FURON CO, 10-K, 1996-03-25

FURON CO
10-K, 1996-03-25
GASKETS, PACKG & SEALG DEVICES & RUBBER & PLASTICS HOSE

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

FEBRUARY 3, 1996

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-8088

FURON COMPANY
(Exact name of registrant as specified in its charter)

CALIFORNIA 95-1947155
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

29982 IVY GLENN DRIVE, LAGUNA NIGUEL, CA 92677
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (714) 831-5350

Securities registered pursuant to Section 12(b) of the Act on the NEW YORK STOCK
EXCHANGE:

COMMON STOCK, WITHOUT PAR VALUE

COMMON STOCK PURCHASE RIGHTS

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----
As of February 12, 1996, the aggregate market value of voting stock
held by non-affiliates of the registrant was approximately $171,577,000. As of
March 19, 1996, the number of outstanding shares of Common Stock of the
registrant was 8,913,802.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for the 1996
Annual Meeting of Shareholders (to be held on June 4, 1996) have been
incorporated by reference into Part III of this report.

1
<PAGE> 2

PART I

ITEM 1. BUSINESS

GENERAL

Furon(R) designs, develops and manufactures highly engineered components made
primarily from specially formulated high performance polymer materials. Most of
Furon's products are designed and engineered to meet specific requirements of
customers in the industrial process, transportation, industrial equipment,
electronics and healthcare industries.

The Company has historically expanded its operations through the acquisition and
further development of businesses which manufacture and sell components to
original equipment manufacturers and which possess similar technologies and
serve similar markets. On February 2, 1996, the Company acquired the Fluorglas
business of AlliedSignal Inc. Fluorglas' principal product offerings are
pressure-sensitive adhesive tapes and PTFE flexible composites and fabrications,
as well as PTFE films and metal-clad PTFE/glass laminates. This acquisition,
coupled with the acquisition on January 31, 1995 of Custom Coating & Laminating
Corporation's business devoted to the manufacture and sale of release liners and
other specialty engineered products incorporating surface chemistry technology,
enabled the Company to expand and complement its CHR(R) brand of products. (See
Note 2 of the "Notes to Consolidated Financial Statements" for additional
information concerning these acquisitions.)

In addition to its acquisition activities, the Company has developed its
business through the introduction of new product lines and improvements in its
existing products and capabilities and operational methodologies. For example,
in addition to the reorganization of its operations described below, the Company
believes that its World Class Performance program continues to improve its
operations through improved product quality and performance features, improved
customer service, minimization of waste, manufacturing costs and inventories,
reduced cycle times and increased employee productivity and involvement.
Further, the Company continues to focus its technology center on the development
of proprietary polymer compounds that can be used to produce high margin,
differentiated polymer products.

During fiscal 1996, the Company sold two of its peripheral businesses. On
December 31, 1995, the Company sold its metallic gasket business based in
Houston, Texas to Garlock, Inc. and effective April 29, 1995, it sold its custom
molded rubber goods business located in Sunnyvale, California to the business'
management. For additional information concerning these divestitures, see Note 2
of the "Notes to Consolidated Financial Statements."

Furon was incorporated in California in 1957 and changed its name from "The
Fluorocarbon Company" to "Furon Company" in January 1990. Unless the context
otherwise requires, the terms "Furon" and the "Company" are used in this report
to refer to Furon Company and its subsidiaries.

- -------------------------
(R)Furon and CHR are registered trademarks of the Company.

2
<PAGE> 3

OPERATIONS

Prior to fiscal 1995, the Company conducted its operations in independent
business units developed and organized around manufacturing capabilities and
products and grouped from time to time based on varying product, market or other
criteria. In fiscal 1995, the Company consolidated the diverse independent
business unit operations into one Furon operating unit that is organized around
customers in the industrial process, transportation, industrial equipment,
electronics and healthcare industries. The Company believes that its current
organizational structure enables it to better serve its customers and grow its
customer base, eliminate redundancies and other inefficiencies, and more fully
leverage its technologies and other capabilities.

MARKETS AND PRODUCTS

The Company principally serves the industrial process, transportation,
industrial equipment, electronics and healthcare industries, offering the
following FURON(R) brand products: CHR(R) and FLUORGLAS(R) pressure sensitive
tapes, and PTFE and silicone coated fabrics; CHR(R) release liners and solid and
sponge silicone rubber; DEKORON(R) control and instrumentation cable and wire,
self-regulating heating and fiber optics cable; FELSTED(R) cables, control
cables, and control systems; OMNISEAL(R) spring energized PTFE seals, lip seals,
hydraulic seals, and metallic O-rings and C-rings; RULON(R) high performance
polymer materials and molded, extruded and machined bearings and other
components made from those materials; SYNFLEX(R) hydraulic hose, specialty hose,
and tubing, couplings and accessories; UNITHERM(R) heated hose and steam traced,
preinsulated and electrical traced tubing; and FURON(R) fabricated and extruded
high performance plastic and silicone components, fluid handling products, and
custom fabricated composite, urethane and polyimide foam components.

Furon's sales are generated primarily by its own salespersons located in most
major industrial areas. The remaining sales are made by independent
manufacturers' representatives and distributors. Most of the Company's customers
are original equipment manufacturers, commercial or industrial construction
companies or firms servicing the maintenance and replacement parts market or
distributors to these markets. The Company's business is not dependent upon a
single customer, or a few customers, and no single customer accounted for more
than 5% of Furon's sales volume during any of the last three fiscal years. (For
certain financial information concerning the Company's foreign and domestic
operations and export sales, see Note 10 of the "Notes to Consolidated Financial
Statements.")

- -------------------------
(R) FURON, CHR, FLUORGLAS, DEKORON, FELSTED, OMNISEAL, RULON, SYNFLEX and
UNITHERM are registered trademarks of the Company.

3
<PAGE> 4

COMPETITION

The Company competes with a large number of companies, some of which have
greater financial resources, but none of which competes with the Company in more
than a limited number of products. Depending on the product, the principal
competitive factors for Furon are materials capability, engineering, design and
process technology, quality, reliability and the ability to meet delivery dates.
The Company believes that trade secrets are important to its proprietary
products. To protect its trade secrets, the Company requires all salaried
employees to enter into confidentiality agreements. While the Company holds many
patents and trademarks with varying degrees of significance to its operations,
the Company's business is not dependent upon any particular one.

BACKLOG OF ORDERS

Furon's backlog of unfilled orders at February 3, 1996 was $54,241,000 and
$50,629,000 at January 28, 1995, a 7% increase. Excluding the effect of
acquisitions and divestitures, Furon's backlog decreased 5% to 47,539,000 at
February 3, 1996.

It is estimated that substantially all of Furon's backlog of orders at February
3, 1996 will be filled during the next 12 months, except for approximately
$1,200,000 of backlog which is scheduled to be filled during the subsequent
12-month period. The lead time between receipt of orders and shipment of
products, other than products for commercial aircraft, is typically a matter of
weeks. Although many of Furon's orders contain cancellation clauses, Furon has
seldom experienced significant cancellations of orders.

RAW MATERIALS

Furon purchases its raw materials, ranging from polymer resins to component
parts, from numerous suppliers. The top resins used by the Company are PTFE and
related resins, Nylon 11 sold under the trade name Rilsan(R), and silicone
polymers. The Company purchases its requirements for PTFE and related resins and
silicone polymers from the major suppliers of those resins, while ELF Atochem is
the Company's sole source for Rilsan. Rilsan is used primarily in the production
of heavy duty air brake tubing. Alternative sources of material which can be
substituted for Rilsan are available in the event a shortage of Rilsan develops.

RESEARCH AND DEVELOPMENT

For information concerning the amounts spent by the Company during the last
three fiscal years on research and development activities, see Note 1 of the
"Notes to Consolidated Financial Statements."

EMPLOYEES

At February 3, 1996, Furon employed 2,483 persons. Furon considers its employee
relations to be good.

- -------------------------
(R)Rilsan is a registered trademark of ELF Atochem.

4
<PAGE> 5

ENVIRONMENTAL MATTERS

Compliance with environmental laws and regulations designed to regulate the
discharge of materials into the environment or otherwise protect the environment
requires continuing management effort and expenditures by the Company. The
Company does not believe that the operating costs incurred in the ordinary
course of business to satisfy air and other permit requirements, properly
dispose of hazardous wastes and otherwise comply with these laws and regulations
form or will form a material component of its operating costs or have or will
have a material adverse effect on its competitive or consolidated financial
positions.

The Company or one of its subsidiaries is currently involved in environmental
remediation at six former manufacturing sites. In addition, one of the Company's
subsidiaries is involved as an EPA-named potentially responsible party or
private cost recovery/contribution action defendant in connection with
environmental remediation at the following "superfund" waste disposal sites:
Solvents Recovery Service of New England site in Southington, Connecticut;
Gallups Quarry site in Plainfield, Connecticut; and the Davis Liquid Waste and
Picillo Superfund sites in Coventry, Rhode Island.

As of February 3, 1996, the Company's reserves for environmental remediation
matters totaled approximately $1.9 million. While neither the timing nor the
amount of the ultimate costs associated with these matters can be determined
with certainty, based on investigations to determine the nature of the potential
liability at each site, the estimated amount of investigation and remedial costs
expected to be necessary to complete the remediation and other factors, the
Company presently believes that these reserves should be sufficient to cover the
Company's aggregate liability for these matters and, accordingly, does not
expect them to have a material adverse effect on its consolidated financial
position or results of operations. The actual costs to be incurred by the
Company at each site will depend on a number of factors, including one or more
of the following: the final delineation of contamination; the final
determination of the remedial action required; negotiations with governmental
agencies with respect to cleanup levels; changes in regulatory requirements;
innovations in investigatory and remedial technology; effectiveness of remedial
technologies employed; and the ultimate ability to pay of any other responsible
parties.

5
<PAGE> 6

ITEM 2. PROPERTIES

Furon has organized its domestic manufacturing facilities according to the
principal process used by each facility in the production of Furon's products.
These domestic "Centers of Excellence" and the Company's European manufacturing
facilities are identified below. Furon believes that these and its other
facilities are suitable for its business and adequate for its present needs, and
that appropriate additional or substitute space is available, if needed, to
accommodate physical expansion of the business in the foreseeable future. For
further information regarding the Company's lease commitments, see Note 6 of the
"Notes to Consolidated Financial Statements."

<TABLE>
<CAPTION>
EXPIRATION OF
SQUARE MAXIMUM
CENTERS OF EXCELLENCE FOOTAGE LEASE TERM
--------------------- ------- ----------
<S> <C> <C>
Machining:
Anaheim, CA 91,000 7/31/10
Los Alamitos, CA 74,000 12/14/03

Molding:
Bristol, RI 106,000 8/31/32
Mundelein, IL 60,000 8/31/00

Extrusion:
Mantua, OH 151,000 8/31/32
Aurora, OH 148,000 8/31/32
Mickleton, NJ 86,000 8/31/32
Mt. Pleasant, TX 67,000 8/31/32
Cape Coral, FL 30,000 5/31/06

Plastic Forming:
Seattle, WA 116,000 1/31/97

Coating/Films:
New Haven, CT 110,000 8/31/32
Hoosick Falls, NY 109,000 Owned
Worcester, MA 76,000 Owned

Clean Room
Manufacturing:
Fremont, CA 30,000 7/01/03
</TABLE>

6
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ITEM 2. PROPERTIES (CONTINUED)

<TABLE>
<S> <C> <C>
Assembly & Metal
Fabrication:
Kent, OH 50,000 1/06/01
Holmesville, OH 28,000 Owned

Compounding:
Aurora, OH 30,000 Owned

Europe:
Gembloux, Belgium 49,000 Owned
Kontich, Belgium 30,000 11/30/99
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

The Company is from time to time named as a defendant in various lawsuits. The
Company vigorously defends all lawsuits brought against it, unless a reasonable
settlement appears appropriate. While the outcome of pending proceedings cannot
be predicted with certainty, the Company believes that the ultimate resolution
of the actions currently pending should not have a material adverse effect on
its consolidated financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth
quarter of the year ended February 3, 1996.

7
<PAGE> 8

OFFICERS OF FURON

Furon's executive and other officers are as follows:

<TABLE>
<CAPTION>
Name Age Position/Business Experience
- ---- --- ----------------------------
<S> <C> <C>
EXECUTIVE OFFICERS

J. Michael Hagan 56 Chairman of the Board

Mr. Hagan has been employed by the Company since
1967 and was promoted to Division Manager in 1969,
elected Vice President in 1975, and served as a
director and President from 1980 to June 1991 when
he was appointed Chairman of the Board.

Terrence A. Noonan 58 President and Director

Mr. Noonan has been the President of Furon since
June 1991 and was elected as a director in August
1991. From 1989 to June 1991, he served as an
Executive Vice President in charge of various
operations. He joined Furon in 1987 as a Vice
President, having previously served since 1980 as
a Group General Manager of Eaton Corporation, a
diversified manufacturing company.

Monty A. Houdeshell 47 Vice President, Chief Financial Officer and
Treasurer

Mr. Houdeshell joined the Company in 1988 as Vice
President, Chief Financial Officer and Treasurer
and also served as Secretary from 1988 to February
1991. From 1985 to 1988, Mr. Houdeshell served as
Vice President, Chief Financial Officer and
Treasurer of Oak Industries, Inc., a manufacturer
of electronic components and controls.

OTHER OFFICERS

Koichi Hosokawa 47 Controller

Mr. Hosokawa joined the Company in 1988 as
Controller and will be leaving the Company on
April 30, 1996. From 1982 to 1988, Mr. Hosokawa
was Corporate Controller of Acme Holding, Inc., a
hardware manufacturing subsidiary of The Stanley
Works.

Donald D. Bradley 40 General Counsel and Secretary

Mr. Bradley joined the Company in June 1990 as
Senior Attorney and Assistant Secretary and was
named Corporate Secretary in February 1991 and
General Counsel in February 1992. Previously, he
was a Special Counsel with O'Melveny & Myers, an
international law firm with which he had been
associated since 1982.
</TABLE>

All officers of the Company are elected annually by and serve at the pleasure of
the Board of Directors. There are no family relationships among any of Furon's
officers.

8
<PAGE> 9

STATEMENT REGARDING FORWARD LOOKING DISCLOSURE

Except for the historical information contained in this report, certain matters
discussed herein, including (without limitation) "Business -- Environmental
Matters" (Item 1) and "Legal Proceedings" (Item 3) in Part I and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (Item
7) in Part II, are forward looking statements. These statements involve risks
and uncertainties, including (without limitation) the matters identified in
those sections and the following: the effect of economic and market conditions
and raw material price increases; the impact of costs, insurance recoveries and
governmental, judicial and other third party interpretations and determinations
in connection with legal and environmental proceedings; and the impact of
current or pending legislation and regulation.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock has traded on the New York Stock Exchange ("NYSE")
under the trading symbol "FCY" since March 8, 1995. Previously, it traded on the
NASDAQ National Market System under the trading symbol "FCBN." As of March 18,
1996, the Company had approximately 1,100 holders of record of its Common Stock.
The following table sets forth for the periods indicated (i) the high and low
closing sale prices per share of the Company's Common Stock as reported by the
NYSE since March 8, 1995 and by NASDAQ prior to that date and (ii) the amount
per share of cash dividends paid by the Company with respect to its Common
Stock.

<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------------------------------

FEBRUARY 3, 1996 JANUARY 28, 1995
--------------------------------- -----------------------------

QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
- ------- ---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
First $22-1/2 $18-7/8 $0.06 $18-1/2 $15-1/4 $0.06
Second 23-1/4 20 0.06 18-1/2 14-1/4 0.06
Third 21 16-1/2 0.06 21 15-3/4 0.06
Fourth 20-1/2 15-1/2 0.06 23 19-1/4 0.06
</TABLE>

Future dividends will be considered by the Board of Directors taking into
account the Company's profit levels and capital requirements as well as
financial and other conditions existing at the time.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data for the five years in the
period ended February 3, 1996 should be read in conjunction with, and is
qualified by, the more detailed information and consolidated financial
statements included in Item 8 (Part II), "Consolidated Financial Statements and
Supplementary Data."

9
<PAGE> 10

ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)

<TABLE>
<CAPTION>
Years ended
-----------------------------------------------------------------------
IN THOUSANDS, EXCEPT February 3, January 28, January 29, January 30, February 1,
SHARE AND PER SHARE AMOUNTS 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 344,886 $ 312,060 $ 285,194 $ 300,107 $ 306,170
Cost of sales 249,102 217,827 204,727 213,932 224,781
----------- ----------- ----------- ----------- -----------
Gross profit 95,784 94,233 80,467 86,175 81,389
Selling, general and administrative
expenses 78,337 77,368 66,458 71,782 73,491
Restructuring charge - - - - 23,650
Unusual and nonrecurring charges - - - - 8,371
Other (income), net (3,866) (3,126) (2,296) (2,363) (2,104)
Interest expense 2,899 2,394 3,337 4,243 5,824
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 18,414 17,597 12,968 12,513 (27,843)
Provision (benefit) for income taxes 5,245 6,159 4,798 5,256 (5,501)
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 13,169 $ 11,438 $ 8,170 $ 7,257 $ (22,342)
=========== =========== =========== =========== ===========
Net income (loss) per share $ 1.46 $ 1.27 $ 0.92 $ 0.84 $ (2.65)
=========== =========== =========== =========== ===========

Weighted average number of common
shares and equivalents outstanding 9,040,262 8,992,926 8,859,200 8,681,606 8,439,121

Cash dividends per share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24

At year end:
Total assets $ 211,484 $ 179,873 $ 175,224 $ 174,229 $ 181,021
Total long-term obligations $ 59,528 $ 32,791 $ 38,795 $ 43,488 $ 54,088
Total stockholders' equity $ 102,882 $ 91,599 $ 80,815 $ 75,247 $ 71,017
</TABLE>

10
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

The Company's fiscal year ends on the Saturday closest to January 31. The fiscal
year refers to the year in which the period ends (e.g. fiscal 1996 ended
February 3, 1996). Fiscal year 1996 consists of 53 weeks and fiscal years 1995
and 1994 consisted of 52 weeks.

Consolidated sales for fiscal year 1996 were 11% higher than in fiscal year
1995. When removing the effect of acquisitions and divestitures from fiscal 1996
and fiscal 1995, sales increased 7%. Sales to the semiconductor, truck and
general industrial markets were particularly strong. Sales to the commercial
aircraft, aerospace and healthcare markets were relatively flat. Sales to the
chemical and industrial processing markets were down substantially from last
year primarily due to the deferral of major capital expansion projects. Also
contributing with improved sales were European operations. A healthier economy
in Europe provided improved demand across all product lines, and coupled with
stronger foreign currency exchange rates resulted in increased dollar sales of
21% (8% after removing the effect of foreign currency exchange rate changes)
over last year.

In fiscal 1995, sales were 9% higher than in fiscal 1994. However, when removing
the effect of the divested businesses, sales increased 14%.

The gross profit percentage for fiscal year 1996 has declined from 30.2% to
27.8% as compared to the prior fiscal year. Excluding the impact of acquisitions
and divestitures, the gross profit percentage declined from 30.8% to 28.5%. Most
of this decrease is attributable to higher raw material costs and sales mix
compared to the prior year. Also affecting gross profit were higher costs
incurred related to the implementation of the Company's new operating structure.
The gross profit percentage increased from 28.2% in fiscal year 1994 to 30.2% in
fiscal year 1995. This improvement was primarily attributable to the Company's
focus on increasing productivity and cost reduction. When removing the effect of
divestitures, the gross profit percentage improved from 29.2% in fiscal year
1994 to 30.7% in fiscal year 1995.

Selling, general and administrative expenses as a percentage of sales were
22.7%, 24.8% and 23.3% for fiscal years 1996, 1995 and 1994, respectively. After
removing the effect of acquisitions, operating expenses as a percentage of sales
were 23.1%, 24.8% and 23.3% for fiscal years 1996, 1995 and 1994, respectively.
In terms of dollars, operating expenses increased primarily due to increased
selling expenses resulting from the Company's continued customer and market
focus. Offsetting the higher selling expenses were lower general and
administrative expenses over the prior year, mainly as a result of fewer costs
incurred related to the implementation of the Company's new operating structure.
The costs incurred in fiscal year 1995 included professional fees incurred in
connection with various consulting projects, travel, communications and
accelerated depreciation of information systems impacted by implementing the new
strategy. Research and development costs were up as the Company continues to
increase its focus on new product development.

Other income, net for fiscal year 1996 increased 23.7% over fiscal year 1995,
primarily as a result of higher licensee fees and a decrease in expenses
attributable to the elimination of income related to businesses held for sale.
This included the elimination of $180,000 of pretax loss from fiscal year 1996
and $500,000 and $363,000 of pretax profit from fiscal year 1995 and 1994,
respectively, for the previously held for sale businesses. Offsetting these
increases was lower interest income resulting from a reduction in cash balances
available for investing due to acquisition activity. In addition, included is
the net gain on divestitures of two businesses (see Note 2 of the "Notes to
Consolidated Financial Statements") offset by charges for closure and
consolidation of certain businesses, and charges to retiree medical liabilities
related to prior acquisitions. The Company substantially completed its
restructuring

11
<PAGE> 12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

program without incurring certain costs that were included in the 1992 charge.
As a result, the Company reduced its restructuring accrual by $485,000.

Interest expense increased by 21% in fiscal year 1996 as compared to fiscal year
1995. Amounts owing under the Company's bank credit facility increased by
approximately $17 million over the prior year due to acquisition of the assets
of the Custom Coating and Laminating Corporation ("CC&L") and Fluorglas
businesses. Interest expense decreased 28% in fiscal year 1995 as compared to
fiscal year 1994 due to a $6 million decrease in amounts owing under the
Company's bank credit facility.

Pretax results of operations improved 5% from a profit of $17.6 million in
fiscal year 1995 to a profit of $18.4 million in fiscal year 1996. This
improvement in profitability, which was the result of higher sales volumes and
other income partially offset by higher manufacturing costs and interest
expense, was more than enough to offset increased operating expenses incurred
with implementing the new customer focused structure and strategy.

The Company's effective tax rate for the fiscal year 1996 was 28.5% as compared
to 35.0% in fiscal year 1995 and 37.0% in fiscal year 1994. The lower effective
tax rate in 1996, as compared to fiscal year 1995, resulted from the realization
of certain reserves and tax credits due to the completion of IRS audit cycles
and closure of earlier fiscal years. The lower effective tax rate in fiscal
1995, as compared to fiscal year 1994, was primarily due to a reduction of the
effect of foreign taxes as well as increased tax benefits from the Company's
export sales corporation.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal year 1996, cash provided by operations increased 225% over fiscal
year 1995, to approximately $25.5 million. Included in fiscal 1996 was a use of
cash from the change in working capital of $5.1 million versus $18.3 million in
fiscal 1995. This cash flow allowed for further reductions in bank borrowings.
The most significant component is the favorable change in accounts receivable
offset by inventory which grew year over respective year, as well as accounts
payable. Heavy volume of shipments in late January and a build up of stock to
improve response time are primarily responsible. Additionally, the settlement of
Internal Revenue Service audits noted above resulted in the reduction of current
portion of income taxes payable.

At February 3, 1996 the Company's working capital was $60.7 million, an increase
of $6.0 million from the prior year. At February 3, 1996, the Company's ratio of
current assets to current liabilities was approximately 2.5:1. Capital
expenditures totaled $13.6 million and were primarily for renovating existing
facilities, leasehold improvements or replacement of existing equipment in
addition to implementation of the new operating structure referred to above.

The Company continues to believe that it generates sufficient cash flow from its
operations to finance near and long-term internal growth, capital expenditures
and the principal and interest payments on its long-term debt. The Company will
continue to evaluate its employment of capital resources including asset
management and other sources of financing.

The Company continually reviews possible acquisitions and should the Company
make a substantial acquisition, it would require utilization of the remaining
$62.0 million available at February 3, 1996 from its existing credit facility or
financing from other sources.

12
<PAGE> 13

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

ENVIRONMENTAL MATTERS

13
<PAGE> 14

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Furon Company

We have audited the accompanying consolidated balance sheets of Furon Company as
of February 3, 1996 and January 28, 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended February 3, 1996. Our audits also included the
financial statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 consolidated financial position of Furon
Company at February 3, 1996 and January 28, 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended February 3, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

Orange County, California
March 8, 1996

14
<PAGE> 15

FURON COMPANY
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------
FEBRUARY 3, JANUARY 28, JANUARY 29,
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 1996 1995 1994
- -------------------------------------------------------------------------------

<S> <C> <C> <C>
Net sales $ 344,886 $ 312,060 $ 285,194

Cost of sales 249,102 217,827 204,727
--------- --------- ---------

Gross profit 95,784 94,233 80,467

Selling, general and administrative
expenses 78,337 77,368 66,458

Other (income), net (3,866) (3,126) (2,296)

Interest expense 2,899 2,394 3,337
--------- --------- ---------

Income before income taxes 18,414 17,597 12,968

Provision for income taxes 5,245 6,159 4,798
--------- --------- ---------

Net income $ 13,169 $ 11,438 $ 8,170
========= ========= =========
Net income per share of
Common Stock $ 1.46 $ 1.27 $ 0.92
========= ========= =========
</TABLE>

See accompanying notes.

15
<PAGE> 16

FURON COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
FEBRUARY 3, JANUARY 28,
IN THOUSANDS 1996 1995
- -----------------------------------------------------------------------------------

<S> <C> <C>
Current assets:

Cash and cash equivalents $ - $ 6,475

Accounts receivable, less allowance for doubtful
accounts of $1,367 in 1996 and $696 in 1995 51,681 48,955

Inventories 39,827 31,197

Deferred income taxes 5,178 8,215

Prepaid expenses and other assets 5,367 6,843
--------- ---------
Total current assets 102,053 101,685

Property, plant and equipment, at cost:

Land 1,305 456

Buildings and leasehold improvements 18,044 13,868

Machinery and equipment 128,396 99,718
--------- ---------
147,745 114,042

Less accumulated depreciation and amortization (68,093) (61,981)
--------- ---------
Net property, plant and equipment 79,652 52,061

Intangible assets, at cost, less accumulated amortization
of $27,498 in 1996 and $23,739 in 1995 23,543 17,953

Other assets 6,236 8,174
--------- ---------
$ 211,484 $ 179,873
========= =========
</TABLE>

See accompanying notes.

16
<PAGE> 17

FURON COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
FEBRUARY 3, JANUARY 28,
IN THOUSANDS, EXCEPT SHARE DATA 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:

Cash, less checks outstanding $ 1,052 $ -

Accounts payable 18,851 19,093

Salaries, wages and related benefits payable 11,101 10,508

Current portion of long-term debt - 8,000

Other current liabilities 10,345 9,359
--------- ---------
Total current liabilities 41,349 46,960

Long-term debt 38,000 12,750

Other long-term liabilities 21,528 20,041

Deferred income taxes 7,725 8,523

Commitments and contingencies

Stockholders' equity:

Preferred stock without par value, 2,000,000 shares
authorized, none issued or outstanding - -

Common stock without par value, 15,000,000 shares
authorized, 8,906,905 and 8,800,164 shares issued
and outstanding in 1996 and 1995, respectively 37,575 36,280

Foreign currency translation adjustment 403 419

Unearned ESOP shares (3,205) (3,112)

Unearned compensation (556) (885)

Additional pension liability (1,649) (379)

Retained earnings 70,314 59,276
--------- ---------
Total stockholders' equity 102,882 91,599
--------- ---------
$ 211,484 $ 179,873
========= =========
</TABLE>

See accompanying notes.

17
<PAGE> 18

FURON COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT SHARE AMOUNTS
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED FEBRUARY 3, 1996, JANUARY 28, 1995 AND JANUARY 29, 1994

Foreign Total
Common Stock Currency Unearned Unearned Additional Stock-
-------------------- Translation ESOP Compen- Pension Retained holders'
Shares Amount Adjustment Shares sation Liability Earnings Equity
--------------------------------------------------------------------------------------------
- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 30, 1993 8,563,444 $34,628 $ 511 $(3,072) $ (644) $ - $43,824 $ 75,247
- -------------------------------------- -------------------------------------------------------------------------------------------
Cash dividends - - - - - - (2,068) (2,068)
Exercise of stock options 56,774 539 - - - - - 539
Retired shares (10,412) (172) - - - - - (172)
Grant of restricted shares, net of
cancellations 15,900 325 - - (325) - - -
Amortization of unearned
compensation - - - - 260 - - 260
Foreign currency translation
adjustment - - (1,545) - - - - (1,545)
Principal payment from ESOP - - - 384 - - - 384
Net income - - - - - - 8,170 8,170
- -------------------------------------- -------------------------------------------------------------------------------------------
BALANCE AT JANUARY 29, 1994 8,625,706 35,320 (1,034) (2,688) (709) - 49,926 80,815
- -------------------------------------- -------------------------------------------------------------------------------------------
Cash dividends - - - - - - (2,088) (2,088)
Exercise of stock options 349,272 5,018 - - - - - 5,018
Retired shares (218,529) (4,763) - - - - - (4,763)
Grant of restricted shares, net of
cancellations 43,715 705 - - (705) - - -
Amortization of unearned
compensation - - - - 529 - - 529
Foreign currency translation
adjustment - - 1,453 - - - - 1,453
Loan to ESOP, net - - - (424) - - - (424)
Excess of additional pension liability
over unrecognized net transition
obligation - - - - - (379) - (379)
Net income - - - - - - 11,438 11,438
- -------------------------------------- -------------------------------------------------------------------------------------------
BALANCE AT JANUARY 28, 1995 8,800,164 36,280 419 (3,112) (885) (379) 59,276 91,599
- -------------------------------------- -------------------------------------------------------------------------------------------
Cash dividends - - - - - - (2,131) (2,131)
Exercise of stock options 90,312 1,133 - - - - - 1,133
Retired shares (11,852) (251) - - - - - (251)
Grant of restricted shares 10,610 215 - - (215) - - -
Cancellations of restricted shares (13,420) (212) - - 112 - - (100)
Stock issued under Employee
Stock Purchase Plan 31,091 410 - - - - - 410
Amortization of unearned
compensation - - - - 432 - - 432
Foreign currency translation
adjustment - - (16) - - - - (16)
Loan to ESOP, net - - - (93) - - - (93)
Excess of additional pension liability
over unrecognized net transition
obligation - - - - - (1,270) - (1,270)
Net income - - - - - - 13,169 13,169
- -------------------------------------- -------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 3, 1996 8,906,905 $37,575 $ 403 $(3,205) $ (556) $(1,649) $70,314 $102,882
- -------------------------------------- -------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes.

