993 Stock Option Plan for Non-Employee
Directors provides for the issuance to non-employee directors on the date of the
first regular meeting of the Crompton Board in the fourth quarter of each
calendar year of an option to purchase that number of full shares of Crompton's
common stock determined by dividing the amount of the annual retainer payable to
non-employee directors for service on the Crompton Board by the fair market
value of the

41
<PAGE>
stock on the date of the grant. The exercise price of the options is to be equal
to such fair market value on the date of grant. The options are to vest over a
two-year period and are to be exercisable over a ten-year period from the date
of grant. The plan provides for the grant of options with respect to a maximum
of 100,000 shares of stock. Options to be granted under the plan are
nonstatutory options not intended to qualify as incentive stock options under
the Code.

REPORT OF THE COMMITTEE ON EXECUTIVE COMPENSATION

Executive Compensation Philosophy

The compensation program for Crompton's executive officers is administered
in accordance with a pay for performance philosophy to link executive
compensation with the values, objectives, business strategy, management
initiatives and financial performance of Crompton. In addition, a significant
portion of each executive officer's compensation is contingent upon the creation
of shareholder value.

The Committee on Executive Compensation of the Board (the "Committee")
believes that stock ownership by management and restricted stock-based
performance compensation plans serve to align the interests of management and
other shareholders in the enhancement of shareholder value. The Committee
further maintains that long-term strategic leadership commitment is promoted
through vesting a significant portion of restricted stock performance awards at
retirement.

The compensation of Crompton's executive officers is comprised of cash and
equity components and is designed to be competitive and highly leveraged based
upon corporate financial performance and shareholder returns. The compensation
program provides an opportunity to earn compensation in the third quartile
within the chemical industry as well as within a broader group of companies of
comparable size and complexity. Actual compensation levels may be greater or
less than average competitive levels in surveyed companies based upon annual and
long-term performance of Crompton as well as individual performance. The
measures of performance utilized under Crompton's compensation plans are as
follows:

. Annual actual after-tax earnings performance versus targeted after-tax
earnings performance.

. Annual actual return on capital performance versus targeted return on
capital performance.

. Annual actual revenue performance versus targeted revenue performance.

. Three-year average annual return on equity and after-tax earnings per
share growth.

Base Salaries

Base salaries and salary ranges for the executive officers are based upon
competitive data gathered from several national and highly recognized
compensation services. The Committee on Executive Compensation reviews and
approves the salary ranges for the executive officers.

Management Incentive Plan

Crompton's Management Incentive Plan is an annual incentive program for
executive officers and other key managers. The purpose of the plan is to provide
a direct financial incentive in the form of an annual cash award to executives
who achieve the annual goals for their business unit and Crompton. The plan
includes the Annual Incentive Compensation Plan for "A" Group of Senior
Executives, which provides for an annual incentive pool for eligible executives
based upon Crompton's return on stockholders' equity. Awards from the incentive
pool are made annually by the Committee on Executive Compensation, with the
maximum award not to exceed 100% of a participant's base salary. At the present
time, Mr. Calarco is the only participant authorized to receive such awards.

42
<PAGE>
The other officers named in the compensation table below participate in a
plan which provides for the payment of annual awards from a fund established
with reference to the return on capital employed of Crompton as a whole, or of
the business unit for which the officer is responsible. Assuming a stipulated
level for return on capital employed has been attained, individual awards are
based 60% on the achievement by the applicable business unit of specific
objectives with respect to revenue, after-tax earnings, and return on capital,
and 40% on the achievement by the individual of individual management
objectives.

Stock Options and Restricted Stock

The stock option and restricted stock program is a long-term incentive plan
for Crompton's executive officers and other key managers. The objectives of the
program are to align executive and shareholder long-term interests by creating a
strong and direct link between executive pay and shareholder return, and to
enable executives to develop and maintain a significant, long-term stock
ownership position in Crompton's common stock.

The executive officers listed in the compensation table below receive a
major portion of their compensation in the form of shares of Crompton's common
stock. They receive annual grants of stock options, priced at fair market value
on the date of grant. The number of options granted in 1995 was in the second
quartile of all companies included in industrial company survey data available
to the Committee.

The factors used to award options include overall corporate performance,
percentile rankings, base salary, and total compensation.

In addition, Crompton's executive officers have received the opportunity
under the 1988 Plan to earn shares of restricted stock based upon Crompton's
cumulative after-tax earnings growth and return on equity over a three-year
period. These grants have the potential to deliver above-average compensation if
the goals are met. If the employment of an individual terminates after an award
is earned for any reason other than death, disability, retirement, or a change
in control of Crompton, any shares that have not vested will be forfeited.
Crompton exceeded the performance criteria established under the 1988 Plan for
the period 1989-1991. Awards for the 1989-1991 period vest and are distributed
to individuals in common stock of Crompton in five installments, the first four
having been distributed on December 9, 1992, December 6, 1993, December 13,
1994, and December 12, 1995, and the final one to be distributed upon
retirement. Crompton met the performance criteria established under the 1988
Plan for the period 1992-1994. Awards for the 1992-1994 period vest and are
distributed to individuals in common stock of Crompton in four uniform
installments, one during each of the years 1994-1996, and the final one upon
retirement. If the employment of an individual terminates for any reason other
than death, disability, retirement or a change in control of Crompton, all
shares that have not vested will be forfeited.

Compensation of Chief Executive Officer

The Committee did not increase Mr. Calarco's base salary of $495,000 during
fiscal year 1995. The Executive Compensation Committee administers the Annual
Incentive Compensation Plan for "A" Group of Senior Executives. Currently, the
CEO is the only participant in this plan. Each year, a pool of funds is made
available under this plan based upon Crompton's return on equity (ROE). At
higher ROE levels, larger percentages of net income are allocated to the pool.
The maximum incentive which the CEO may receive is equal to the lesser of 100%
of salary or $650,000. The maximum award may be reduced if other goals, such as
those for revenue and earnings growth, are not achieved. Based on the
performance of Crompton in 1995 and the achievement of a return on average
common equity of 17.4%, and an increase in sales of 13%, Mr. Calarco earned
$415,000 under the Annual Incentive Compensation Plan for "A" Group of Senior
Executives. The Committee believes Mr. Calarco has continued to manage Crompton
extremely well in a particularly challenging business climate and has achieved
above

43
<PAGE>
average results in comparison to others in the chemical industry. For example,
the Crompton's average ROE for the 1991 to 1995 period was 23.4% which placed
the Crompton in the top quartile of the peer group of 22 specialty chemical
companies reflected in the performance graphs on pages 9 and 10 below. The stock
options granted to Mr. Calarco during 1995 are consistent with the design of
Crompton's executive compensation program and are shown in the compensation
table below.

Tax Deductibility of Executive Compensation

The Committee's policy on the tax deductibility of compensation paid to
Crompton's CEO and other executive officers is to maximize deductibility to the
extent possible without abdicating all of its discretionary power. To this end,
the Committee has reviewed all of Crompton's plans and has taken several actions
as follows. First, the Committee has assured that the gains on non-qualified
stock option grants will be deductible by amending the 1988 Plan to place a
limit on the number of option shares that one individual may receive. The limit
is 25% of the total share authorization. Secondly, the Committee resolved to
continue the practice of not repricing options. Finally, at the 1994 annual
meeting of shareholders, the shareholders approved the material terms of the
performance goal for the Annual Incentive Compensation Plan for "A" Group of
Senior Executives, which is "performance-based" under Section 162(m) of the
Code, and amounts paid under the plan are fully deductible.

Committee on Executive Compensation

Decisions on compensation of Crompton's executive officers are made by the
four member Committee on Executive Compensation, a committee of the Board of
Directors composed of the persons listed below, all of whom are non-employee
directors. The Committee has retained an independent executive compensation
consultant to evaluate Crompton's executive compensation program and has access
to independent compensation data.

The Committee on Executive
Compensation:
James A. Bitonti, Chairman
Robert A. Fox
Roger L. Headrick
Michael W. Huber

Notwithstanding anything to the contrary set forth in any of Crompton's
previous filings under the Securities Act or the Exchange Act that might
incorporate future filings, including this Joint Proxy Statement/Prospectus, in
whole or in part, the foregoing Report of the Committee on Executive
Compensation and the following Performance Graphs shall not be deemed
incorporated by reference into any such filings.

44
<PAGE>
PERFORMANCE GRAPHS

The following graph compares the cumulative total return on the common stock
of Crompton for the last five fiscal years with the returns on the Standard &
Poor's 500 Stock Index, the Standard & Poor's Specialty Chemicals Index and a
peer group of 22 specialty chemical companies, assuming the investment of $100
in Crompton's common stock, the S&P 500 Index, the S&P Specialty Chemicals Index
and the peer group companies on December 31, 1990, and the reinvestment of all
dividends. The peer group investment is weighted based on total market
capitalization at the beginning of each fiscal year.

COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
CROMPTON & KNOWLES CORPORATION, S&P 500,
S&P SPECIALTY CHEMICALS, AND PEER GROUP

$300

$250

$200

$150

$100 [GRAPH]

$50

1990 1991 1992 1993 1994 1995

C & K $100 $257 $268 $270 $205 $173
S& P 500 100 130 140 154 156 215
Peer Group 100 151 166 171 165 193
S&P Specialty 100 141 149 170 149 195
Chemicals

45
<PAGE>
The graph below shows the cumulative total return to Crompton's stockholders
since December 31, 1984, shortly before Mr. Calarco became President and CEO,
compared with the same indices shown on the previous graph, thus illustrating
the relative performance of Crompton's common stock during Mr. Calarco's entire
tenure with Crompton.

COMPARISON OF ELEVEN-YEAR CUMULATIVE RETURN
CROMPTON & KNOWLES CORPORATION, S&P 500,
S&P SPECIALTY CHEMICALS, AND PEER GROUP

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2,500
$2,000
$1,500
$1,000
$500
$0

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

C & K $100 $132 $188 $216 $337 $695 $792 $2,032 $2,122 $2,135 $1,620 $1,366
S & P 500 100 132 156 164 191 252 244 318 342 376 382 524
Peer Group 100 132 159 178 197 258 276 417 457 473 455 533
S&P Specialty 100 137 156 162 177 216 207 292 310 353 308 404
Chemicals
</TABLE>

The specialty chemical peer group comprises the following 22 companies: Betz
Laboratories, Inc., The Dexter Corporation, Ecolab Inc., Engelhard Corporation,
Ethyl Corporation, Ferro Corporation, H.B. Fuller Company, Great Lakes Chemical
Corporation, M. A. Hanna Company, International Flavors & Fragrances Inc.,
Lawter International, Inc., Loctite Corporation, The Lubrizol Corporation, Nalco
Chemical Company, Pall Corporation, Petrolite Corporation, Quaker Chemical
Corporation, RPM, Inc., A. Schulman, Inc., Sigma-Aldrich Corporation, Valspar
Corporation, and Witco Corporation.

The S&P Specialty Chemicals Index companies are W.R. Grace & Co., Great
Lakes Chemical Corporation, Morton International Inc. and Nalco Chemical
Company.