18
<PAGE> 19
FURON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------
FEBRUARY 3, JANUARY 28, JANUARY 29,
IN THOUSANDS 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 13,169 $ 11,438 $ 8,170
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 11,292 9,540 8,547
Amortization 3,783 3,961 3,660
Provision for losses on accounts receivable 724 303 254
Deferred income taxes 2,239 46 65
(Gain) loss on sale of assets and divestitures (2,385) 15 390
Working capital changes, net of acquisitions and disposals:
Accounts receivable 2,467 (11,173) (4,525)
Inventories (2,059) (4,918) 1,129
Accounts payable and accrued liabilities (3,663) 4,063 3,964
Income taxes payable (1,790) (3,704) 2,913
Other current assets and liabilities, net (43) (2,561) (653)
-------- -------- --------
(5,088) (18,293) 2,828
Changes in other long-term operating assets and liabilities 1,783 842 (3,091)
-------- -------- --------

Net cash provided by operating activities 25,517 7,852 20,823

INVESTING ACTIVITIES
Acquisition of businesses (43,497) -- --
Purchases of property, plant and equipment (13,570) (12,912) (8,458)
Proceeds from sale of divestitures 8,517 543 9,772
Proceeds from sale of equipment 334 185 618
Proceeds from notes receivable 844 429 2,416
Increase in notes receivable (242) (810) (4,933)
-------- -------- --------

Net cash used in investing activities (47,614) (12,565) (585)

FINANCING ACTIVITIES
Proceeds from long-term debt 46,756 8 27
Principal payments on long-term debt (29,506) (6,015) (8,471)
Proceeds from issuance of common stock 782 255 367
Principal payments received from ESOP 384 384 384
Dividends paid on common stock (2,131) (2,088) (2,068)
Loan to ESOP (579) (808) --
-------- -------- --------

Net cash provided by (used in) financing activities 15,706 (8,264) (9,761)

EFFECT OF EXCHANGE RATE CHANGES ON CASH (84) 969 (1,441)
-------- -------- --------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,475) (12,008) 9,036
-------- -------- --------

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,475 18,483 9,447
-------- -------- --------

CASH AND CASH EQUIVALENTS AT END OF YEAR $ -- $ 6,475 $ 18,483
======== ======== ========
</TABLE>

See accompanying notes.

19
<PAGE> 20
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of Furon Company and
its subsidiaries, all of which are wholly owned. All significant intercompany
transactions have been eliminated. Certain reclassifications have been made to
prior year amounts in order to be consistent with the current year presentation.

Fiscal Year

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Consolidated Statements of Cash Flows

Excess cash is invested in income-producing investments including commercial
paper, money market accounts, overnight repurchase agreements and short-term
certificates of deposit with original maturities of less than three months.
These investments are stated at cost which approximates market. Included in
other income is interest and dividend income from investments of $118,000,
$677,000, and $490,000 in fiscal 1996, 1995 and 1994, respectively.

Interest paid in fiscal 1996, 1995 and 1994 was $2,919,000, $2,451,000, and
$3,536,000, respectively.

Income taxes paid in fiscal 1996, 1995 and 1994 was $4,100,000, $8,500,000 and
$1,800,000, respectively.

20
<PAGE> 21
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

Inventories, stated at the lower of cost (first-in, first-out) or market, are
summarized as follows:

<TABLE>
<CAPTION>
FEBRUARY 3, JANUARY 28,
IN THOUSANDS 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and purchased parts $16,878 $12,482
Work-in-process 9,872 9,153
Finished goods 13,077 9,562
------- -------
$39,827 $31,197
======= =======
</TABLE>

Property, Plant and Equipment

Depreciation is provided on the straight-line method over the following
estimated useful lives:

Buildings 25-45 years
Machinery and equipment 3-18 years
Leasehold improvements Term of the lease (including options)

Concentration of Credit Risk

Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base, and
their dispersion across many different geographical regions. At February 3,
1996, the Company had no significant concentrations of credit risk.

Research and Development Costs

Research and development costs are expensed as incurred. Total research and
development expense, including application engineering, for fiscal 1996, 1995
and 1994 was $8,502,000, $7,125,000 and $6,103,000, respectively, and is
included in selling, general and administrative expenses in the consolidated
statements of income. Continuous research and development is necessary for the
Company to maintain its competitive position.

21
<PAGE> 22
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible Assets

Intangible assets acquired in business combinations, net of accumulated
amortization, are summarized as follows:

<TABLE>
<CAPTION>
FEBRUARY 3, JANUARY 28,
IN THOUSANDS 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $ 9,113 $ 328
Other intangible assets 14,430 17,625
------- -------
$23,543 $17,953
======= =======
</TABLE>

Goodwill is amortized over 25 years. Other intangible assets are amortized over
periods ranging from 7 to 25 years.

Translation of Foreign Currencies

Foreign subsidiary financial statements are translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
"Foreign Currency Translations." The resulting cumulative foreign currency
translation adjustment is reported separately in stockholders' equity.
Transaction gains and losses included in results of operations were not
significant in fiscal 1996, 1995 and 1994. The functional currency of the
Company's foreign operations is the respective local currency.

Net Income Per Share

Net income per share is based on the weighted average number of common shares
outstanding and common share equivalents resulting from dilutive stock options
outstanding in each of the three years in the period ended February 3, 1996. The
number of shares used in the computation was 9,040,262, 8,992,926 and 8,859,200,
respectively.

Recently Issued Accounting Standards

In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," which requires impairment losses to be recorded on long-lived
assets used in operations, when indicators of impairment are present and when
assets are expected to be disposed. The Company is required to adopt the
provisions of SFAS No. 121 for fiscal 1997 and, based on current circumstances,
does not believe the effect will be material.

22
<PAGE> 23
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," was
issued. As permitted by this statement, the Company intends to continue to use
the traditional accounting for stock-based awards prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees." Adoption of the new standard in
this form will have no impact on reported income in future years; however, pro
forma disclosures of the effect of stock-based awards on net income and earnings
per share as if SFAS No. 123 had been adopted will be required.

2. ACQUISITIONS AND DISPOSITIONS

Acquisitions

On January 31, 1995 the Company acquired certain assets of Custom Coating &
Laminating Corporation ("CC&L"). The cash purchase price was $24.0 million, of
which $18.0 million was borrowed under the Company's unsecured revolving credit
facility. In addition, the Company assumed certain liabilities approximating
$2.4 million, and may pay up to an additional $4.0 million based upon future
product sales over the next three fiscal years. The business manufactures
release liners and other specialty engineered products incorporating surface
chemistry technology. Its manufacturing facilities are located in Worcester,
Massachusetts.

On February 2, 1996, the Company acquired certain assets and assumed certain
liabilities of the Fluorglas business ("Fluorglas") from AlliedSignal Inc., for
$19.0 million in cash. The purchase price was paid from borrowings under the
Company's unsecured revolving facility. Fluorglas manufactures a broad line of
pressure sensitive adhesive tapes and PTFE flexible composites and fabrications
in facilities located in Hoosick Falls, New York.

These acquisitions have been recorded using the purchase method of accounting,
and their results of operations have been included in the consolidated financial
statements since the respective dates of acquisition. The excess purchase price
over the estimated fair value of net assets acquired for CC&L of approximately
$9.3 million is being amortized using the straight-line method over 25 years.
The purchase price for Fluorglas has been preliminarily allocated to the net
assets acquired based on their estimated fair values with no goodwill being
recorded. Management believes that any resulting adjustments will not have a
material effect on the results of operations.

23
<PAGE> 24
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)

Summarized below are the unaudited consolidated results of operations of the
Company, including the CC&L and Fluorglas businesses on a pro forma basis, as
though both acquisitions had occurred at the beginning of each respective fiscal
year. The pro forma financial information is presented for informational
purposes only and may not be indicative of the results of operations had the
transactions been effected, nor is it necessarily indicative of the results of
operations which may occur in the future.

<TABLE>
<CAPTION>
YEARS ENDED
IN THOUSANDS, EXCEPT PER SHARE DATA FEBRUARY 3, 1996 JANUARY 28, 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $377,501 $365,954
Net income 14,594 13,257
Net income per share of Common Stock 1.48 1.45
</TABLE>

Dispositions

During the fiscal year ended February 3, 1996 the Company sold two businesses
for a net pre-tax gain of $2.7 million and accrued approximately $665,000 for
insurance reserves relative to one of the businesses. These amounts are included
in Other income, net in the accompanying statement of income.

In conjunction with the acquisitions and divestitures made during fiscal year
ended February 3, 1996, the Company has developed plans to close and
consolidate certain businesses. Accordingly, a pre-tax charge of $1.3 million
for closing duplicate facilities and severance costs is included in Other
income, net. In fiscal year ended February 3, 1996, retiree medical liabilities
related to prior acquisitions increased by $865,000.

3. RESTRUCTURING CHARGE

During fiscal 1992, the Company implemented a comprehensive restructuring
program designed to improve profitability and improve the Company's focus on its
primary objectives and strengths. Accordingly, a pretax charge of $23.7 million,
primarily related to the estimated loss on the disposal of the Company's
businesses which did not meet its long-term strategy was taken. The change in
the reserve during fiscal 1996 was primarily attributable to payments on
consulting and non-compete agreements and abandoned leases related to divested
businesses. As of February 3, 1996, the company substantially completed its
restructuring program without incurring certain costs that had been included in
1992 charge. As a result, the Company reduced its restructuring accrual by
$485,000.

24
<PAGE> 25
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

4. INCOME TAXES

The provision (benefit) for income taxes for the three years ended February 3,
1996, consists of the following:

<TABLE>
<CAPTION>
IN THOUSANDS CURRENT DEFERRED TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1996:

Federal $ 954 $ 2,300 $3,254
Foreign 1,197 -- 1,197
State 855 (61) 794
------ ------- ------

$3,006 $ 2,239 $5,245
====== ======= ======
1995:

Federal $4,714 $ (79) $4,635
Foreign 848 -- 848
State 551 125 676
------ ------- ------

$6,113 $ 46 $6,159
====== ======= ======
1994:

Federal $3,810 $ (368) $3,442
Foreign 472 -- 472
State 451 433 884
------ ------- ------

$4,733 $ 65 $4,798
====== ======= ======
</TABLE>

25
<PAGE> 26
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

4. INCOME TAXES (CONTINUED)

The provision (benefit) for income taxes differs from the amount computed by
applying the statutory income tax rate for the following reasons:

<TABLE>
<CAPTION>
FEBRUARY 3, 1996 JANUARY 28, 1995 JANUARY 27, 1994
----------------- ---------------- ----------------
DOLLARS IN THOUSANDS AMOUNT % AMOUNT % AMOUNT %
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory federal
provision $ 6,445 35.0 $ 6,159 35.0 $ 4,539 35.0

Realization of reserves
due to completed
audit cycles and
closure of earlier
fiscal years (1,200) (6.5) -- -- -- --

State and local taxes,
net of federal tax
benefit 801 4.4 1,076 6.1 832 6.4

Effect of foreign taxes (164) (0.9) (145) (0.8) 104 0.8

Research and
experimental credit (195) (1.1) (424) (2.4) (303) (2.3)

Export sales corporation
benefit (376) (2.0) (393) (2.2) (243) (1.9)

Other (66) (0.4) (114) (0.7) (131) (1.0)
------- ---- ------- ---- ------- ----

$ 5,245 28.5 $ 6,159 35.0 $ 4,798 37.0
======= ==== ======= ==== ======= ====
</TABLE>

26
<PAGE> 27
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

4. INCOME TAXES (CONTINUED)

Significant components of the Company's deferred tax liabilities and assets are
as follows:

<TABLE>
<CAPTION>
FEBRUARY 3, JANUARY 28,
IN THOUSANDS 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:

Tax over book depreciation $(5,844) $(4,923)
------- -------

Deferred tax assets:

Inventories 923 1,007

Accruals recognized in
different periods for tax
than financial reporting 4,113 6,830
------- -------

Total assets 5,036 7,837

Valuation allowance for realization
of and payment for reserves
and depreciable assets (1,739) (3,222)
------- -------

Net deferred assets 3,297 4,615
------- -------

Total deferred taxes $(2,547) $ (308)
======= =======
</TABLE>

Applicable U.S. income and foreign withholding taxes have not been provided on
undistributed earnings of certain foreign subsidiaries and affiliates
aggregating $6,500,000 at February 3, 1996. Management's intention is to
reinvest such undistributed earnings outside the United States for an indefinite
period except for distributions upon which incremental U.S. income taxes would
not be material. Any withholding taxes ultimately paid, which could approximate
$325,000, may be recoverable as foreign tax credits in the United States.

27
<PAGE> 28
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

4. INCOME TAXES (CONTINUED)

During the fourth quarter of fiscal 1995 the Company resolved the Internal
Revenue Service audit for fiscal years 1988 and 1989 relating to the purchase
price allocation of an acquisition made in fiscal 1988. This resolution
resulted in realization of reserves due to completed audit cycles and
closure of earlier fiscal years.

During the fourth quarter of fiscal 1994 the Company resolved the Internal
Revenue Service audit for fiscal years 1990 and 1991. It was determined that the
Company had provided sufficient income tax expense for the resolution of the
1990 and 1991 audits as of fiscal 1993, and beginning with fourth quarter fiscal
1994, the Company has decreased the taxes provided for the issues resolved in
this audit.

5. LONG-TERM DEBT

On October 30, 1995, the Company entered into a credit agreement with a
syndicate of banks. The agreement provides the Company with a five year,
unsecured, revolving credit facility in the amount of $100,000,000. Beginning
October 30, 1998 availability under the facility will be reduced by $6,250,000
on a semi-annual basis. All advances outstanding under the credit facility are
due on October 30, 2000. Under terms of the agreement, the Company may borrow at
the prevailing prime rate or at a rate based upon LIBOR. Borrowings based upon
the LIBOR rate are subject to performance grid pricing. In addition, the Company
pays a commitment fee on the unused portion of the revolving facility. The
commitment fee is subject to performance grid pricing.

At February 3, 1996, the unused portion of the credit facility was $62,000,000.
Borrowing rates during the year ranged from 5.8% to 7.0% (5.9% at February 3,
1996).

In order to reduce the impact of changes in interest rates on its variable rate
borrowings, the Company entered into an 8-year Interest Rate Swap agreement with
a commercial bank in August 1988. The notional amount of the swap, which
decreases $2,000,000 each quarter, totaled $6,000,000 at February 3, 1996. The
swap agreement effectively changes the Company's interest rate on $6,000,000 of
its variable borrowings to a fixed interest rate of 9.938%.

Due to the fact that the swap agreement increases the effective rate of the
Company's borrowings, the Company is not exposed to credit risk in the event of
nonperformance by the other parties to the interest rate swap agreement. The
fair market value of this off balance sheet instrument as determined by an
independent third party at February 3, 1996 is $128,000.

28
<PAGE> 29
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

5. LONG-TERM DEBT (CONTINUED)

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
FEBRUARY 3, JANUARY 28,
IN THOUSANDS 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Loans under bank credit agreements $38,000 $ 20,750
Less current portion -- (8,000)
------- --------

Due after one year $38,000 $ 12,750
======= ========
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

At February 3, 1996, the Company is obligated under non-cancelable leases of
real property and equipment used in its operations for minimum annual rentals
plus insurance and taxes. Amounts payable under these obligations are as
follows:

<TABLE>
<CAPTION>
FISCAL YEARS
ENDED IN THOUSANDS
------------ ------------
<S> <C>
1997 $ 7,925
1998 6,926
1999 5,904
2000 4,574
2001 4,004
2002 to 2006 15,288
2007 to 2011 3,778
</TABLE>

29
<PAGE> 30
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Certain leases contain escalation provisions for periodic adjustments based on
certain indices. Rental expense for operating leases for the three years in the
period ended February 3, 1996 was $8,646,000, $7,956,000 and $7,952,000,
respectively.

At February 3, 1996, the Company is obligated under irrevocable letters of
credit totaling $2,145,000.

At February 3, 1996, the Company had approximately $2,300,000 of foreign
currency hedge contracts outstanding consisting of over-the-counter forward
contracts. The contracts reflect the selective hedging of the Belgium Franc with
varying maturities up to six months. Net unrealized gains/losses from hedging
activities were not material as of February 3, 1996.

The Company is currently involved in various litigation. Management of the
Company is of the opinion that the ultimate resolution of such litigation should
not have a material effect on the Company's consolidated financial position or
results of operations.

30
<PAGE> 31
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

7. STOCKHOLDERS' EQUITY

Stock Incentive Plan

The Company has a 1995 Stock Incentive Plan (approved by the Board of Directors
in April 1995) and a 1982 Stock Incentive Plan. Under both plans, the
Compensation Committee, appointed by the Board of Directors, is authorized to
grant awards to any officer or key employee of the Company. Awards granted can
take the form of non-qualified stock options, stock appreciation rights,
restricted stock awards (RSAs), and performance share awards. The 1995 Stock
Incentive Plan does not provide for depreciation rights and tax-offset bonuses
which are components of the 1982 Stock Incentive Plan. The 1995 Stock Incentive
Plan provides for the annual grant of awards in a maximum number of shares of
common stock of 1.8% of the Company's issued and outstanding shares as of the
last day of the preceding fiscal year, commencing with the fiscal year beginning
February 4, 1996. Accordingly no awards have been issued under this plan. Shares
of common stock authorized under the 1982 Stock Incentive Plan have been nearly
exhausted as approximately 49,969 shares are available for grant at February 3,
1996. Options are granted at a price equal to 100% of the fair market value at
the date of grant and become exercisable not earlier than six months after the
award date and vest at a rate of 25% per year. The options shall remain
exercisable until the expiration date but not later than ten years after the
award date.

At February 3, 1996, 153,775 RSAs have been granted (of which 28,320 have been
canceled) under the 1982 Stock Incentive Plan. The issuance of these RSAs
resulted in $1,907,000 (net of cancellations) of unearned compensation which is
being amortized over the five year period in which the awards vest.

The following summarizes stock option transactions under the 1982 Stock
Incentive Plan for the year ended February 3, 1996:

<TABLE>
<CAPTION>
NUMBER PER SHARE
OF SHARES OPTION PRICE
--------- -------------
<S> <C> <C>
Options outstanding at January 28, 1995 729,328 $8.17 - 18.00

Granted 118,000 19.38
Exercised (90,312) 8.17 - 13.31
Canceled (6,500) 19.38
------- -------------

Options outstanding at February 3, 1996 750,516 $9.75 - 19.38
======= =============

Exercisable at February 3, 1996 531,516 $9.75 - 18.00
======= =============
</TABLE>

31
<PAGE> 32
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

7. STOCKHOLDERS' EQUITY (CONTINUED)

Shareholders' Rights Plan

On March 21, 1989, the Board of Directors authorized the distribution of one
right for each outstanding share of common stock under the Shareholders' Rights
Plan. The rights which were distributed on May 23, 1989, become exercisable ten
business days after (i) a person has acquired or obtained the right to acquire
20% or more of the Company's general voting power without approval by the Board
of Directors, or (ii) a tender or exchange offer which would make a person the
beneficial owner of 30% or more of the Company's general voting power, whichever
is earlier. When exercisable, each right entitles the shareholder to purchase
one-fourth of a share of common stock at a price of $13.75, subject to
adjustment. In the event the Company engages in certain business combinations or
a 20% shareholder engages in certain transactions with the Company, each holder
of a right (other than those of the acquiring person) shall have the right to
receive, upon the exercise thereof and payment of four times the then current
exercise price, that number of shares of Common Stock of the surviving Company's
common stock which at the time of such transaction would have a market value of
two times such price paid.

8. EMPLOYEE BENEFIT PLANS

The Company and its subsidiaries sponsor various qualified plans which cover
substantially all of its domestic employees including a
profit-sharing/retirement plan, an employee stock ownership plan, and an
employee stock purchase plan. The Company also sponsors a nonqualified defined
benefit plan covering certain employees.

Profit-Sharing/Retirement Plan

The trusteed profit-sharing/retirement plan provides for an employee salary
deferral contribution, a company matching contribution and a company primary
contribution. Under the deferral provisions (401K), eligible employees are
permitted to contribute up to 10% of gross compensation to the
profit-sharing/retirement plan. For amounts up to 8% of the employee's gross
compensation the Company will match the employee's contribution at a rate
determined by the Board of Directors. Under the company primary contribution
provision, each eligible employee will receive a contribution to the
profit-sharing/retirement plan based on a percentage of qualified wages as
determined based on the Company's performance. Total Company contributions for
the years ended February 3, 1996, January 28, 1995 and January 29, 1994 were
$1,917,000, $1,528,000 and $1,336,000, respectively.

32
<PAGE> 33
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

Employee Stock Ownership Plan

The Company sponsors an Employee Stock Ownership Plan (ESOP) covering
substantially all of its employees (subject to certain limitations). The Company
annually contributes amounts sufficient to cover principal and interest on loans
made to the ESOP as determined by the Board of Directors.

Prior to December 31, 1992, the Company loaned the ESOP $3,666,000 ($1,957,000
outstanding at February 3, 1996) to purchase 311,000 shares of stock, at
interest rates ranging from 7.83% to 9.12%. The loans are payable in ten annual
installments of principal and interest. In fiscal 1996, the Company loaned the
ESOP $579,063 to purchase 27,500 shares of stock from a director of the Company,
at interest rates ranging from 6.36% to 7.31%. In fiscal 1995, the Company
loaned the ESOP $808,125 to purchase 45,000 shares of stock from a director of
the Company, at interest rates ranging from 7.45% to 7.67%. These loans are
payable in ten annual installments of principal and interest, beginning in
fiscal 1996. Shares are released and allocated to participant accounts annually
as loan repayments are made.

In fiscal 1995, the Company adopted the provisions of AICPA Statement of
Position No. 93-6 (the SOP) which requires that compensation expense be measured
based on the fair value of the shares over the period the shares are earned. In
addition, the SOP requires that dividends paid on unallocated shares held by the
ESOP are reported as a reduction of accrued interest or as compensation expense
rather than a charge to retained earnings, and shares not yet committed to be
released are not considered outstanding in the calculation of earnings per
share. As allowed by the SOP, the Company has elected not to apply the SOP's
provisions to shares acquired prior to fiscal 1994. As such, compensation
expense related to such shares is measured based on the historical cost of the
shares, dividends have been deducted as a charge to retained earnings and the
unallocated shares are considered outstanding in the calculation of earnings per
share. The adoption of the SOP did not have a material impact on the
consolidated financial statements.

Of the leveraged shares acquired prior to fiscal 1994, 117,367 and 165,731 are
allocated and unallocated, respectively, at February 3, 1996. Of the leveraged
shares acquired in fiscal 1996 and 1995, there were 2,021 allocated shares,
5,615 committed-to-be-released shares and 64,864 unallocated shares at February
3, 1996. The fair value of unallocated shares acquired in fiscal 1996 was
$1,232,000 at February 3, 1996. Total compensation cost recognized by the
Company during fiscal 1996, 1995 and 1994, which consists of the annual
contribution and plan administrative costs, net of dividend income on
unallocated and forfeited shares, totaled $699,000, $528,000 and $339,000,
respectively.

33
<PAGE> 34
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

Employee Stock Purchase Plan

Effective November 1, 1994 the Company adopted an Employee Stock Purchase Plan
to provide substantially all employees who have completed one year of service an
opportunity to purchase shares of its common stock through payroll deductions,
up to 10% of eligible compensation. Annually, on October 31, participant account
balances are used to purchase shares of stock at the lesser of 85 percent of the
fair market value of shares on November 1 (grant date) or October 31 (exercise
date). The aggregate number of shares purchased by an employee may not exceed
5,000 shares annually (subject to limitations imposed by the Internal Revenue
Code). The stock purchase plan expires on October 31, 2004. A total of 200,000
shares are available for purchase under the plan. There were 31,091 shares
issued under the plan during fiscal 1996.

Supplemental Executive Retirement Plan

In fiscal 1987, the Company adopted an unfunded executive defined benefit
retirement plan for certain key officers of the Company, which provides for
benefits which supplement those provided by the Company's other retirement
plans. Benefits payable under the plan are based upon compensation levels and
length of service of the participants.

In accordance with SFAS No. 87, "Employers' Accounting for Pensions," the
Company has recorded an additional liability of $2,342,000 and $1,156,000 in
fiscal 1996 and 1995, respectively, which represents the excess of the
accumulated benefit obligation over previously recognized accrued pension costs.
In 1996 and 1995, the excess of additional pension liability over the
unrecognized net transition obligation has been recorded as a component of
stockholders' equity.

34
<PAGE> 35
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

Actuarial present value of benefit obligations:

<TABLE>
<CAPTION>
FEBRUARY 3, JANUARY 28,
IN THOUSANDS 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Vested benefit obligation $ 8,200 $ 6,574
======= =======

Accumulated benefit obligation $ 8,345 $ 6,662
======= =======

Unfunded projected benefit obligation $ 8,652 $ 7,419
Unrecognized net loss (1,956) (1,136)
Unrecognized net transition obligation (693) (777)
------- -------
6,003 5,506
Additional minimum liability 2,342 1,156
------- -------
Accrued pension cost $ 8,345 $ 6,662
======= =======

Assumptions:
Discount rate 7.5% 8.5%
Salary increase rate 5.0% 5.0%
</TABLE>

Net periodic pension costs for fiscal 1996, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
FEBRUARY 3, JANUARY 28, JANUARY 29,
IN THOUSANDS 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 37 $ 44 $ 41
Interest cost 618 609 605
Net amortization and deferral 211 212 184
---- ---- ----
$866 $865 $830
==== ==== ====
</TABLE>

35
<PAGE> 36
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT INCOME NET INCOME
PER SHARE DATA NET SALES GROSS PROFIT BEFORE TAXES NET INCOME PER SHARE
- -------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>

YEAR ENDED FEBRUARY 3, 1996

1st Quarter $88,453 $25,560 $5,162 $3,355 $ 0.37
2nd Quarter 82,300 22,343 4,169 2,710 0.30
3rd Quarter 85,401 23,065 4,457 3,797 0.42
4th Quarter 88,732 24,816 4,626(a) 3,307 0.37

YEAR ENDED JANUARY 28, 1995

1st Quarter $74,960 $21,960 $3,832 $2,414 $ 0.27
2nd Quarter 75,127 22,580 4,234 2,667 0.30
3rd Quarter 81,071 25,092 5,119 3,357 0.37
4th Quarter 80,902 24,601 4,412 3,000 0.33
</TABLE>

(a) The fourth quarter of fiscal year ended February 3, 1996 includes a gain on
sale of businesses of approximately $2.7 million, a charge of approximately
$1.4 million relative to various compensation plans and a charge of
approximately $1.3 million in connection with the closing of certain
facilities as described in Note 2.

36
<PAGE> 37
FURON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 3, 1996

10. SEGMENT INFORMATION

The Company designs, develops and manufactures highly engineered components made
primarily from specially formulated high performance polymer materials, a single
business segment. Most of Furon's products are designed and engineered to meet
specific requirements of customers in the industrial process, transportation,
industrial equipment, electronics and healthcare industries.

The following table provides information as to the significant geographic areas
in which the Company has operations.

<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------

FEBRUARY 3, JANUARY 28, JANUARY 29,
IN THOUSANDS 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales to outside customers:

United States $309,683 $283,006 $261,424
Europe 35,203 29,054 23,770
-------- -------- --------
$344,886 $312,060 $285,194
======== ======== ========

Income before income taxes:

United States $ 15,333 $ 15,096 $ 11,407
Europe 3,081 2,501 1,561
-------- -------- --------
$ 18,414 $ 17,597 $ 12,968
======== ======== ========

Identifiable assets:

United States $190,463 $160,848 $160,905
Europe 21,021 19,025 14,319
-------- -------- --------
$211,484 $179,873 $175,224
======== ======== ========

Export sales $ 35,967 $ 38,145 $ 27,536
======== ======== ========
</TABLE>

37
<PAGE> 38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information in response to this Item is incorporated herein by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 4, 1996. Information concerning the Company's executive
officers is included in Part I.

ITEM 11. EXECUTIVE COMPENSATION

Information in response to this Item is incorporated herein by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 4, 1996.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information in response to this Item is incorporated herein by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 4, 1996.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information in response to this Item is incorporated herein by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 4, 1996.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) 1. Index to Financial Statements Page
----
Report of Independent Auditors 14

Consolidated Statements of Income 15
Years ended February 3, 1996,
January 28, 1995 and January 29, 1994

38
<PAGE> 39
PART IV (CONTINUED)

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K. (CONTINUED)

Page
----
Consolidated Balance Sheets
February 3, 1996 and January 28, 1995 16

Consolidated Statements of Stockholders' Equity
Years ended February 3, 1996, January 28, 1995
and January 29, 1994 18

Consolidated Statements of Cash Flows
Years ended February 3, 1996, January 28, 1995
and January 29, 1994 19

Notes to Consolidated Financial Statements
February 3, 1996 20

2. Index to Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts *40

All other schedules have been omitted since the
required information is not present or not present in
amounts sufficient to require the submission of the
schedules, or because the information required is
included in the consolidated financial statements or
the notes thereto.

3. Exhibits:

The exhibits listed in the accompanying Index to Exhibits are
filed as part of this annual report.

(b) Reports on Form 8-K:

No reports on Form 8-K were filed during the last quarter of
the period covered by this report.

* Schedule not included in this document.

39
<PAGE> 40
FURON COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED FEBRUARY 3, 1996, JANUARY 28, 1995 AND JANUARY 29, 1994

<TABLE>
<CAPTION>
DEDUCTIONS/
BALANCE AT ADDITIONS ACCOUNTS WRITTEN
BEGINNING CHARGED TO COSTS OFF NET OF BALANCE AT
OF YEAR AND EXPENSES RECOVERIES OTHER END OF YEAR
---------- ---------------- ---------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL
RECEIVABLES:

1996 $695,750 $724,147 $(256,851) $ 203,889 (a) $1,336,935
======== ======== ========= ========== ==========

1995 $631,540 $302,954 $(238,744) -- $ 695,750
======== ======== ========= ========== ==========

1994 $740,700 $253,770 $(362,930) -- $ 631,540
======== ======== ========= ========== ==========
</TABLE>

(a) Relates to opening balances of acquisitions.

40
<PAGE> 41
FURON COMPANY

INDEX TO EXHIBITS

REGULATION S-K SEQUENTIAL
ITEM NUMBER PAGE NUMBER
- -------------- -----------
3 Restated Articles of Incorporation
(Incorporated by reference to Exhibit 3 to
the Registrant's Annual Report on Form 10-K
filed on April 7, 1994, Commission File No.
0-8088)

3.1 Amended and Restated Bylaws (Incorporated by
reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K filed on April 7,
1994 and Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q filed on
September 13, 1994, Commission File 0-8088)

4 Rights Agreement as amended (Incorporated by
reference to Exhibit 2.1 to the Registrant's
Registration Statement on Form 8-A filed
March 22, 1989, and Exhibit 4.1 to the
Registrant's Annual Report on Form 10-K filed
on April 28, 1992, Commission File No.
0-8088)

10.1* 1982 Stock Incentive Plan (as Amended and
Restated as of March 22, 1994) (Incorporated
by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q
filed on September 13, 1994, Commission File
No. 0-8088)

10.2* Employee Relocation Assistance Plan as
amended (Incorporated by reference to Exhibit
10.2 to the Registrant's Annual Report on
Form 10-K filed on March 21, 1990, Commission
File No. 0-8088)

10.3* Supplemental Executive Retirement Plan as
presently in effect (Incorporated by
reference to Exhibit 10.5 to the Registrant's
Annual Report on Form 10-K filed on March 28,
1991, Exhibit 10.4 to the Registrant's Annual
Report on Form 10-K filed on March 29, 1993,
and Exhibit 10.4A to the Registrant's
Quarterly Report on Form 10-Q filed on
September 13, 1994, Commission File No.
0-8088)

10.4 Asset Purchase Agreement, dated as of January
31, 1995, by and between the Registrant and
Custom Coating & Laminating Corporation
(Incorporated by reference to Exhibit 2 to
the Registrant's Current Report on Form 8-K/A
filed on February 17, 1995, Commission File
No. 0-8088)

* A management contract or compensatory plan
or arrangement.

41
<PAGE> 42
FURON COMPANY
INDEX TO EXHIBITS
(CONTINUED)

<TABLE>
<CAPTION>
REGULATION S-K SEQUENTIAL
ITEM NUMBER PAGE NUMBER
----------- -----------
<S> <C>
10.5* Form of Indemnity Agreement with each of the directors and
officers of the Registrant (Incorporated by reference to
Exhibit C to the Registrant's definitive Proxy Statement
filed May 2, 1988, Commission File No. 0-8088)

10.6* Form of Change-in-Control Agreement between the Registrant
and each of its executive officers (Incorporated by
reference to Exhibit 10.7 to the Registrant's Annual Report
on Form 10-K filed on March 28, 1991, Commission File No.
0-8088)

10.7* Deferred Compensation Plan (Incorporated by reference to
Exhibit 10.7 to the Registrant's Annual Report on Form 10-K
filed on March 29, 1993, Commission File No. 0-8088)

10.8* Economic Value Added (EVA) Incentive Compensation Plan, as
Amended and Restated (Incorporated by reference to Exhibit
10.8 to the Registrant's Annual Report on Form 10-K filed
on April 7, 1994, Commission File No. 0-8088)

10.9* Consulting agreement with Peter Churm for fiscal 48
year 1997

10.9A* Consulting agreement with Peter Churm for fiscal year 1996
(Incorporated by reference to Exhibit 10.9 to the
Registrant's Annual Report on Form 10-K filed on March 22,
1995, Commission File No. 0-8088)

10.10* Promissory note and subordination agreement for Terrence A.
Noonan relocation (Incorporated by reference to Exhibit
10.10 to the Registrant's Annual Report on Form 10-K filed
on April 7, 1994, Commission File No. 0-8088)
</TABLE>

* A management contract or compensatory plan or
arrangement.

42
<PAGE> 43
FURON COMPANY
INDEX TO EXHIBITS
(CONTINUED)

<TABLE>
<CAPTION>
REGULATION S-K SEQUENTIAL
ITEM NUMBER PAGE NUMBER
----------- -----------
<S> <C>
10.11 1993 Non-Employee Directors' Stock Compensation Plan, as
amended (Incorporated by reference to Exhibit 10.12 to the
Registrant's Quarterly Report on Form 10-Q filed on June 2,
1994 and Exhibit 10.12A to the Registrant's Quarterly
Report on Form 10-Q filed on August 24, 1995, Commission
File No. 0-8088).

10.12* 1995 Stock Incentive Plan (Incorporated by reference to
Exhibit A to the Registrant's definitive Proxy Statement
filed May 1, 1995, Commission File No. 0-8088)

10.13 Credit Agreement, dated as of October 30, 1995, between the
Registrant, as Borrower, Bank of America National Trust and
Savings Association, as the Agent, and the Banks named
therein.

10.14 Asset Purchase Agreement, dated November 9, 1995, by and
among the Registrant, as Purchaser, AlliedSignal Laminate
Systems, Inc., as Seller, and AlliedSignal Inc., as Parent.

11 Statement re Computation of Net Income Per Share

21 Subsidiaries of the Registrant

23 Consent of Independent Auditors

27 Financial Data Schedule
</TABLE>

* A management contract or compensatory plan
or arrangement.

43
<PAGE> 44
SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf on March 19, 1996 by the undersigned, thereunto duly authorized.

FURON COMPANY

By: /S/ MONTY A. HOUDESHELL /S/ KOICHI HOSOKAWA
------------------------------- --------------------------
Monty A. Houdeshell Koichi Hosokawa
Vice President, Chief Financial Controller
Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. Each person whose signature
appears below hereby authorizes and appoints J. Michael Hagan, Terrence A.
Noonan, and Monty A. Houdeshell as attorneys-in-fact and agents, each acting
alone, to execute and file with the applicable regulatory authorities any
amendment to this report on his behalf individually and in each capacity stated
below.

/S/ J. MICHAEL HAGAN /S/ COCHRANE CHASE
- -------------------------------------- ---------------------------
J. Michael Hagan Cochrane Chase
Chairman of the Board Director, March 19, 1996
(Principal Executive Officer),
March 19, 1996

/S/ TERRENCE A. NOONAN /S/ H. DAVID BRIGHT
- -------------------------------------- ---------------------------
Terrence A. Noonan H. David Bright
President and Director, March 19, 1996 Director, March 19, 1996

/S/ PETER CHURM /S/ WILLIAM D. CVENGROS
- -------------------------------------- ---------------------------
Peter Churm William D. Cvengros
Chairman Emeritus, March 19, 1996 Director, March 19, 1996

/S/ MONTY A. HOUDESHELL /S/ R. DAVID THRESHIE
- -------------------------------------- ---------------------------
Monty A. Houdeshell R. David Threshie
Vice President, Chief Financial Director, March 19, 1996
Officer and Treasurer, March 19, 1996

/S/ KOICHI HOSOKAWA /S/ BRUCE E. RANCK
- -------------------------------------- ---------------------------
Koichi Hosokawa Bruce E. Ranck
Controller, March 19, 1996 Director, March 19, 1996

/S/ WILLIAM C. SHEPHERD
---------------------------
William C. Shepherd
Director, March 19, 1996

44
<PAGE> 45
FURON COMPANY
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
REGULATION S-K SEQUENTIAL
ITEM NUMBER PAGE NUMBER
----------- -----------
<S> <C>
3 Restated Articles of Incorporation (Incorporated by
reference to Exhibit 3 to the Registrant's Annual Report on
Form 10-K filed on April 7, 1994, Commission File No.
0-8088)

3.1 Amended and Restated Bylaws (Incorporated by reference to
Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
filed on April 7, 1994 and Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q filed on September 13, 1994,
Commission File 0-8088)

4 Rights Agreement as amended (Incorporated by reference to
Exhibit 2.1 to the Registrant's Registration Statement on
Form 8-A filed March 22, 1989, and Exhibit 4.1 to the
Registrant's Annual Report on Form 10-K filed on April 28,
1992, Commission File No. 0-8088)

10.1* 1982 Stock Incentive Plan (as Amended and Restated as of
March 22, 1994) (Incorporated by reference to Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q filed on
September 13, 1994, Commission File No. 0-8088)

10.2* Employee Relocation Assistance Plan as amended
(Incorporated by reference to Exhibit 10.2 to the
Registrant's Annual Report on Form 10-K filed on March 21,
1990, Commission File No. 0-8088)

10.3* Supplemental Executive Retirement Plan as presently in
effect (Incorporated by reference to Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K filed on March 28,
1991, Exhibit 10.4 to the Registrant's Annual Report on
Form 10-K filed on March 29, 1993, and Exhibit 10.4A to the
Registrant's Quarterly Report on Form 10-Q filed on
September 13, 1994, Commission File No. 0-8088)

10.4 Asset Purchase Agreement, dated as of January 31, 1995, by
and between the Registrant and Custom Coating & Laminating
Corporation (Incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K/A filed on February
17, 1995, Commission File No. 0-8088)
</TABLE>

* A management contract or compensatory plan or
arrangement.

45
<PAGE> 46
FURON COMPANY
INDEX TO EXHIBITS
(CONTINUED)

10.7* Deferred Compensation Plan (Incorporated by reference to
Exhibit 10.7 to the Registrant's Annual Report on Form 10-K
filed on March 29, 1993, Commission File No. 0-8088)

10.9* Consulting agreement with Peter Churm for fiscal year 1997 48

* A management contract or compensatory plan or
arrangement.

46
<PAGE> 47
FURON COMPANY
INDEX TO EXHIBITS
(CONTINUED)

<TABLE>
<CAPTION>
REGULATION S-K SEQUENTIAL
ITEM NUMBER PAGE NUMBER
----------- -----------
<S> <C>

10.11 1993 Non-Employee Directors' Stock Compensation Plan, as
amended (Incorporated by reference to Exhibit 10.12 to the
Registrant's Quarterly Report on Form 10-Q filed on June 2,
1994, and Exhibit 10.12A to the Registrant's Quarterly
Report on Form 10-Q filed on August 24, 1995, Commission
File No. 0-8088).

10.12* 1995 Stock Incentive Plan (Incorporated by reference to
Exhibit A to the Registrant's definitive Proxy Statement
filed May 1, 1995, Commission File No. 0-8088)

10.13 Credit Agreement, dated as of October 30, 1995, between the
Registrant, as Borrower, Bank of America National Trust and
Savings Association, as the Agent, and the Banks named
therein.

10.14 Asset Purchase Agreement, dated November 9, 1995, by and
among the Registrant, as Purchaser, AlliedSignal Laminate
Systems, Inc., as Seller, and AlliedSignal Inc., as Parent.

11 Statement re Computation of Net Income Per Share

21 Subsidiaries of the Registrant

23 Consent of Independent Auditors

27 Financial Data Schedule
</TABLE>

* A management contract or compensatory plan
or arrangement.

<PAGE> 1
EXHIBIT 10.9

March 19, 1996

Mr. Peter Churm
67 Monarch Bay
Dana Point, CA 92629-3459

Re: Consulting Agreement

Dear Pete:

This will confirm that:

1. Effective February 4, 1996, Furon retained you to provide
management consulting services for Furon's fiscal year ending
February 1, 1997. You will be paid $76,800 and will be reimbursed
for business related expenses incurred in the performance of
those services. As part of this arrangement, you are entitled to,
and Furon has purchased, general medical insurance coverage for
your spouse, as well as medical insurance to supplement Medicare
coverage maintained by you, at an aggregate cost to Furon of
approximately $600 per month, and Furon will reimburse you and
your spouse for any uninsured out-of-pocket medical expenses. It
is contemplated that the consulting arrangement will require the
commitment of approximately 50% of your business time.

2. In performing your services as a consultant pursuant to that
arrangement, you have been and will continue to be an independent
contractor, and not an employee of Furon.

3. This consulting arrangement is subject to the annual review and
approval of Furon's Board of Directors.

If the foregoing accurately sets forth the terms of your consulting
agreement with Furon, please so indicate by signing the extra-enclosed copy of
this letter at the place provided for your signature and returning it to me.

Cordially,

/s/ J. MICHAEL HAGAN
--------------------------------
J. Michael Hagan
Chairman of the Board

APPROVED AND AGREED
EFFECTIVE AS OF FEBRUARY 4, 1996

/s/ PETER CHURM
- --------------------------------
Peter Churm

<PAGE> 1
EXHIBIT 10.13

CREDIT AGREEMENT

This Credit Agreement ("Agreement") is entered into as of October 30,
1995 by and among Furon Company, a California corporation ("Borrower"), Bank of
America National Trust and Savings Association, a national banking association,
and each other bank signatory hereto set forth on the signature pages of this
Agreement and any financial institution which may hereafter execute and deliver
a Commitment Assignment and Acceptance that is registered with the Agent
pursuant to Section 9.8 (collectively, the "Banks" and individually, a "Bank"),
and Bank of America National Trust and Savings Association, as Agent.

RECITALS

A. Borrower is party to that certain Second Amended and Restated Credit
Agreement dated as of January 28, 1994, as amended, among Borrower, the banks
named therein and Agent (the "Prior Credit Agreement").

B. Borrower, the Agent and the banks under the Prior Credit Agreement
desire to terminate such credit facility and concurrently enter into this
Agreement on the terms and conditions set forth herein.

In consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:

ARTICLE I
DEFINITIONS, ACCOUNTING TERMS AND EXHIBITS

1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth respectively after each:

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<PAGE> 2
"Acquisition" means any transaction, or any series of related
transactions, by which Borrower and/or any of its Subsidiaries directly or
indirectly (i) acquires any going business or all or substantially all of the
assets of any firm, partnership, joint venture, corporation or division thereof,
whether through purchase of assets, merger or otherwise, or (ii) acquires (in
one transaction or as the most recent transaction in a series of transactions)
control of at least a majority in ordinary voting power of the securities of a
corporation which have ordinary voting power for the election of directors, or
(iii) acquires control of a 50% or more ownership interest in any partnership or
joint venture.

"Adjusted Consolidated Tangible Effective Net Worth" means Borrower's
actual Consolidated Tangible Effective Net Worth as of July 29, 1995, adjusted,
if the Acquisition of Fluorglas is completed, on a pro forma basis as if such
Acquisition had been completed on July 29, 1995.

"Advance" means any advance made or to be made by a Bank to Borrower as
provided in Article 2.

"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "controls (and the correlative terms,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise); provided that, in any event, any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation that has more than 100 record holders of such securities or 10% or
more of the partnership or other ownership interests of any other Person that
has more than 100 record holders of such interests will be deemed to control
such corporation or other Person.

"Agent" means Bank of America National Trust and Savings Association as
agent for the Banks hereunder and under the other Loan Documents, and each
successor agent.

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<PAGE> 3
"Agent's Office" means Bank of America National Trust and Savings
Association, Global Agency #5596, 1455 Market Street, 13th Floor, San Francisco,
California 94103, Attention: Peggy Fujimoto, or such other office as the Agent
may designate in writing to Borrower and the Banks.

"Agreement" means this Credit Agreement, either as originally executed
or as it may from time to time be supplemented, modified, amended, renewed,
extended or supplanted.

"Applicable Amount" means, (a) for the Pricing Period from the Closing
Date through December 15, 1995, the per annum rate, expressed in basis points,
indicated by the Compliance Certificate delivered on the Closing Date, and (b)
for each Pricing Period thereafter, the applicable per annum rate set forth
below opposite the indicated ratios as of the last day of the Fiscal Quarter
most recently ended prior to the commencement of that Pricing Period, as set
forth in the most recently delivered Compliance Certificate:

<TABLE>
<CAPTION>
Level Leverage Fixed LIBOR Rate Commitment
Ratio Charge Fee
Coverage
Ratio
================================================================================================
<S> <C> <C> <C> <C>
I less than 1.00:1 37.50 15.00
greater than 2.00:1
- ----------------------------------------- ----------------------------
II greater than or equal to
1.00:1 but less than 1.50:1 43.75 15.00
- ------------------------------------------------------------------------------------------------
III less than 1.50:1 less than or equal to
2.00:1 50.00 17.50
- ------------------------------------------------------------------------------------------------
IV greater than or equal to
1.50:1 but less than 2.00:1 50.00 17.50
n/a
- ----------------------------------------- ----------------------------
V greater than or equal to
2.00:1 but less than 2.50:1 62.50 20.00
- ----------------------------------------- ----------------------------
VI greater than or equal to
2.50:1 75.00 25.00
================================================================================================
</TABLE>

provided that (a) if Borrower does not deliver a Compliance Certificate
prior to the commencement of any Pricing Period, then until (but only until)
such certificate is delivered the

- 3 -
<PAGE> 4
Applicable Amount for that Pricing Period shall be based on Level VI, and (b) as
long as any Default or Event of Default exists the Applicable Amount shall be
based on Level VI; provided, further, that if any Compliance Certificate based
on preliminary Fiscal Year numbers is subsequently determined to be in error,
then any resulting increase (but not decrease) in interest or fees indicated by
such correction shall be made retroactively; any resulting decrease in interest
or fees indicated by such correction shall be effective from the Agent's date of
receipt of such revised Compliance Certificate.

"Applicable Currency" means, as to any particular payment or Advance,
Dollars or the Offshore Currency in which it is denominated or is payable.

"Arranger" means BA Securities, Inc., a Delaware corporation.

"Bank of America" means Bank of America National Trust and Savings
Association in its capacity as a Bank.

"Banking Day" means any Monday, Tuesday, Wednesday, Thursday, or Friday
other than a day on which banks are authorized or required to be closed in
California or New York and (i) with respect to disbursements and payments of
LIBOR Rate Loans denominated in Dollars, a day on which dealings in dollars are
carried on in the London interbank market, and (ii) with respect to any
disbursements and payments in and calculations pertaining to any Offshore
Currency Advance, a day on which commercial banks are open for foreign exchange
business in London, England and the applicable Agent's Payment Office, and on
which dealings in the relevant Offshore Currency are carried on in the
applicable offshore foreign exchange interbank market in which disbursement of
or payment in such Offshore Currency will be made or received hereunder.

"Base Rate" means a fluctuating rate per annum equal to the higher of
(a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest publicly
announced from time to time by Bank of America in San Francisco, California, as
its reference rate. It is a rate set by Bank of America based upon various
factors including Bank of America's costs and desired return, general economic
conditions and other factors, and is used as a reference

- 4 -
<PAGE> 5
point for pricing some loans, which may be priced at, above, or below such
announced rate.

"Base Rate Loan" means a Loan made hereunder and designated as a Base
Rate Loan in accordance with Section 2.3.

"Borrower" means Furon Company, a California corporation.

"Borrowing" means a borrowing hereunder consisting of (a) Loans of the
same Type and in the same Applicable Currency made to Borrower on the same day
by the Banks under Section 2, and, other than in the case of Base Rate Loans or
Swing Line Advances, having the same LIBOR Period or (b) Swing Line Advances.

"Capital Expenditure" means any expenditure (including any capitalized
lease expenditure) that is considered a capital expenditure under Generally
Accepted Accounting Principles, consistently applied, including without
limitation, any amount that is required to be treated as a capitalized asset
pursuant to Financial Accounting Standards Board Statement No. 13.

"Cash" means all monetary items (including currency coin and bank
demand deposits) that are treated as cash under Generally Accepted Accounting
Principles.

"Cash Equivalents" means, when used in connection with any Person, the
Person's Investments in:

- 5 -
<PAGE> 6
(a) Government securities due within one year of the making
of the Investment;

(b) Marketable direct obligations issued or unconditionally
guaranteed by the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case maturing
within one year from the date of acquisition thereof;

(c) Marketable direct obligations of any State of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having a rating of at least
Baa3 by Moody's Investors Service, Inc. or BBB- by S&P.

(d) Readily marketable commercial paper of corporations doing
business in and incorporated under the Laws of the United States of America or
any State thereof, in each case due within one year after the date of the making
of the Investment and, on the date of such Investment, having a rating of at
least Prime-2 by Moody's Investors Service, Inc. or A-2 by S&P; and

(e) Certificates of deposit or banker's acceptances maturing
within one year from the date of acquisition thereof issued by (i) commercial
banks organized under the laws of the United States of America or any State
thereof or the District of Columbia, each having combined capital and surplus of
not less than $500,000,000; or (ii) foreign commercial banks, each having
combined capital and surplus of not less than $500,000,000, and as to which
Agent and/or Banks maintain a correspondent relationship.

"Change in Control" means any transaction or series of related
transactions (a) in which any Person or two or more Persons acting in concert
acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), directly or indirectly, of 35% or more of the common
stock of Borrower, or (b) in which individuals who as of the Closing Date
constitute the board of directors of Borrower (the "Incumbent Board"), cease for
any reason to constitute at

- 6 -
<PAGE> 7
least a majority of the board of directors, provided that any person becoming a
director subsequent to the Closing Date whose election, or nomination for
election by Borrower or shareholders, is approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election or removal of the directors of Borrower, as contemplated in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall for the purposes of
this Agreement, be considered as though such person were a member of the
Incumbent Board of Borrower, or (c) constituting a "Change in Control," or other
similar occurrence under documentation evidencing or governing any Indebtedness
of Borrower of $15,000,000 or more which results in an obligation of Borrower to
prepay, purchase, offer to purchase, redeem or defease such Indebtedness.

"Closing Date" means, if all of the conditions precedent to the
effectiveness to this Agreement have then been satisfied, October 30, 1995.

"Commitment" means, subject to Articles 2 and 5, the amount set forth
on Schedule 1.1 hereto. The initial share of the Commitment of each Bank
signatory hereto is set forth in Schedule 1.1.

"Commitment Assignment and Acceptance" means the document executed by a
Bank and an assignee substantially in the form of Exhibit B.

"Compliance Certificate" means a compliance certificate in the form of
Exhibit C signed, on behalf of Borrower, by a Senior Officer of Borrower.

"Computation Date" means (a) with respect to Borrowings of Offshore
Currency Advances, the requested Borrowing date; (b) with respect to outstanding
Offshore Currency Advances, the last applicable Banking Day of each month and
the date of any reduction in the Commitment; and (c) with respect to the
conversion or continuation of Offshore Currency Advances, the date of such
conversion or continuation.

- 7 -
<PAGE> 8
"Consolidated EBITDA" means, for any period for Borrower and its
Subsidiaries, an amount equal to the sum of (a) Consolidated Net Income, (b)
interest expense, (c) the amount of taxes, based on or measured by income, used
or included in the determination of Consolidated Net Income, (d) extraordinary
losses and (e) the amount of depreciation and amortization expense deducted in
determining Consolidated Net Income less (f) extraordinary gains, all determined
in conformity with Generally Accepted Accounting Principles.

"Consolidated Net Income" means, with respect to any fiscal period, the
consolidated net income of Borrower and its consolidated Subsidiaries for that
period, determined in accordance with Generally Accepted Accounting Principles
consistently applied.

"Consolidated Tangible Effective Net Worth" means, as at the end of
each fiscal year, Shareholders' Equity minus intangible assets (as determined in
accordance with Generally Accepted Accounting Principles).

"Conversion/Continuation Date" means any date on which, under Section
2.4, Borrower (a) converts Loans of one Type to another Type, or (b) maintains
as Loans of the same Type, but with a new LIBOR Period, Loans having LIBOR
Periods expiring on such date.

"Debtor Relief Laws" means the Bankruptcy Code of the United States of
America, as amended from time to time, and all other applicable liquidation,
conservatorship, insolvency, reorganization, or similar debtor relief Laws from
time to time in effect affecting the rights of creditors generally.

"Default" means any event that, with the giving of notice or passage of
time or both, would be an Event of Default.

"Default Rate" means the interest rate described in Section 3.9.

"Designated Deposit Account" means a deposit account to be maintained
by Borrower with Bank of America, as from time to time

- 8 -
<PAGE> 9
designated by Borrower by written notification to Bank of America.

"Distribution" means, with respect to any shares of capital stock or
any warrant or right to acquire shares of capital stock or any other equity
security issued by a Person, (a) the retirement, redemption, purchase, or other
acquisition for value by such Person of any such security, (b) the declaration
or (without duplication) payment by such Person of any Dividend in Cash or in
Property (other than common stock of such Person) on or with respect to any such
security, (c) any Investment by such Person in the holder of any such security,
and (d) any other payment by such Person constituting a distribution under
applicable Laws with respect to such security.

"Disposition" means the sale, transfer or other disposition in any
single transaction or series of related transactions of any asset, or group of
related assets, of Borrower or any of its Subsidiaries.

"Dividend" means, with respect to any shares of capital stock or any
warrant or right to acquire shares of capital stock or any other equity security
issued by a Person, the declaration or (without duplication) payment by such
Person of any dividend in Cash or Property (including common stock) on or with
respect to any such security.

"Dollars" means the national currency of the United States of America.

"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b) as to any
amount denominated in an Offshore Currency, the equivalent amount in Dollars on
the basis of the Spot Rate for the delivery of such Offshore Currency on the
most recent Computation Date therefor.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and as in effect from time to time.

"Events of Default" has the meaning set forth for that term in Section
7.1.

- 9 -
<PAGE> 10
"Expiration Date" means the earlier to occur of: (a) October 31, 2000;
and (b) the date on which the Commitment terminates in accordance with the
provisions of this Agreement.

"Federal Funds Rate" means the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day of determination
(or if such day of determination is not a Banking Day, for the next preceding
Banking Day) by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Banking Day, the average of the quotations for
such day on such transaction received by the Agent from three Federal funds
brokers of recognized standing selected by it.

"Fiscal Year" means the 52 or 53 week fiscal periods of Borrower,
ending always on either the last Saturday of January or on the first Saturday of
February, generally the Saturday nearest to each January 31.

"Fixed Charge Coverage Ratio" means, at the end of each Fiscal Year for
the preceding Fiscal Year just ended, and at the end of each quarter of each
Fiscal Year for the preceding four fiscal quarters, for Borrower and its
consolidated Subsidiaries, the ratio of (a) Consolidated EBITDA for such period
plus rental expense during such period minus Capital Expenditures during such
period to (b) the amount of scheduled principal payments to be made on any
outstanding Indebtedness of Borrower within the next four fiscal quarters plus
interest expense for such period plus rental expense for such period.

"Funded Debt" means, at any date, all Indebtedness for borrowed money
of Borrower and its consolidated Subsidiaries.

"FX Trading Office" means the Foreign Exchange Trading Center #5193,
San Francisco, California, of Bank of America, or such other of Bank of
America's offices as Bank of America may designate from time to time.

"Generally Accepted Accounting Principles" means, as of any date of
determination, accounting principles (a) set forth as

- 10 -
<PAGE> 11
generally accepted in then currently effective opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants, (b)
set forth as generally accepted in then currently effective Statements of the
Financial Accounting Standards Board or (c) that are then approved by such other
entity as may be approved by a significant segment of the accounting profession.
The term "consistently applied," as used in connection therewith, means
that the accounting principles applied as at any dates and for any periods are
either (i) consistent in all material respects with those applied to the
consolidated financial statements of Borrower as at January 28, 1995, and for
the fiscal period then ended or (ii) not so consistent but the inconsistency is
disclosed in a report on such financial statements, or prior financial
statements, by a firm of independent certified public accountants and the report
states that such firm concurs in the change of accounting principles applied
thereto.

"Governmental Agency" means (a) any federal, state, county or municipal
government, or political subdivision thereof, (b) any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality, or public body, (c) any court or administrative tribunal, or
(d) any arbitration tribunal or other nongovernmental authority to whose
jurisdiction a Person has consented, in each case whether of the United States
of America or any other nation.

"Hostile Acquisition" means any Acquisition, or any agreement by
Borrower to make any Acquisition of any corporation or other business entity
whose board of directors or comparable group has notified Borrower that it
opposes such Acquisition.

"Indebtedness" means all obligations, contingent and otherwise, that in
accordance with Generally Accepted Accounting Principles should be classified
upon the obligor's balance sheet as liabilities; provided that Indebtedness of
any Person shall not include any particular Indebtedness if, upon or prior to
the maturity thereof, there shall have been deposited with the proper
depository, in trust, money (or evidences of such Indebtedness as permitted by
the instrument creating such Indebtedness) in the necessary amount to pay,
redeem or satisfy such Indebtedness.

- 11 -
<PAGE> 12
"Investment" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of
loan, advance, capital contribution, guaranty, or other debt or equity
participation or interest, or otherwise, in any other Person, including any
partnership or joint venture interest of such Person.

"Laws" means, collectively, all international, foreign, federal, state
and local statutes, treaties, codes, ordinances, rules, regulations and
precedents of any court or other Governmental Agency.

"Level" means Level I, Level II, Level III, Level IV, Level V or Level
VI, as determined by reference to the definition of "Applicable Amount."

"Leverage Ratio" means, as of any date of determination, the ratio of
Borrower's Funded Debt as of such date to Consolidated EBITDA for the four
fiscal quarters ending on such date.

"LIBOR Period" means, as to each LIBOR Rate Loan, the period commencing
on the date specified by Borrower pursuant to the applicable Request for Loan
and ending 1, 2, 3 or 6 months thereafter, as specified by Borrower in the
applicable Request for Loan, provided that:

(a) The first day in any LIBOR Period shall be a Banking Day;

(b) Any LIBOR Period that would otherwise end on a day that is
not a Banking Day shall be extended to the next succeeding Banking Day unless
such Banking Day falls in another calendar month, in which case such LIBOR
Period shall end on the next preceding Banking Day; and

"LIBOR Rate" means, with respect to any LIBOR Rate Loan, the average of
the rates per annum (determined by the Agent and rounded upward to the nearest
1/100 of 1%) at which deposits in

- 12 -
<PAGE> 13
the Applicable Currency are offered to the Reference Bank in the London
interbank market at approximately 11:00 a.m., London time, two Banking Days
before the first day of the applicable LIBOR Period in an aggregate amount,
approximately equal to the amount of each such Reference Bank's portion of such
LIBOR Rate Loan and for a period of time comparable to the number of days in the
applicable LIBOR Period. The determination of the LIBOR Rate by Agent shall be
conclusive in the absence of manifest error.

"LIBOR Rate Loan" means an Advance made hereunder and designated as a
LIBOR Rate Loan in accordance with Section 2.3, and may be a LIBOR Rate Loan
denominated in Dollars or in an Offshore Currency.

"Lien" means any mortgage, chattel mortgage, deed of trust, pledge,
security interest, encumbrance, lien or charge of any kind, affecting any
Property, including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature thereof, and
the filing of or agreement to give any financing statement or comparable
document under the Uniform Commercial Code or comparable Law of any
jurisdiction.

"Loan" or "Loans" means the Advances to be made by the Banks to
Borrower pursuant to this Agreement. Loans may be a Base Rate Loan or a LIBOR
Rate Loan (each, a "Type" of Loan).

"Loan Documents" means, collectively, this Agreement, the Notes, any
Compliance Certificate, the Swing Line Documents and any other certificates,
documents or agreements of any type or nature heretofore or hereafter executed
or delivered by Borrower to Agent or Banks in any way relating to or in
furtherance of this Agreement either as originally executed or as the same may
from time to time be supplemented, modified, amended or extended.

"Majority Banks" means Banks holding 66 2/3% of the aggregate principal
amount outstanding hereunder, or, if no amounts are outstanding, Banks holding
66 2/3% of the Commitment.

"Minimum Tranche" means, in respect of Advances comprising part of the
same Borrowing, or to be converted or continued under Section 2.4, (a) in the
case of Advances other than Swing Line

- 13 -
<PAGE> 14
Advances, $5,000,000 or any multiple of $1,000,000 in excess thereof, (b) in the
case of Swing Line Advances, $1,000,000 or any amount in excess thereof and (c)
in the case of Offshore Currency Advances, 10,000 units of the Applicable
Currency, or multiples thereof, having a Dollar Equivalent of not less than
$5,000,000 and multiples of 10,000 units of the Applicable Currency in excess
thereof.

"Multiemployer Plan" means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA.

"Net Cash Proceeds" means, with respect to any Disposition, (a) the
gross cash proceeds received by Borrower or its Subsidiaries upon such
Disposition, (b) the gross cash installments paid to Borrower or its
Subsidiaries by an obligor on any promissory note or other instrument or
security received upon such Disposition, and (c) the gross cash consideration
received by Borrower or its Subsidiaries upon the sale or other disposition of
property received by Borrower or its Subsidiaries upon such Disposition, minus
in each case (y) the actual expenses of such Disposition paid or payable by
Borrower or its Subsidiaries in connection with such Disposition and (z) the
present value of the amount of taxes on or measured by income estimated by
Borrower to be payable in connection with such Disposition, which estimate is
reasonably acceptable to the Banks.

"Note" means a promissory note substantially in the form of Exhibit A
evidencing the Advances made by each Bank (and any promissory note that may be
issued in substitution, renewal, extension or exchange therefor) with all blanks
properly filled in, and executed by Borrower in favor of each Bank requesting a
Note, either as originally executed or as the same may from time to time be
supplemented, replaced, modified, amended, renewed, extended, increased or
refinanced.

"Obligations" means all present or future obligations of every kind or
nature whatsoever of Borrower at any time or from time to time owed under the
Loan Documents, whether due or to become due, matured or unmatured, liquidated
or unliquidated, or contingent or noncontingent, and includes obligations of
performance as well as obligations of payment.

- 14 -
<PAGE> 15
"Offshore Currency" means at any time English pounds sterling, Deutsche
Marks, Japanese yen and any other freely available currency approved by the
Majority Banks that is traded in the London foreign exchange market and for
which Bank of America can determine a Spot Rate.

"Offshore Currency Advance" means any LIBOR Rate Loan denominated in an
Offshore Currency.

"Offshore Currency Limit" means, as to all Offshore Currencies, an
amount of Offshore Currencies, the Dollar Equivalent of which is $30,000,000.