46
<PAGE>
EXECUTIVE COMPENSATION

The following tables set forth information concerning compensation paid or
to be paid to the chief executive officer of Crompton and each of the four most
highly compensated executive officers of Crompton other than the chief executive
officer, for services to Crompton in all capacities during 1993, 1994 and 1995,
and options granted to and exercised by the same individuals during the period
indicated.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------
AWARDS
ANNUAL COMPENSATION -----------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND -------------------- STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#) SATION($)(1)
- -------------------------------------------- ---- --------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Vincent A. Calarco.......................... 1995 495,000 415,000 -- 110,000 89,687
Chairman of the Board 1994 493,000 300,000 -- 78,000 111,870
President and CEO 1993 472,917 495,000 -- 60,000 105,480
Charles J. Marsden.......................... 1995 250,000 55,000 -- 28,000 39,512
Vice President-- 1994 240,000 56,000 -- 22,000 42,121
Finance and 1993 230,000 112,000 -- 17,000 44,393
Chief Financial Officer
Robert W. Ackley............................ 1995 216,000 117,000 -- 26,500 36,714
V.P. and President-- 1994 203,750 108,000 -- 20,000 36,383
Davis-Standard Corporation 1993 188,750 100,000 -- 16,000 33,357
John T. Ferguson II......................... 1995 178,000 30,000 -- 10,500 27,314
General Counsel and 1994 168,000 35,000 -- 12,500 29,656
Secretary 1993 156,667 67,000 -- 9,500 33,060
Edmund H. Fording, Jr....................... 1995 175,167 25,000 -- 10,500 24,774
V.P. and President-- 1994 166,000 29,000 -- 8,000 23,891
Crompton & Knowles 1993 166,000 59,000 -- 11,500 25,531
Colors Incorporated
</TABLE>

- ------------
(1) Includes the following amounts paid during 1995 under Crompton's
Supplemental Medical and Dental Reimbursement Plans (SMD), and employer
contributions to Crompton's Employee Stock Ownership Plan (ESOP) and
Individual Account Retirement Plan (IARP) (with that portion of the ESOP and
IARP contributions in excess of the Section 401(k) and Section 415
limitations having been paid into Crompton's Benefit Equalization Plan): Mr.
Calarco, $2,235 (SMD), $31,802 (ESOP), $55,560 (IARP); Mr. Marsden, $5,027
(SMD), $13,065 (ESOP), $21,420 (IARP); Mr. Ackley, $1,074 (SMD), $12,960
(ESOP), $22,680 (IARP); Mr. Ferguson, $4,397 (SMD), $9,063 (ESOP), $13,854
(IARP); and Mr. Fording, $1,291 (SMD), $8,166 (ESOP), $15,317 (IARP).

Total restricted stock outstanding for the persons shown in the table at the
end of fiscal year 1995: Vincent A. Calarco, 276,033 shares valued at
$3,657,437, of which 132,033 shares valued at $1,749,437 are forfeitable;
Charles J. Marsden, 80,232 shares valued at $1,063,074, of which 36,232 shares
valued at $480,074 are forfeitable; Robert W. Ackley, 50,002 shares valued at
$662,527, of which 23,002 shares valued at $304,777 are forfeitable; Edmund H.
Fording, 12,691 shares valued at $168,156, all of which shares are forfeitable;
and John T. Ferguson II, 9,634 shares valued at $127,651, all of which shares
are forfeitable. Dividends are paid on restricted shares from the date of grant
but do not vest and are not distributed until the underlying shares are
distributed.

47
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR(1)

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER TOTAL STOCK
OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION TERM
UNDERLYING EMPLOYEES EXERCISE -------------------
OPTIONS IN FISCAL PRICE EXPIRATION 5%($) 10%($)
NAME GRANTED(#) YEAR ($/SH) DATE $21.18 $33.72
- ---------------------------------- ---------- ---------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
V.A. Calarco...................... 102,308(2) 33.0% 13.00 11/17/05 836,879 2,119,822
7,692(3) 2.5% 13.00 10/17/05 62,921 159,378
C.J. Marsden...................... 20,808(2) 6.7% 13.00 11/17/05 170,209 431,142
7,692(3) 2.5% 13.00 10/17/05 62,921 159,378
R.W. Ackley....................... 18,808(2) 6.1% 13.00 11/17/05 153,849 389,702
7,692(3) 2.5% 13.00 10/17/05 62,921 159,378
J.T. Ferguson II.................. 4,589(2) 1.5% 13.00 11/17/05 37,538 95,084
5,911(3) 1.9% 13.00 10/17/05 48,352 122,476
E.H. Fording, Jr.................. 2,058(2) 0.7% 13.00 11/17/05 16,834 42,642
8,442(3) 2.7% 13.00 10/17/05 69,056 174,918
</TABLE>

- ------------
(1) An option entitles the holder to purchase one share of the common stock of
Crompton at a purchase price equal to the fair market value of Crompton's
common stock on October 18, 1995, the date of grant of all of the options
shown in the table. All options are subject to expiration prior to the dates
shown in the table in case of death or termination of employment. Fifty
percent of the options shown in the table are exercisable beginning on the
first anniversary of the date of grant, and fifty percent are exercisable
beginning on the second anniversary of the date of grant. The purchase price
for stock on the exercise of options may be paid in cash or in shares of
Crompton's common stock already owned by the option holder, or by a
combination thereof. In the event of a change in control of Crompton, all of
the options shown in the table will immediately become exercisable.
(2) Non-qualified options.
(3) Incentive options.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED AT FY-END($)
ACQUIRED ON VALUE OPTIONS FY-END(#) 12/30/95--FMV $13.2500
EXERCISE REALIZED -------------------------- ---------------------------
NAME (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ---------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
V.A. Calarco................ -- -- 894,160 149,000 5,697,531.73 27,500.00
C.J. Marsden................ 16,300 253,791.00 237,376 39,500 1,251,138.93 7,125.00
R.W. Ackley................. 11,500 110,687.50 62,000 36,500 -- 6,625.00
J.T. Ferguson II............ 8,834 65,167.26 38,250 16,750 -- 2,625.00
E.H. Fording, Jr............ -- -- 74,500 14,500 204,172.50 2,625.00
</TABLE>

- ------------
(1) All numbers reflect the 2-for-1 stock split on May 22, 1992.
(2) Fair market value at date of exercise less exercise price.

Compensation Committee Interlocks and Insider Participation

Messrs. Fox, Headrick and Huber served as members and Mr. Bitonti served as
Chairman of the Executive Compensation Committee of the Crompton Board during
the last completed fiscal year. No member of the Executive Compensation
Committee is a current or former officer or employee of Crompton or any of its
subsidiaries.

During 1995, Mr. Calarco served as a director of Caremark International
Inc., of which Mr. Piccolo is Chairman and Chief Executive Officer.

48
<PAGE>
Retirement Plans

Each of the persons shown in the Summary Compensation Table on page 11 is
covered by a supplemental retirement agreement with Crompton. Under each
supplemental agreement, the aggregate benefit payable on an annualized basis
from employer contributions under Crompton's Individual Account Retirement Plan
to each officer at normal retirement age will be supplemented by Crompton so
that the total annual benefit payable to him for life will be 35%, 50% or 60% of
the average total compensation (including salary and bonus) paid to him during
the highest five years of the last ten years prior to his normal retirement age.
A supplemental benefit in a reduced amount may be payable in the event of
termination of employment prior to normal retirement age. At any time after the
date on which benefit payments commence, the officer may elect to receive a
single lump sum equal to 90% of the actuarial equivalent of the benefit
otherwise payable to the officer. An officer may elect to have his supplemental
benefit under the agreement paid in a form which will provide for the
continuation of benefits, to a beneficiary selected by him, upon his death after
retirement. Each agreement also provides for the payment of a reduced benefit to
the officer's beneficiary in the event of his death prior to normal retirement
age and for the payment of disability benefits in addition to those available
under Crompton's regular disability insurance program. Benefits under each
agreement are payable only if the officer has completed at least five years of
service after entering into the agreement, does not voluntarily terminate his
employment unless such termination is the result of his retirement under a
retirement plan or is with approval of the Crompton Board, and meets certain
other conditions set forth in the agreement.

Each of the supplemental retirement agreements also provides that if, after
a change in control of Crompton (as defined in the agreement) has occurred, the
officer's employment is terminated by Crompton other than for cause, disability,
or death or the officer resigns for good reason (as defined in the agreement),
the officer will be vested in an unreduced benefit equal to 35%, 50% or 60%
(whichever level is applicable to him under the agreement) of his average total
compensation over the highest five of the last ten years of his employment. In
the event the officer is under age 55 when terminated, the benefit would be
based on his final average total compensation projected to age 55 in accordance
with certain assumptions set forth in the agreement. The benefit would be paid
annually for life commencing at age 65, with provision made for payment to the
officer's beneficiary of the value of the expected benefit in the event of his
death prior to attaining that age.

The following table sets forth the estimated aggregate annual benefit
payable to each of the officers named in the table under his supplemental
retirement agreement, from employer contributions to the IARP, and (in the case
of Mr. Ackley) under a retirement plan which was terminated in 1982, upon
retirement at or after normal retirement age based on each officer's
compensation history to date and assuming payment of such benefit in the form of
a life annuity:

<TABLE>
<CAPTION>
ESTIMATED ANNUAL
NAME OF INDIVIDUAL RETIREMENT BENEFIT
- -------------------------- ------------------
<S> <C>
Vincent A. Calarco........ $523,900
Charles J. Marsden........ 158,892
Robert W. Ackley.......... 145,642
John T. Ferguson II....... 71,852
Edmund H. Fording, Jr..... 72,485
</TABLE>

Employment Agreements

Mr. Calarco is employed pursuant to an employment agreement which was
amended and restated in February 1988. The amended agreement provides for Mr.
Calarco's employment as Chairman of the Board, President and Chief Executive
Officer for a term of three years, with automatic annual one year extensions of
the term unless Crompton gives notice at least 60 days prior to the anniversary
of the date of the agreement that the term will not be extended. The amended
agreement calls for a base salary of not less than $310,000 and for Mr.
Calarco's continued participation in employee benefit plans and other fringe
benefit arrangements substantially as in the past. In the event Mr. Calarco's
employment is

49
<PAGE>
terminated by Crompton other than for cause, disability, or death or by Mr.
Calarco for good reason (as defined in the agreement), Crompton is obligated to
pay Mr. Calarco his salary to the date of termination, incentive compensation in
an amount no less than the bonus paid to him for the prior year pro-rated to
that date, and a lump sum termination payment equal to three times the sum of
his then current salary and the highest bonus paid to him during the three years
preceding his termination, to continue other employee benefits provided under
the agreement for a period of three years or until he obtains other employment,
and to make certain additional payments to cover any excise tax imposed under
the Code on the amounts payable as a result of his termination and any legal
fees incurred by Mr. Calarco in enforcing Crompton's obligations under the
agreement.

Crompton has entered into employment agreements with certain other key
management employees, including Messrs. Marsden, Ackley, Ferguson and Fording.
Each agreement is operative only upon the occurrence of a change in control (as
defined in the agreement) and is intended to encourage the executive to remain
in the employ of Crompton by providing him with greater security. Absent a
change in control, the agreement does not require Crompton to retain the
executive or to pay him any specified level of compensation or benefits. In the
event of a change in control, the agreement provides that there will be no
change, without the executive's consent, in the salary, bonus opportunity,
benefits, duties, and location of employment of the executive for a period of
one or two years after the change in control. If, during such period, the
executive's employment is terminated by Crompton other than for cause,
disability, or death or the executive resigns for good reason (as defined in the
agreement), Crompton will pay the executive his salary to the date of
termination, incentive compensation in an amount no less than the bonus paid to
him for the prior year pro-rated to that date, and a lump sum severance payment
equal to one or two times (depending on the executive) the sum of his base
salary and the highest bonus paid to him during the three years preceding his
termination and will continue other employee benefits similar to those provided
to the executive prior to his termination for a period of one or two years or
until his earlier employment with another employer.