"Overnight Rate" means, for any day, the rate of interest per annum at
which overnight deposits in the Applicable Currency, in an amount approximately
equal to the amount with respect to which such rate is being determined, would
be offered for such day by Bank of America's London Branch to major banks in the
London or other applicable offshore interbank market.

"Party" means any Person other than the Agent and the Banks, which now
or hereafter is a party to any of the Loan Documents.

"PBGC" means the Pension Benefit Guaranty Corporation or any successor
established under ERISA.

"Person" means any entity, whether an individual, trustee, corporation,
partnership, joint stock company, trust, unincorporated organization, bank,
business association or firm, joint venture, Governmental Agency or otherwise.

"Plan" means any employee benefit plan subject to ERISA and maintained
by Borrower or any of its Subsidiaries or to which Borrower or any of its
Subsidiaries is required to contribute on behalf of its employees.

"Pricing Period" means (a) the period commencing on the Closing Date
and ending on December 15, 1995, and (b) the period commencing on each December
16 and ending on the next following March 15, (c) the period commencing on each
March 16 and ending on the next following June 15, (d) the period commencing on
each

- 15 -
<PAGE> 16
June 16 and ending on the next following September 15 and (e) the period
commencing on each September 16 and ending on the next following December 15.

"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

"Quarterly Payment Date" means each February 28, May 29, August 29, and
November 29; provided, however, that the last Quarterly Payment Date for
Advances shall be the Expiration Date.

"Reference Bank" means Bank of America National Trust and Savings
Association.

"Regulation D" means Regulation D, as at any time amended, of the Board
of Governors of the Federal Reserve System or any other regulation in substance
substituted therefor.

"Regulatory Development" means any or all of the following: (a) any
change in any applicable law or the interpretation thereof by any Governmental
Agency (whether or not having the force of Law); (b) the application of any
existing applicable law or the interpretation thereof by any Governmental Agency
(whether or not having the force of Law); and (c) compliance by any Bank with
any request or directive (whether or not having the force of Law) of any
Governmental Agency or central bank.

"Request for Loan" means a request for an Advance signed by a
Responsible Official of Borrower, substantially in the form of Exhibit D.

"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, any Law or any judgment, award, decree, writ or
determination of, or any consent or similar agreement with a Governmental
Agency, in each case applicable to or binding upon such Person or any of its
Property or to which such Person or any of its Property is subject.

"Responsible Official" means, (a) when used with reference to Borrower,
any corporate officer thereof, and (b) when used with

- 16 -
<PAGE> 17
reference to any other Person, any officer or general partner or any other
responsible official thereof. Except as otherwise specifically provided herein,
any requirement that any document or certificate be signed or executed by any
Person requires that such document or certificate be signed or executed by a
Responsible Official of such Person, and that such Responsible official signing
or executing such document or certificate on behalf of such Person shall be
authorized to do so.

"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.

"Same Day Funds" means (i) with respect to disbursements and payments
in Dollars, immediately available funds, and (ii) with respect to disbursements
and payments in an Offshore Currency, same day or other funds as may be
determined by the Agent to be customary in the place of disbursement or payment
for the settlement of international banking transactions in the relevant
Offshore Currency.

"Senior Officer" means the (a) chief executive officer, (b) chief
operating officer, (c) chief financial officer, (d) controller, (e) any
executive vice president, (f) treasurer or (g) general counsel, in each case
whatever the title nomenclature may be, of the Person designated.

"Shareholders' Equity" means, as of any date of determination,
shareholders' equity in Borrower and its consolidated Subsidiaries as of that
date determined in accordance with Generally Accepted Accounting Principles;
provided that there shall be excluded from Shareholders' Equity any amount
attributable to capital stock that is, directly or indirectly, required to be
redeemed or repurchased by the issuer thereof at a specified date or upon the
occurrence of specified events or at the election of the holder thereof.

"Special LIBOR Circumstance" means the application or adoption of any
Law or interpretation, or any change therein or thereof, or any change in the
interpretation or administration thereof by any Governmental Agency, central
bank or comparable authority charged with the interpretation or administration
thereof, or compliance by a Bank with any request or directive

- 17 -
<PAGE> 18
(whether or not having the force of Law) of any such Governmental Agency,
central bank or comparable authority, or the existence or occurrence of
circumstances affecting the London interbank market generally that are beyond
the reasonable control of the Bank.

"Spot Rate" for a currency means the rate quoted by Bank of America at
approximately 8:00 a.m. (San Francisco time) on the date two Banking Days prior
to the Computation Date as the spot rate for purchase by Bank of America of such
currency with another currency through its FX Trading Office as of the
Computation Date.

"Subordinated Obligations" means any Indebtedness of Borrower which (a)
is subordinated to the Obligations, (b) the terms of which are in form,
substance and amount substantially the same as the terms of the Indenture dated
as of January 15, 1986, pursuant to which Borrower issued $25,000,000 in
principal amount of 8% Convertible Subordinated Debentures due 2011 (none of
which debentures remains outstanding), (c) has subordination provisions
consistent with current market conventions for similar indebtedness at the time
of issuance, and (d) has been approved by Majority Banks as being in compliance
with clauses (b) and (c) above.

"Subsidiary" means any corporation of which more than 50% of the
outstanding securities of any class or classes (however designated) having
ordinary voting power to elect directors of the corporation (other than
securities having the power only by reason of the happening of a contingency) is
at the time owned by any Person and/or one or more than one other Subsidiary of
such Person.

"Swing Line" means the revolving line of credit established by the
Swing Line Bank in favor of Borrower pursuant to Section 2.5.

"Swing Line Advances" means advances made by the Swing Line Bank to
Borrower pursuant to Section 2.5.

"Swing Line Bank" means Bank of America.

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<PAGE> 19
"Swing Line Documents" means any promissory note and any other
documents executed by Borrower as requested by the Swing Line Bank from time to
time in favor of the Swing Line Bank in connection with the Swing Line.

"Swing Line Outstandings" means, as of any date of determination, the
aggregate principal Indebtedness of Borrower on all Swing Line Advances then
outstanding.

"Type" has the meaning specified in the definition of "Loan."

1.2 Use of Defined Term. Except as otherwise expressly provided herein,
any defined terms used in the plural shall refer to all members of the relevant
class, and any defined term used in the singular shall refer to any one or more
of the members of the relevant class.

1.3 Accounting Terms. Except as otherwise expressly provided herein,
all accounting terms not specifically defined in this Agreement shall be
construed in conformity with, and all financial data required to be submitted by
this Agreement shall be prepared in conformity with Generally Accepted
Accounting Principles, applied on a consistent basis.

1.4 Exhibits and Schedules. All exhibits and schedules to this
Agreement, either as now existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference.

1.5 Rounding. Any financial ratios required to be maintained by
Borrower pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.

1.6 Currency Equivalents Generally. For all purposes of this Agreement
(but not for purposes of the preparation of any financial statements delivered
pursuant hereto or the calculation of any financial covenant), the equivalent in
any Offshore

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<PAGE> 20
Currency or other currency of an amount in Dollars, and the equivalent in
Dollars of an amount in any Offshore Currency or other currency, shall be
determined at the Spot Rate for delivery of such Offshore Currency on the
applicable Computation Date.

ARTICLE 2
LOANS

2.1 General Provisions.

(a) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Closing Date to the
Expiration Date, each Bank shall, pro rata according to its pro rata share of
the Commitment then in effect make Advances to Borrower in such amounts as
Borrower may request in an aggregate amount outstanding at any one time not to
exceed the Commitment. Until the Expiration Date, Borrower may borrow and repay
Advances in whole or in part, and reborrow, all in accordance with the terms
hereof.

(b) No new Advances shall be made under the Commitment if (i) the
aggregate amount of such Advances and of all Advances previously made and then
outstanding shall exceed the Commitment or (ii) the aggregate amount of all
outstanding Offshore Currency Advances shall on any Computation Date exceed the
Offshore Currency Limit.

2.2 Loan Accounts. (a) The Advances made by each Bank shall be
evidenced by one or more accounts or records maintained by such Bank in the
ordinary course of business. The accounts or records maintained by each Bank
shall be presumptive evidence of the amount of the Advances made by the Banks to
Borrower, and the interest and payments thereon. Any failure so to record or any
error in doing so shall not, however, limit, increase or otherwise affect the
obligation of Borrower hereunder to pay any amount owing with respect to the
Advances.

(b) Upon the request of any Bank made through the Agent, the
Advances made by such Bank may be evidenced by one or more Notes, instead of
loan accounts. Each such Bank shall endorse on the schedules annexed to its
Note(s) the date, amount

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<PAGE> 21
and maturity of each Advance made by it and the amount of each payment of
principal made by Borrower with respect thereto. Each such Bank is irrevocably
authorized by Borrower to endorse its Note(s) and each Bank's record shall be
presumptive evidence of the amount owing; provided, however,
that the failure of a Bank to make, or an error in making, a notation thereon
with respect to any Advance shall not limit, increase or otherwise affect the
obligations of Borrower hereunder or under any such Note to such Bank.

(c) The Swing Line Advances shall be evidenced by one or more
loan accounts maintained by the Swing Line Bank in the ordinary course of
business, and such accounts shall be presumptive evidence of the principal
amount owing under the Swing Line. Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of
Borrower to pay any amount owing with respect to Swing Line Advances;
provided, however, that the Swing Line Bank may request Borrower
to execute and deliver a promissory note to evidence the Swing Line Advances,
and Borrower agrees to execute and deliver such a promissory note, and such
other Swing Line Documents as the Swing Line Bank may from time to time
reasonably request.

2.3 Procedure for Borrowing. (a) Each Borrowing shall be made upon
Borrower's irrevocable (except as set forth herein) telephonic notice (in each
case confirmed immediately by delivery of a Request for Loan) received by the
Agent prior to 9:00 a.m. (San Francisco time) (i) four Banking Days prior to the
requested Borrowing date, in the case of Offshore Currency Advances; (ii) three
Banking Days prior to the requested Borrowing date, in the case of LIBOR Rate
Loans denominated in Dollars; and (iii) one Banking Day prior to the requested
Borrowing date, in the case of Base Rate Loans, specifying: (A) the amount of
the Borrowing, which shall be in an aggregate amount not less than the Minimum
Tranche; (B) the requested Borrowing date, which shall be a Banking Day; (C) the
Type of Advances comprising the Borrowing; (D) the duration of the LIBOR Period
applicable to such Advances included in such notice; if the Request for Loan
fails to specify the duration of the LIBOR Period for any Borrowing comprised of
LIBOR Rate Loans, such LIBOR Period shall be one month; and (E) in the case of a
Borrowing comprised of Offshore Currency Advances, the Applicable Currency.

- 21 -
<PAGE> 22
(b) The Dollar Equivalent amount of any Borrowing in an Offshore
Currency will be determined by the Agent for such Borrowing as of the
Computation Date therefor determined in accordance with the definition thereof.
Upon receipt of the Request for Loan, the Agent will promptly notify each Bank
thereof and of the amount of such Bank's pro rata share of the Borrowing. In the
case of a Borrowing comprised of Offshore Currency Advances, such notice will
provide the amount of each Bank's pro rata share of the Borrowing, and the Agent
will, upon the determination of the Dollar Equivalent amount of the Borrowing as
specified in the Request for Loan, promptly notify each Bank of the exact Dollar
Equivalent of such Bank's pro rata share of the Borrowing.

(c) In the case of a proposed Borrowing comprised of Offshore
Currency Advances, the Banks shall be under no obligation to make such Offshore
Currency Advances if the Agent has received notice from any of the Banks by
12:00 noon (San Francisco time) four Banking Days prior to the day of such
Borrowing that such Bank cannot provide Loans in the requested Offshore
Currency. The Agent shall promptly notify the Banks and Borrower of such notice.
Borrower may withdraw such Request for Loan by notifying the Agent not later
than 8:00 a.m. (San Francisco time) one Banking Day prior to the requested date
of such Borrowing. If Borrower does not so withdraw such Request for Loan, such
Request for Loan shall be deemed to be requesting a Borrowing in Dollars
comprised of Base Rate Loans in an amount equal to the Dollar Equivalent amount
of the Borrowing originally requested in such Request for Loan.

(d) Each Bank will make the amount of its pro rata share of each
Borrowing available to the Agent for the account of Borrower at the Agent's
Payment Office on the Borrowing date requested by Borrower in Same Day Funds and
in the requested currency (i) in the case of a Borrowing comprised of Advances
in Dollars, by 10:00 a.m. (San Francisco time) and (ii) in the case of a
Borrowing comprised of Offshore Currency Advances, by such time as the Agent may
reasonably specify, but in no event later than 11:00 a.m. (San Francisco time)
on the date of Borrowing. The proceeds of all such Advances will then be made
available to Borrower by the Agent at such office by crediting the account of

- 22 -
<PAGE> 23
Borrower on the books of Bank of America with the aggregate of the amounts made
available to the Agent by the Banks and in like funds as received by the Agent.

(e) If any Bank shall not have made its full amount available to
the Agent and the Agent in such circumstances has made available to Borrower
such amount, that Bank shall within one Banking Day following the Borrowing date
make such amount available to the Agent, together with interest at the Federal
Funds Rate for each day during such period. A certificate of the Agent submitted
to any Bank with respect to amounts owing under this Section 2.9 shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Agent shall constitute such Bank's Loan on the Borrowing date for
all purposes of this Agreement. If such amount is not made available to the
Agent within one Banking Day following the Borrowing date, the Agent shall
notify Borrower of such failure to fund and, upon demand by the Agent, Borrower
shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Advances
comprising such Borrowing.

(f) After giving effect to any Borrowing, there may not be more
than 10 different LIBOR Periods in effect.

2.4 Conversion and Continuation Elections. (a) Borrower may, upon
delivery of notice in accordance with Section 2.4(b): (i) elect, as of any
Banking Day, in the case of Base Rate Loans, or as of the last day of the
applicable LIBOR Period, in the case of any LIBOR Rate Loans denominated in
Dollars, to convert any such Loans (or any part thereof in an amount not less
than the Minimum Tranche) into Loans in Dollars of any other Type; or (ii)
elect, as of the last day of the applicable LIBOR Period, to continue any Loans
having LIBOR Periods expiring on such day (or any part thereof in an amount not
less than the Minimum Tranche); provided, that if at any time the
aggregate amount of LIBOR Rate Loans in respect of any Borrowing is reduced, by
payment, prepayment, or conversion of part thereof to be less than the Minimum
Tranche, such LIBOR Rate Loans shall automatically convert into Base Rate Loans,
and on and after such date the right of Borrower to continue such Loans as, and
convert such

- 23 -
<PAGE> 24
Loans into, LIBOR Rate Loans shall terminate, unless there are additional Loans
sufficient to equal the Minimum Tranche.

(b) Borrower shall deliver irrevocable (except as set forth
herein) telephonic notice (in each case confirmed immediately by delivery of a
Notice of Conversion/Continuation) received by the Agent not later than 9:00
a.m. (San Francisco time) at least (i) three Banking Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as LIBOR Rate Loans denominated in Dollars; (ii) four Banking Days in advance of
the continuation date, if the Loans are to be continued as Offshore Currency
Advances; and (iii) one Banking Day in advance of the Conversion/Continuation
Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the
proposed Conversion/Continuation Date; (B) the aggregate amount and Applicable
Currency of Loans to be converted or continued; (C) the Type of Loans resulting
from the proposed conversion or continuation; and (D) other than in the case of
conversions into Base Rate Loans, the duration of the requested LIBOR Period.

(c) If upon the expiration of any LIBOR Period applicable to
LIBOR Rate Loans in Dollars, Borrower has failed to select timely a new LIBOR
Period to be applicable to such LIBOR Rate Loans, as the case may be, or if any
Event of Default then exists, Borrower shall be deemed to have elected to
convert such LIBOR Rate Loans into Base Rate Loans effective as of the
expiration date of such LIBOR Period. If Borrower has failed to select a new
LIBOR Period to be applicable to Offshore Currency Advances prior to 8:00 a.m.
on the fourth Banking Day in advance of the expiration date of the current LIBOR
Period applicable thereto as provided in Section 2.4(b), or if any Event of
Default shall then exist, subject to the provisions of Section 2.4(d), Borrower
shall be deemed to have elected to continue such Offshore Currency Advances on
the basis of a one month LIBOR Period.

(d) In the case of a proposed continuation of Offshore Currency
Advances, the Banks shall be under no obligation to continue such Offshore
Currency Advances if the Agent has received notice from any of the Banks by
12:00 Noon (San Francisco time) four Banking Days prior to the day of such

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<PAGE> 25
continuation that such Bank cannot continue to provide Loans in the relevant
Offshore Currency. The Agent shall promptly notify the Banks and Borrower of
such notice and such Notice of Continuation/Conversion shall be deemed
withdrawn, and such Offshore Currency Advance shall be due and payable at the
end of the LIBOR Period thereof.

(e) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by
Borrower, the Agent will promptly notify each Bank of the details of any
automatic conversion or continuation. All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Bank.

(f) Unless the Majority Banks otherwise agree, during the
existence of an Event of Default, Borrower may not elect to have any Advance
converted into or continued as a LIBOR Rate Loan in Dollars or an Offshore
Currency Advance, and all such Advances shall be converted into Base Rate Loans
in an amount equal to the Dollar Equivalent of such Advances on the last day of
the LIBOR Interest Period of such Advances.

(g) After giving effect to any conversion or continuation of
Loans, there may not be more than 10 different LIBOR Periods in effect.

2.5 The Swing Line.

(a) Availability. The Swing Line Bank shall from time to
time through the day prior to the Final Maturity Date make Swing Line Advances
in Dollars to Borrower in such amounts as Borrower may request, provided
that (i) giving effect to such Swing Line Advance, the Swing Line Outstandings
shall not exceed $5,000,000 and the aggregate amount of all Advances shall not
exceed the Commitment, (ii) without the consent of the Majority Banks, no Swing
Line Advance may be made during the existence of a Default or an Event of
Default, and (iii) the Swing Line Bank may at any time in its sole discretion,
upon at least two Banking Days' prior notice to Borrower, suspend or terminate
availability under the Swing Line. Subject to the foregoing, Borrower may

- 25 -
<PAGE> 26
borrow, repay and reborrow under this Section. The Swing Line Bank shall
promptly notify the Agent of the Swing Line Advance Outstandings each time there
is a change therein.

(b) Borrowings. Unless notified to the contrary by the Swing Line
Bank, Borrowings under the Swing Line may be made in an amount not less than the
Minimum Tranche upon telephonic request made to the Swing Line Bank not later
than 3:00 p.m., San Francisco time, on the Business Day of the requested
Borrowing (which telephonic request shall be promptly confirmed in writing by a
Responsible Official of Borrower by telecopier with telephonic notice to the
Agent). Promptly after receipt of such a request for borrowing, the Swing Line
Bank shall obtain telephonic verification from the Agent that, giving effect to
such request, availability for Advances will exist under Section 2.1 (and such
verification shall be promptly confirmed in writing by telecopier).

(c) Repayments. Unless notified to the contrary by the Swing Line
Bank, each repayment of a Swing Line Advance shall be in an amount which is an
integral multiple of $1,000,000. If Borrower instructs the Swing Line Bank to
debit its demand deposit account at the Swing Line Bank in the amount of any
payment with respect to a Swing Line Advance, or the Swing Line Bank otherwise
receives repayment, after 3:00 p.m., San Francisco time, on a Business Day, such
payment shall be deemed received on the next Business Day.

(d) Mandatory Repayments. In the event that there are Swing Line
Outstandings on five (5) consecutive Business Days, then on the next Business
Day (unless Borrower has made other arrangements acceptable to the Swing Line
Bank to reduce the Swing Line Outstandings to zero), Borrower shall request an
Advance pursuant to Section 2.3 in an amount complying with Section 2.1 and
sufficient to reduce the Swing Line Outstandings to zero. The Agent shall
automatically provide such amount directly to the Swing Line Bank (which the
Swing Line Bank shall then apply to the Swing Line Outstandings) and credit any
balance of the Advance in immediately available funds as provided in Section
2.3(d). In the event that Borrower fails to request a Advance within the time
specified by Section 2.3 on any such date, the Agent may, but is not required
to, without notice to or

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<PAGE> 27
the consent of Borrower, cause Advances to be made by the Banks under the
Commitment in the amount necessary to comply with Section 2.1 and sufficient to
reduce the Swing Line Outstandings to zero and, for this purpose, the conditions
precedent set forth in Sections 6.1 and 6.2 shall not apply. The proceeds of
such Advances shall be paid to the Swing Line Bank for application to the Swing
Line Outstandings.

(e) Purchase of Participations. Upon the making of a Swing Line
Advance, each Bank shall be deemed to have purchased from the Swing Line Bank a
participation therein in an amount equal to that Bank's pro rata share of the
Commitment multiplied by the amount of the Swing Line Advance. Upon demand made
by the Swing Line Bank, each Bank shall, according to its pro rata share of the
Commitment, promptly provide to the Swing Line Bank its purchase price therefor
in an amount equal to its participation therein. The obligation of each Bank to
so provide its purchase price to the Swing Line Bank shall be absolute and
unconditional and shall not be affected by the occurrence of an Event of Default
or any other occurrence or event.

2.6 Commitment Reductions.

(a) Scheduled Reductions. The Commitment, and each Bank's pro rata
share thereof, shall automatically reduce on each October 31 and April 30 to an
amount not exceeding the amount shown opposite each date, commencing on October
31, 1998 until the Expiration Date, on which date all amounts outstanding under
the Commitment shall be due and payable in full, as follows:

<TABLE>
<CAPTION>
Maximum
Scheduled Remaining
Reduction Dates Commitment
---------------- -----------
<S> <C>
October 31, 1998 $93,750,000
April 30, 1999 87,500,000
October 31, 1999 81,250,000
April 30, 2000 75,000,000
October 31, 2000 0
</TABLE>

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<PAGE> 28
If, after giving effect to any of the foregoing reductions, the aggregate amount
of all Loans outstanding exceeds the Commitment, Borrower shall immediately, and
without notice or demand, prepay the outstanding principal amount of the Loans
in an aggregate amount equal to such excess in accordance with Section 2.6(d).

(b) Dispositions. The Commitment, and each Bank's pro rata share
thereof, shall automatically reduce by an amount equal to the Net Cash Proceeds
received by Borrower or any of its Subsidiaries from Dispositions in excess of
$7,500,000 in the aggregate in any four-quarter period. Such reduction shall be
effective 12 months after the receipt of such Net Cash Proceeds; provided,
however, that no reduction shall be required to the extent any of such excess
Net Cash Proceeds are used to make permitted Acquisitions or Capital
Expenditures hereunder within 12 months after the receipt of such Net Cash
Proceeds. If, after giving effect to any of the foregoing reductions, the
aggregate amount of all Loans outstanding exceeds the Commitment, Borrower shall
immediately, and without notice or demand, prepay the outstanding principal
amount of the Loans in an aggregate amount equal to such excess in accordance
with Section 2.6(d).

(c) Optional Reductions of Commitment. Subject to the provisions
of Section 2.6(d) hereof, Borrower shall have the right, without premium or
penalty, at any time and from time to time prior to the Expiration Date, upon at
least three (3) Banking Days prior written notice to Agent at Agent's Office, to
reduce permanently and irrevocably the Commitment in aggregate principal amounts
of not less than $5,000,000 or any integral multiple of $1,000,000 in excess
thereof, or to terminate the undisbursed portion of the Commitment. Each
optional reduction of the Commitment shall be applied in the order of occurrence
of scheduled reductions of the Commitment.

(d) Prepayments if Loans Exceed Commitment. If, after giving
effect to any of the foregoing reductions, the aggregate amount of all Loans
outstanding exceeds the Commitment, Borrower shall immediately, and without
notice or demand, prepay the outstanding principal amount of the Loans in an
aggregate amount equal to such excess. If Borrower intends to prepay Offshore
Currency Advances, the Agent will, upon Borrower's request, calculate the Dollar
Equivalent thereof as of the reduction date.

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<PAGE> 29
Each prepayment of principal shall be accompanied by payment of interest accrued
through the date of payment on the amount of principal paid and, in any event,
any payment or prepayment of all or any part of any LIBOR Rate Loan on a day
other than the last day of the applicable LIBOR Period shall be subject to
Section 3.8. All accrued commitment fees to, but not including, the effective
date of each reduction shall be paid on the effective date of such reduction.

2.7 Prepayments. (a) Subject to Section 3.8, if on any Computation Date
the Agent shall have determined that the aggregate amount of all Loans exceeds
the Commitment due to a change in the Spot Rate, the Agent shall give notice to
Borrower, and Borrower shall thereupon prepay the outstanding principal amount
of the Loans in an aggregate amount equal to such excess in accordance with
Section 2.6(d).

(b) Subject to Section 3.8, Borrower may, at any time or from time
to time, ratably prepay Loans in whole or in part, in minimum Dollar Equivalent
amounts of the Minimum Tranche. Borrower shall deliver a notice of prepayment to
be received by the Agent not later than 10:00 a.m. (San Francisco time) (i) at
least four Banking Days in advance of the prepayment date if the Loans to be
prepaid are Offshore Currency Advances, (ii) at least three Banking Days in
advance of the prepayment date if the Loans to be prepaid are LIBOR Rate Loans
denominated in Dollars, and (iii) no later than the prepayment date if the Loans
to be prepaid are Base Rate Loans. Such notice of prepayment shall specify the
date and amount of such prepayment and whether such prepayment is of Base Rate
Loans, LIBOR Rate Loans, or any combination thereof, and the Applicable
Currency. Such notice shall not thereafter be revocable by Borrower and the
Agent will promptly notify each Bank thereof and of such Bank's pro rata share
of such prepayment. If such notice is given by Borrower, Borrower shall make
such prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with accrued interest to each
such date on the amount of any LIBOR Rate Loans prepaid and any amounts required
pursuant to Section 3.8. Any Commitment reductions shall be applied against
remaining scheduled Commitment reductions as designated by Borrower.

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<PAGE> 30
2.8 Loan Proceeds. The Advances shall be applied by Borrower to pay all
amounts owing under the Prior Credit Agreement, to general working capital
purposes, and to finance non-Hostile Acquisitions.

2.9 Involuntary Termination of Commitment Upon Change In Control. Upon
the occurrence of a Change in Control, the Commitment hereunder shall terminate
unless Borrower requests by written notice to the Agent that the Banks approve a
waiver of this provision and the Banks unanimously approve such waiver in
writing. In the event of a Change in Control which has not been approved by the
board of directors of Borrower, the Banks shall have the right to determine in
their sole discretion that none or only a portion of the Commitment shall be
terminated and become due and payable. In the event of a Change in Control which
has been approved by the board of directors of Borrower, the Banks shall have
the right to determine in their reasonable judgment that none or only a portion
of the Commitment shall be terminated and become due and payable hereunder. No
waiver of this provision shall be effective unless approved by all of the Banks
in writing.

ARTICLE 3
PAYMENTS; FEES

3.1 Principal and Interest.

(a) Interest shall be payable on the outstanding daily unpaid
principal amount of each Advance from the date thereof until payment in full and
shall accrue and be payable at the rates set forth herein, before and after
default, before and after maturity, before and after any judgment, and before
and after the commencement of any proceeding under any Debtor Relief Law, with
interest on overdue interest to bear interest at the Default Rate to the extent
permitted by applicable Laws.

(b) Subject to the terms and conditions of this Agreement,
Borrower may, by delivering to the Agent a Request for Loan in accordance with
the terms of this Agreement, from time to time request that outstanding Advances
bear interest calculated based either on the Base Rate or the LIBOR Rate. If
Borrower

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<PAGE> 31
shall fail to deliver a Request for Loan in accordance with the terms hereof
prior to the expiration of a LIBOR Period, Borrower shall be deemed to have
requested that the relevant Advance shall be converted to an Advance bearing
interest calculated based on the Base Rate as of such date.

(c) Interest accrued on each Base Rate Loan shall be due and
payable on each Quarterly Payment Date and on the Expiration Date.

(d) LIBOR Rate Loans shall bear interest at the relevant rate
calculated based on the LIBOR Rate from the first day of the relevant LIBOR
Period until but not including the last day of the LIBOR Period therefor.
Interest accrued on each LIBOR Rate Loan which is for a term of three (3) months
or less shall be due and payable on the last day of the related LIBOR Period.
Interest accrued on each other LIBOR Rate Loan shall be due and payable on the
date which is three months after the date such LIBOR Rate Loan was made and on
the last day of the related LIBOR Period. Except as otherwise provided in
Section 3.9, the unpaid principal amount of any LIBOR Rate Loan shall bear
interest at a rate per annum as set forth below in Section 3.1(f).

(e) Interest accrued on each Swing Line Loan shall be due and
payable on such dates, not more frequently than monthly, as may be specified by
the Swing Line Bank and in any event on the Expiration Date. The Swing Line Bank
shall be responsible for invoicing Borrower for such interest. The interest
payable on Swing Line Advances is solely for the account of the Swing Line Bank.

(f) Except as otherwise provided in Section 3.9, Advances shall
bear interest on a per annum basis as follows:

(i) Base Rate Loans shall bear interest at the Base Rate;

(ii) LIBOR Rate Loans shall bear interest at the LIBOR Rate
plus the Applicable Amount; and

(iii) Swing Line Loans shall bear interest at the Base Rate.

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<PAGE> 32
3.2 Fees.

(a) Agent's and Arranger's Fees. Borrower agrees to pay to the
Agent and the Arranger, for their own accounts, the fees referred to in the
letter agreement dated October 17, 1995 between Borrower, Bank of America and
the Arranger.

(b) Participation Fee. Borrower agrees to pay to the Agent, for
the account of each Bank, a fee equal to .0625% of each Bank's final allocated
pro rata share of the Commitment hereunder.

(c) Commitment Fee. From the Closing Date until but not including
the Expiration Date, Borrower shall pay to the Agent, for the account of each
Bank pro rata according to that Bank's pro rata share of the Commitment, a
commitment fee on the average daily amount by which the Commitment exceeds
Advances outstanding under the Commitment; provided, however, that Swing Line
Advances shall not be considered usage. Such fee shall equal a rate per annum
equal to the Applicable Amount. The commitment fee shall accrue daily and be
payable quarterly in arrears on each Quarterly Payment Date. The Agent shall
calculate the basic commitment fee and the amount thereof allocable to each Bank
according to that Bank's pro rata share of the Commitment and shall notify
Borrower in writing of such amounts. The amount of each commitment fee received
by the Agent for the account of a Bank shall be promptly paid by the Agent to
that Bank in immediately available funds.

3.3 Increased Commitment Costs. Upon reasonable notice from any Bank
(with a copy to the Agent), Borrower forthwith shall reimburse such Bank for any
increase in the costs of such Bank relating to any fees, premiums, assessments,
charges and/or reserve requirements imposed or requested subsequent to the
Closing Date by any Governmental Agency (whether or not having the force of Law)
against credit commitments of such Bank that is attributed by such Bank, using
any reasonable attribution method, from time to time, to its pro rata share of
the Commitment. Such Bank's notice shall set forth the basis on which it has
been determined that such an amount is due from Borrower, a calculation of the
amount due, and a certification that the

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<PAGE> 33
corresponding costs have been incurred by the Bank. Borrower shall only be
obligated to reimburse a Bank for costs incurred after the date of such notice
and for such costs incurred within the 120 day-period immediately preceding the
date such notice is received by Borrower. In the event such Bank fails to
provide notice to Borrower as provided hereinabove, Borrower shall not be
obligated to reimburse such Bank for increased commitment costs.