50
<PAGE>
PRINCIPAL STOCKHOLDERS OF CROMPTON

The directors and the executive officers of Crompton have advised Crompton
that they were directly or indirectly the beneficial owners of outstanding
common stock of Crompton at the close of business on February 9, 1996, as set
forth below, in each case representing less than one percent of such shares
outstanding except as otherwise indicated. No person was known to the Crompton
Board to be the beneficial owner of more than 5% of Crompton's outstanding
voting securities as of February 9, 1996.

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS
- -------------- -------------------------------------------- -------------------------- ----------------
<S> <C> <C> <C>
Common Vincent A. Calarco.......................... 1,744,427(2) 3.6%(15)
Common James A. Bitonti............................ 29,547(3)
Common Robert A. Fox............................... 30,829(4)
Common Roger L. Headrick........................... 57,190(5)
Common Leo I. Higdon, Jr........................... 2,906(6)
Common Michael W. Huber............................ 19,889(7)
Common Charles J. Marsden.......................... 480,450(8)
Common C.A. (Lance) Piccolo........................ 14,452(9)
Common Patricia K. Woolf........................... 3,413(10)
Common Robert W. Ackley............................ 349,110(11)
Common John T. Ferguson II......................... 56,119(12)
Common Edmund H. Fording, Jr....................... 96,227(13)
Common Directors and Executive Officers as a Group
(17 persons)................................ 3,277,696(14) 6.6%(16)
</TABLE>

- ------------
(1) Except as noted below, the officers and directors have both sole voting and
sole investment power over the shares reflected in this table.
(2) Includes 894,160 shares which Mr. Calarco had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; 496,944
shares held under the 1988 Plan and the Employee Stock Ownership Plan, as
to which he has voting but no investment power; and 58,872 shares owned by
his wife and 18,721 shares held by him or his wife as custodian for their
children, as to which he disclaims beneficial ownership.
(3) Includes 2,397 shares which Mr. Bitonti had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; 11,200 shares
owned jointly by Mr. Bitonti with his wife; 10,494 shares held under the
Restricted Stock Plan for Directors; and 4,800 shares owned by his wife as
to which he disclaims beneficial ownership.
(4) Includes 2,397 shares which Mr. Fox had the right to acquire through stock
options exercisable within 60 days of February 9, 1996; and 8,448 shares
held under the Restricted Stock Plan for Directors.
(5) Includes 2,397 shares which Mr. Headrick had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; and 10,173
shares held under the Restricted Stock Plan for Directors.
(6) Includes 1,555 shares which Mr. Higdon had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; and 1,351
shares held under the Restricted Stock Plan for Directors.
(7) Includes 2,397 shares which Mr. Huber had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; and 7,492
shares held under the Restricted Stock Plan for Directors.
(8) Includes 237,376 shares which Mr. Marsden had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; 106,665
shares held under the 1988 Plan and the Employee Stock Ownership Plan, as
to which he has voting but no investment power; and 19,000 shares owned by
his wife as to which he disclaims beneficial ownership.
(9) Includes 2,397 shares which Mr. Piccolo had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; and 9,115
shares held under the Restricted Stock Plan for Directors.
(10) Includes 622 shares which Ms. Woolf had the right to acquire through stock
options exercisable within 60 days of February 9, 1996; and 1,845 shares
held under the Restricted Stock Plan for Directors.
(11) Includes 62,000 shares which Mr. Ackley had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; 86,912 shares
held under the 1988 Plan and the Employee Stock Ownership Plan, as to which
he has voting but no investment power; and 2,400 shares owned by his wife,
as to which he disclaims beneficial ownership.
(12) Includes 38,250 shares which Mr. Ferguson had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; 15,189 and
shares held under the 1988 Plan, the Employee Stock Ownership Plan, and a
Benefit Equalization Plan Trust as to which he has voting but no investment
power.
(13) Includes 74,500 shares which Mr. Fording had the right to acquire through
stock options exercisable within 60 days of February 9, 1996; and 9,164
shares held under the 1988 Plan and the Employee Stock Ownership Plan, as
to which he has voting but no investment power.
(14) Includes 1,441,921 shares which the officers and directors in the group had
the right to acquire through stock options exercisable within 60 days of
February 9, 1996.
(15) 2.4%, giving effect to the issuance of up to 26,089,206 shares of Crompton
Common Stock in the Merger.
(16) 4.4%, giving effect to the issuance of up to 26,089,206 shares of Crompton
Common Stock in the Merger.

51
<PAGE>
DESCRIPTION OF CROMPTON CAPITAL STOCK

Under the Crompton Articles, Crompton is authorized to issue (i) 250,000,000
shares of Crompton Common Stock, of which 48,039,309 shares were issued and
outstanding as of July 9, 1996 and (ii) 250,000 shares of Preferred Stock,
without par value, none of which was issued and outstanding.

CROMPTON COMMON STOCK

The holders of Crompton Common Stock are entitled to receive dividends as
may be declared from time to time by the Board of Directors out of funds legally
available therefor. The holders of Crompton Common Stock are entitled to one
vote per share on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Holders of Crompton Common Stock are entitled to
receive, upon any liquidation of Crompton, all remaining assets available for
distribution to stockholders after satisfaction of Crompton's liabilities and
the preferential rights of any preferred Stock that may then be issued and
outstanding. The outstanding shares of Crompton Common Stock are, and the shares
to be issued in the Merger will be, fully paid and nonassessable. The holders of
Crompton Common Stock have no preemptive, conversion or redemption rights. The
transfer agent and registrar for the Crompton Common Stock is Chemical Mellon
Shareholder Services.

PREFERRED SHARE PURCHASE RIGHTS

On July 20, 1988, the Crompton Board declared a dividend of one preferred
share purchase right on each outstanding share of Crompton Common Stock. The
Crompton Rights, which expire on August 4, 1998, were issued on August 5, 1988
to stockholders of record on that date and were authorized to be issued in
respect of each share of Crompton Common Stock subsequently issued. Under
certain circumstances each Crompton Right will entitle the holder to purchase
one eight-hundredth of a share of Series A Junior Participating Preferred Stock,
without par value (the "Series A Junior Preferred Shares"), of Crompton at an
exercise price of $18.75 per one eight-hundredth of a Series A Junior Preferred
Share, subject to adjustment. The Crompton Rights will not be exercisable or
transferable apart from the Crompton Common Stock until the earlier to occur of
either: (i) ten days following a public announcement that a person or group has
acquired 20% or more of the outstanding Crompton Common Stock, or (ii) ten
business days following commencement of, or a public announcement of an
intention to make, a tender or exchange offer, which would result in the
beneficial ownership by a person or group of 20% or more of the outstanding
Crompton Common Stock. The Crompton Rights will not have any voting rights nor
be entitled to dividends.

If, after the Crompton Rights become exercisable, Crompton is acquired in a
merger or other business combination transaction or 50% or more of its
consolidated assets or earning power is sold, provision will be made for each
holder of a Crompton Right to receive on exercise of the Crompton Right, that
number of shares of common stock of the acquiring company which at the item of
such transaction would have a market value of two times the exercise price of
the Crompton Right. In addition, in the event a person or group shall become the
beneficial owner of 20% or more of the outstanding Crompton Common Stock (an
"Acquiring Person"), each holder of a Crompton Right other than an Acquiring
Person shall have the right, upon exercise of a Crompton Right, to purchase
shares of Crompton Common Stock having a market value equal to two times the
exercise price of the Crompton Right. Notwithstanding the foregoing, any
Crompton Rights that are owned or acquired by an Acquiring Person will be void
and the holder thereof shall have no right to exercise or transfer such Crompton
Rights. The Crompton Rights are redeemable at $.00125 per Crompton Right at any
time prior to the time that a person or group acquires beneficial ownership of
20% or more of the outstanding Crompton Common Stock.

52
<PAGE>
CERTAIN CHARTER AND BY-LAW PROVISIONS

The Crompton Articles and Crompton By-Laws contain certain provisions that
would likely have an effect of delaying or deterring a change in control of
Crompton. Such provisions require, among other things, (i) a classified Board of
Directors, with each class containing as nearly as possible one-third of the
whole number of members of the Board of Directors and the members of each class
serving for three-year terms, (ii) a vote of at least 80% of the holders of
Crompton's voting securities to approve certain business combination
transactions with a stockholder who is the beneficial owner of 10% or more of
Crompton's outstanding voting securities, (iii) a vote of at least 80% of
Crompton's voting securities to amend certain of the Crompton Articles and
Crompton By-Laws, (iv) advance notice procedures with respect to nominations of
directors other than by or at the direction of the Board of Directors, and (v) a
vote of two-thirds ( 2/3) of Crompton's outstanding voting securities to approve
certain merger and consolidation agreements involving Crompton.

PLAN OF DISTRIBUTION

Under the terms of a Placement Agreement dated as of , 1996 (the
"Placement Agreement"), the shares of Common Stock offered hereby are being
offered by the Company through Salomon Brothers Inc, as exclusive placement
agent (the "Placement Agent"), which has agreed to use its best efforts to
solicit offers to purchase such shares on the terms and subject to the
conditions set forth therein. The shares of Common Stock offered hereby may also
be sold to the Placement Agent, acting as principal, at a discount for resale to
one or more purchasers at market prices prevailing at the time of sale or at
negotiated prices. After the Common Stock is released for sale to the public,
the offering price and other selling terms may be varied by the Placement Agent.
The Company shall have the right, in its discretion, to reject any offer
received by it, in whole or in part. The Placement Agent shall have the right,
in its discretion, without notice to the Company, to reject any offer received
by it, in whole or in part. The Company will pay the Placement Agent a
commission of % of the aggregate purchase price of the shares of Common Stock
offered hereby.

The Placement Agreement provides that Crompton will indemnify the Placement
Agent against certain liabilities in connection with the Offering, including
liabilities under the Securities Act, or to contribute to payments that the
Placement Agent may be required to make in respect thereof.

Payment of the purchase price of the shares of Common Stock offered hereby
will be required to be made in immediately available funds in The City of New
York.

Salomon Brothers Inc has provided financial advisory services to the Company
and to entities related to the Company and may in the future provide financial
advisory services to the Company or such other entities, for which it has
received or expects to receive customary fees.

LEGAL MATTERS

The validity of the shares of Crompton Common Stock offered hereby will be
passed upon for Crompton by Wachtell, Lipton, Rosen & Katz, special counsel to
Crompton.

The Placement Agent has been represented by Cravath, Swaine & Moore, New
York, New York.

EXPERTS

The consolidated financial statements of Crompton as of December 30, 1995
and December 31, 1994, and for the years ended December 30, 1995, December 31,
1994, and December 25, 1993, have been included herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.

53
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF CROMPTON & KNOWLES CORPORATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Earnings for the fiscal years ended December 30, 1995,
December 31, 1994, and December 25, 1993......................................... F-2
Consolidated Balance Sheets at December 30, 1995 and December 31, 1994............. F-3
Consolidated Statements of Cash Flows for the fiscal years ended December 30, 1995,
December 31, 1994, and December 25, 1993......................................... F-4
Consolidated Statements of Stockholders' Equity for the fiscal years ended December
30, 1995, December 31, 1994, and December 25, 1993............................... F-5
Notes to Consolidated Financial Statements......................................... F-6
Independent Auditors' Report....................................................... F-16

INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Earnings (Unaudited) for the quarters ended March 30,
1996 and April 1, 1995........................................................... F-17
Consolidated Balance Sheets (Unaudited) at March 30, 1996 and December 30, 1995.... F-18
Consolidated Statements of Cash Flows (Unaudited) for the quarters ended March 30,
1996 and April 1, 1995........................................................... F-19
Notes to Consolidated Financial Statements for the Quarter ended March 30, 1996
(Unaudited)...................................................................... F-20
</TABLE>

F-1
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
FISCAL YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994,
AND DECEMBER 25, 1993
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................... $665,513 $589,757 $558,348
-------- -------- --------

Costs and Expenses
Cost of products sold..................................... 473,654 403,784 380,941
Selling, general and administrative....................... 104,535 91,581 82,970
Depreciation and amortization............................. 15,035 13,298 12,076
Interest.................................................. 8,364 2,167 1,093
Other income.............................................. (166) (1,042) (1,205)
-------- -------- --------
Total costs and expenses................................ 601,422 509,788 475,875
-------- -------- --------
Earnings
Earnings before income taxes.............................. 64,091 79,969 82,473
Income taxes.............................................. 23,598 29,053 30,515
-------- -------- --------
Net earnings.............................................. $ 40,493 $ 50,916 $ 51,958
-------- -------- --------
-------- -------- --------
Net Earnings Per Common Share............................... $ .84 $ 1.00 $ 1.00
-------- -------- --------
-------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-2
<PAGE>
CONSOLIDATED BALANCE SHEETS
FISCAL YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Assets
Current Assets
Cash................................................................. $ 918 $ 1,832
Accounts receivable.................................................. 112,693 81,859
Inventories.......................................................... 154,846 157,356
Other current assets................................................. 23,038 19,610
-------- --------
Total current assets............................................. 291,495 260,657
Non-Current Assets
Property, plant and equipment........................................ 129,991 117,105
Cost in excess of acquired net assets................................ 51,922 43,429
Other assets......................................................... 10,730 11,137
-------- --------
$484,138 $432,328
-------- --------
-------- --------
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable........................................................ $ 60,439 $ 39,670
Accounts payable..................................................... 49,415 47,000
Accrued expenses..................................................... 35,136 33,369
Income taxes payable................................................. 3,747 4,138
Other current liabilities............................................ 16,578 14,865
-------- --------
Total current liabilities........................................ 165,315 139,042
-------- --------
Non-Current Liabilities
Long-term debt....................................................... 64,000 54,000
Accrued postretirement liability..................................... 7,559 8,698
Deferred income taxes................................................ 7,217 6,681
Stockholders' Equity
Common stock, $.10 par value--issued 53,361,072 shares............... 5,336 5,336
Additional paid-in capital........................................... 59,440 62,241
Retained earnings.................................................... 234,113 218,837
Accumulated translation adjustment................................... 6,320 1,858
Treasury stock at cost............................................... (62,972) (54,213)
Deferred compensation................................................ (2,190) (10,152)
-------- --------
Total stockholders' equity....................................... 240,047 223,907
-------- --------
$484,138 $432,328
-------- --------
-------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994,
AND DECEMBER 25, 1993
INCREASE (DECREASE) TO CASH (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net earnings............................................... $ 40,493 $ 50,916 $ 51,958
Adjustments to reconcile net earnings to net cash provided
by operations:
Depreciation and amortization............................ 15,035 13,298 12,076
Deferred income taxes.................................... 729 2,389 340
Deferred compensation.................................... 768 (332) 1,611
Changes in assets and liabilities:
Accounts receivable...................................... (27,234) 5,815 (11,798)
Inventories.............................................. 8,247 (34,695) (253)
Other current assets..................................... (3,080) (2,735) 722
Other assets............................................. (485) (943) 2
Accounts payable and accrued expenses.................... (4,719) (8,186) (4,937)
Income taxes payable..................................... 323 (7,986) 3,918
Other current liabilities................................ (1,938) 4,777 (1,435)
Accrued postretirement liability......................... (1,139) (386) 310
Other.................................................... (264) (175) (109)
-------- -------- --------
Net cash provided by operations............................ 26,736 21,757 52,405
-------- -------- --------
Cash Flows from Investing Activities
Acquisitions............................................... (9,538) (13,734) --
Capital expenditures....................................... (18,249) (21,710) (14,299)
Other investing activities................................. (1,505) 590 1,972
-------- -------- --------
Net cash used by investing activities...................... (29,292) (34,854) (12,327)
-------- -------- --------
Cash Flows from Financing Activities
Proceeds from (payments on) long-term borrowings........... 10,000 40,000 (10,000)
Change in notes payable.................................... 20,675 34,533 (282)
Treasury stock acquired.................................... (4,296) (47,647) (5,103)
Treasury stock issued under stock options and other
plans.................................................... 393 1,756 1,905
Dividends paid............................................. (25,217) (23,309) (19,482)
-------- -------- --------
Net cash provided (used) by financing activities........... 1,555 5,333 (32,962)
-------- -------- --------
Cash
Effect of exchange rates on cash........................... 87 312 (273)
-------- -------- --------
Change in cash............................................. (914) (7,452) 6,843
Cash at beginning of year.................................. 1,832 9,284 2,441
-------- -------- --------
Cash at end of year........................................ $ 918 $ 1,832 $ 9,284
-------- -------- --------
-------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994,
AND DECEMBER 25, 1993
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Common Stock
Balance at beginning and end of year...................... $ 5,336 $ 5,336 $ 5,336
-------- -------- --------
Additional Paid-in Capital
Balance at beginning of year.............................. 62,241 61,783 59,644
Stock options and other issuances......................... (410) 1,592 2,139
Return of shares from long-term incentive plan trust...... (2,391) -- --
Issuance under long-term incentive plan................... -- (1,134) --
-------- -------- --------
Balance at end of year.................................... 59,440 62,241 61,783
-------- -------- --------
Retained Earnings
Balance at beginning of year.............................. 218,837 191,230 158,754
Net earnings.............................................. 40,493 50,916 51,958
Cash dividends declared on common stock ($.525 per share
in 1995, $.46 in 1994, and $.38 in 1993)................ (25,217) (23,309) (19,482)
-------- -------- --------
Balance at end of year.................................... 234,113 218,837 191,230
-------- -------- --------
Accumulated Translation Adjustment
Balance at beginning of year.............................. 1,858 (557) 3,803
Equity adjustment for translation of foreign currencies... 4,462 2,415 (4,360)
-------- -------- --------
Balance at end of year.................................... 6,320 1,858 (557)
-------- -------- --------
Treasury Stock
Balance at beginning of year.............................. (54,213) (11,278) (7,956)
Issued, primarily under stock options (72,729 shares in
1995, 58,957 shares in 1994, and 489,976 in 1993)....... 340 276 1,781
Common stock acquired (272,800 shares in 1995, 2,954,700
shares in 1994 and 280,000 in 1993)..................... (4,296) (47,647) (5,103)
Return of shares from long-term incentive plan trust
(448,000 shares)........................................ (4,803) -- --
Issuance under long-term incentive plan (261,399
shares)................................................. -- 4,436 --
-------- -------- --------
Balance at end of year.................................... (62,972) (54,213) (11,278)
-------- -------- --------
Deferred Compensation
Balance at beginning of year.............................. (10,152) (6,518) (8,129)
Return of shares from long-term incentive plan trust...... 7,194 -- --
Issuance under long-term incentive plan................... -- (3,302) --
Amortization.............................................. 768 (332) 1,611
-------- -------- --------
Balance at end of year.................................... (2,190) (10,152) (6,518)
-------- -------- --------
Total stockholders' equity................................ $240,047 $223,907 $239,996
-------- -------- --------
-------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of all
subsidiaries. Intercompany balances and transactions are eliminated in
consolidation. The Company's fiscal year ends on the last Saturday in December
for domestic operations and a week earlier for most foreign operations.

Translation of Foreign Currencies

Foreign currency accounts are translated into U.S. dollars as follows:
exchange rates at the end of the period are used to translate all assets and
liabilities; average exchange rates during the year are used to translate income
and expense accounts. Gains and losses resulting from the translation of foreign
currency balance sheet accounts into U.S. dollars are included in a separate
caption, "Accumulated translation adjustment," in the stockholders' equity
section of the consolidated balance sheets.

Property, Plant and Equipment

Property, plant and equipment are carried at cost, less accumulated
depreciation. Depreciation expense ($13,204 in 1995, $11,935 in 1994 and $10,828
in 1993) is computed generally on the straight-line method using the following
ranges of asset lives: buildings and improvements--10 to 40 years, machinery and
equipment--5 to 15 years, and furniture and fixtures--5 to 10 years.

Renewals and improvements which extend the useful lives of the assets are
capitalized. Capitalized leased assets and leasehold improvements are
depreciated over their useful lives or the remaining lease term, whichever is
shorter. Expenditures for maintenance and repairs are charged to expense as
incurred.

Inventory Valuation

Inventories are valued at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for a significant portion of
chemicals inventories and the first-in, first-out (FIFO) method for the
remaining inventories.

Cost in Excess of Acquired Net Assets

The cost of acquisitions in excess of tangible and identifiable intangible
assets in the amount of $51,922 has, in the opinion of management based on the
undiscounted expected cash flows of the businesses, incurred no permanent
impairment in value. This cost is being amortized using the straight-line method
over periods from twenty to forty years. Accumulated amortization amounted to
$8,281 in 1995 and $6,622 in 1994.

Research and Development

Expenditures for research and development costs are charged to operations as
incurred ($14,027 in 1995, $12,106 in 1994, and $11,184 in 1993).

Income Taxes

A provision has not been made for U.S. income taxes which would be payable
if undistributed earnings of foreign subsidiaries of approximately $72,400 at
December 30, 1995, were distributed to the Company in the form of dividends,
since it is management's intention to permanently invest such earnings in the
related foreign operations. If distributed, such earnings would incur income tax
expense at substantially less than the U.S. income tax rate, primarily because
of the offset of foreign tax credits.

F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

Statements of Cash Flows

Cash includes bank term deposits of three months or less. Cash payments
during the years ended 1995, 1994 and 1993 included interest of $8,488, $2,005
and $1,556 and income taxes of $23,515, $35,319 and $24,347, respectively.

Earnings Per Common Share

The computation of earnings per common share is based on the weighted
average number of common and common equivalent shares outstanding amounting to
48,447,686 in 1995, 51,151,525 in 1994 and 52,175,691 in 1993. A dual
presentation of earnings per common share has not been made since there is no
significant difference in earnings per share calculated on a primary or fully
diluted basis.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in a current
transaction between willing parties. Such fair values must often be determined
by using one or more methods that indicate value based on estimates of
quantifiable characteristics as of a particular date. Values were estimated as
follows:

Cash, short-term receivables and accounts payable--The carrying amount
approximates fair value because of the short maturity of these instruments.

Notes payable and long-term debt--Fair values of short-term borrowings
and long-term debt approximate carrying value because interest rates on such
debt are at variable market rates.

Hedging contracts--Consists primarily of forward foreign currency
contracts carried at market.

Other Disclosures

Included in accounts receivable are allowances for doubtful accounts in the
amount of $3,269 in 1995 and $3,829 in 1994. Included in other current
liabilities are customer deposits in the amount of $11,322 in 1995 and $11,183
in 1994.