3.4 LIBOR Fees. So long as any Bank may be required to maintain
reserves against "eurocurrency liabilities" under Regulation D, Borrower shall
pay to that Bank a LIBOR fee that shall be calculated by applying an annual rate
determined from the formula set forth below against that Bank's share of the
principal amount of each LIBOR Rate Loan made by that Bank for the term of that
LIBOR Period, as applicable:

LIBOR Rate for that
LIBOR Rate Loan
- ----------------------------------------
1 minus rate of reserve requirements minus LIBOR Rate for that
(expressed as a decimal) for that Bank LIBOR Rate Loan
under Regulation D in respect of
Eurocurrency liabilities during the term
of that LIBOR Rate Loan

Amounts payable to any Bank under this section shall be determined solely by
that Bank based upon the assumption that the Bank funded 100% of its share of
each LIBOR Rate Loan in the London interbank market for a corresponding amount
and term, regardless of whether that Bank did so in fact. In the event of any
change in the rate of reserve requirements for that Bank under Regulation D
during the term of any LIBOR Rate Loan, or any variation in those requirements
based upon amounts or kinds of assets or liabilities, or other factors, that
Bank may use any reasonable attribution and/or averaging method it deems
appropriate and practical for determining the rate of reserve requirements for
that Bank that shall be used in the computation of the formula set forth above.
Each Bank shall notify Borrower of the amount of its LIBOR fee for each LIBOR
Rate Loan within 45 days after the last day of its term and Borrower shall pay
that LIBOR fee within five days after its receipt of the notice. Any such notice
from a Bank shall describe the manner of calculation

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<PAGE> 34
of the fee and include a statement that the Bank has been, during the applicable
period, required to maintain reserves against "eurocurrency liabilities" under
Regulation D. In the event such Bank fails to provide notice as set forth
hereinabove, Borrower shall not be obligated to pay such LIBOR fee.

3.5 LIBOR Costs. Upon notice from any Bank, Borrower shall promptly
reimburse that Bank for any increase in its costs, including without limitation
taxes (other than any tax, or changes in the rate of any tax, based upon the
income, profits or business of that Bank, or upon any personal property or
franchise of that Bank, or any similar tax which may be levied upon that Bank,
or any change in the rate of any such similar tax by the United States, or any
other government having jurisdiction, or any political subdivision or taxing
authority of any thereof, and other than a withholding tax covered by Section
3.12), fees, charges, and/or reserve requirements directly or indirectly
resulting from or relating to any LIBOR Rate Loan made by that Bank due to any
circumstance after the date hereof, including any payment of principal or
interest on a date other than the due date. As used in the preceding sentence,
"reserve requirements" shall be calculated after taking into account any
compensation received by that Bank through the computation of any LIBOR fee paid
to that Bank. Amounts payable to any Bank under this Section shall be determined
solely by such Bank upon the assumption that such Bank funded 100% of its share
of the LIBOR Rate Loan in the London interbank market for a corresponding amount
and term, regardless of whether that Bank did so in fact. In attributing any
Bank's general costs relating to issuance of certificates of deposit, or to its
eurocurrency operations to any transaction under this Agreement, or averaging
any cost over a period of time, that Bank may use any reasonable attribution
and/or averaging method it deems appropriate and practical. Any notice under
this Section shall be given to Borrower, with a copy to the Agent, and shall be
accompanied by a certificate from that Bank setting forth in reasonable detail
the nature and calculation of the relevant amounts. Borrower shall only be
obligated to reimburse a Bank for costs incurred after the date of such notice
and for such costs incurred within the 120 day-period immediately preceding the
date such notice is received by Borrower. In the event such Bank fails to
provide notice as set

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<PAGE> 35
forth hereinabove, Borrower shall not be obligated to reimburse such Bank for
LIBOR costs.

3.6 Special LIBOR Circumstances. If any Regulatory Development or the
applicable offshore interbank market shall at any time in the reasonable opinion
of any Bank make it unlawful or impractical for that Bank to fund or maintain
its share of a LIBOR Rate Loan (including LIBOR Rate Loans in any Applicable
Currency) in such interbank market for a corresponding amount or term, or to
continue that funding or maintaining, or to determine or charge interest rates
based upon any appropriate LIBOR Rate, that Bank shall promptly notify the
Agent, who shall notify Borrower and the other Banks, and:

(a) that Bank may then determine that its then outstanding
aggregate principal amounts of any LIBOR Rate Loan shall be redesignated,
prospectively, a Base Rate Loan and, upon written notice to Borrower by the
Agent, each LIBOR Rate Loan of such Bank shall be so redesignated; and

(b) such Bank's obligation to make LIBOR Rate Advances shall be
suspended for the duration of such illegality, impossibility or
impracticability.

In the case of any Offshore Currency Advances, unless Borrower has notified the
Agent to the contrary, each such Offshore Currency Advance made by such Bank
shall be redesignated, prospectively, a Base Rate Loan equal to the Dollar
Equivalent amount thereof.

3.7 Capital Requirements. If any Bank determines that either (i) the
introduction of or any change in any law or regulation or in the interpretation
or administration of any law or regulation by any governmental authority charged
with the interpretation or administration thereof from the date hereof or (ii)
compliance with any guideline or request from any such governmental authority
(whether or not having the force of Law) has or would have the effect of
reducing the rate of return on the capital of the Bank or any corporation
controlling the Bank as a consequence of or with reference to the Bank's making
or maintaining any commitment, credit, advance or other transaction hereunder
below the rate which the Bank or such other corporation

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<PAGE> 36
could have achieved but for such introduction, change or compliance (taking into
account the policies of the Bank or corporation with regard to capital), then
Borrower shall from time to time, upon reasonable demand by the Bank, pay to the
Bank additional amounts sufficient to compensate the Bank or other corporation
for such reduction. A certificate as to such amounts, submitted to Borrower by
the Bank (with a copy to the Agent), shall be conclusive and binding for all
purposes, absent manifest error. Borrower shall only be obligated to reimburse a
Bank for costs incurred after the date of such notice and for such costs
incurred within the 120 day-period immediately preceding the date such notice is
received by Borrower.

3.8 Indemnification. Borrower hereby indemnifies the Banks against, and
agrees to hold the Banks harmless from and reimburse the Banks on demand for all
costs, expenses, claims, penalties, liabilities, losses, legal fees and damages
(including without limitation any interest paid or that would be paid by the
Banks for deposits in the applicable interbank market and from fees payable to
terminate the deposits from which such funds were obtained or from charges
relating to any Offshore Currency Advances) incurred or sustained, or that would
be incurred or sustained, by the Banks, as reasonably determined by the Banks,
as a result of the prepayment of a LIBOR Rate Loan prior to the last day of its
LIBOR Period, or any failure of Borrower to consummate, or the failure by
Borrower to satisfy any condition required for the consummation of, any LIBOR
Rate Loan, on the date or in the amount specified in any notice requesting or
designating a LIBOR Rate Loan, such indemnification to be determined as though
the Banks had funded or would have funded 100% of such LIBOR Rate Loan in the
offshore interbank market. The determination of such amount by any Bank, when
evidenced by a certificate from that Bank giving a,reasonably detailed
calculation of the amount of said cost, expense, claim, penalty, liability,
loss, fee, damage or other charge, shall be presumed correct in the absence of
manifest error.

3.9 Late Payments. Should any installment of principal or interest or
any other amount payable under any Loan Document not be paid within five (5)
days of when due, whether by acceleration or otherwise, it shall thereafter bear
interest at a fluctuating interest rate per annum at all times equal to the sum
of 2% plus

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<PAGE> 37
the Base Rate in effect on the date this rate goes into effect as to any
particular amount due, to the extent permitted by applicable Law, until paid in
full (whether before or after judgment).

3.10 Computation of Interest and Fees. All computations of interest and
fees hereunder shall be calculated on the basis of a year of 365 days or 366
days, as the case may be, and the actual number of days elapsed, except that
computations of interest and fees on all LIBOR Rate Loans and Offshore Currency
Advances shall be calculated on the basis of a year of 360 days and an actual
day month. Any Advance that is repaid on the same day on which it is made shall
bear interest for one day.

3.11 Holidays. If any principal payment to be made by Borrower on a
Base Rate Loan shall come due on a day other than a Banking Day, payment shall
be made on the next succeeding Banking Day and the extension of time shall be
reflected in computing interest. if any principal payment to be made by Borrower
on a LIBOR Rate Loan shall come due on a day other than a Banking Day, payment
shall be made on the next preceding or succeeding Banking Day as determined by
the Agent in accordance with the then current banking practice in the London
interbank market and the adjustment shall be reflected in computing interest.

3.12 Payment Free of Taxes. Any payments made by any Party under the
Loan Documents shall be made free and clear of, and without reduction by reason
of, any tax, assessment or other charge imposed by any Governmental Agency,
central bank or comparable authority (other than taxes on income or gross
receipts generally applicable to banks). To the extent that Borrower is
obligated by applicable Laws to make any deduction or withholding on account of
taxes, assessments or other charges imposed by any Governmental Agency from any
amount payable to any Bank under this Agreement, Borrower shall (a) make such
deduction or withholding and pay the same to the relevant Governmental Agency
and (b) pay such additional amount to that Bank as is necessary to result in
that Bank's receiving a net after-tax (or after-assessment or after-charge)
amount equal to the amount to which that Bank would have been entitled under
this Agreement absent such deduction or withholding. If and when receipt of such
payment results in an excess payment or credit to that Bank

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<PAGE> 38
on account of such taxes, assessments or other charges, that Bank shall refund
such excess to Borrower. Each Bank agrees that, if requested by Borrower, it
will assign its pro rata share of the Commitment to a lender designated by
Borrower, and reasonably acceptable to the Majority Banks, if Borrower becomes
obligated under this Section to pay any material amount with respect to interest
payable to that Bank and the event or condition causing such payment has
continued for not less than 90 days.

3.13 Funding Sources. Nothing in this Agreement shall be deemed to
obligate any Bank to obtain the funds for its share of any Advance in any
particular place or manner or to constitute a representation by any Bank that it
has obtained or will obtain the funds for its share of any Advance in any
particular place or manner.

3.14 Failure to Charge Not Subsequent Waiver. Any decision by any Bank
not to require payment of any fee or costs, or to reduce the amount of the
payment required for any fee or costs, or to calculate any fee or any cost in
any particular manner, shall in no way limit or be deemed a waiver of any Bank's
right to require full payment of any fee or costs, or to calculate any fee or
any costs in any other manner.

3.15 Pro Rata Treatment. Each payment and prepayment of principal on an
Advance shall be made pro rata according to the unpaid principal amount of such
Advance held by each Bank.

3.16 Time and Place of Payments: Evidence Payments. The amount of each
payment hereunder, under the Notes or under any Loan Document shall be made to
the Agent at the Agent's Office, for the account of each of the Banks or the
Agent, as the case may be, (a) with respect to principal of, interest on, and
any other amounts (other than commitment fees) relating to, any Offshore
Currency Advance, in the Offshore Currency in which such Loan is denominated or
payable, and, with respect to all other amounts payable hereunder, in Dollars.
Such payments shall be made in Same Day Funds, and (i) in the case of Offshore
Currency payments, no later than such time on the dates specified herein as may
be notified by the Agent to Borrower at least one Banking Day prior to the date
due to be necessary for such payment to be credited on such date in accordance
with normal banking

- 38 -
<PAGE> 39
procedures in the place of payment, and (ii) in the case of any Dollar payments,
no later than 11:00 a.m. (San Francisco time) on the date specified herein. For
ease of administration, all Advances shall be credited to the Designated Deposit
Account, and payments due hereunder shall be made by debiting the Designated
Deposit Account. All payments received after the above times shall be deemed
received on the next succeeding Banking Day. The amount of all payments received
by the Agent for the account of a Bank shall be promptly paid by the Agent to
that Bank in immediately available funds.

3.17 Agent's Right to Assume Payments Will Be Made. Unless the Agent
shall have been notified by Borrower prior to the date on which any payment to
be made by Borrower hereunder is due that Borrower does not intend to remit such
payment, the Agent may, in its discretion, assume that Borrower has remitted
such payment when so due and the Agent may, in its discretion and in reliance
upon such assumption, make available to each Bank on such payment date an amount
equal to such Bank's share of such assumed payment. If Borrower has not in fact
remitted such payment to the Agent, each Bank shall forthwith on demand repay to
the Agent the amount of such assumed payment made available to such Bank,
together with interest thereon in respect of each day from and including the
date such amount was made available by the Agent to such Bank to the date such
amount is repaid to the Agent at the effective average daily Federal Funds Rate
as published by the Federal Reserve Bank of New York as notified by the Agent to
such Bank or, in the case of a payment in an Offshore Currency, at the Overnight
Rate.

3.18 Applications of Payments. Amounts received by the Agent for
application to amounts due and payable to the Agent or the Banks shall be
applied, if not otherwise specified by Borrower or if received after the
occurrence and continuance of an Event of Default, to amounts due and payable as
follows: first, to any amounts due and payable under Section 9.3, second, to the
ratable payment of any accrued interest or fees that are then due and payable,
third, to the payment of the outstanding Swing Line Advances, fourth, to the
ratable payment of the outstanding Base Rate Advances, and fifth to the ratable
payment of other outstanding Advances in the order of nearest expiring LIBOR
Periods, together with, in the case of payment of LIBOR Rate

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<PAGE> 40
Loans, any additional amount for which Borrower shall be obligated in respect of
the payment of LIBOR Rate Loans pursuant to Section 3.8.

3.19 Survivability. All of Borrower's obligations under this Article 3
shall survive for six months following the date on which all Advances hereunder
were fully paid and the Commitment terminated.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BORROWER

Borrower represents and warrants to the Banks that:

4.1 Incorporation, Qualification, Powers and Stock. Borrower and each
of its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the Laws of the State of its incorporation, is duly
qualified to do business as, and is in good standing as, a foreign corporation
in each other jurisdiction in which the conduct of its business or the ownership
of its Property makes such qualification necessary (except where the failure to
so qualify would not have a material adverse effect on the business of Borrower
and its Subsidiaries taken as a whole), and has all requisite corporate power
and corporate authority to conduct its business and to own its Property. All
outstanding shares of stock of Borrower and each of its Subsidiaries are duly
authorized, validly issued, fully paid and non-assessable.

4.2 Execution, Delivery and Performance of Loan Documents.

(a) Borrower has all requisite corporate power and corporate
authority to execute and deliver, and to perform all of its obligations under,
each Loan Document to which it is a Party.

(b) The execution and delivery by Borrower and the performance by
Borrower of each of its obligations under, each Loan Document have been duly
authorized by all necessary corporate action and do not:

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<PAGE> 41
(1) require any consent or approval not heretofore obtained
of any stockholder, security holder or creditor of Borrower;

(2) violate any provision of the articles of incorporation or
the bylaws of Borrower;

(3) result in or require the creation or imposition of any
Lien (other than under the Loan Documents) upon or with respect to
Property now owned or leased or hereafter acquired by Borrower; or

(4) violate any provision of any Law (including without
limitation Regulations G, r, U or X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to
Borrower which would reasonably be expected to have a materially
adverse effect on the Property or business condition (financial or
otherwise) of Borrower and its Subsidiaries taken as a whole; or

(5) result in a breach of or constitute a default under, or
cause or permit the acceleration of any obligation owed under, any
indenture or loan or credit agreement or any other material agreement,
lease or instrument to which Borrower is a party or by which Borrower
or any Property of Borrower is bound or affected.

(c) Borrower and each of its Subsidiaries is not in default under
or in violation of any Law, orders, writ, judgment, injunction, decree,
determination, award, indenture, agreement, lease or instrument in any respect
that is materially adverse to the interests of the Banks under the Loan
Documents or that could materially impair the ability of Borrower to perform its
obligations under the Loan Documents.

(d) No authorization, consent, approval, order, license, permit or
exemption from, or filing, registration or qualification with, any Governmental
Agency is or will be required under applicable Law to authorize or permit the

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<PAGE> 42
execution and delivery by Borrower of each Loan Document, and the payment by
Borrower of all amounts due under the Loan Documents.

(e) Each of the Loan Documents, when executed and delivered, will
constitute legal, valid and binding obligations of Borrower and each of them is
enforceable against Borrower in accordance with its terms except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors, rights generally.

4.3 Compliance With Laws and Other Requirements. Borrower and each of
its Subsidiaries is in compliance with all Laws and other requirements
applicable to its business and has obtained all authorizations, consents,
approvals, orders, licenses, permits and exemptions from, and have accomplished
all filings, registrations or qualifications with, any Governmental Agency that
are necessary for the transaction of its business, except where the failure to
be in such compliance, obtain such authorizations, consents, approvals, orders,
licenses, permits or exemptions, or accomplish such filings, registrations or
qualifications, is not materially adverse to the interests of the Banks, and
does not materially impair the ability of Borrower to perform its obligations
under the Loan Documents.

4.4 Financial Statements. Borrower has furnished to Agent complete and
accurate copies of the audited consolidated balance sheet of Borrower as of
January 28, 1995, and its audited consolidated statements of income, of changes
in financial position, and of changes in stockholder's equity for the Fiscal
Year then ended. The financial statements described were prepared in accordance
with Generally Accepted Accounting Principles, consistently applied, and fairly
present the financial condition, results of operations and changes in financial
position of Borrower and its Subsidiaries as at the dates thereof and for the
periods covered thereby.

4.5 No Material Adverse Change. There has been no material adverse
change in the condition, financial or otherwise, of Borrower and its
Subsidiaries taken as a whole, since the date of the financial statements
described in Section 4.4, and Borrower and each of its Subsidiaries does not,
taken as a whole, have any material liability or, to the best knowledge of
Borrower,

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<PAGE> 43
material contingent liability, not reflected or disclosed in the financial
statements or notes thereto described in Section 4.4.

4.6 Tax Liability. Except to the extent that failure to file tax
returns or to pay taxes would not reasonably be expected to have a materially
adverse effect on the Property or business condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole, Borrower and each of its
Subsidiaries have filed all tax returns (federal, state and local) required to
be filed and has paid all taxes shown thereon to be due and all property taxes
due, including interest and penalties, if any. To the best knowledge of
Borrower, there does not exist any substantial likelihood that any Governmental
Agency will, in respect of periods prior to January 31, 1992, successfully
assert a tax deficiency against Borrower or any of its Subsidiaries that is
material to Borrower and its Subsidiaries taken as a whole that has not been
adequately reserved against in the financial statements described in Section
4.4. Borrower and each of its Subsidiaries has established and is maintaining
adequate reserves for tax liabilities, if any, sufficient to comply with
Generally Accepted Accounting Principles.

4.7 Litigation. There are no actions, suits or proceedings pending or,
to the best knowledge of Borrower, threatened against or affecting Borrower or
any of its Subsidiaries or any Property of Borrower or any of its Subsidiaries
before any Governmental Agency which could have a material adverse effect on the
interests of the Banks under the Loan Documents, or could materially impair the
ability of Borrower to perform its Obligations under the Loan Documents.

4.8 No Default. No event has occurred and is continuing that is a
Default or an Event of Default.

4.9 Subsidiaries. The Subsidiaries of Borrower are listed in Schedule
4.9.

4.10 ERISA.

(a) other than as set forth in Schedule 4.10 there are no Plans.

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<PAGE> 44
(b) With respect to each Plan:

(1) such Plan complies in all material respects with ERISA
and/or any other applicable Laws;

(2) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred that could result in the termination or
disqualification of such Plan; and

(3) Neither Borrower nor any of its Subsidiaries has engaged
in any "prohibited transaction" (as defined in Section 4975 of the
Internal Revenue Code of 1986, as amended).

(1) the actuarial present value of all vested benefits under
such Plan does not exceed the current fair market value of the assets
of such Plan by an amount that could materially affect the ability of
Borrower to perform its obligations under the Loan Documents; and

(2) such Plan has not incurred any "accumulated funding
deficiency", (as defined in ERISA), whether or not waived, since the
effective date of ERISA.

(d) Neither Borrower nor any of its Subsidiaries is a party to or
has any employees that are covered by any Multiemployer Plan subject to ERISA,
and neither Borrower nor any of its Subsidiaries are currently subject to any
withdrawal liability under any Multiemployer Plan subject to ERISA.

4.11 Regulations G, T, U and X. Neither Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
"margin security" or "margin stock" (within the meaning of Regulations G and U,
respectively, of the Board of Governors of the Federal Reserve System of the
United States of America). If requested by Agent, Borrower and each of its
Subsidiaries will furnish each Bank with

- 44 -
<PAGE> 45
a statement or statements in conformity with the requirements of Federal Reserve
Forms G-3 and/or U-1 referred to in Regulations G or U of said Board of
Governors. No part of the proceeds of any Advance hereunder will be used to
purchase or carry any such margin security or margin stock or to extend credit
to others for the purpose of purchasing or carrying any such margin security or
margin stock. Neither the making of any Advance hereunder nor the use of
proceeds thereof will violate, or be inconsistent with, the provisions of
Regulations G, T, U or X of said Board of Governors.

4.12 Fiscal Year. Borrower operates on a 52 or 53 week Fiscal Year,
ending on either the last Saturday of January or the first Saturday of February,
generally on the Saturday nearest to each January 31.

4.13 Disclosure of Material Facts. No written statement made or
delivered by or on behalf of Borrower in connection with the Loan Documents or
the making of any Loan hereunder contains at the time when made or delivered, to
the best knowledge of Borrower, any untrue statement of a material fact, or
omits, at the time when made or delivered, to the best knowledge of Borrower, to
state a material fact with respect to the subject matter of such statement
necessary to make the statement made or delivered not misleading.

ARTICLE 5
COVENANTS OF BORROWER

As long as any Loan remains unpaid or any of the obligations remains
owing or any portion of the Commitment remains in effect, unless the Agent (with
the approval of the Majority Banks) otherwise consents in writing:

5.1 Limitations on Business Activity. Borrower shall not, and shall not
permit any of its Subsidiaries to, substantially change the character or nature
of its business, as conducted as of the Closing Date.

5.2 Maintenance of Corporate Existence, Property, Insurance, Etc.
Borrower shall, and shall cause each of its Subsidiaries to:

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<PAGE> 46
(a) Maintain its Property in good condition and make all necessary
renewals, replacements, additions, betterments and improvements thereto,
consistent with sound business practice and as is customary in the case of
Persons of established reputation engaged in the same or similar businesses and
similarly situated;

(b) Maintain, with financially sound and reputable insurers,
insurance with respect to its Property and businesses against such casualties
and contingencies of such types and in such amounts as is customary in the case
of Persons of established reputations engaged in the same or similar businesses
and similarly situated;

(c) Keep true books of account and records in which full and
correct entries will be made of all its business transactions, and reflect in
its financial statements adequate accruals and appropriations to reserves all in
accordance with Generally Accepted Accounting Principles, consistently applied;

(d) Do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights and franchises; and

(e) Not be in violation of any Laws, ordinances or governmental
rules and regulations to which it is subject and shall not fail to maintain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its Property or to the conduct of its business, if such
violation or failure to maintain would reasonably be expected to materially
adversely affect the Property or business condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole.

5.3 Payment of Taxes and Claims. Borrower shall pay, and shall cause
each of its Subsidiaries to pay, before they become delinquent:

(a) All taxes, assessments and governmental charges or levies
imposed upon Borrower or any Subsidiary, or upon the Property of Borrower or any
Subsidiary; and

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<PAGE> 47
(b) All claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons which, if unpaid, might result in
the creation of a Lien upon any Property of Borrower or any of its Subsidiaries;

provided, however, that none of the foregoing need be paid while being
contested in good faith so long as Borrower's or the Subsidiary's title to, and
its right to use, its Property is not materially adversely affected thereby, and
so long as adequate reserves, if required by Generally Accepted Accounting
Principles, are maintained for such claims.

5.4 Compliance with Agreements, Duties and Obligations. Borrower shall,
and shall cause each of its Subsidiaries to, promptly and fully comply with all
of its respective agreements, duties and obligations under the Loan Documents,
and under any other agreements or instruments to which it is a party, including
but not limited to any agreements or instruments with respect to any
Indebtedness of Borrower or any of its Subsidiaries, where failure to comply, as
aforesaid, with such other agreements and instruments would have a material
adverse effect on the Property or business condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole.

5.5 Inspection. Borrower covenants that Agent shall, at Banks' expense,
have the right, upon notice (which notice shall specify the nature and purpose
of the inspection) to Borrower or any of its Subsidiaries, to visit and inspect
any of the Property of, to examine or audit the books of account and records of
and to copy and take extracts therefrom and to discuss the affairs, finances or
accounts of, and to be advised as to the same by the officers of Borrower or the
Subsidiary, in such detail and through such agents and representatives as Agent
may desire, all at such reasonable times and as often as may be reasonably
requested; provided, however, that Agent shall conduct no more than four
inspections in any Fiscal Year. Borrower shall cause each of its Subsidiaries to
comply with this Section 5.5.

5.6 Mergers and Sale of Assets. Borrower shall not, and shall cause
each of its Subsidiaries to not:

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<PAGE> 48
(a) Sell or otherwise dispose of any material Property for less
than its fair value; or

(b) Sell or otherwise dispose of, in a single transaction or a
series of related transactions, all or a substantial part of its Property; or

(c) Merge with or into any other Person, firm or corporation,
except that a Subsidiary of Borrower may merge with or into Borrower or another
Subsidiary of Borrower.

In the event that the aggregate consideration paid from the
Closing Date through the Expiration Date in connection with the disposition of
assets exceeds $7,500,000 in any four quarter period, then the net cash proceeds
from the disposition of assets in excess of such amounts shall be paid to the
Agent for the account of the Banks pursuant to Section 2.6(b). Automatically and
simultaneously with each such payment, the Commitment shall be reduced in like
amount and the scheduled Commitment reductions under Section 2.6(a) shall be
reduced in the inverse order of their occurrence.

5.7 Consolidated Tangible Effective Net Worth. Borrower shall maintain,
as of the end of any fiscal quarter, a Consolidated Tangible Effective Net Worth
of at least (i) 80% of the amount of Borrower's Adjusted Consolidated Tangible
Effective Net Worth as of July 29, 1995 plus (ii) 50% of all positive
Consolidated Net Income of Borrower earned since July 29, 1995 plus (iii) 50% of
the net proceeds from the issuance of equity securities (other than equity
securities issued pursuant to any of Borrower's employee benefit plans).

5.8 Leverage Ratio. Borrower shall not, as of the end of any fiscal
quarter, permit the Leverage ratio to be greater than 3:00 to 1.

5.9 Fixed Charge Coverage Ratio. Borrower shall not, as of the end of
any fiscal quarter, permit the Fixed Charge Coverage Ratio to be less than 1.50
to 1.

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<PAGE> 49
5.10 Restricted Payments. Borrower shall not, and shall not suffer or
permit any Subsidiary to, declare or make any Distribution or Dividend; except
that:

(a) Borrower and any Subsidiary may declare or pay cash dividends
in respect of its capital stock in an amount not to exceed (i) 50% of the
positive net income of Borrower and its Subsidiaries arising after the Closing
Date and computed on a cumulative consolidated basis, plus (ii) a cumulative
amount not exceeding $5,000,000; provided, that prior to any payment under
clause (i) the Agent and the Banks shall have received the financial statements
required by Section 5.13(a)(3) for the year in respect of which such dividends
are being made and (ii) immediately after giving effect to such proposed action,
no Default or Event of Default would exist; and

(b) Subsidiaries of Borrower may make distributions, dividends or
other payments of the type described above to Borrower or other Subsidiaries of
Borrower.

5.11 Liens. Borrower shall not, and shall cause each of its
Subsidiaries to not, pledge, mortgage, lien or hypothecate, or suffer the
creation or existence of any pledge, mortgage, lien or hypothecation of any of
its Property and shall not, and shall cause each of its Subsidiaries to not
suffer to exist any contractual obligation that contains a covenant binding
Borrower or any of its Subsidiaries that prohibits Liens on its Property, except
for:

(a) Existing Liens disclosed in Schedule 5.11 hereto securing
obligations outstanding on the Closing Date as such obligations may be extended
or refinanced; provided that the Obligations secured thereby are not increased;

(b) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons not yet delinquent or thereafter
payable without penalty or which are being contested in good faith in accordance
with Section 5.3, so long as Borrower's or the Subsidiary's title to, and right
to use, the Property so affected is not materially

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<PAGE> 50
adversely affected thereby, and so long as adequate reserves are maintained for
such claims;

(c) Liens constituting purchase money real Property mortgages, and
refinancing thereof, where recourse may be had only against the Real Property
purchased or financed, and where the obligations secured by such Liens against
such real Property do not exceed, in the aggregate, $7,000,000;

(d) Liens for amounts not in excess of those amounts under lien at
the Closing Date, where such Liens are not otherwise allowed hereunder;

(e) Capitalized leases which do not secure obligations in excess
of $5,000,000 in the aggregate over the term thereof, outstanding at any one
time; and

(f) other miscellaneous Liens incidental to the conduct of
Borrower's or the Subsidiary's business or the ownership or leasing of its
Properties that were not incurred in connection with the borrowing of money or
the purchase of Property or the obtaining of advances or credit and that do not,
in the aggregate, materially detract from the value of its Property, materially
impair the use of Borrower's or the Subsidiary's Property in the operation of
its businesses, or materially impair Borrower's or the Subsidiary's ability to
perform the obligations.

5.12 Notice of Default. Borrower covenants that if any Responsible
Official of Borrower shall obtain knowledge of the occurrence of any Default
hereunder or under any Subordinated Obligation, Borrower at once shall give
notice to Agent specifying with particularity the nature of such Default, the
period of existence of such Default, and the action Borrower is taking and/or
proposes to take with respect thereto.

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<PAGE> 51
5.13 Financial and Business Information.

(a) Borrower shall deliver to Agent:

(1) as soon as practicable after the end of each fiscal
quarter of Borrower (including the last quarter of each Fiscal Year,
provided that with respect to such last quarter the financial
statements required hereby may be in preliminary form, prior to
year-end and audit adjustments) and in any event within forty-five (45)
days thereafter, (i) consolidated (and consolidating, if prepared)
balance sheets as at the end of such fiscal quarter, (ii) consolidated
(and consolidating, if prepared) statements of income for the portion
of its Fiscal Year ending with such fiscal quarter and (iii)
consolidated (and consolidating, if prepared) statements of changes in
stockholders, equity and cash flows of Borrower and its Subsidiaries
for the portion of its Fiscal Year ending with such fiscal quarter, all
in reasonable detail, prepared in accordance with Generally Accepted
Accounting Principles applicable to interim financial statements,
consistently applied, and certified by a Responsible Official of
Borrower as fairly presenting the financial condition, results of
operations and changes in financial position of Borrower and its
Subsidiaries as at the end of and for the period ending on such date,
subject only to changes resulting from year-end adjustments;
notwithstanding the foregoing, in the event Borrower prepares and files
a 10-Q Report with the Securities and Exchange Commission, such report
may be provided to Banks for the applicable fiscal quarter in lieu of
the report described above;

(2) as soon as practicable after the end of each Fiscal Year
of Borrower and in any event within one hundred twenty (120) days
thereafter (i) the consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such year and (ii) consolidated
statements of income, of changes in stockholders, equity and of cash
flows of Borrower and its Subsidiaries for such Fiscal Year, all in
reasonable detail, prepared in accordance with Generally Accepted
Accounting Principles, consistently applied, and certified by an
independent public "big-six" accounting firm acceptable to

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<PAGE> 52
Agent and the Majority Banks as fairly presenting the financial
condition, results of operations and changes in financial position of
Borrower and its Subsidiaries as at the end of and for the period
ending on such date, such certification to contain no qualifications as
to the scope of the audit and only such other qualifications as are
acceptable to Agent and the Majority Banks, together with a copy of the
"management letter" provided by such independent accounting firm to
Borrower in connection with its annual audit; notwithstanding the
foregoing, in the event Borrower prepares and files a 10-K Report with
the Securities and Exchange Commission, such report may be provided to
Banks for the applicable Fiscal Year in lieu of the annual audit
described above; and

(3) within sixty (60) days after the end of a Fiscal Year, an
annual financial forecast, with appropriate schedules, for the then
current Fiscal Year, including, without limitation, a balance sheet,
income statement and statement of cash flow, as prepared for internal
distribution to management of Borrower;

(b) Each set of quarterly financial statements delivered pursuant
to subsection (a)(2) of this Section and each set of annual financial statements
delivered pursuant to subsection (a)(3) of this Section shall be accompanied by
a properly completed Compliance Certificate executed by a Responsible Official
of Borrower, certifying the matters required therein as of the date of such
financial statements; if there is any material variance in the calculations set
forth in any Compliance Certificate based on preliminary numbers for the last
quarter of each Fiscal Year from such calculations based on the final, audited
financial statements for such Fiscal Year, Borrower shall promptly deliver a
revised Compliance Certificate setting forth the revised calculations thereof;

(c) Borrower shall furnish to Agent such other information and
data with respect to Borrower as Banks from time to time may reasonably request.