Accounting Standard Changes

In March 1995, the Financial Accounting Standards Board issued Statement No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" which is effective in 1996. The statement requires
companies to review assets for possible impairment and provides guidelines for
recognition of impairment losses related to long-lived assets and certain
intangibles. The Company is evaluating the impact of the statement, but expects
that the guidelines required by the statement will not result in impairment of
value that would have a material effect on the Company's net earnings and
financial position in 1996.

In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 "Accounting for Stock-Based Compensation" which is effective in 1996.
The Company intends to follow the option that permits entities to continue to
apply current accounting standards to stock based employee compensation
arrangements. Effective with year-end 1996 reporting, the Company will disclose
in the notes to the consolidated financial statements the impact on net earnings
and earnings per share as if Statement No. 123 were applied.

F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

Acquisitions

In January 1995, the Company acquired the business and certain assets of
McNeil Akron Repiquet S.a.r.l. in France at a cost of $4,638. In March 1995, the
Company acquired Killion Extruders, Inc. at a cost of $4,900. The acquisitions
have been accounted for using the purchase method and, accordingly, the acquired
assets and liabilities have been recorded at their fair values at the dates of
acquisition. The excess cost of the purchase price over fair value of net assets
acquired in the amount of $9,649 is being amortized over forty years. The
operating results of each acquisition are included in the Consolidated
Statements of Earnings since the date of the acquisition.

Inventories

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Finished goods........................................ $ 89,177 $ 90,386
Work in process....................................... 30,316 32,640
Raw materials and supplies............................ 35,353 34,330
-------- --------
$154,846 $157,356
-------- --------
-------- --------
</TABLE>

At December 30, 1995, inventories valued using the last-in, first-out (LIFO)
method amounted to $70,550 ($75,958 at December 31, 1994). The LIFO reserve was
not significant in 1995 and 1994.

Property, Plant and Equipment

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Land.................................................. $ 7,490 $ 7,292
Buildings and improvements............................ 71,677 61,926
Machinery and equipment............................... 133,111 113,296
Furniture and fixtures................................ 4,030 3,662
Construction in progress.............................. 12,975 16,620
-------- --------
229,283 202,796
Less accumulated depreciation......................... 99,292 85,691
-------- --------
$129,991 $117,105
-------- --------
-------- --------
</TABLE>

Leases

The future minimum rental payments under operating leases having initial or
remaining non-cancellable lease terms in excess of one year (as of December 30,
1995) total $21,434 as follows: $5,533 in 1996, $4,254 in 1997, $3,637 in 1998,
$3,223 in 1999, $1,676 in 2000 and $3,111 in later years. Total rental expense
for all operating leases was $8,126 in 1995, $7,305 in 1994, and $6,509 in 1993.

All long-term leases expire prior to 2013. Real estate taxes, insurance and
maintenance expenses generally are obligations of the Company and, accordingly,
are not included as part of rental payments. It is expected that, in the normal
course of business, leases that expire will be renewed or replaced by leases on
other properties.

F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

Debt

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Revolving credit loans.................................. $60,000 $50,000
Industrial revenue bonds................................ 4,000 4,000
------- -------
Total long-term debt.............................. $64,000 $54,000
------- -------
------- -------
</TABLE>

The industrial revenue bonds mature in 1997 and carry an interest rate that
fluctuates within the tax exempt market. The average interest rate incurred in
1995 was 3.8%. The bonds are secured by a bank letter of credit.

In June 1995, the Company amended its credit agreement with a group of five
banks whereby the unsecured revolving credit loans available to the Company were
increased to $125,000 through September 28, 1998. The agreement calls for
interest at the prime rate on revolving loans, but offers pricing options based
on certificate of deposit and Eurodollar rates which generally are more
favorable than the prime rate option. The Company must pay an annual fee of .15%
of the total unused commitment. The covenants of the revolving credit agreement
impose restrictions on the Company with respect to debt and tangible net worth
levels. These restrictions are not expected to adversely affect the Company's
operations. At December 30, 1995, the $60,000 borrowed under the revolving
credit agreement bore an interest rate of 6.2%. At December 30, 1995, unsecured
notes payable outstanding of $60,439 borrowed under the Company's uncommitted
lines of credit bore a variable interest rate of 6.0%.

The aggregate annual maturities of long-term debt are $4,000 in 1997 and
$60,000 in 1998.

Income Taxes

The components of pretax earnings and taxes are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
PreTax Earnings:
Domestic.................................... $59,306 $67,555 $68,498
Foreign..................................... 4,785 12,414 13,975
------- ------- -------
Total....................................... $64,091 $79,969 $82,473
------- ------- -------
------- ------- -------

Taxes:
Domestic
Current taxes............................. $21,500 $23,361 $27,857
Deferred taxes............................ 1,604 2,057 (587)
------- ------- -------
$23,104 $25,418 $27,270
------- ------- -------
------- ------- -------
Foreign
Current taxes............................... $ 1,369 $ 3,303 $ 2,318
Deferred taxes.............................. (875) 332 927
------- ------- -------
$ 494 $ 3,635 $ 3,245
------- ------- -------
------- ------- -------
Total
Current taxes............................... $22,869 $26,664 $30,175
Deferred taxes.............................. 729 2,389 340
------- ------- -------
$23,598 $29,053 $30,515
------- ------- -------
------- ------- -------
</TABLE>

F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

The following is a percentage reconciliation of computed "expected" tax
expense to actual tax expense:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense.................. 35.0% 35.0% 35.0%
State taxes (net of U.S. tax benefit)............ 4.3 3.6 3.6
Foreign tax differential......................... (1.8) (0.9) (2.0)
Other, net....................................... (0.7) (1.4) .4
---- ---- ----
36.8% 36.3% 37.0%
---- ---- ----
---- ---- ----
</TABLE>

Provisions have been made for deferred income taxes based on differences
between financial statement and tax bases of assets and liabilities using
currently enacted tax rates and regulations. The components of the net deferred
tax asset as of December 30, 1995 and December 31, 1994, are as follows:

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred tax asset:
Inventory reserves.................................... $ 3,596 $ 3,239
Bad debt reserves..................................... 515 232
Deferred compensation liability....................... 885 638
Various expense accruals.............................. 3,395 4,475
Accrued postretirement liability...................... 3,024 3,598
------- -------
Total deferred tax assets......................... 11,415 12,182
Deferred tax liability--depreciation.................... (10,241) (10,279)
------- -------
Net deferred tax asset............................ $ 1,174 $ 1,903
------- -------
------- -------
</TABLE>

Total deferred tax assets for 1995 and 1994 include current assets of $8,391
and $8,584, respectively. The deferred tax liability is non-current for 1995 and
1994.

Capital Stock

The Company is authorized to issue 250,000,000 shares of common stock at a
par value of $.10. There are 53,361,072 common shares issued, of which 5,351,962
and 4,703,891 shares were held in the treasury at December 30, 1995 and December
31, 1994, respectively.

The Company is authorized to issue 250,000 shares of preferred stock without
par value, none of which are outstanding. Preferred share purchase rights
(Rights) outstanding with respect to each share of the Company's common stock
entitle the holder to purchase one eight-hundredth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $18.75. The Rights cannot
become exercisable until ten days following a public announcement that a person
or group has acquired 20% or more of the common shares of the Company or intends
to make a tender or exchange offer which would result in their ownership of 20%
or more of the Company's common shares. The Rights also entitle the holder under
certain circumstances to receive shares in another company which acquires the
Company or merges with it.

Stock Incentive Plans

The 1988 Long Term Incentive Plan (the 1988 Plan) authorizes the Board to
grant stock options, stock appreciation rights, restricted stock and long-term
performance awards to the officers and other key employees of the Company over a
period of ten years. Non-qualified and incentive stock options may be granted
under the 1988 plan at prices not less than 100% of the market value on the date
of the

F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

grant. All outstanding options will expire not more than ten years and one month
from the date of grant. There were 4,000,000 shares of common stock reserved for
awards under the 1988 Plan.

The 1993 Stock Option Plan for Non-Employee Directors authorizes 100,000
shares to be optioned to non-employee directors at the rate of their annual
retainer divided by the stock price on the date of grant. The option will vest
over a two year period and be exercisable over a ten year period from the date
of grant, at a price equaling the fair market value on the date of grant.

Under the 1988 Plan, 1,261,000 common shares have been transferred to an
independent trustee to administer restricted stock awards for the Company's long
term incentive program. At December 30, 1995 deferred compensation relating to
such shares in the amount of $2,190 is being amortized over an estimated service
period of six to fifteen years. In June 1995, the trustee returned 448,000
common shares to the Company representing those shares which have not yet been
earned under the incentive program. Compensation expense relating to unearned
shares is being accrued annually based upon the expected level of incentive
achievement.

Changes during 1995, 1994 and 1993 in shares under option are summarized as
follows:

<TABLE>
<CAPTION>
PRICE PER SHARE
-------------------------------
RANGE AVERAGE SHARES
------------ --------------- ---------
<S> <C> <C> <C>
Outstanding at 12/26/92............................. $ 1.29-22.78 $ 7.88 1,929,900
Granted............................................. 19.31-23.75 19.45 218,736
Exercised........................................... 1.29-18.31 2.87 (424,419)
Lapsed.............................................. 4.01-19.19 14.01 (6,667)

Outstanding at 12/25/93............................. 2.15-23.75 10.57 1,717,550
Granted............................................. 14.63-21.44 14.83 282,647
Exercised........................................... 2.15-9.31 5.59 (57,473)
Lapsed.............................................. 9.31-19.31 18.12 (27,001)

Outstanding at 12/31/94............................. 2.47-23.75 11.24 1,915,723
Granted............................................. 9.31-16.06 13.07 330,481
Exercised........................................... 2.49-9.31 6.40 (61,299)
Lapsed.............................................. 9.31-23.75 18.04 (23,791)

Outstanding at 12/30/95............................. $ 2.47-23.75 $ 11.59 2,161,114
Exercisable at 12/30/95............................. $ 2.47-23.75 $ 10.64 1,592,779
</TABLE>

Shares available for grant at December 30, 1995 and December 31, 1994 were
536,302 and 842,992, respectively.

The Company has an Employee Stock Ownership Plan that is offered to eligible
employees of the Company and certain of its subsidiaries. The Company makes
contributions equivalent to a stated percentage of employee contributions. The
Company's contributions were $2,020, $1,677 and $1,617 in 1995, 1994 and 1993,
respectively.

Postretirement Health Care Benefits

The Company provides health benefits attributable to past service of
eligible retired and active employees under the Company's postretirement health
care benefit plans. Effective January 1, 1992, the Company adopted the
provisions of FASB Statement No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." In 1994, the Company adopted several changes to
its postretirement health care benefit plans including an annual cap for medical
premiums paid by the Company,

F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

higher deductible amounts and out-of-pocket limits on medical payments. The plan
amendments resulted in a prior service gain of $3,254 which is being amortized
over the average remaining employee service period of 15 years. Postretirement
health care benefit expense did not have a material effect on net earnings for
the years 1995, 1994 and 1993.