5.14 Maintenance of Corporate Structure. Except as otherwise permitted
by Section 5.6. Borrower shall not change its

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<PAGE> 53
corporate structure through mergers, acquisitions, creation or dissolution of
Subsidiaries or otherwise without the prior written permission of the Majority
Banks.

5.15 Maintenance of Fiscal Year. Borrower shall not change its Fiscal
Year without notifying Agent.

5.16 Disclosure of Material Litigation. Borrower immediately shall
notify Agent of any litigation or other action, suit or proceeding before any
Governmental Agency to which, to the best knowledge of Borrower, Borrower or any
of its Subsidiaries is a party if the amount in controversy exceeds $5,000,000,
or in the reasonable opinion of Borrower otherwise is material. Thereafter,
Borrower shall keep Agent apprised of the status of the litigation or other such
action, suit or proceeding in such manner as Agent may reasonably request.

5.17 ERISA Compliance.

(a) Borrower shall not, and shall cause each of its Subsidiaries
to not:

(1) engage in any "prohibited transaction" as such term is
defined in Section 4975 of the Internal Revenue Code of 1986, as
amended;

(2) incur any "accumulated funding deficiency" as that term
is defined in Section 302 of ERISA; or

(3) terminate any plan in a manner which could result in
material liability of Borrower or any of its Subsidiaries to the Plan
or to the PBGC or the imposition of a Lien on the Property of Borrower
or any of its Subsidiaries pursuant to Section 4068 of ERISA.

(b) Borrower shall not, and shall cause each of its Subsidiaries
to not, assume any obligation to contribute to any Multiemployer Plan, nor shall
it acquire any Person or the assets of any Person which has, or has had at any
time from and after January 2, 1974, an obligation to contribute to any
Multiemployer Plan, where the withdrawal liability may exceed $15,000,000.

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<PAGE> 54
(c) Borrower immediately shall notify Agent of the occurrence of any
"reportable event," as defined in Section 4043 of ERISA (other than a
"reportable event" that is not subject to the provision of 30 day notice to the
PBGC), or of any "prohibited transaction" (as defined in Section 4975 of the
Internal Revenue Code of 1986, as amended) with respect to any Plan or any trust
created thereunder. Upon request by Agent, Borrower promptly shall furnish to
Agent copies of any reports or other documents filed by Borrower or any of its
Subsidiaries with the United States Secretary of Labor, the PBGC, the Internal
Revenue Service and/or any other Governmental Agency with respect to any Plan.

(d) Each Plan shall comply in all material respects with ERISA and all
other applicable Laws.

5.18 Payment or Prepayment of Indebtedness. Borrower shall not pay or
prepay any principal, interest or any other amount with respect to any of the
Subordinated Obligations or purchase or redeem any Subordinated Obligations,
except that, so long as no Default or Event or Default has occurred and is
continuing, Borrower may make such payments or prepayments with support of a
certificate from a Senior Officer of Borrower substantiating, on a pro forma
basis, compliance with all financial ratio covenants and, in any event, Borrower
may pay interest in accordance with the terms of any Subordinated Obligation.

5.19 Investments. Borrower shall not, and shall cause each of its
Subsidiaries to not, make any Investments, including Hostile Acquisitions,
except (a) Investments in Cash Equivalents, (b) loans or extensions of credit in
connection with Borrower's employee relocation program, so long as the aggregate
outstanding amount of such loans and extensions at any one time does not exceed
$2,000,000 and (c) aggregate Investments in partnerships, joint ventures,
minority positions and treasury stock of Borrower, not to exceed $15,000,000.

5.20 Disposition of Assets. Borrower shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
any property (including accounts and notes receivable, with or without

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<PAGE> 55
recourse) or enter into any agreement to do any of the foregoing, except:

(a) dispositions of inventory, or used, worn-out or surplus
equipment or other dispositions in the ordinary course of business;

(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;

provided, that (i) at the time of any disposition, no Event of Default
shall exist or shall result from such disposition, (ii) the aggregate sales
price from such disposition shall be paid in cash, and (iii) Borrower shall
comply with Section 2.6(b).

5.21 Indebtedness, Including Guaranties. Borrower, on a consolidated
basis, shall not create, incur, assume or suffer to exist any Indebtedness
except:

(a) trade credit incurred in favor of vendors of goods, services,
supplies or merchandise in the ordinary course of Borrower's or a Subsidiary's
business;

(b) Subordinated Obligations;

(d) Indebtedness presently outstanding as set forth in Schedule
5.20, provided that the terms thereof are not modified to impose more burdensome
terms on Borrower;

(e) other Indebtedness for the purchase of real Property (or the
refinancing thereof) where recourse may be had only against the Property
purchased, and such Indebtedness shall not exceed in the aggregate $7,000,000;

(f) Indebtedness with respect to any commercial or standby letters
of credit outstanding at any one time not to exceed in the aggregate $7,000,000;

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<PAGE> 56
(g) additional Indebtedness under capitalized leases not to exceed
$5,000,000 over the term thereof in the aggregate, outstanding at any one time;

(h) obligations with respect to any guaranties at any one time not
to exceed in the aggregate $5,000,000;

(i) senior unsecured Indebtedness outstanding at any one time not
to exceed in the aggregate $50,000,000;

(j) Indebtedness consisting of interest rate swap agreements; and

(k) Indebtedness of Borrower to its Subsidiaries.

5.22 Transfers Among Affiliates. Borrower shall not (a) allow transfers
of assets from Borrower and its consolidated Subsidiaries to any unconsolidated
Subsidiary or unconsolidated Subsidiaries of Borrower in an aggregate amount in
excess of $5,000,000 or (b) allow the cumulative intercompany payables of
unconsolidated Subsidiaries of Borrower payable to Borrower and its consolidated
Subsidiaries to increase more than $5,000,000 over the amount of such payables
as of the Closing Date.

ARTICLE 6
CONDITIONS

6.1 First Advance. The obligation of the Banks to make the initial
Advances is subject to the condition precedent (in addition to any applicable
conditions precedent set forth in Section 6.2) that the Agent shall have
received all of the following documents, each of which shall be originals unless
otherwise specified, each properly executed by a Responsible Official of each
party thereof, and each dated as of the Closing Date and in form and substance
satisfactory to Agent (unless otherwise specified or, in the case of the date of
any of the following, unless Agent otherwise agrees):

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<PAGE> 57
(a) sufficient executed counterparts of this Agreement such that
the Agent, each Bank and Borrower may receive an executed set of
counterparts of this Agreement;

(b) Notes executed by Borrower payable to the order of each Bank
requesting a Note equal to that Bank's pro rata share of the
Commitment;

(c) a certificate of the corporate secretary of Borrower
certifying that, except as amended by any amendments attached to such
certificate, the articles of incorporation of Borrower and its domestic
Subsidiaries, including any amendments thereto, delivered pursuant to
the Prior Credit Agreement or before are complete and accurate copies
thereof as in effect on the date hereof;

(d) a certificate of the corporate secretary of Borrower
certifying that, except as amended by any amendments attached to such
certificate, the bylaws of Borrower and its domestic Subsidiaries,
including any amendments thereto, delivered pursuant to the Prior
Credit Agreement or before are complete and accurate copies thereof as
in effect on the date hereof;

(e) a certificate of the corporate secretary of Borrower setting
forth: (i) a copy of the resolutions adopted by the board of directors
of Borrower authorizing the execution, delivery and performance of the
Loan Documents by Borrower; (ii) a copy of the resolution authorizing
unsecured borrowings from the Banks adopted by the board of directors;
and (iii) the name of each incumbent officer of Borrower and each other
Responsible Official authorized to sign Loan Documents and Compliance
Certificates on behalf of Borrower;

(f) the written legal opinion of in-house counsel for Borrower, as
counsel for Borrower, in form and content acceptable to Agent and
substantially in the form of Exhibit E;

(g) a current certificate of a Responsible Official of Borrower
certifying that the representations and warranties set forth in Article
4 are true and correct and

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<PAGE> 58
that no event has occurred and is continuing that constitutes a Default
or an Event of Default;

(h) a Request for Loan;

(i) a Compliance Certificate as of the last day of the most
recently ended Fiscal Quarter;

(j) payment of the fees referred to in Sections 3.2(a) and (b);
and

(k) such other documents and assurances as the Agent may
reasonably require.

6.2 Any Advance. The obligation of the Banks to make any Advance is
subject to the following conditions precedent (in addition to any applicable
conditions precedent specified elsewhere in this Article 6):

(a) All representations and warranties contained in Article 4
(except as modified with the consent of Majority Banks or as allowed hereunder)
shall be correct on and as of the date of the Advance, both immediately before
and immediately after giving effect to such Advance, as though made on and as of
that date, and no Default or Event of Default shall have occurred and be
continuing;

(b) Borrower shall have complied with all applicable requirements
of Article 2 with respect to such Advance.

ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES

7.1 Events of Default. The occurrence of any one or more of the
following events or conditions, whatever the reason therefor, shall constitute
an Event of Default hereunder:

(a) Failure to pay the principal of any Advance or any portion
thereof when due, whether at the stated maturity, upon acceleration, by reason
of required prepayment or otherwise; or

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<PAGE> 59
(b) Failure to pay any installment of interest on any Advance or
the commitment fee within five (5) days of the time when due; or

(c) Failure to pay any other amount payable by Borrower under the
Loan Documents within thirty (30) days after notice of such failure is given by
Agent or by any Bank to Borrower; or

(d) Failure to perform the covenants contained in 5.6 [Mergers and
Sale of Assets], 5.7 [Consolidated Tangible Effective Net Worth], 5.8 [Leverage
Ratio], 5.9 [Fixed Charge Coverage Ratio], 5.14 [Maintenance of Corporate
Structure], 5.18 [Payment or Prepayment of Indebtedness]; or

(e) Failure to perform or observe any other term, covenant or
agreement contained in any Loan Document on its part to be performed or observed
and such failure shall continue for more than thirty (30) calendar days after
notice of such failure is given by Agent or Borrower; or

(f) Any representation or warranty in any Loan Document proves to
have been incorrect when made in any material respect provided, however, that if
such Default can be cured, then such Default shall not constitute an Event of
Default if, within thirty (30) days after Borrower or Agent discovers such
Default, Borrower cures such Default; or

(g) This Agreement or any Note at any time after its execution and
delivery and for any reason other than the agreement of the Banks or
satisfaction in full of all obligations, ceases to be in full force and effect
or is declared to be null and void by a court of competent jurisdiction; or the
validity or enforceability thereof is contested in a judicial proceeding by
Borrower (except a shareholder derivative action); or Borrower denies that it
has any or further liability or obligation under any Loan Document, unless all
obligations of Borrower thereunder have been fully paid and performed; or

(h) Other than as permitted herein, Borrower is dissolved or
liquidated or all or substantially all of the assets of Borrower or any
Subsidiary are sold or otherwise transferred without the written consent of the
Banks; or

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<PAGE> 60
(i) Borrower or any of its Subsidiaries is the subject of an order
for relief by a bankruptcy court, or is unable or admits in writing its
inability to pay its debts as they mature or makes an assignment for the benefit
of creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
for it or for all or any material part of its Property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer is
appointed for Borrower or any of its Subsidiaries or for all or any material
part of its Property without the application or consent of Borrower or the
Subsidiary; or Borrower or any of its Subsidiaries institutes or consents to any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, custodianship, conservatorship, liquidation, rehabilitation or
similar proceeding relating to it or to all or any material part of its Property
under the Laws of any jurisdiction; or any similar proceeding is instituted
without the consent of Borrower or the Subsidiary; or any judgment, writ,
warrant, attachment, execution or similar process is issued or levied against
all or any material part of the Property of Borrower and its Subsidiaries taken
as a whole and is not released, vacated or fully-bonded within sixty (60)
calendar days after its issue or levy; or

(j) Borrower or any of its Subsidiaries has defaulted with respect
to any Indebtedness owed to any Person having an aggregate principal amount of
more than $1,000,000, and such Person, as a consequence of such default, has the
right to accelerate the maturity of such Indebtedness, or has commenced judicial
or nonjudicial action to collect such Indebtedness or foreclose or otherwise
realize upon security held therefor where such default or action would, in the
reasonable judgment of the Majority Banks, have a material effect on the
business of Borrower and its Subsidiaries, taken as a whole, or such Person has
taken or is taking such other actions as might materially and adversely affect
the interests of the Banks under the Loan Documents; or

(k) Majority Banks have reasonably determined that a material
adverse change has occurred since the Closing Date in the operations, business
or condition, financial or otherwise, of

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<PAGE> 61
Borrower that would prevent or preclude Borrower from discharging its
obligations under the Agreement or the Notes, and sixty (60) calendar days have
elapsed since the date that notice of such determination (which notice shall
specify in reasonable detail the nature of such material adverse change) is
given to Borrower.

7.2 Remedies Upon Event of Default. Without limiting any other rights
or remedies of the Agent or the Banks provided for elsewhere in this Agreement
or the Loan Documents, or by applicable Law or in equity, or otherwise:

(a) Upon the occurrence of any Event of Default, and so long as
any such Event of Default shall be continuing (other than an Event of Default
described in Section 7.1(i)):

(i) all commitments to make Advances and all other
obligations of the Agent or the Banks and all rights of Borrower and
any other Parties under the Loan Documents shall be suspended without
notice to or demand upon Borrower, which are expressly waived by
Borrower; and

(ii) the Majority Banks may request the Agent to, and the
Agent thereupon shall, declare the unpaid principal of or unperformed
balance of all obligations due to Banks hereunder and under the Notes,
all interest accrued and unpaid thereon, and all other amounts payable
under the Loan Documents to be forthwith due and payable, whereupon the
same shall become and be forthwith due and payable, without protest,
presentment, notice of dishonor, demand, or further notice of any kind,
all of which are expressly waived by Borrower.

(b) Upon the occurrence of any Event of Default described in
Section 7.1(i):

(i) all commitments to make Advances and all other
obligations of the Agent or the Banks and all rights of Borrower and
any other parties under the Loan Documents shall terminate without
notice to or demand upon Borrower, which are expressly waived by
Borrower, except that all the Banks may waive the Event of Default or,
without waiving, determine, upon terms and conditions satisfactory to
all the

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<PAGE> 62
Banks, to reinstate the Commitment and make further Advances, which
waiver or determination shall apply equally to, and shall be binding
upon, all of the Banks; and

(ii) the unpaid principal of or unperformed balance of all
obligations due to the Banks hereunder and under the Notes, and all
interest accrued and unpaid on such obligations, and all other amounts
payable under the Loan Documents shall be forthwith due and payable,
without protest, presentment, notice of dishonor, demand, or further
notice of any kind, all of which are expressly waived by Borrower.

(c) Upon the occurrence of an Event of Default, the Banks and the
Agent, or any of them, without notice to or demand upon Borrower, which are
expressly waived by Borrower, may proceed to protect, exercise, and enforce
their rights and remedies under the Loan Documents against Borrower or any other
Party and such other rights and remedies as are provided by Law or equity. The
order and manner in which the rights and remedies of the Banks under the Loan
Documents and otherwise are exercised shall be determined by the Majority Banks.

(d) All payments received by the Agent and the Banks, or any of
them, shall be applied first to the costs and expenses (including attorneys'
fees and disbursements) of the Agent, acting as Agent, and of the Banks and
thereafter paid pro rata to the Banks in the same proportion that the aggregate
of the unpaid principal amount owing on the obligations of Borrower to each
Bank, plus accrued and unpaid interest thereon, bears to the aggregate of the
unpaid principal amount owing on all the obligations, plus accrued and unpaid
interest thereon.

Regardless of how each Bank may treat the payments for the purpose of computing
Borrower's obligations, the payments shall be applied first, to the costs and
expenses of the Agent, acting as Agent, and the Banks as set forth above, second
to the payment of accrued and unpaid fees hereunder and interest on all
Obligations to the Banks, to and including the date of such application (ratably
according to the accrued and unpaid interest on the Advances), third, to
the ratable payment of the unpaid principal of all Obligations to the Banks, and
fourth, to the

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<PAGE> 63
payment of all other amounts then owing to the Agent or the Banks under the Loan
Documents. No application of payments will cure any Event of Default or prevent
acceleration, or continued acceleration, of amounts payable under the Loan
Documents or prevent the exercise, or continued exercise, of rights or remedies
of the Banks hereunder or under applicable Law.

ARTICLE 8
THE AGENT

8.1 Appointment and Authorization. Each Bank hereby irrevocably
appoints and authorizes the Agent to take such action as Agent on its behalf and
to exercise such powers under the Loan Documents as are delegated to the Agent
by the terms thereof or are reasonably incidental, as determined by the Agent,
thereto. This appointment and authorization does not constitute appointment of
the Agent as trustee for any Bank and, except as specifically set forth herein
to the contrary, the Agent shall take such action and exercise such powers only
in an administrative and ministerial capacity.

8.2 Agent and Affiliates. Bank of America National Trust and Savings
Association (and each successor Agent) has the same rights and powers under the
Loan Documents as any other Bank and may exercise the same as though it were not
the Agent; and the term "Bank" or "Banks" includes Bank of America National
Trust and Savings Association in its individual capacity. Bank of America
National Trust and Savings Association (and each successor Agent) and its
respective Affiliates may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with Borrower and any
Affiliate of Borrower, as if it were not the Agent and without any duty to
account therefor to the Banks. Bank of America National Trust and Savings
Association (and each successor Agent) need not account to any other Bank for
any monies received by it for reimbursement of its costs and expenses as Agent
hereunder, or for any monies received by it in its capacity as a Bank hereunder,
except as otherwise provided herein.

8.3 Banks' Credit Decisions. Each Bank agrees that it has,
independently and without reliance upon the Agent, any other

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Bank, or the directors, officers, agents, or employees of the Agent or of any
other Bank, and instead in reliance upon information supplied to it by or on
behalf of Borrower and its Subsidiaries and upon such other information as it
has deemed appropriate, made its own independent credit analysis and decision to
enter into this Agreement. Each Bank also agrees that it shall, independently
and without reliance upon the Agent, any other Bank, or the directors, officers,
agents, or employees of the Agent or of any other Bank, continue to make its own
independent credit analyses and decisions in acting or not acting under the Loan
Documents.

8.4 Action by Agent.

(a) The Agent may assume that no Event of Default has occurred and
is continuing, unless the Agent has actual knowledge of the Event of Default,
has received notice from Borrower stating the nature of the Event of Default, or
has received notice from a Bank stating the nature of the Event of Default and
that Bank considers the Event of Default to have occurred and to be continuing.

(b) The Agent has only those obligations under the Loan Documents
that are expressly set forth therein. Without limitation on the foregoing, the
Agent shall have no duty to inspect any property of Borrower or any of its
Subsidiaries, although the Agent may in its discretion periodically inspect any
property from time to time, in accordance with Section 5.5 hereof and, upon
request by any Bank shall provide the results of such inspection to that Bank
provided that Bank shares in the costs of such inspection. If the Agent desires
to seek reimbursement from a Bank for the cost of any such inspection it will
obtain the approval of that Bank prior to each such inspection.

(c) Except for any obligation expressly set forth in the Loan
Documents and as long as the Agent may assume that no Event of Default has
occurred and is continuing, the Agent may, but shall not be required to,
exercise its discretion to act or not act, except that the Agent shall be
required to act or not act upon the instructions of the Majority Banks (or of
all the Banks, to the extent required by this Agreement) and those instructions
shall be binding upon the Agent and all the Banks,

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provided that the Agent shall not be required to act or not act if to do
so would expose the Agent to significant liability or would be contrary to any
Loan Document or to applicable law.

(d) If the Agent has received a notice specified in clause (a),
the Agent shall give notice thereof to the Banks and shall act or not act upon
the instructions of the Majority Banks (or of all the Banks, to the extent
required by this Agreement), provided that the Agent shall not be required to
act or not act if to do so would be contrary to any Loan Document or to
applicable Law or would result, in the reasonable judgment of the Agent, in
substantial risk of liability to the Agent, and except that if the Majority
Banks (or all the Banks, if required under this Agreement) fail, for three (3)
Banking Days after the receipt of notice from the Agent, to instruct the Agent,
then the Agent in its sole discretion, may act or not act as it deems advisable
for the protection of the interests of the Banks.

(e) The Agent shall have no liability to any Bank for acting, or
not acting, as instructed by the Majority Banks (or all the Banks, if required
under this Agreement), notwithstanding any other provision hereof.

8.5 Liability of Agent. Neither the Agent nor any of its respective
directors, officers, agents, or employees shall be liable for any action taken
or not taken by them under or in connection with the Loan Documents, except for
their own gross negligence or willful misconduct. Without limitation on the
foregoing, the Agent and its respective directors, officers, agents and
employees:

(a) may treat the payee of any Note as the holder thereof until
the Agent receives notice of the assignment or transfer thereof in form
satisfactory to the Agent, signed by the payee and may treat each Bank as the
owner of that Bank's interest in the obligations due to Banks for all purposes
of this Agreement until the Agent receives notice of the assignment or transfer
thereof, in form satisfactory to the Agent, signed by that Bank;

(b) may consult with legal counsel, in-house legal counsel,
independent public accountants, in-house accountants and

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other professionals, or other experts selected by it with reasonable care, or
with legal counsel, independent public accountants, or other experts for
Borrower, and shall not be liable for any action taken or not taken by it or
them in good faith in accordance with the advice of such legal counsel,
independent public accountants, or experts;

(c) will not be responsible to any Bank for any statement,
warranty, or representation made in any of the Loan Documents or in any notice,
certificate, report, request, or other statement (written or oral) in connection
with any of the Loan Documents;

(d) except to the extent expressly set forth in the Loan
Documents, will have no duty to ascertain or inquire as to the performance or
observance by Borrower or any other Person of any of the terms, conditions, or
covenants of any of the Loan Documents or to inspect the property, books, or
records of Borrower or any of its Subsidiaries or other Person;

(e) will not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, effectiveness, sufficiency, or
value of any Loan Document, any other instrument or writing furnished pursuant
thereto or in connection therewith;

(f) will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate, statement, or
other instrument or writing believed by it or them to be genuine and signed or
sent by the proper party or parties; and

(g) will not incur any liability for any arithmetical error in
computing any amount payable to or receivable from any Bank hereunder, including
without limitation payment of principal and interest on the Advances, payment of
commitment fees, Advances, and other amounts; provided that promptly upon
discovery of such an error in computation, the Agent, the Banks, and (to the
extent applicable) Borrower shall make such adjustments as are necessary to
correct such error and to restore the parties to the position that they would
have occupied had the error not occurred.

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8.6 Indemnification. Each Bank shall, ratably in accordance with the
respective principal amount of its Bank Commitment, indemnify and hold the Agent
and its directors, officers, agents, and employees harmless against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements of any kind or nature whatsoever (including,
without limitation, attorneys' fees and disbursements) that may be imposed on,
incurred by, or asserted against it or them in any way relating to or arising
out of the Loan Documents (other than losses incurred by reason of the failure
by Borrower to pay the obligations due to Banks hereunder or under the Notes) or
any action taken or not taken by it as Agent thereunder, except for the Agent's
gross negligence or willful misconduct. Without limitation on the foregoing,
each Bank shall reimburse the Agent upon demand for that Bank's ratable share of
any reasonable cost or expense incurred by the Agent in connection with the
negotiation, preparation, execution, delivery, administration, amendment,
waiver, refinancing, restructuring, reorganization (including a bankruptcy
reorganization), or enforcement of the Loan Documents, to the extent that
Borrower is required by Section 9.3 to pay that cost or expense but fails to do
so upon demand. Any such reimbursement shall not relieve Borrower of its
obligations under Section 9.3.

8.7 Successor Agent. The Agent may resign as such at any time upon 30
days' notice to Borrower and the Banks. The Majority Banks may at any time
remove the Agent by written notice to that effect to be effective on such date
as the Majority Banks designate. In either event, the Majority Banks shall
appoint a successor Agent or Agents, which shall be reasonably Acceptable to
Borrower and which must be from among the Banks; provided, that if the Majority
Banks have not appointed a successor Agent within thirty (30) days after the
date the Agent gave notice of resignation or was removed, the Agent shall be
entitled to appoint a successor Agent from among the Banks, which is reasonably
acceptable to Borrower, and in such event Agent's resignation shall then be
effective upon such successor's acceptance of appointment. Upon a successor's
acceptance of appointment as Agent, the successor will thereupon succeed to and
become vested with all the rights, powers, privileges, and duties

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of the Agent under the Loan Documents, and the resigning or removed Agent will
thereupon be discharged from its duties and obligations thereafter arising under
the Loan Documents. If no successor agent shall have succeeded to the rights,
powers and privileges and duties of the Agent within thirty (30) days after the
retiring Agent's notice of resignation the retiring Agent's resignation shall
nevertheless thereupon become effective, and the Banks shall perform all of the
duties of the Agent hereunder until such time, if any, as the Majority Banks
appoint a successor agent as provided above.

8.8 No Obligations of Borrower. Nothing contained in this Article 8
shall be deemed to impose upon Borrower any obligation in respect of the due and
punctual performance by the Agent of its obligations to the Banks under any
provision of this Agreement, and Borrower shall have no liability to the Agent
or any of the Banks in respect of any failure by the Agent or any Bank to
perform any of its obligations to the Agent or the Banks under this Agreement.
Without limiting the generality of the foregoing, where any provision of this
Agreement relating to the payment of any amounts due and owing under the Loan
Documents provides that such payments shall be made by Borrower to the Agent for
the account of the Banks, Borrower's obligations to the Banks in respect of such
payments shall be deemed to be satisfied upon the making of such payments to the
Agent in the manner provided by this Agreement.

ARTICLE 9
MISCELLANEOUS

9.1 Cumulative Remedies; No Waiver. The rights, powers, and remedies of
Agent, Banks or any Party hereto provided herein or in any Note or other Loan
Document are cumulative and not exclusive of any right, power, or remedy
provided by law or equity. No failure or delay on the part of Agent, Banks or
any Party in exercising any right, power, or remedy may be, or may be deemed to
be, a waiver thereof; nor may any single or partial exercise of any right,
power, or remedy preclude any other or further exercise of any other right,
power or remedy.

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9.2 Amendments; Consents. No amendment, modification, supplement,
termination, or waiver of any provision of this Agreement or any other Loan
Document, and no consent to any departure by Borrower or any other Party
therefrom, may in any event be effective unless in writing signed by Borrower
and Agent, with the approval of the Majority Banks, and then only for the
specific purpose given. Without the approval in writing of Borrower and all the
Banks, no amendment, modification, supplement, termination, waiver, or consent
may be effective:

(a) to amend or modify the principal of, or the amount of
principal, principal prepayments, or the rate of interest payable on, any
Obligation or the amount of any Commitment or of any fee payable to any Bank;

(b) to postpone any date fixed for any payment of principal of,
prepayment of principal of, or any installment of interest on, any obligation or
any installment of any fee or to extend the term of any Commitment;

(c) to amend or modify the provisions of the definitions in
Section 1.1 of "Majority Banks" or of Sections 9.2, 9.9, 9.10 or 9.11; or

(d) to amend or modify any provision of this Agreement or the Loan
Documents that expressly requires the consent or approval of all the Banks.

Any amendment, modification, supplement, termination, waiver, or consent
pursuant to this Section 9.2 shall apply equally to, and shall be binding upon,
Borrower, all the Banks and the Agent.

9.3 Costs, Expense and Taxes. Borrower shall pay within five (5)
Banking Days of receiving written notice thereof from the Agent:

(a) the reasonable costs and expenses of Agent in connection with
the negotiation, preparation, execution, and delivery of this Agreement or any
other Loan Document and the syndication of the Advances hereunder or any matter
related thereto; (b) the reasonable costs and expenses of Agent in connection
with any amendment or waiver of any of the Loan

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Documents or the administration of this Agreement or any other Loan Document or
any matter related thereto; and (c) the reasonable costs and expenses of Agent
and the Banks in connection with enforcement of this Agreement or any other Loan
Document or other matter related thereto (including any enforcement in any
bankruptcy or similar proceedings); in each case including without limitation
recording fees, filing fees, search fees and other out-of-pocket expenses, and
the reasonable fees and out-of-pocket expenses of any legal counsel (including,
without limitation, the reasonable allocated cost of Agent's in-house counsel
and staff), independent public accountants and other outside experts. Borrower
shall also pay within five (5) Banking Days of receiving written notice thereof
from the Agent any and all documentary and other taxes (other than income or
gross receipts taxes generally applicable to banks) and all costs, expenses,
fees and charges payable or determined to be payable in connection with the
execution, delivery, filing or recording of this Agreement, any other Loan
Document or any other instrument or writing to be delivered hereunder or
thereunder, or in connection with any transaction pursuant hereto or thereto. In
the event of litigation relating to this Agreement, the prevailing party shall
be entitled to attorneys' fees and costs. Borrower shall reimburse, hold
harmless and indemnify Agent and the Banks from and against any and all loss,
liability or legal or other expense with respect to or resulting from any delay
in paying or failure to pay any tax, cost, expenses, fee or charge or that any
Bank may suffer or incur by reason of the failure of Borrower to perform any of
its obligations under this Agreement or any Loan Document. Any amount payable
under the Loan Documents other than the Advances which is not paid when due or
within any applicable grace period shall, thereafter, bear interest at the
Default Rate in effect under the Notes with respect to Base Rate Loans, as set
forth in Section 3.9 hereof.

9.4 Nature of Banks, Obligations. Nothing contained in this Agreement
or any other Loan Document and no action taken by the Agent or the Banks or any
of them pursuant hereto or thereto may, or may be deemed to, make the Banks a
partnership, an association, a joint venture, or other entity, either among
themselves or with Borrower. Each Bank's obligation to make any Advance pursuant
hereto is several and not joint or joint and several, and is not conditioned
upon the performance by any other

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Bank of its obligation to make Advances. A default by any Bank will not increase
the Commitment of any other Bank. Any Bank not in default may, if it desires,
assume in such proportion as the nondefaulting Banks agree the obligations of
any Bank in default, but is not obligated to do so.