The financial status of the accrued postretirement liability is as follows:

<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Retirees................................................. $ 3,834 $2,812
Fully eligible active participants....................... 662 608
Other active participants................................ 1,150 1,240
------- ------
Total accumulated postretirement liability............... 5,646 4,660
Unrecognized actuarial gain (loss)....................... (1,113) 784
Unrecognized prior service gain.......................... 3,026 3,254
------- ------
$ 7,559 $8,698
------- ------
------- ------
</TABLE>

For measurement purposes, a 11.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1995. The rate is assumed
to decrease 1% per year to 6.5% in 2000 and remain at that level thereafter. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0%.

An increase in the assumed health care cost rate of 1% in each year would
increase the accumulated postretirement benefit obligation by approximately
$460.

Pensions

The Company maintains a defined contribution pension plan for eligible
employees under provisions of section 401(k) of the Internal Revenue Code. The
plan provides for Company contributions at a certain percentage of each
participant's salary and allows voluntary tax-deferred employee contributions up
to a stated percentage of salary. Other foreign and domestic pension plans are
not significant. Total pension expense aggregated $4,516 in 1995, $4,251 in 1994
and $4,036 in 1993.

Contingencies

In the normal course of its business, the Company is subject to
investigations, claims and legal proceedings, some of which concern
environmental matters, involving both private and governmental parties. In some
cases, the remedies sought or damages claimed may be substantial. While each of
these matters is subject to various uncertainties as to outcome, and some of
them may be decided unfavorably to the Company, based on the facts known to the
Company and on consultation with legal counsel, management believes that there
are no such matters pending or threatened which will have a material effect on
the financial position of the Company or the results of the Company's operations
in any given year.

Foreign Operations

Financial data applicable to the Company's foreign operations are as
follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Net sales................................... $113,280 $97,848 $103,356
Net earnings................................ $ 4,291 $ 8,779 $ 10,730
Assets...................................... $113,852 $90,508 $ 82,789
</TABLE>

F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

Business Segment Data

Sales by segment represent sales to unaffiliated customers only.
Intersegment sales and transfers between geographic areas are nominal and have
not been disclosed separately. Consolidated operating profit is defined as total
revenue less operating expenses. In computing consolidated operating profit, the
following items have not been deducted: interest expense, other income and
income taxes. Identifiable assets by segment are those assets that are used in
the Company's operations in each segment. Corporate assets are principally cash,
prepayments and other assets maintained for general corporate purposes.

Information by Business Segment

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales
Specialty chemicals....................................... $385,647 $393,544 $407,280
Specialty process equipment and controls.................. 279,866 196,213 151,068
-------- -------- --------
$665,513 $589,757 $558,348
-------- -------- --------
-------- -------- --------
Operating Profit
Specialty chemicals....................................... $ 42,609 $ 60,783 $ 68,067
Specialty process equipment and controls.................. 40,154 31,195 25,967
General corporate expenses................................ (10,474) (10,884) (11,673)
-------- -------- --------
72,289 81,094 82,361
Interest expense.......................................... (8,364) (2,167) (1,093)
Other income.............................................. 166 1,042 1,205
-------- -------- --------
Earnings before income taxes.............................. $ 64,091 $ 79,969 $ 82,473
-------- -------- --------
-------- -------- --------

Identifiable Assets
Specialty chemicals....................................... $318,020 $313,457 $281,804
Specialty process equipment and controls.................. 150,320 103,151 69,279
-------- -------- --------
468,340 416,608 351,083
Corporate................................................. 15,798 15,720 12,163
-------- -------- --------
$484,138 $432,328 $363,246
-------- -------- --------
-------- -------- --------
Depreciation and Amortization
Specialty chemicals....................................... $ 11,510 $ 11,141 $ 10,628
Specialty process equipment and controls.................. 3,328 1,995 1,324
-------- -------- --------
14,838 13,136 11,952
Corporate................................................. 197 162 124
-------- -------- --------
$ 15,035 $ 13,298 $ 12,076
-------- -------- --------
-------- -------- --------
Capital Expenditures
Specialty chemicals....................................... $ 15,076 $ 18,891 $ 12,057
Specialty process equipment and controls.................. 3,087 2,756 2,131
-------- -------- --------
18,163 21,647 14,188
Corporate................................................. 86 63 111
-------- -------- --------
$ 18,249 $ 21,710 $ 14,299
-------- -------- --------
-------- -------- --------
</TABLE>

F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

Information by Major Geographic Segment

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales
United States............................................. $552,233 $491,909 $454,992
Europe.................................................... 94,347 88,693 93,808
Other..................................................... 18,933 9,155 9,548
-------- -------- --------
$665,513 $589,757 $558,348
-------- -------- --------
-------- -------- --------
Exports to Unaffiliated Customers
Included in United States sales:
Far East.................................................. $ 16,895 $ 19,858 $ 26,244
Latin America............................................. 12,225 15,027 10,183
Europe.................................................... 23,713 9,381 7,251
Other..................................................... 11,989 10,178 4,338
-------- -------- --------
64,822 54,444 48,016
-------- -------- --------
Included in European sales:
Far East.................................................. -- 10,117 8,649
Latin America............................................. 4,422 4,631 4,261
Other..................................................... 3,042 6,362 3,756
-------- -------- --------
7,464 21,110 16,666
-------- -------- --------
$ 72,286 $ 75,554 $ 64,682
-------- -------- --------
-------- -------- --------
Operating Profit
United States............................................. $ 77,893 $ 79,148 $ 79,536
Europe.................................................... 4,166 12,038 13,736
Other..................................................... 704 792 762
-------- -------- --------
82,763 91,978 94,034
General corporate expenses................................ (10,474) (10,884) (11,673)
-------- -------- --------
$ 72,289 $ 81,094 $ 82,361
-------- -------- --------
-------- -------- --------
Identifiable Assets
United States............................................. $370,286 $341,820 $280,457
Europe.................................................... 105,408 85,578 77,203
Other..................................................... 8,444 4,930 5,586
-------- -------- --------
$484,138 $432,328 $363,246
-------- -------- --------
-------- -------- --------
</TABLE>

F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

Summarized Unaudited Quarterly Financial Data
<TABLE>
<CAPTION>
1995
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................................ $168,193 $175,617 $159,065 $162,638
Gross profit..................................... 51,634 51,818 44,606 43,801
Net earnings..................................... 13,196 12,058 8,077 7,162
Net earnings per common share.................... .27 .25 .17 .15
Common dividends per share....................... .12 .135 .135 .135
Market price per common share:
High........................................... 17 3/8 20 15 3/4 14 7/8
Low............................................ 15 7/8 13 3/8 13 5/8 12
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................................ $133,594 $154,452 $142,821 $158,890
Gross profit..................................... 42,684 50,952 44,025 48,312
Net earnings..................................... 12,758 16,107 10,224 11,827
Net earnings per common share.................... .25 .31 .20 .24
Common dividends per share....................... .10 .12 .12 .12
Market price per common share:
High........................................... 24 1/8 23 5/8 18 1/2 16 5/8
Low............................................ 19 5/8 17 3/8 15 7/8 13 7/8
</TABLE>

RESPONSIBILITY FOR FINANCIAL STATEMENTS

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and have been audited by KPMG Peat
Marwick LLP, Independent Certified Public Accountants, whose report is presented
herein.

Management of the Company assumes responsibility for the accuracy and
reliability of the financial statements. In discharging such responsibility,
management has established certain standards which are subject to continuous
review and are monitored through the Company's financial management and internal
audit group.

The Board of Directors pursues its oversight role for the financial
statements through its Audit Committee which consists of outside directors. The
Audit Committee meets on a regular basis with representatives of management, the
internal audit group and KPMG Peat Marwick LLP.

F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
CROMPTON & KNOWLES CORPORATION

We have audited the consolidated balance sheets of Crompton & Knowles
Corporation and subsidiaries as of December 30, 1995 and December 31, 1994 and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the fiscal years in the three-year period ended December 30,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Crompton &
Knowles Corporation and subsidiaries at December 30, 1995 and December 31, 1994
and the results of their operations and their cash flows for each of the fiscal
years in the three-year period ended December 30, 1995 in conformity with
generally accepted accounting principles.

/s/ KPMG PEAT MARWICK LLP

Stamford, Connecticut
January 24, 1996

F-16
<PAGE>
UNAUDITED CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
QUARTERS ENDED MARCH 30, 1996 AND APRIL 1, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
MARCH 30, APRIL 1,
1996 1995
--------- --------
<S> <C> <C>
Net sales.............................................................. $ 164,840 $168,193
Cost of products sold................................................ 116,948 116,559
Selling, general and administrative.................................. 27,094 25,422
Depreciation and amortization........................................ 4,009 3,725
Interest............................................................. 2,037 1,568
Other income......................................................... (252) (228)
--------- --------
Total costs and expenses......................................... 149,836 147,046
--------- --------
--------- --------
Earnings before income taxes........................................... 15,004 21,147
Income taxes........................................................... 5,536 7,951
Net earnings........................................................... $ 9,468 $ 13,196
Net earnings per common share.......................................... $ .20 $ .27
Dividends per common share............................................. $ .135 $ .12
Average shares outstanding............................................. 48,318 48,921
</TABLE>

See accompanying notes to consolidated financial statements.

F-17
<PAGE>
UNAUDITED CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 30, 1996 AND DECEMBER 30, 1995
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
MARCH 30, DECEMBER 30,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash............................................................... $ 2,599 $ 918
Accounts receivable................................................ 123,779 112,693
Inventories........................................................ 163,210 154,846
Other current assets............................................... 25,589 23,038
--------- ------------
Total current assets........................................... 315,177 291,495
NON-CURRENT ASSETS
Property, plant and equipment...................................... 135,051 129,991
Cost in excess of acquired net assets.............................. 60,525 51,922
Other assets....................................................... 10,765 10,730
--------- ------------
$ 521,518 $484,138
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable...................................................... $ 57,886 $ 60,439
Accounts payable................................................... 60,991 49,415
Accrued expenses................................................... 41,916 35,136
Income taxes payable............................................... 8,141 3,747
Other current liabilities.......................................... 21,894 16,578
--------- ------------
Total current liabilities...................................... 190,828 165,315
NON-CURRENT LIABILITIES
Long-term debt..................................................... 74,000 64,000
Accrued postretirement liability................................... 7,635 7,559
Deferred income taxes.............................................. 7,197 7,217

STOCKHOLDERS' EQUITY
Common stock....................................................... 5,336 5,336
Additional paid-in capital......................................... 59,557 59,440
Retained earnings.................................................. 237,098 234,113
Accumulated translation adjustment................................. 4,797 6,320
Treasury stock at cost............................................. (62,890) (62,972)
Deferred compensation.............................................. (2,040) (2,190)
--------- ------------
Total stockholders' equity..................................... 241,858 240,047
--------- ------------
--------- ------------
$ 521,518 $484,138
</TABLE>

See accompanying notes to consolidated financial statements.

F-18
<PAGE>
UNAUDITED CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTERS ENDED MARCH 30, 1996 AND APRIL 1, 1995
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
MARCH 30, APRIL 1,
1996 1995
--------- --------
<S> <C> <C>
Increase (decrease) to cash
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings......................................................... $ 9,468 $ 13,196
Adjustments to reconcile net earnings to net cash provided by
operations:
Depreciation and amortization...................................... 4,009 3,726
Deferred compensation.............................................. 150 473
Changes in assets and liabilities, net............................. 663 (12,979)
Net cash provided by operations................................ 14,290 4,416

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions......................................................... (10,025) (8,633)
Capital expenditures................................................. (2,967) (5,733)
Other investing activities........................................... (635) 457
Net cash used by investing activities.......................... (13,627) (13,909)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings................................... 10,000 --
Change in notes payable.............................................. (2,510) 19,851
Net treasury stock activity.......................................... 35 (3,607)
Dividends paid....................................................... (6,483) (5,814)
Net cash provided by financing activities...................... 1,042 10,430

CASH
Effect of exchange rates on cash..................................... (24) 34
Change in cash....................................................... 1,681 971
Cash at beginning of period.......................................... 918 1,832
Cash at end of period................................................ $ 2,599 $ 2,803
</TABLE>

See accompanying notes to consolidated financial statements.

F-19
<PAGE>
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 30, 1996 (UNAUDITED)
(IN THOUSANDS)

PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

The information included in the foregoing consolidated financial statements
is unaudited but reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented.

Included in accounts receivable are allowances for doubtful accounts of
$3,640 in 1996 and $3,269 at December 30, 1995.

Accumulated depreciation amounted to $102,385 in 1996 and $99,292 at
December 30, 1995.

Accumulated amortization of cost in excess of acquired net assets amounted
to $8,665 in 1996 and $8,281 at December 30, 1995.

Other current liabilities primarily include customer deposits.

It is suggested that the interim consolidated financial statements be read
in conjunction with the consolidated financial statements and notes included in
the Company's 1995 Annual Report on Form 10-K.

CAPITAL STOCK

There are 53,361,072 common shares issued at $.10 par value, of which
5,334,321 shares and 5,351,962 shares were held in the treasury at March 30,
1996 and December 30, 1995, respectively.

INVENTORIES

Components of inventories are as follows:

<TABLE>
<CAPTION>
MARCH 30, DECEMBER 30,
1996 1995
--------- ------------
<S> <C> <C>
Finished goods...................................... $ 95,816 $ 89,177
Work in process..................................... 31,030 30,316
Raw materials and supplies.......................... 36,364 35,353
--------- ------------
$ 163,210 $154,846
--------- ------------
--------- ------------
</TABLE>

EARNINGS PER COMMON SHARE

The computation of earnings per common share is based on the weighted
average number of common and common equivalent shares outstanding. A dual
presentation of earnings per common share has not been made since there is no
significant difference in earnings per share calculated on a primary or fully
diluted basis.

ACQUISITIONS

In January 1996, the Company acquired ER-WE-PA, GmbH at a cost of $10,025
subject to audit adjustment. The acquisition has been accounted for using the
purchase method and, accordingly, the acquired assets and liabilities have been
recorded at their fair values at the dates of acquisition. The excess cost of
purchase price over fair value of net assets acquired in the amount of $8,392 is
being

F-20
<PAGE>
amortized over forty years. The operating results are included in the
consolidated statements of earnings since the date of acquisition.

BUSINESS SEGMENT DATA
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------
MARCH 30, APRIL 1,
1996 1995
--------- --------
<S> <C> <C>
SALES
Specialty chemicals................................... $ 96,083 $102,542
Specialty process equipment and controls.............. 68,757 65,651
$ 164,840 $168,193

OPERATING PROFIT
Specialty chemicals................................... $ 12,791 $ 15,591
Specialty process equipment and controls.............. 7,106 10,057
General corporate expense............................. (3,108) (3,161)
16,789 22,487
Interest expense...................................... (2,037) (1,568)
Other income.......................................... 252 228

Earnings before income taxes.......................... $ 15,004 $ 21,147
</TABLE>

SUBSEQUENT EVENT

On April 30, 1996 the Company entered into an agreement and plan of merger
with Uniroyal Chemical Corporation ("Uniroyal"), a $1.1 billion manufacturer of
chemicals and polymers including rubber chemicals, crop protection chemicals and
chemicals and additives for the plastics and lubricants industries. Under the
terms of the agreement and subject to the conditions contained therein, among
other things, each share of Uniroyal common stock will be exchanged for 0.9577
shares of the Company's common stock. Each share of Uniroyal's Series A
Cumulative Redeemable Preferred Stock and Series B Preferred Stock will be
converted into 6.3850 shares of the Company's common stock.

The merger agreement provides that Uniroyal would be required to pay the
Company a termination fee of $50 million if the merger agreement is terminated
(i) under certain circumstances following receipt of a proposal for a competing
transaction and a competing transaction is consummated within one year following
such termination or (ii) after Uniroyal's determination to terminate the merger
agreement to pursue a competing transaction that would be more favorable to
Uniroyal stockholders than the proposed merger with the Company.

The merger is subject to approval by the stockholders of both Uniroyal and
the Company. Special stockholder meetings have been set by each company for
August 21, 1996. The merger is expected to be concluded shortly after the
stockholder votes.

F-21
<PAGE>

NO DEALER, SALESPERSON OR ANY OTHER 1,000,000 SHARES
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN CROMPTON & KNOWLES
CONNECTION WITH THE OFFER MADE BY THIS CORPORATION
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY AGENT. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION COMMON STOCK
THAT THERE HAS BEEN NO CHANGE ($0.10 PAR VALUE)
IN THE AFFAIRS OF THE COMPANY SINCE THE
DATES AS OF WHICH INFORMATION IS GIVEN
IN THIS PROSPECTUS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING [LOGO]
SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION.

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

TABLE OF CONTENTS
PAGE
----
Available Information............ ii
Prospectus Summary............... 1
Risk Factors..................... 7
Use of Proceeds.................. 12
Market Price and Dividend Data... 12 SALOMON BROTHERS INC
The Company...................... 13 Placement Agent
Recent Developments.............. 19
Selected Historical Financial
Data of Crompton............... 22
Management's Discussion and
Analysis of Financial Condition
and Results of Operations of PROSPECTUS
Crompton....................... 23 Dated August , 1996
Historical and Unaudited Pro Forma
Combined Capitalization....... 28
Unaudited Pro Forma Combined
Financial Information......... 30
Directors and Executive Officers
of Crompton................... 39
Compensation of Directors and
Executive Officers of
Crompton........................ 41
Principal Stockholders of
Crompton...................... 51
Description of Crompton Capital
Stock......................... 52
Plan of Distribution............ 53
Legal Matters................... 53
Experts......................... 53
Index to Financial Statements of
Crompton & Knowles Corporation... F-1

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

UNTIL , 1996 (25 DAYS AFTER
THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE
COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby, other than
discounts and commissions. All amounts are estimated except the Securities and
Exchange Commission (the "SEC") registration fee and the National Association of
Securities Dealers, Inc. ("NASD") registration fee.

<TABLE>
<CAPTION>
PAYABLE BY
THE REGISTRANT
--------------
<S> <C>
SEC registration fee.......................................... $ 5,045
NASD registration fee......................................... 1,963
Printing and engraving expenses............................... 75,000*
Miscellaneous fees and expenses............................... 1,000*
--------------
Total................................................... 83,008*
--------------
--------------
</TABLE>

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

* Estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 67 of the Business Corporation Law of the Commonwealth of
Massachusetts (the "B.C.L.") sets forth conditions and limitations governing the
indemnification of officers, directors, and other persons.

The Registrant's By-laws provide that the Registrant shall, to the full
extent permitted by law, indemnify each of its directors and officers (including
persons who serve at its request as directors, officers, or trustees of another
organization in which it has any interest, direct or indirect, as a shareholder,
creditor, or otherwise or who serve at its request in any capacity with respect
to any employee benefit plan) against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as fines and
penalties, and counsel fees, reasonably incurred by him in connection with the
defense or disposition of any action, suit, or other proceeding, whether civil
or criminal, in which he may be involved or with which he may be threatened,
while in office or thereafter, by reason of his being or having been such a
director, officer, or trustee, except with respect to any matter as to which he
shall have been adjudicated in any proceeding not to have acted in good faith in
the reasonable belief that his action was in the best interests of the
Registrant or, to the extent that such matter relates to service with respect to
an employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan; provided, however, that as to any
matter disposed of by a compromise payment by such director or officer, pursuant
to a consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Registrant, after notice that it
involves such indemnification: (a) by a disinterested majority of the directors
then in office; or (b) by a majority of the disinterested directors then in
office, provided that there has been obtained an opinion in writing of
independent legal counsel to the effect that such director or officer appears to
have acted in good faith in the reasonable belief that his action was in the
best interests of the Registrant; or (c) by the holders of a majority of the
outstanding stock at the time entitled to vote for directors, voting as a single
class, exclusive of any stock owned by any interested director of officer.

Expenses, including counsel fees, reasonably incurred by any director or
officer in connection with the defense or disposition of any such action, suit,
or other proceeding may be paid from time to time by the Registrant, at the
discretion of a majority of the disinterested directors then in office, in
advance of the final disposition thereof upon receipt of an undertaking by such
director or officer to repay the amount so paid to the Registrant if it is
ultimately determined that indemnification for such expenses is

II-1
<PAGE>
not authorized pursuant to the By-laws, which undertaking may be accepted
without reference to the financial ability of such director or officer to make
repayment.

The Registrant's Restated Articles of Organization provide that a director
shall not be personally liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director; provided, however,
that this shall not eliminate or limit the liability of a director to the extent
provided by applicable law (i) for any breach of the director's duty of loyalty
to the Registrant or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 61 or 62 of the B.C.L. (such sections relate generally to
the liability of directors for authorizing distributions to shareholders at a
time when the Registrant is insolvent or bankrupt and the liability of directors
for approving loans to officers or directors of the Registrant which are not
repaid and which were not approved or ratified by a majority of disinterested
directors or shareholders), or (iv) for any transactions from which the director
derived an improper personal benefit. No amendment to or repeal of this
provision shall apply to or have any effect on the liability or alleged
liability of any director of the Registrant for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.

The Registrant has insurance to indemnify its directors and officers, within
the limits of the Registrant's insurance policies, for those liabilities in
respect of which such indemnification insurance is permitted under the laws of
the Commonwealth of Massachusetts.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Not applicable.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits. The following exhibits are filed as part of this Registration
Statement.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>

1.01 Form of Placement Agreement.*

2.01 Agreement and Plan of Merger dated as of April 30, 1996, among the Registrant, Tiger
Merger Corp., and Uniroyal Chemical Corporation, included as Annex A in the Joint
Proxy Statement/Prospectus included as part of the Registrant's Registration
Statement on Form S-4 (Registration Statement No. 333-08539), and incorporated
herein by reference. The Registrant agrees to furnish supplementally a copy of any
omitted exhibit or schedule to the Commission upon Request.

3.01 Restated Articles of Organization of the Registrant filed with the Commonwealth of
Massachusetts on October 27, 1988, as amended on April 10, 1990 and on April 14,
1992, filed as Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 26, 1992 (Commission File No. 1-4663) and incorporated
herein by reference.

3.02 By-laws of the Registrant as amended to date, filed as Exhibit 3(b) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1989
(Commission File No. 1-4663) and incorporated herein by reference.

4.01 Rights Agreement dated as of July 20, 1988, between the Registrant and The Chase
Manhattan Bank, N.A., as Rights Agent, filed as Exhibit 1 to the Registrant's
Current Report on Form 8-K dated July 29, 1988 (Commission File No. 1-4663) and
incorporated herein by reference.

4.02 Agreement dated as of March 28, 1991, amending Rights Agreement dated as of July 20,
1988, between the Registrant and The Chase Manhattan Bank, N.A., as Rights Agent,
filed as Exhibit 4(i)(i) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1990 (Commission File No. 1-4663) and incorporated
herein by reference.
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
4.03 Credit Agreement dated as of September 28, 1992, among the Registrant, five banks,
and Bankers Trust Company as Agent, filed as Exhibit 10.1 to the Registrant's
Registration Statement on Form S-3 (Registration No. 33-52642) and incorporated
herein by reference.