9.5 Representations and Warranties. All representations and warranties
of Borrower and any other party contained herein or in any other Loan Document
(including, for this purpose, all representations and warranties contained in
any certificate or other writing required to be delivered by or on behalf of
Borrower or such party pursuant to any Loan Document) will survive the making of
the Advances hereunder and the execution and delivery of this Agreement, and, in
the absence of actual knowledge by the Agent of the untruth of any
representation or warranty, have been or will be relied upon by the Agent and
each Bank, notwithstanding any investigation made by the Agent or any Bank or on
their behalf.

9.6 Notices. Except as otherwise provided in any Loan Document, (a) all
notices, requests, demands, directions, and other communications provided for
hereunder and under any other Loan Document must be in writing and must be
mailed, telegraphed, delivered, or sent by telex, telecopier or cable to the
appropriate party at the address set forth on the signature pages of this
Agreement or, as to any Party, at any other address as may be designated by it
in the applicable Loan Document or in a written notice sent to all other parties
in accordance with this section, and (b) any notice, request, demand, direction,
or other communication given by telegram, telex, or cable must be confirmed
within 48 hours by letter mailed or delivered to the appropriate party at its
respective address. Except as otherwise provided in any Loan Document, if any
notice, request, demand, direction, or other communication is given by mail it
will be effective on the third Banking Day after deposited in the United States
mails with first class or airmail postage prepaid; if given by telegraph or
cable, when delivered to the telegraph company with charges prepaid; if given by
telex, when sent; or if given by personal delivery, when delivered.

9.7 Execution in Counterparts. This Agreement and any other Loan
Document in which Borrower is a Party may be executed in any

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number of counterparts and any party hereto or thereto may execute any
counterpart, each of which when executed and delivered will be deemed to be an
original and all of which counterparts of this Agreement or any other Loan
Document, as the case may be, taken together will be deemed to be but one and
the same instrument. The execution of this Agreement or any other Loan Document
by any party hereto or thereto will not become effective until counterparts
hereof or thereof, as the case may be, have been executed by all the parties
hereto or thereto.

9.8 Binding Effect; Assignment.

(a) This Agreement and the other Loan Documents to which Borrower
is a Party will be binding upon and inure to the benefit of Borrower, the Agent,
each of the Banks, and their respective successors and assigns, except that
Borrower may not assign its rights hereunder or thereunder or any interest
herein or therein without the prior written consent of all the Banks. Each Bank
represents that it is not acquiring its Advances with a view to the distribution
thereof within the meaning of the Securities Act of 1933, as amended (subject to
any requirement that disposition of its Advances must be within the control of
such Bank). Any Bank may at any time pledge its Note or any other instrument
evidencing its rights as a Bank under this Agreement to a Federal Reserve Bank,
but no such pledge shall release that Bank from its obligations hereunder or
grant to such Federal Reserve Bank the rights of a Bank hereunder absent
foreclosure of such pledge.

(b) From time to time subsequent to the Closing Date, each Bank
may assign to one or more commercial banks a portion of its pro rata share of
the Commitment; provided that (i) the minimum amount of any such assignment
shall be the lesser of $10,000,000 or such Bank's total Commitment hereunder;
(ii) such commercial bank, if not then a Bank, shall be reasonably acceptable to
the Agent and acceptable to Borrower in Borrower's sole discretion; and (iii)
the assignee shall execute and deliver to the Agent a Commitment Assignment and
Acceptance; and (v) prior to the effective date of any such assignment, the
Agent shall have received a fee of $1,500. In the event that such assignee is at
the time of such assignment a Bank, then the assigning bank shall not be
permitted to assign any portion of

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its commitment unless such assigning bank assigns to the assignee bank all of
its commitment hereunder. Upon the effective date of the Commitment Assignment
and Acceptance, the commercial banks therein shall be a Bank for all purposes of
this Agreement, with the pro rata share of the Commitment therein set forth and,
to the extent of such pro rata share, the assigning Bank shall be released from
its obligations under this Agreement. Borrower agrees that, upon the request of
any Bank made through the Agent, it shall execute and deliver (against delivery
by the assigning Bank to Borrower of its Note) to such assignee Bank, a Note
evidencing that assignee Bank's pro rata share of the Commitment, and to the
assigning Bank, a Note evidencing the remaining balance pro rata share retained
by the assigning Bank.

(c) By executing and delivering a Commitment Assignment and
Acceptance, the assignee thereunder acknowledges and agrees that: (i) other than
the representation and warranty that it is the legal and beneficial owner of the
pro rata share of the Commitment being assigned thereby free and clear of any
adverse claim, the assigning Bank has made no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness or sufficiency of this Agreement
or any other Loan Document; (ii) the assigning Bank has made no representation
or warranty and assumes no responsibility with respect to the financial
condition of Borrower or the performance by Borrower of the obligations; (iii)
it has received a copy of this Agreement, together with copies of the most
recent financial statements delivered pursuant hereto and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Commitment Assignment and Acceptance; (iv) it will,
independently and without reliance upon the Agent or any Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) it appoints and authorizes the Agent to take such action and to
exercise such powers under this Agreement as are delegated to the Agent by
Article 8; and (vi) it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Bank.

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(d) The Agent shall maintain at the Agent's office a copy of each
Commitment Assignment and Acceptance delivered to it and a register for
recordation of the names and addresses of the Banks and their respective pro
rata shares of the Commitment. The entries in such register shall be conclusive,
in the absence of manifest error, and Borrower, the Agent and the Banks may
treat each Person whose name is recorded in the register as a Bank hereunder for
all purposes of this Agreement. Promptly following any entry in the register,
the Agent shall provide to Borrower and the Banks a revised Schedule 1.1 giving
effect thereto.

(e) Each Bank may from time to time without the consent of
Borrower or the Agent grant participations to one or more banks or other
financial institutions in a portion of its pro rata share of the Commitment;
provided, however, that (i) such Bank's obligations under this Agreement shall
remain unchanged, (ii) such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
banks or other financial institutions shall not be a Bank hereunder for any
purpose except, if the participation agreement so provides, for the purposes of
Sections 3.3 [Increased Commitment Costs], 3.4 [LIBOR Fees], 3.5 [LIBOR Costs]
and 9.10 [Indemnity by Borrower], but only to the extent that the cost of such
benefits to Borrower does not exceed the cost which Borrower would have incurred
in respect of such Bank absent the participation, and (iv) Borrower, the Agent
and the other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement, (v) the
consent of the holder of such participation interest shall not be required for
amendments or waivers of provisions of the Loan Documents other than those which
(A) increase the monetary amount of any of the Commitment, (B) extend the
Expiration Date or any other date upon which any payment of money is due to the
Banks or (C) reduce the rate of interest on the Advances, any fee or any other
monetary amount payable to the Banks.

(f) In the event that (i) any Person or two or more Persons acting
in concert acquire beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange

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Commission under the Exchange Act), directly or indirectly of 35% or more of the
common stock of a Bank, or (ii) individuals who as of the Closing Date
constitute the board of directors of any Bank (the "Incumbent Board"), ceases
for any reason to constitute at least a majority of the board of directors,
provided that any person becoming a director subsequent to the Closing Date
whose election or nomination for election by such Bank or its stockholders is
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election or removal of the directors of such
Bank, as contemplated in Rule 14a-11 of Regulation 14a promulgated under the
Exchange Act), shall for the purposes of this Agreement be considered as though
such person were a member of the Incumbent Board of such Bank, then Borrower
shall have the right for a period of sixty (60) days from the date of the
consummation of either of the events set forth in clause (i) or (ii) above to
reallocate that Bank's commitment hereunder to another Bank consenting thereto
or to replace the subject Bank with another financial institution reasonably
acceptable to Agent or, if the subject Bank is the Agent, to the other Banks.

9.9 Sharing of Setoffs. Each Bank severally agrees that if it, through
the exercise of the right of setoff, banker's lien, or counterclaim against
Borrower or otherwise, receives payment of the obligations due it hereunder and
under the Notes that is ratably more than any other Bank, through any means,
then: (a) the Bank exercising the right of setoff, banker's lien, or
counterclaim or otherwise receiving such payment shall purchase, and shall be
deemed to have simultaneously purchased, from the other Banks a participation in
the obligations held by the other Banks and shall pay to the other Banks a
purchase price in an amount so that the share of the obligations held by each
Bank after the exercise of the right of setoff, banker's lien, or counterclaim
or receipt of payment shall be in the same proportion that existed prior to the
exercise of the right of setoff, banker's lien, or counterclaim or receipt of
payment, and (b) such other adjustments and purchases of participations shall be
made from time to time and shall be equitable to ensure that all of the Banks
share any payment obtained in respect of the obligations ratably in accordance
with each Bank's share of the

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obligations immediately prior to, and without taking into account, the payment,
provided that, if all or any portion of a disproportionate payment
obtained as a result of the exercise of the right of setoff, banker's lien,
counterclaim or otherwise is thereafter recovered from the purchasing Bank by
Borrower or any Person claiming through or succeeding to the rights of Borrower,
the purchase of a participation shall be rescinded and the purchase price
thereof shall be restored to the extent of the recovery, but without interest.
Each Bank that purchases a participation in the obligations pursuant to this
Section shall from and after the purchase have the right to give all notices,
requests, demands, directions and other communications under this Agreement with
respect to the portion of the Obligations purchased to the same extent as though
the purchasing Bank were the original owner of the obligations purchased.
Borrower expressly consents to the foregoing arrangements and agrees that any
Bank holding a participation in an obligation so purchased may exercise any and
all rights of setoff, banker's lien or counterclaim with respect to the
participation as fully as if the Bank were the original owner of the obligation
purchased; provided, however, that each Bank agrees that it shall not
exercise any right of setoff, banker's lien or counterclaim without first
obtaining the consent of the Majority Banks.

9.10 Indemnity by Borrower. Borrower agrees to indemnify, save, and
hold harmless the Agent and each Bank and their directors, officers, agents,
attorneys, and employees (collectively, the "indemnitees") from and against: (i)
any and all claims, demands, actions, or causes of action that are asserted
against any indemnitee by any Person if the claim, demand, action, or cause of
action arises out of or relates to a claim, demand, action or cause of action
that the Person asserts or may assert against Borrower, any Affiliate of
Borrower or any officer, director or shareholder of Borrower in their capacity
as such, (ii) any and all claims, demands, actions or causes of action that are
asserted against any indemnitee (other than by Borrower or by another
indemnitee) if the claim, demand, action or cause of action arises out of or
relates to the Commitment, the use of proceeds of any Advances, or the
relationship of Borrower and the Banks under this Agreement or any transaction
contemplated pursuant to this Agreement, (iii) any administrative or
investigative proceeding by any Governmental Agency arising

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out of or related to a claim, demand, action or cause of action described in
clauses (i) or (ii) above; (iv) any and all liabilities, losses, costs, or
expenses (including attorneys' fees and disbursements) that any indemnitee
suffers or incurs as a result of any of the foregoing; and (v) any and all
claims, demands, actions or causes of action arising out of or relating to the
Agent acting in reliance on telephonic instructions from a Person identifying
himself as a Responsible Official of Borrower; provided, that Borrower
shall have no obligation under this Section to the Agent or any Bank with
respect to any of the foregoing arising out of the gross negligence or willful
misconduct of the Agent or such Bank or the breach by the Agent or such Bank of
this Agreement or from the transfer or disposition of any Advance by any Bank.
If any claim, demand, action or cause of action is asserted against any
indemnitee, such indemnitee shall promptly notify Borrower, but the failure to
so promptly notify Borrower shall not affect Borrower's obligations under this
Section unless such failure materially prejudices Borrower's right to
participate in the contest of such claim, demand, action or cause of action, as
hereinafter provided. If requested by Borrower in writing and so long as no
Default or Event of Default shall have occurred and be continuing, such
indemnitee shall in good faith contest the validity, applicability and amount of
such claim, demand, action or cause of action, shall permit Borrower to
participate in such contest and shall cooperate with Borrower to the extent
their interests are aligned. Any indemnitee that proposes to settle or
compromise any claim or proceeding for which Borrower may be liable for payment
of indemnity hereunder shall give Borrower written notice of the terms of such
proposed settlement or compromise reasonably in advance of settling or
compromising such claim or proceeding and shall obtain Borrower's written
approval thereof, which approval may be withheld in Borrower's sole discretion.
Any voluntary settlement by an indemnitee of such a claim or proceeding without
Borrower's written approval, shall relieve Borrower of its obligation to
indemnify that indemnitee with respect to such claim or proceeding. In any legal
action involving more than one indemnitee, all indemnitees shall be represented
by a single legal counsel unless such legal counsel determines that a defense or
counterclaim is available to an indemnitee that is not available to all
indemnitees and that to assert such a defense or counterclaim would create a
conflict of

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interest, or potential conflict of interest, in which case such indemnitee shall
be entitled to separate legal counsel. Any obligation or liability of Borrower
to any indemnitee under this Section shall survive the expiration or termination
of this Agreement and the repayment of all Advances and all other obligations
owed to the Banks.

9.11 Nonliability of Banks. The relationship between Borrower and the
Banks is, and shall at all times remain, solely that of borrower and lenders,
and the Banks and the Agent neither undertake nor assume any responsibility or
duty to Borrower to review, inspect, supervise, pass judgment upon, or inform
Borrower of any matter in connection with any phase of Borrower's business,
operations, or condition, financial or otherwise. Borrower shall rely entirely
upon its own judgment with respect to such matters, and any review, inspection,
supervision, exercise of judgment, or information supplied to Borrower by any
Banks or the Agent in connection with any such matter is for the protection of
the Banks and the Agent, and neither Borrower nor any third party is entitled to
rely thereon.

9.12 Confidentiality. Each Bank agrees to use any confidential
information that it may receive, directly or indirectly, from Borrower pursuant
to this Agreement only for the purposes of this Agreement, and hold such
confidential information in confidence, except for disclosure: (a) to Affiliates
of the Bank; (b) to other Banks; (c) to legal counsel, accountants and (subject
to reasonable prior notice to Borrower) other professional advisors to that
Bank; (d) to regulatory officials having jurisdiction over that Bank; (e) as
required by Law or legal process or in connection with any legal proceeding to
which that Bank and Borrower are adverse parties; and (f) to another financial
institution in connection with a disposition or proposed disposition to that
financial institution of all or part of that Bank's interests hereunder or a
participation interest in its Advances, provided that such disclosure to such
financial institution is made subject to an appropriate confidentiality
agreement on terms substantially similar to this Section. For purposes of the
foregoing, "confidential information" shall mean any information respecting
Borrower or its Subsidiaries reasonably considered by Borrower to be
confidential and so designated in writing by Borrower, other than (i)
information

- 78 -
<PAGE> 79
previously filed with any Governmental Agency and available to the public, (ii)
information previously published in any public medium from a source other than,
directly or indirectly, that Bank, and (iii) information previously disclosed by
Borrower to any Person not associated with Borrower without a written
confidentiality agreement substantially similar to this section. Nothing in this
section shall be construed to create or give rise to any fiduciary duty on the
part of the Agent or the Banks to Borrower.

9.13 No Third Parties Benefited. This Agreement is made for the purpose
of defining and setting forth certain obligations, rights and duties of
Borrower, the Agent and the Banks in connection with the Commitment, and is made
for the sole benefit of Borrower, the Agent and the Banks, and the Agent's and
the Bank's successors and assigns. Except as provided in Sections 9.8 and 9.10,
no other Person shall have any rights of any nature hereunder or by reason
hereof.

9.14 Right of Setoff - Deposit Accounts. Upon the occurrence of an
Event of Default and the acceleration of maturity of the principal indebtedness
of the Advances pursuant to Section 7.2, Borrower hereby specifically authorizes
each Bank (subject to the approval of the Majority Banks) in which Borrower or
any of its Subsidiaries maintains a deposit account (whether a general or
special deposit account, other than trust accounts) or a certificate of deposit
to setoff any obligations owed to the Banks against such deposit account or
certificate of deposit without prior notice to Borrower or such Subsidiary
(which notice is hereby waived) whether or not such deposit account or
certificate of deposit has then matured. Nothing in this section shall limit or
restrict the exercise by a Bank of any right to setoff or banker's lien under
applicable Law, subject to the approval of the Majority Banks. Borrower further
hereby grants to the Banks a security interest in all present and future
"deposit accounts" (as such term is defined in California Commercial Code
Section 9105(i)(e)) of Borrower held in any of the Banks and any proceeds
thereof to secure the obligations and, upon the occurrence of an Event of
Default and the acceleration of maturity of the principal indebtedness of the
Advances pursuant to Section 7.2, each Bank may (subject to the approval

- 79 -
<PAGE> 80
of the Majority Banks) exercise its rights under Article 9 of the Uniform
Commercial Code with respect thereto.

9.15 Further Assurances. Borrower shall, at its expense and without
expense to the Banks or the Agent, do, execute, and deliver such further acts
and documents as any Bank or the Agent from time to time reasonably requires for
the assuring and confirming unto the Banks or the Agent the rights hereby
created or intended now or hereafter so to be, or for carrying out the intention
or facilitating the performance of the terms of any Loan Document.

9.16 Integration. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements (including, without
limitation, the Prior Credit Agreement), written or oral, on the subject matter
hereof except as expressly provided herein to the contrary. The initial draft of
the Loan Documents was prepared by counsel for Agent, and fully reviewed by
Borrower and its counsel. Borrower and its counsel have negotiated certain
revisions and cooperated in the preparation of the final Loan Documents. Hence,
the Loan Documents shall be construed neither against nor in favor of either,
but rather in accordance with the fair meaning thereof.

9.17 Governing Law. The Loan Documents shall be governed by, and
construed and enforced in accordance with, the Laws of California.

9.18 Judgment Currency. If, for the purposes of obtaining judgment in
any court, it is necessary to convert a sum due hereunder or any other Loan
Document in one currency into another currency, the rate of exchange used shall
be that at which in accordance with normal banking procedures the Agent could
purchase the first currency with such other currency on the Banking Day
preceding that on which final judgment is given. The obligation of each Loan
Party in respect of any such sum due from it to the Agent hereunder or under the
other Loan Documents shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than that in which such sum is denominated in
accordance with the applicable provisions of this Agreement (the "Agreement
Currency"), be discharged only to the extent that on

- 80 -
<PAGE> 81
the Banking Day following receipt by the Agent of any sum adjudged to be so due
in the Judgment Currency, the Agent may in accordance with normal banking
procedures purchase the Agreement Currency with the Judgment Currency. If the
amount of the Agreement Currency so purchased is less than the sum originally
due to the Agent in the Agreement Currency, each Loan Party agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Agent or the Person to whom such obligation was owing against such loss. If the
amount of the Agreement Currency so purchased is greater than the sum originally
due to the Agent in such currency, the Agent agrees to return the amount of any
excess to the applicable Loan Party (or to any other Person who may be entitled
thereto under applicable law).

9.19 Choice of Forum. Except as otherwise expressly provided in any
Loan Document, the parties hereto and thereto agree and intend that the proper
and exclusive forum for any litigation of any disputes or controversies arising
out of or related to the Loan Documents shall be the Superior Court of the State
of California for the County of Los Angeles. Each Party to any Loan Document
hereby expressly waives any defense or objection to jurisdiction or venue based
on the doctrine of forum non conveniens, and stipulates that the Superior Court
of the State of California for the County of Los Angeles shall have in personam
jurisdiction and venue over such Party for the purpose of litigating any dispute
or controversy arising out of or related to the Loan Documents. In the event any
party commences or maintains any action or proceeding arising out of or related
to the Loan Documents in a forum other than the Superior Court of the State of
California for the County of Los Angeles, any party shall be entitled to request
the dismissal or stay of such action or proceeding, and each party stipulates
that such action or proceeding shall be dismissed or stayed.

9.20 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other

- 81 -
<PAGE> 82
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.

9.21 Headings. Article and section headings in this Agreement and the
other Loan Documents are included for convenience of reference only and are not
part of this Agreement or the other Loan Documents for any other purpose.

9.22 Time of the Essence. Time is of the essence of the Loan Documents.

9.23 Conflict in Loan Documents. To the extent there is any actual
irreconcilable conflict between the provisions of this Agreement and any other
Loan Document, the provisions of this Agreement shall prevail.

9.24 PURPORTED ORAL AMENDMENTS. BORROWER EXPRESSLY ACKNOWLEDGES THAT
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR
THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN
WRITING THAT COMPLIES WITH SECTION 9.2. BORROWER AGREES THAT IT WILL NOT RELY ON
ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY
ANY REPRESENTATIVE OF THE AGENT OR ANY BANK THAT DOES NOT COMPLY WITH SECTION
9.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THE AGREEMENT
OR THE OTHER LOAN DOCUMENTS.

9.25 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

- 82 -
<PAGE> 83
9.26 Termination of Prior Credit Agreement. The Borrower, the Agent and
the Banks party to the Prior Credit Agreement hereby agree that the commitments
under the Prior Credit Agreement are terminated as of the Closing Date. The
Borrower agrees to pay in full all principal, accrued interest, fees and other
amounts outstanding under the Prior Credit Agreement on the Closing Date.
Subject to Section 3.18 of the Prior Credit Agreement, upon payment in full of
such amounts, any and all obligations of the Borrower under the Prior Credit
Agreement will have been paid, satisfied and discharged in full; provided,
however, that to the extent that any payments made under the Prior Credit
Agreement shall be subsequently invalidated, declared to be fraudulent, a
fraudulent conveyance, or preferential, set aside and/or required to be repaid
to a trustee, receiver, debtor in possession, or any other party, then to the
extent of such payment, the obligations which were intended to be satisfied
shall be revived and continue in full force and effect, as if such payment had
never been received by such person. Amounts repaid to the banks under the Prior
Credit Agreement that are borrowed from the Banks under this Agreement on the
Closing Date may, as among the Banks, be netted such that amounts funded on the
Closing Date hereunder by any Bank which is funding more than it is being repaid
under the Prior Credit Agreement may be applied to partially repay amounts owing
to any Bank which is owed more under the Prior Credit Agreement that the amount
it is funding hereunder.

- 83 -
<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

BORROWER:

FURON COMPANY

By: /S/J. MICHAEL HAGAN
-------------------------
J. Michael Hagan

Its CHAIRMAN OF THE BOARD
OF DIRECTORS

By: /S/MONTY A. HOUDESHELL
-------------------------
Monty A. Houdeshell
Its VICE-PRESIDENT and CHIEF
FINANCIAL OFFICER

Borrower's address for notices:

Furon Company
29982 Ivy Glenn Drive
Laguna Niguel, California 92677
Attn: Chief Financial Officer
Telephone: (714) 831-5350
Telecopier: (714) 643-1548

with a copy of a notice pursuant to Section
7 to:

Furon Company
29982 Ivy Glenn Drive Laguna
Niguel, California 92677
Attn: General Counsel

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent

- 84 -
<PAGE> 85
By: /S/PEGGY FUJIMOTO
-------------------------
Peggy Fujimoto
Vice President

(Signatures continue)

Address for notices:

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION

Agency Management Services
1455 Market Street, 12th Floor
San Francisco, CA 94103
Telephone: (415) 436-3310
Telecopier: (415) 436-2700
Attention: Peggy Fujimoto
Vice President

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank

By: /S/GINA M. WEST
-------------------------
Vice President

Address for notices:

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION

Credit Products #5618
555 South Flower Street, 11th Floor
Los Angeles, CA 90071
Attention: Gina West
Vice President
Telephone: (213) 228-6400
Telecopier: (213) 623-1959

THE BANK OF NEW YORK

- 85 -
<PAGE> 86
By: /S/REBECCA K. LEVINE
-------------------------
Its:

Address for Notices:

THE BANK OF NEW YORK One Wall
Street, 22nd Floor New York,
NY 10286

with a copy to:

THE BANK OF NEW YORK
10990 Wilshire Blvd., Suite 1700
Los Angeles, CA 90024
Attention: Rebecca Levine
Telephone: (310) 996-8650
Telecopier: (310) 996-8667

BANK ONE, COLUMBUS, NATIONAL ASSOCIATION

By: /S/JEAN PORE
-------------------------
Its:

Address for Notices:

BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
Large Corporate
100 East Broad Street
Columbus, OH 43271-0209
Attention: Jean Pore
Telephone: (614) 248-5810
Telecopier: (614) 248-5518

ABN AMRO BANK NV

- 86 -
<PAGE> 87
By: /S/ELLEN M. COLEMAN
-------------------------
Its:

By: /S/MATTHEW S. THOMSON
-------------------------
Its:

Address for Notices:

300 S. Grand Avenue, Suite 1115
Los Angeles, CA 90071
Attention: John Miller
Telephone: (213) 687-2072
Telecopier: (213) 687-2061

- 87 -
<PAGE> 88
SCHEDULE 1.1

COMMITMENTS

<TABLE>
<CAPTION>
Bank Commitment Pro Rata Share
---- ---------- --------------
<S> <C> <C>
Bank of America National $ 33,000,000 33%
Trust and Savings
Association

The Bank of New York 25,000,000 25%

Bank One, Columbus,
National Association 25,000,000 25%

ABN AMRO Bank NV 17,000,000 17%
============ ===

TOTAL $100,000,000 100%
</TABLE>

- 1 -
<PAGE> 89
SCHEDULE 4.9

FURON COMPANY SIGNIFICANT
AND CERTAIN OTHER SUBSIDIARIES
October 30, 1995

State or Other
Jurisdiction of
Incorporation or
Name of Subsidiary* Organization
- ------------------- ----------------
Bunnell Plastics. Inc. New Jersey

CHR Industries, Inc. Connecticut

Dixon Industries Corporation Rhode Island

Fluorocarbon Components, Inc. New York

Fluorocarbon Foreign Sales Corporation Barbados

Furon B.V. Netherlands

Furon Europe, S.A. Belgium

Furon Limited England

Furon Seals N.V./S.A. Belgium

Furon S.A. Belgium

Furon S.A.R.I. France

Sepco Corporation California

- ---------------------
* Each of Furon Company's domestic subsidiaries is a general business
corporation with a wholly owned domestic subsidiary.

- 2 -
<PAGE> 90
SCHEDULE 4.10

ERISA PLANS SPONSORED BY
FURON COMPANY
October 30, 1995

Plan Name Plan #
- --------- ------
The Furon Employees'
Profit-Sharing-Retirement Plan 001

The Group Welfare Benefits Plan for
Employees of the Furon Company 510

The Furon Company Employee
Stock Ownership Plan 016

- 3 -
<PAGE> 91
SCHEDULE 5.11

LIENS INCLUDING CAPITALIZED LEASES

October 30, 1995

CAPITALIZED LEASES

Inception Terms Monthly
Description Date (Months) Payment
- ----------- --------- -------- -------
None

LIST OF LIENS

Original Current
Payee Security Balance Balance
- ----- -------- -------- -------

None

- 4 -
<PAGE> 92
SCHEDULE 5.20

LIST OF INDEBTEDNESS

October 30, 1995

Total Current Long Term
(In thousands) Principal Portion Portion
- -------------- --------- ------- ---------

None

- 5 -

<PAGE> 93
EXHIBIT A

FORM OF PROMISSORY NOTE

$_______________ October 30, 1995
Los Angeles, California

FOR VALUE RECEIVED, the undersigned promises to pay to the order of
__________________________________________________________ (the "Bank") the
principal amount of ____________________________________ ($________________), or
so much thereof as may be advanced hereunder from time to time, payable as
hereinafter set forth. The undersigned promises to pay interest on the principal
amount hereof remaining unpaid from time to time from the date hereof until the
date of payment in full, payable as hereinafter set forth.

Reference is made to the Credit Agreement dated as of October 30, 1995,
among the undersigned, as Borrower, the Banks that are parties thereto, and Bank
of America National Trust and Savings Association, as the Agent (the "Credit
Agreement"). Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings defined for those terms in the Credit
Agreement. This is one of the Notes referred to in the Credit Agreement, and any
holder hereof is entitled to all of the rights, remedies, benefits and privilege
provided for in the Credit Agreement as originally executed or as it may from
time to time be supplemented, modified or amended. The Credit Agreement, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events upon the terms and conditions therein
specified.

The principal indebtedness evidenced by this Note shall be payable in
installments as provided in the Credit Agreement.

Interest shall be payable on the outstanding daily unpaid principal
amount of each Advance hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the
Credit Agreement both

A - 1
NOTE
<PAGE> 94
before and after default and before and after maturity and judgment, with
interest on overdue interest to bear interest at the rates set forth in the
Credit Agreement.

The amount of each payment hereunder shall be made to the Agent at the
Agent's office, for the account of the Bank, in lawful money of the United
States of America and in immediately available funds in the Applicable Currency
on the dates and by the times set forth in the Credit Agreement. The Bank shall
use its best efforts to keep a record of Advances made by it in connection with
Loans and payments of principal with respect to this Note.

The undersigned hereby promises to pay all costs and expense of any
holder hereof incurred in collecting the undersigned's obligations hereunder or
in enforcing or attempting to enforce any of any holder's rights hereunder,
including attorneys' fees and disbursements and the allocated cost of inhouse
counsel, whether or not an action is filed in connection therewith.

The undersigned hereby waives presentment, demand for payment,
dishonor, notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable laws.

This Note shall be delivered to and accepted by the Bank, or by the
Agent on its behalf, in the State of California, and shall be governed by, and
construed and enforced in accordance with, the local Laws thereof.

FURON COMPANY, a California corporation

By:
--------------------------

A - 2
NOTE
<PAGE> 95
EXHIBIT B

COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT

This COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment
and Acceptance") dated as of __________, 199__ is made between
______________________________ (the "Assignor") and __________________________
(the "Assignee").

RECITALS

A, The Assignor is party to that certain Credit Agreement dated as of
October 30, 1995, among Furon Company ("Borrower"), the Banks that are parties
thereto, and Bank of America National Trust and Savings Association, as the
agent (in such capacity, the "Agent") (as extended, renewed, amended or restated
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement and not otherwise defined herein are used herein with the meanings
defined for those terms in the Credit Agreement.

B. As provided under the Credit Agreement, the Assignor has committed
to making Loans to the Borrower in an aggregate amount not to exceed $__________
(the "Commitment").

C. [The Assignor has made Loans in the aggregate principal amount of
Dollar Equivalent ("USDE") $__________ to the Borrower] [No Loans are
outstanding under the Credit Agreement].

D. The Assignor wishes to assign to the Assignee [part of the] [all]
rights and obligations of the Assignor under the Credit Agreement in respect of
its Commitment, together with a corresponding portion of each of its outstanding
Loans in an amount equal to $__________ (the "Assigned Amount") on the terms and
subject to the conditions set forth herein and the Assignee wishes to accept
assignment of such rights and to assume such obligations from the Assignor on
such terms and subject to such conditions;

B - 1
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 96
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:

B - 2
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 97
1. Assignment and Acceptance.

(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) __% (the "Assignee's Percentage
Share") of (A) the Commitment and the Loans of the Assignor and (B) all related
rights, benefits, obligations, liabilities and indemnities of the Assignor under
and in connection with the Credit Agreement and the Loan Documents.

(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Bank under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank. It is the intent
of the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, the Assignor shall not relinquish its rights under
Sections 3 and 9.10 of the Credit Agreement to the extent such rights relate to
the time prior to the Effective Date.

(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignee's Commitment will be
$__________.

(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignor's Commitment will be
$__________.

B - 3
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 98
2. Payments.

(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to USDE
$__________, representing the Assignee's Pro Rata Share of the principal amount
of all Loans.