4.04 First Amendment to Credit Agreement dated as of September 1, 1994, among the
Registrant, five banks, and Bankers Trust Company as Agent, filed as Exhibit 4(b)(2)
to the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 (Commission File No. 1-4663) and incorporated herein by reference.

4.05 Second Amendment to Credit Agreement dated as of May 28, 1995, among the Registrant,
five banks, and Bankers Trust Company as Agent, filed as Exhibit 4(b)(3) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1995
(Commission File No. 1-4663) and incorporated herein by reference.

5.01 Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the shares being
issued.

10.01 1983 Stock Option Plan of Crompton & Knowles Corporation, as amended through April
14, 1987, filed as Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 28, 1987 (Commission File No. 1-4663) and incorporated
herein by reference.

10.03 Amended Annual Incentive Compensation Plan for "A" Group of Senior Executives dated
January 24, 1994, filed as Exhibit 10(d) to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 25, 1993 (Commission File No. 1-4663) and
incorporated herein by reference.

10.04 Summary of Management Incentive Bonus Plan for selected key management personnel,
filed as Exhibit 10(m) to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 27, 1980 (Commission File No. 1-4663) and incorporated herein by
reference.

10.05 Supplemental Medical Reimbursement Plan, filed as Exhibit 10(n) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 27, 1980 (Commission
File No. 1-4663) and incorporated herein by reference.

10.06 Supplemental Dental Reimbursement Plan, filed as Exhibit 10(o) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 27, 1980 (Commission
File No. 1-4663) and incorporated herein by reference.

10.07 Employment Agreement dated February 22, 1988, between the Registrant and Vincent A.
Calarco, filed as Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 26, 1987 (Commission File No. 1-4663) and
incorporated herein by reference.

10.08 Form of Employment Agreement entered into in 1988, 1989, 1992, 1994 and 1996 between
the Registrant or one of its subsidiaries and nine of the executive officers of the
Registrant, filed as Exhibit 10(k) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 26, 1987 (Commission File No. 1-4663) and
incorporated herein by reference.

10.09 Amended Supplemental Retirement Agreement dated October 18, 1995 between the
Registrant and Vincent A. Calarco, filed as Exhibit 10(i) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 30, 1995 (Commission File No.
1-4663) and incorporated herein by reference.

10.10 Form of Amended Supplemental Retirement Agreement dated October 18, 1995 between the
Registrant and three of its executive officers, filed as Exhibit 10(j) to the
Registrant's Annual Report on Form 10- K for the fiscal year ended December 30, 1995
(Commission File No. 1-4663) and incorporated herein by reference.
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.11 Form of Supplemental Retirement Agreement dated October 18, 1995 between the
Registrant and five of its executive officers, filed as Exhibit 10(k) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1995
(Commission File No. 1-4663) and incorporated herein by reference.

10.12 Supplemental Retirement Agreement Trust Agreement dated October 20, 1993 between the
Registrant and Shawmut Bank, N.A., filed as Exhibit 10(l) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 25, 1993 (Commission File No.
1-4663) and incorporated herein by reference.

10.13 Amended Benefit Equalization Plan dated October 20, 1993, filed as Exhibit 10(m) to
the Registrant's Annual Report on Form 10-K for the fiscal year ended December 25,
1993 (Commission File No. 1-4663) and incorporated herein by reference.

10.14 Amended Benefit Equalization Plan Trust Agreement dated October 20, 1993 between the
Registrant and Shawmut Bank, N.A., filed as Exhibit 10(n) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 25, 1993 (Commission File No.
1-4663) and incorporated herein by reference.

10.16 Trust Agreement dated as of May 15, 1989, between the Registrant and Shawmut
Worcester County Bank, N.A. and First Amendment thereto dated as of February 8,
1990, filed as Exhibit 10(w) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989 (Commission File No. 1-4663) and incorporated
herein by reference.

10.17 Form of 1992-1994 Long Term Performance Award Agreement, filed as Exhibit 10(y) to
the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28,
1991 (Commission File No. 1-4663) and incorporated herein by reference.

10.18 Crompton & Knowles Corporation Restricted Stock Plan for Directors approved by the
stockholders on April 9, 1991, filed as Exhibit 10(z) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 1991 (Commission File No.
1-4663) and incorporated herein by reference.

10.19 Amended 1933 Stock Option Plan for Non-Employee Directors, filed as Exhibit 10(s) to
the Registrant's Annual Report on Form 10-K for the fiscal year ended December 30,
1995 (Commission File No. 1-4663) and incorporated herein by reference.

11.01 Statement re computation of per share earnings, filed as Exhibit 11 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 30, 1996
(Commission File No. 1-4663) and incorporated herein by reference.

21.01 Subsidiaries of the Registrant, filed as Exhibit 21 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 30, 1995 (Commission File No.
1-4663) and incorporated herein by reference.

23.01 Consent of KPMG Peat Marwick LLP.

23.02 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.01).

24.01 Power of Attorney.
</TABLE>

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

* To be filed by amendment.

(b) Financial Statement Schedules.

Schedule II--Valuation and Qualifying Accounts (incorporated by reference
from the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 30, 1995 (Commission File No. 1-4663), as amended by Form 10-K/A filed
with the Commission on July 9, 1996).

II-4
<PAGE>
ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(b) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut, on August 1, 1996.

CROMPTON & KNOWLES CORPORATION

By: /s/ VINCENT A. CALARCO
..................................
Vincent A. Calarco
Chairman, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 1, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<S> <C>
/s/ VINCENT A. CALARCO Chairman, President and Chief Executive
............................................. Officer (principal executive officer)
Vincent A. Calarco

/s/ CHARLES J. MARSDEN Vice President-Finance, Chief Financial
............................................. Officer and Director (principal financial
Charles J. Marsden officer)

/s/ PETER BARNA Treasurer (principal accounting officer)
.............................................
Peter Barna

* Director
.............................................
James A. Bitonti

* Director
.............................................
Robert A. Fox

* Director
.............................................
Roger L. Headrick

Director
.............................................
Leo I. Higdon, Jr.

* Director
.............................................
Michael W. Huber

* Director
.............................................
C.A. Piccolo

* Director
.............................................
Patricia K. Woolf, Ph.D
</TABLE>

*By: /s/ JOHN T. FERGUSON II
...........................
John T. Ferguson II
Attorney-in-Fact

II-6
<PAGE>
EXHIBIT INDEX

Exhibits required by S-K item 601:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>

1.01 Form of Placement Agreement.*

4.03 Credit Agreement dated as of September 28, 1992, among the Registrant, five banks,
and Bankers Trust Company as Agent, filed as Exhibit 10.1 to the Registrant's
Registration Statement on Form S-3 (Registration No. 33-52642) and incorporated
herein by reference.

5.01 Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the shares being
issued.

10.02 Amendments to Crompton & Knowles Corporation Stock Option Plans adopted February 22,
1988, filed as Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 26, 1987 (Commission File No. 1-4663) and incorporated
herein by reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.03 Amended Annual Incentive Compensation Plan for "A" Group of Senior Executives dated
January 24, 1994, filed as Exhibit 10(d) to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 25, 1993 (Commission File No. 1-4663) and
incorporated herein by reference.

10.10 Form of Amended Supplemental Retirement Agreement dated October 18, 1995 between the
Registrant and three of its executive officers, filed as Exhibit 10(j) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1995
(Commission File No. 1-4663) and incorporated herein by reference.

10.11 Form of Supplemental Retirement Agreement dated October 18, 1995 between the
Registrant and five of its executive officers, filed as Exhibit 10(k) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1995
(Commission File No. 1-4663) and incorporated herein by reference.

10.15 Amended 1988 Long Term Incentive Plan, filed as Exhibit 10(o) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 25, 1993 (Commission
File No. 1-4663) and incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.16 Trust Agreement dated as of May 15, 1989, between the Registrant and Shawmut
Worcester County Bank, N.A. and First Amendment thereto dated as of February 8,
1990, filed as Exhibit 10(w) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989 (Commission File No. 1-4663) and incorporated
herein by reference.

23.01 Consent of KPMG Peat Marwick LLP.

23.02 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.01).

24.01 Power of Attorney.
</TABLE>

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

* To be filed by amendment.

EXHIBIT 5.01

[Letterhead of Wachtell, Lipton, Rosen & Katz]

July 31, 1996

Crompton & Knowles Corporation
One Station Place, Metro Center
Stamford, Connecticut 06902

Re: Registration Statement on Form S-1
of Crompton & Knowles Corporation
----------------------------------

Ladies and Gentlemen:

We are acting as special counsel to Crompton & Knowles Corporation, a
Massachusetts corporation ("Crompton"), in connection with the above-captioned
Registration Statement filed by Crompton with the Securities and Exchange
Commission (the "Registration Statement") with respect to up to 1,000,000
shares of common stock, $0.10 par value ("Crompton Common Stock"), of Crompton
proposed to be offered thereunder by Crompton.

In connection with this opinion, we have reviewed the Registration
Statement and the exhibits thereto, and we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements, certificates of public officials and of officers of
Crompton, and other instruments, including an opinion of Massachusetts counsel,
and such matters of law and fact as we have deemed necessary to render the
opinion contained herein.

Based upon and subject to the foregoing, we are of the opinion that
the shares of Crompton Common Stock being registered under the Registration
Statement, when issued, will be validly issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement and to the
reference to our firm under the caption "LEGAL MATTERS" in the Prospectus
contained therein. In giving such consent, we do not hereby admit that

<PAGE>

Crompton & Knowles Corporation
July 31, 1996
Page 2

we are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended.

Very truly yours,

/s/ Wachtell, Lipton, Rosen & Katz

Exhibit 23.01

The Board of Directors
Crompton & Knowles Corporation
One Station Place, Metro Center
Stamford, CT 06902

We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the Registration Statement/Prospectus.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Stamford, Connecticut
July 31, 1996

Exhibit 24.01

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Vincent A. Calarco, Charles J. Marsden and John
T. Ferguson, II, and each of them, his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission any other
regulatory authority, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons of the
Registrant in the capacities and on the dates indicated.

Name Title Date
---- ----- ----

/s/ Vincent A. Calarco Chairman of the Board, July 31, 1996
- -------------------------
Vincent A. Calarco President, and Director
(Principal Executive Officer)

/s/ Charles J. Marsden Vice President - Finance July 31, 1996
- -------------------------
Charles J. Marsden and Director (Principal
Financial Officer)

/s/ Peter Barna Treasurer (Principal July 31, 1996
- -------------------------
Peter Barna Accounting Officer)

/s/ James A. Bitonti Director July 31, 1996
- -------------------------
James A. Bitonti

/s/ Robert A. Fox Director July 31, 1996
- -------------------------
Robert A. Fox

/s/ Roger L. Headrick Director July 31, 1996
- -------------------------
Roger L. Headrick

Director July , 1996
- -------------------------
Leo I. Higdon, Jr.

/s/ Michael W. Huber Director July 31, 1996
- -------------------------
Michael W. Huber

/s/ C.A. Piccolo Director July 31, 1996
- -------------------------
C.A. Piccolo

/s/ Patricia K. Woolf, Ph.D Director July 31, 1996
- ----------------------------
Patricia K. Woolf, Ph.D