(b) The [Assignor] [Assignee] further agrees to pay to the
Agent a processing fee in the amount specified in Section 9.8(b) of the Credit
Agreement.

3. Reallocation of Payments.

Any interest, fees and other payments accrued to the Effective Date
with respect to the Commitment and Loans shall be for the account of the
Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.

4. Independent Credit Decision.

The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 5.13(a) of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Credit Agreement.

5. Effective Date; Notices.

B - 4
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 99
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be __________, 199__ (the
"Effective Date"); provided that the following conditions precedent have
been satisfied on or before the Effective Date:

(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;

(ii) if applicable, the consent of the Agent and the
Borrower required for an effective assignment of the Assigned Amount by the
Assignor to the Assignee under Section 9.8(b)(ii) of the Credit Agreement shall
have been duly obtained in writing and shall be in full force and effect as of
the Effective Date;

(iii) the Assignee shall pay to the Assignor all amounts
due to the Assignor under this Assignment and Acceptance;

(iv) the processing fee referred to in Section 2(b) hereof
and in Section 9.8(b) of the Credit Agreement shall have been paid to the Agent;
and

(v) the Assignor shall have assigned and the Assignee shall
have assumed a percentage equal to the Assignee's Percentage Share of the rights
and obligations of the Assignor under the Credit Agreement (if such agreement
exists).

(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Borrower and the Agent for
acknowledgement by the Agent, a Notice of Assignment substantially in the form
attached hereto as Schedule 1.

B - 5
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 100
6. Withholding Tax.

The Assignee (a) represents and warrants to the Assignor, the Agent and the
Borrower that under applicable law and treaties no tax will be required to be
withheld by the Assignor with respect to any payments to be made to the Assignee
hereunder or by the Borrower or the Agent under the Credit Agreement, (b) agrees
to furnish (if it is organized under the laws of any jurisdiction other than the
United States or any State thereof) to the Agent and the Borrower prior to the
time that the Agent or Borrower is required to make any payment of principal,
interest or fees hereunder or under the Credit Agreement, duplicate executed
originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein the Assignee claims entitlement to the
benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder or under the Credit
Agreement) and agrees to provide new Forms 4224 or 1001 upon the expiration of
any previously delivered form or comparable statements in accordance with
applicable U.S. law and regulations and amendments thereto, duly executed and
completed by the Assignee, and (c) agrees to comply with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.

B - 6
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 101
7. Representations and Warranties.

(a) The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any Lien or other adverse claim; (ii) it is
duly organized and existing and it has the full power and authority to take, and
has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.

(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Borrower, or the performance or observance by the Borrower, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.

(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and

B - 7
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 102
deliver this Assignment and Acceptance and any other documents required or
permitted to be executed or delivered by it in connection with this Assignment
and Acceptance, and to fulfill its obligations hereunder; (ii) no notices to, or
consents, authorizations or approvals of, any Person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance; and apart from any agreements or undertakings
or filings required by the Credit Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; and (iv) it is an
Eligible Assignee.

8. Further Assurances.

The Assignor and the Assignee each hereby agree to execute and deliver such
other instruments, and take such other action, as either party may reasonably
request in connection with the transactions contemplated by this Assignment and
Acceptance, including the delivery of any notices or other documents or
instruments to the Borrower or the Agent, which may be required in connection
with the assignment and assumption contemplated hereby.

9. Miscellaneous.

(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.

B - 8
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 103
(b) All payments made hereunder shall be made without any set-off
or counterclaim.

(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.

(d) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.

(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. The Assignor
and the Assignee each irrevocably submits to the non-exclusive jurisdiction of
any State or Federal court sitting in California over any suit, action or
proceeding arising out of or relating to this Assignment and Acceptance and
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such California State or Federal court. Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.

(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).

[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Credit Agreement.]

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.

B - 9
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 104
[ASSIGNOR]

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

[ASSIGNEE]

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

B - 10
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 105
SCHEDULE 1 TO
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT

NOTICE OF COMMITMENT ASSIGNMENT AND ACCEPTANCE

_______________, 19__

Bank of America National Trust
and Savings Association, as Agent
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Peggy Fujimoto
Vice President

FURON COMPANY
29982 Ivy Glenn Drive
Laguna Niguel, California 92677
Attention: Chief Financial Officer

Ladies and Gentlemen:

We refer to that certain Credit Agreement dated as of October 30, 1995,
among Furon Company ("Borrower"), the Banks that are parties thereto, and Bank
of America National Trust and Savings Association, as the agent (in such
capacity, the Agent") (as extended, renewed, amended or restated from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement and not
otherwise defined herein are used herein with the meanings defined for those
terms in the Credit Agreement.

1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Credit Agreement (including, without limitation, all related rights, title
and interest of the Assignor in and to the Commitment of the Assignor so
assigned and all outstanding Loans made by the Assignor so assigned) pursuant to
the Commitment Assignment and Acceptance Agreement attached hereto (the
"Commitment Assignment and

B - 11
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 106
Acceptance"). Before giving effect to such assignment the Assignor's Commitment
is $ ___________ and the aggregate amount of its outstanding Loans and L/C
Borrowings is USDE $___________.

2. The Assignee agrees that, upon receiving the consent of the Agent
and, if applicable, Borrower to such assignment, the Assignee will be bound by
the terms of the Credit Agreement as fully and to the same extent as if the
Assignee were the Bank originally holding such interest in the Credit Agreement.

3. The following administrative details apply to the Assignee:

(A) Notice Address:

Assignee name: __________________________
Address: _______________________________
_______________________________
_______________________________
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
Telex (Answerback): ____________________

(B) Payment Instructions:

Account No.: ___________________________
At: ___________________________
___________________________
___________________________
Reference: ___________________________
Attention: ___________________________

4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.

B - 12
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 107
Very truly yours,

[NAME OF ASSIGNOR]

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

[NAME OF ASSIGNEE]

By:
----------------------------

Title:
-------------------------

(Signatures continue)

ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:

FURON COMPANY

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

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent

By:
-------------------------------
Vice President

B - 13
COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
<PAGE> 108
EXHIBIT C

COMPLIANCE CERTIFICATE

1. This Compliance Certificate ("Certificate") is executed and
delivered by Borrower to Agent pursuant to that certain Credit Agreement
("Agreement") dated as of October 30, 1995, entered into by Borrower, the Banks
that are parties thereto, and Bank of America National Trust and Savings
Association, as the Agent. Any terms used herein and not defined herein shall
have the meanings defined in the Agreement.

2. The information in this Certificate is for the fiscal period
beginning ________________, ____ and ending ________________, ____ (the
"Relevant Date"). Except as otherwise expressly noted herein, all information
contained herein and all certifications made herein are as of the Relevant
Date.

3. A review of the activities of Borrower during the fiscal
period beginning ________________, ____ and ending on the Relevant Date has been
made under the supervision of the undersigned Responsible Official with a view
to determining whether during that fiscal period Borrower performed and observed
all Obligations.

4. To the best knowledge of the undersigned Responsible
Official, during the fiscal period beginning and ending on the Relevant Date,
Borrower performed and observed each of the covenants and Obligations under the
Credit Documents, and no Default or Event of Default has occurred or is
continuing except (a) those failures to perform and observe covenants
and Obligations and those Defaults and Events of Defaults noted in a prior
Compliance Certificate; (b) those failures to perform or observe a covenant or
Obligation which are set forth in the attached statement describing the nature
and status of each such failure and the actions Borrower is taking or proposes
to take with respect to each such failure; and (c) those defaults and Events of
Default which are set forth in the attached statement

C - 1
COMPLIANCE CERTIFICATE

<PAGE> 109
describing the nature and status of each such Default or Event of Default and
the actions Borrower is taking or proposes to take with respect to each such
Default or Event of Default.

5. To the best knowledge of the undersigned, no circumstance or
event has occurred which (a) has or could reasonably be expected to have any
material adverse effect whatsoever upon the validity or enforceability of any
Credit Document, (b) is or could reasonably be expected to be material and
adverse to the condition (financial or otherwise) or business operations of
Borrower or to the prospects of Borrower, (c) materially impairs or could
reasonably be expected to materially impair the ability of Borrower to perform
its Obligations or (d) materially impairs or could reasonably be expected to
materially impair the ability of the Banks to enforce their legal remedies
pursuant to the Credit Documents since the date of the last Compliance
Certificate, except as noted herein. If any such circumstance or event has
occurred, a statement describing each such change in reasonable detail is
attached.

6. To the best knowledge of the undersigned, the financial
statements attached hereto as Exhibit "A" fairly present the financial
condition, results of operations and changes in financial position of Borrower
in accordance with Generally Accepted Accounting Principles, consistently
applied (other than, with respect to any financial statements for the period of
a calendar month, any requirements for footnote disclosures), as at the date and
for such periods reflected by such financial statements (subject to year-end
accruals and audit adjustments for statements as of any date other than
year-end).

7. To the best knowledge of the undersigned, the certificate
attached hereto as Exhibit "B" is true and correct.

8. This Certificate is executed by a Senior Officer of
Borrower.

BORROWER:

FURON COMPANY, a California corporation

C - 2
COMPLIANCE CERTIFICATE
<PAGE> 110
By:
-----------------------------
Senior Officer

-----------------------------
Printed Name of Signer

-----------------------------
Title of Signer

C - 3
COMPLIANCE CERTIFICATE
<PAGE> 111
EXHIBIT A TO COMPLIANCE CERTIFICATE

[BORROWER'S FINANCIAL STATEMENTS]

C - 4
COMPLIANCE CERTIFICATE
<PAGE> 112
EXHIBIT B TO COMPLIANCE CERTIFICATE

FURON COMPANY
SELECTED FINANCIAL CALCULATIONS
FOR THE PERIOD ENDED _______________, ____

Capitalized terms used herein shall have the meanings set forth
in the Credit Agreement dated as of October 30, 1995 (the "Credit Agreement")
among Furon Company ("Borrower"), the Banks named therein, and Bank of America
National Trust and Savings Association, as agent ("Agent"). Section references
herein relate to the section of the Credit Agreement. The following calculations
are selected items from the Credit Agreement and are no way intended to limit
the scope of the Compliance Certificate.

A. Consolidated Tangible Effective Net Worth (Section 5.7):

1. Actual Consolidated Tangible
Effective Net Worth:

(a) Shareholders Equity _______________

(b) Intangible Assets _______________

2. Required Consolidated Tangible
Effective Net Worth:

(a) 50% of Positive Consolidated
Net Income earned since
July 29, 1995 _______________

(b) 50% of net proceeds from
equities _______________

C - 5
COMPLIANCE CERTIFICATE
<PAGE> 113
Consolidated Tangible Effective
Net Worth as of July 29, 1995,
adjusted on a pro forma basis as
if the Fluorglas Acquisition, if
completed, had been completed on
July 29, 1995 _______________

(d) Line (c) times 80% _______________

(e) Required Consolidated Tangible
Effective Net Worth (Lines (a)+
(b)+(d)) _______________

B. Leverage Ratio (Section 5.8):

1. Funded Debt _______________

2. Consolidated EBITDA:

(a) Consolidated Net Income for the
fiscal quarter last ended
and the three immediately
preceding fiscal quarters
(total for the four periods) _______________

C - 6
COMPLIANCE CERTIFICATE
<PAGE> 114
(b) Interest expense for period: _______________

(d) Extraordinary losses _______________

(e) Depreciation and amortization
for period: _______________

(f) Extraordinary gains _______________

(g) Consolidated EBITDA
(Lines (a)+(b)+(c)+(d)+(e)-(f)): _______________

C. Leverage Ratio (Line B1 divided
by Line 2(g)):
________ to 1

D. Maximum Permitted Leverage Ratio: 3 to 1

C. Fixed Charge Coverage Ratio (Section 5.10):

1. (a) Consolidated EBITDA (Line B.2(g)) _______________

(b) Rental expense _______________

(d) Lines (a)+(b)-(c) _______________

2. (a) Scheduled principal payments
on any Indebtedness _______________

(b) Interest expense for such
period _______________

C - 7
COMPLIANCE CERTIFICATE
<PAGE> 115
(c) Rental expense _______________

(d) Lines (a)+(b)+(c) _______________

3. Fixed Charge Coverage (Item 1(d)
divided by 2(d)) _______________

4. Minimum Fixed Charge Coverage
Ratio: 1.50 to 1.00

D. Indebtedness, Including Guaranties (Section 5.21):

1. Aggregate Indebtedness for
the purchase of real property
(not to exceed $7,000,000) _______________

2. Aggregate Indebtedness with
respect to any commercial or
standby letters of credit
(not to exceed $7,000,000) _______________

3. Capitalized leases (not to
exceed $5,000,000) _______________

4. Aggregate Indebtedness with
respect to any guaranties
(not to exceed $5,000,000) _______________

5. Senior unsecured Indebtedness
(not to exceed $50,000,000) _______________

To the best knowledge of the undersigned Senior Officer of
Furon Company, the information contained herein is true and correct.

FURON COMPANY

By:___________________________
Name:_________________________

C - 8
COMPLIANCE CERTIFICATE
<PAGE> 116
Title:________________________

C - 9
COMPLIANCE CERTIFICATE
<PAGE> 117
EXHIBIT D

REQUEST FOR LOAN

1. This REQUEST FOR LOAN is executed and delivered by Borrower to Bank
of America National Trust and Savings Association, as the Agent, pursuant to the
Credit Agreement (the "Agreement") dated as of October 30, 1995, entered into by
Borrower, the Agent and the Banks therein named. Any terms used herein and not
defined herein shall have the meanings defined in the Agreement.

2. Borrower hereby requests that the Banks make or continue to make an
Advance for the account of Borrower pursuant to the Agreement, as follows:

(a) Amount and Applicable Currency of Advance:
/$//__/ _________________.

(b) Date of Advance to be made or continued:
_____________________, 19__.

/ / Base Rate Loan

/ / LIBOR Rate Loan with a ____-month LIBOR Period

(d) This is a (check one box only):

/ / New Advance

/ / Continuation of an outstanding Advance

D - 1
REQUEST FOR LOAN
<PAGE> 118
3. This Request for Loan is executed on ________________, 199_, by a
Responsible Official of Borrower, on behalf of Borrower. The undersigned, in
such capacity, hereby certifies each and every matter contained herein to be
true and correct.

FURON COMPANY

By:__________________________
Its:_________________________

D - 2
REQUEST FOR LOAN
<PAGE> 119
EXHIBIT E

OPINION OF COUNSEL

October 30, 1995

Bank of America National Trust
and Savings Association, As Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
and
the Banks listed on Annex I hereto

Re: Credit Agreement Between Furon Company, Bank of America National Trust
and Savings Association, as the Agent, and the Banks named therein

Gentlemen:

This opinion is being delivered to you pursuant to Section 6.1(f) of
that certain Credit Agreement, dated as of October 30, 1995 (the "Agreement"),
between Furon Company, a California corporation, as Borrower, Bank of America
National Trust and Savings Association, as the Agent, and the Banks named
therein. Terms not otherwise defined herein shall have the meanings defined for
such terms in the Agreement.

I am the ____________________ of the Borrower and have made such
investigations of fact and law, obtained such certificates of Responsible
Officials of Borrower and of public officials, and done such other things as I
have deemed necessary for the purpose of this opinion. I have examined
originals, or copies identified to my satisfaction as being true copies, of the
Agreement and the other Loan Documents.

E - 1
OPINION OF COUNSEL
<PAGE> 120
Bank of America National Trust
and Savings Association and
Banks listed on Annex I hereto
October __, 1995
Page 2

Based on the foregoing and in reliance thereon, I am of the opinion
that:

(i) Each of Borrower and its material Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and is dully qualified to transact business
in each jurisdiction in which the conduct of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure so to qualify would not have a material adverse effect on the business,
operations or condition (financial or otherwise) of Borrower and its
Subsidiaries, taken as a whole.

(ii) Borrower has all requisite corporate power and corporate authority
to conduct its business, to own and lease its properties and to execute, deliver
and perform all of its obligations under the Credit Documents.

(iii) To the best of my knowledge the execution, delivery and
performance by Borrower of each of the Credit Documents to which it is a party
have been duly authorized by all necessary corporate action on the part of
Borrower and do not (a) require any consent or approval not heretofore obtained
of any Person, (b) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of Borrower, (c) violate any provisions of any material
law (including, without limitation, Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System) or order, writ, judgment, injunction or
decree presently in effect and having applicability to Borrower or (d) violate
or result in a breach of any material agreement to which Borrower is a party.

(iv) No authorization, consent, approval, order, license or permit
from, or filing, registration or qualification with, or

E - 2
OPINION OF COUNSEL
<PAGE> 121
Bank of America National Trust
and Savings Association and
Banks listed on Annex I hereto
October __, 1995
Page 3

exemption from any of the foregoing from, any Governmental Agency is required to
authorize or permit under applicable law the execution, delivery and performance
by Borrower of the Credit Documents to which it is a Party.

(v) Each of the Credit Documents to which Borrower is a Party has been
duly executed and delivered and constitutes the valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization moratorium or similar laws
affecting creditor's right generally. I advise you that the enforceability of
the Agreement is subject to the effect of general principles of equity
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance
of injunctive relief, regardless of whether considered in a proceeding in equity
or at law.

(vi) To the best of my knowledge there are no actions, suits or
proceedings pending or threatened against or affecting Borrower or any property
of Borrower in any court or before any Governmental Agency except where any such
action, suit or proceeding should not have a material adverse effect on the
consolidated financial conditions of the Borrower and its Subsidiaries, taken as
a whole.

(vii) Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" or "margin security" within the meanings of
Regulations G, T, U or X, respectively, of the Board of Governors of the Federal
Reserve System.

E - 3
OPINION OF COUNSEL
<PAGE> 122
Bank of America National Trust
and Savings Association and
Banks listed on Annex I hereto
October __, 1995
Page 4

My opinions above as to compliance with certain statutes, rules and
regulations are based upon a review of those statutes, rules and regulations
which in my experience are normally applicable to transactions of the type
contemplated by the Loan Documents, and statutes, rules and regulations
applicable to corporations conducting businesses similar to Borrower.

I have assumed the genuineness of all signatures (other than those of
the Borrower), the authenticity of all items submitted to me as originals, and
the conformity with originals of all items submitted to me as copies and the due
authority of all persons executing the same. I have also assumed the due
authorization, execution and delivery by you and the Banks of the Agreement, the
valid and binding nature of the Agreement as to you and the Banks and the due
authorization, execution and delivery by you and the Banks of all other
agreements required by the Agreement to be delivered by you and the Banks on or
prior to the Closing Date.

I am a member of the bar of the State of California and do not express
any opinion as to laws other than those of the United States and the State of
California. This opinion is rendered as of the date hereof and I disclaim any
undertaking or obligation to advise you of changes which may thereafter effect
the matters covered herein.

This opinion is rendered to you in connection with the transactions
referred to herein and may not be relied on by any other Person (other than
permitted assignees or participants or successors in interest of any Bank) or by
you in any other context. This opinion may not be quoted nor may copies hereof
be furnished to any other Person without the prior written consent of the
undersigned, except that you may furnish a copy hereof (a) to your independent
auditors and attorneys, (b) to any

E - 4
OPINION OF COUNSEL
<PAGE> 123
Bank of America National Trust
and Savings Association and
Banks listed on Annex I hereto
October __, 1995
Page 5

Governmental Agency or authority having regulatory jurisdiction over you, (c)
pursuant to order or legal process of any court of Governmental Agency or
authority, (d) in connection with any legal action to which you are a party
arising out of the transactions referred to above or (e) to a financial
institution in connection with a proposed assignment of your interest.

Respectfully submitted,

E - 5
OPINION OF COUNSEL
<PAGE> 124
ANNEX I

Bank of America National Trust and Savings Association
The Bank of New York
Bank One, Columbus, National Association
ABN AMRO Bank, NV

E - 6
OPINION OF COUNSEL
<PAGE> 125
================================================================================
- --------------------------------------------------------------------------------

CREDIT AGREEMENT

DATED AS OF OCTOBER 30, 1995

AMONG

FURON COMPANY

BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT

AND

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

ARRANGED BY
<PAGE> 126
[BANK OF AMERICA LOGO] BA SECURITIES, INC.
- --------------------------------------------------------------------------------

================================================================================

E - 8
OPINION OF COUNSEL
<PAGE> 127
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS, ACCOUNTING TERMS AND EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Use of Defined Term . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.4 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.5 Rounding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.6 Currency Equivalents Generally . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE 2
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . 19
2.5 The Swing Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.6 Commitment Reductions . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.7 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.8 Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.9 Involuntary Termination of Commitment Upon Change In Control . . . . . . 24

ARTICLE 3
PAYMENTS; FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1 Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3 Increased Commitment Costs . . . . . . . . . . . . . . . . . . . . . . . 27
3.4 LIBOR Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5 LIBOR Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.6 Special LIBOR Circumstances . . . . . . . . . . . . . . . . . . . . . . 29
3.7 Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.9 Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.10 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . 30
</TABLE>

E - 9
OPINION OF COUNSEL
<PAGE> 128
<TABLE>
<S> <C>
3.11 Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.12 Payment Free of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.13 Funding Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.14 Failure to Charge Not Subsequent Waiver . . . . . . . . . . . . . . . . 31
3.15 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.16 Time and Place of Payments: Evidence Payments . . . . . . . . . . . . . 31
3.17 Agent's Right to Assume Payments Will Be Made . . . . . . . . . . . . . 32
3.18 Applications of Payments . . . . . . . . . . . . . . . . . . . . . . . . 32
3.19 Survivability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . 33
4.1 Incorporation, Qualification, Powers and Stock . . . . . . . . . . . . . 33
4.2 Execution, Delivery and Performance of Loan Documents . . . . . . . . . 33
4.3 Compliance With Laws and Other Requirements . . . . . . . . . . . . . . 34
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 35
4.6 Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.8 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.11 Regulations G, T, U and X . . . . . . . . . . . . . . . . . . . . . . . 37
4.12 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.13 Disclosure of Material Facts . . . . . . . . . . . . . . . . . . . . . . 37

ARTICLE 5
COVENANTS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.1 Limitations on Business Activity . . . . . . . . . . . . . . . . . . . . 37
5.2 Maintenance of Corporate Existence, Property, Insurance, Etc . . . . . . 37
5.3 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . 38
5.4 Compliance with Agreements, Duties and Obligations . . . . . . . . . . . 39
5.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.6 Mergers and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . 39
5.7 Consolidated Tangible Effective Net Worth . . . . . . . . . . . . . . . 40
5.8 Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.9 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . 40
5.10 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>

E - 10
OPINION OF COUNSEL
<PAGE> 129
<TABLE>
<S> <C>
5.11 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.12 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.13 Financial and Business Information . . . . . . . . . . . . . . . . . . . 41
5.14 Maintenance of Corporate Structure . . . . . . . . . . . . . . . . . . . 43
5.15 Maintenance of Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 43
5.16 Disclosure of Material Litigation . . . . . . . . . . . . . . . . . . . 43
5.17 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.18 Payment or Prepayment of Indebtedness . . . . . . . . . . . . . . . . . 44
5.19 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.20 Disposition of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.21 Indebtedness, Including Guaranties . . . . . . . . . . . . . . . . . . . 45
5.22 Transfers Among Affiliates . . . . . . . . . . . . . . . . . . . . . . . 46

ARTICLE 6
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.1 First Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.2 Any Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.2 Remedies Upon Event of Default . . . . . . . . . . . . . . . . . . . . . 50

ARTICLE 8
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . 51
8.2 Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.3 Banks' Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . 52
8.4 Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.5 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.8 No Obligations of Borrower . . . . . . . . . . . . . . . . . . . . . . . 56

ARTICLE 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.1 Cumulative Remedies; No Waiver . . . . . . . . . . . . . . . . . . . . . 56
9.2 Amendments; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3 Costs, Expense and Taxes . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>

E - 11
OPINION OF COUNSEL
<PAGE> 130
<TABLE>
<S> <C>
9.4 Nature of Banks, Obligations . . . . . . . . . . . . . . . . . . . . . . 58
9.5 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 58
9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.7 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . 59
9.8 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . . . . . 59
9.9 Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.10 Indemnity by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.11 Nonliability of Banks . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.13 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . 65
9.14 Right of Setoff - Deposit Accounts . . . . . . . . . . . . . . . . . . . 65
9.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.16 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.17 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.18 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.19 Choice of Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.20 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . 67
9.21 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.22 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.23 Conflict in Loan Documents . . . . . . . . . . . . . . . . . . . . . . . 67
9.24 PURPORTED ORAL AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . 67
9.25 WAIVER OF RIGHT TO TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . 67
9.26 Termination of Prior Credit Agreement . . . . . . . . . . . . . . . . . 68
</TABLE>

EXHIBITS

A Promissory Note
B Commitment Assignment and Acceptance
C Compliance Certificate
D Request for Loan
E Opinion of Counsel

SCHEDULES

1.1 Commitment and Pro Rata Shares
4.9 Subsidiaries
4.10 ERISA Plans
5.11 Liens Including Capitalized Liens
5.20 Existing Indebtedness

E - 12
OPINION OF COUNSEL

<PAGE> 1
EXHIBIT 10.14

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT dated as of November 9, 1995 by and among
AlliedSignal Laminate Systems, Inc., a Delaware corporation ("SELLER"), Furon
Company, a California corporation ("PURCHASER"), and AlliedSignal Inc., a
Delaware corporation and the indirect parent of Seller ("PARENT").

WITNESSETH:

WHEREAS, Seller, through its Fluorglas division, is engaged in the
business (the "BUSINESS") of developing, manufacturing and selling the products
(the "PRODUCTS") listed in Schedule A hereto, including (i) pressure-sensitive
adhesive tapes, PTFE flexible composites and fabrications and PTFE films (the
"FLUORGLAS CORE BUSINESS") and (ii) metal-clad PTFE/glass laminates (the
"FLUORGLAS MICROWAVE BUSINESS"); and

WHEREAS, Seller desires to sell and Purchaser desires to purchase
certain assets of Seller used primarily in the Business;

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

1. PURCHASE AND SALE

1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement and except as otherwise provided herein, at the Closing, Seller and
Parent shall sell, convey, transfer, assign and deliver to Purchaser, and
Purchaser shall purchase and accept from Seller and Parent, all of Seller's and
Parent's right, title and interest in and to (i) all of the assets of Seller and
Parent primarily used in or primarily related to the Fluorglas Core Business and
all assets of Seller and Parent which are exclusively used in the Fluorglas
Microwave Business, in each case, together with such changes, deletions or
additions occurring between the respective dates of the Schedules hereto and the
Closing Date in the ordinary course of business, and (ii) such other assets as
are identified in the schedules to this Agreement (the "ASSETS"), including
without limitation all of Seller's and Parent's right, title and interest in and
to the following:

<PAGE> 2

(a) "PERSONAL PROPERTY" of Seller, which term includes (i) the
machinery and equipment, fixtures, furniture, office equipment, vehicles,
tools and other tangible personal property which is located at the
Facilities (as defined in Section 4.18) and is used in or related to the
Business, including but not limited to those items listed in Schedule 4.5(a)
hereto; and (ii) the machinery and equipment listed in Schedule 4.5(a)
hereto located at Seller's plant in La Crosse, Wisconsin, utilized
exclusively to manufacture metal-clad PTFE/glass laminates for the Fluorglas
Microwave Business;

(b) accounts receivable of the Business as of the Closing Date, whether
recorded or unrecorded, provided that the accounts receivable of the
Fluorglas Microwave Business will be handled in accordance with the
provisions of Schedule 1.1(b) attached hereto (the "ACCOUNTS RECEIVABLE");

(c) inventory of the Business as of the Closing Date, wherever located,
including raw materials, work-in-process and finished goods (the
"INVENTORY");

(d) the patents and patent applications, trademarks, trade names,
copyrights and licenses specified in Schedule 4.6(a) hereto, and other
intellectual property exclusively used in the Business, including, without
limitation, processes, products, apparatus, formulae, drawings, trade
secrets, know-how, discoveries, inventions (including conceptions of
inventions), software, and design, manufacturing, engineering and other
technical information, except as otherwise expressly excluded pursuant to
Section 1.3 (the "INTELLECTUAL PROPERTY"); provided, however, that with
respect to such other intellectual property, except for the provisions of
Section 6.7(a), nothing in this Agreement shall prevent Seller from using
such other intellectual property which (1) is now or hereafter becomes
through no fault of Seller or its Affiliates part of the public domain, (2)
is independently developed by Seller without reference to Confidential
Information (as defined in Section 6.9) which Seller is obligated to
maintain in confidence under Section 6.9, or (3) is made available to Seller
by a third party not in violation of any confidential obligation to
Purchaser;

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<PAGE> 3

(e) all contracts, agreements, arrangements, leases, purchase orders
and commitments of the Business, including those listed on Schedule 4.7
hereto (the "CONTRACTS") provided that Purchaser assumes the obligations
under such Contracts;

(f) all sales data and information, customer lists, supplier lists,
engineering and production records, mailing lists, catalogues, brochures,
sales literature, promotional material, advertising material and other
selling material of the Business;

(g) transferable governmental and other permits, licenses (other than
licenses encompassed within Intellectual Property), approvals, certificates
of inspection, filings, franchises and other authorizations relating to the
Assets including, but not limited to those listed in Schedule 4.17 hereto
(the "PERMITS AND LICENSES");

(h) all prepaid expenses of the Business except as set forth on
Schedule 1.1(h) hereto;

(i) rights of Seller pursuant to any express or implied warranties,
representations or guarantees made by suppliers furnishing goods or services
to the Business;

(j) the land identified in Schedule 1.4.2, including all buildings,
fixtures and improvements attached thereto, and all rights appurtenant
thereto (the "REAL PROPERTY");

(k) all books and records and all files, documents and papers
(including, but not limited to, those contained in computerized storage
media) pertaining to the Assets, the Assumed Liabilities (as defined below)
or otherwise relating to the Business and customarily located at the
Facilities prior to the Closing Date (excluding the corporate minute book,
stock transfer ledger and other corporate records of Seller, copies of which
will be available to Purchaser upon reasonable request); and

(l) the goodwill incident to the Business.

1.2 Non-Assignable Assets. Notwithstanding anything in this Agreement
to the contrary, this Agreement shall not

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<PAGE> 4

constitute an agreement to assign any Asset if the attempted assignment
thereof, without the consent of a third party thereto, would constitute a breach
of any obligation of Seller or would in any way adversely affect the rights of
Purchaser or Seller thereunder. If such consent is not obtained, or if an
attempted assignment thereof would be ineffective or would affect the rights of
Seller thereunder so that Purchaser would not in fact receive all such rights,
Seller will, to the extent not prohibited by or not in violation of any such
agreement, (a) cooperate with Purchaser in any commercially-reasonable
arrangement designed to provide for Purchaser the benefits (including the
exercise of Seller's rights) under any such Asset, including enforcement for the
benefit of Purchaser of any and all rights of Seller against a third party
thereto arising out of the breach or cancellation by such third party or
otherwise, (b) hold all funds paid to Seller thereunder on and after the Closing
Date in trust for the account of Purchaser, and (c) remit such money to
Purchaser as promptly as possible. Any transfer or assignment to Purchaser by
Seller of any property or property rights or any agreement which shall require
the consent or approval of any third party shall be made subject to such consent
or approval being obtained.

1.3 Excluded Assets. Notwithstanding anything to the contrary contained
in this Agreement, the following are not intended to be sold, assigned,
transferred or conveyed to Purchaser hereunder (the "EXCLUDED ASSETS"):

(a) all cash, cash equivalents and overdrafts of the Business;

(b) the basic books and records of account and all supporting vouchers,
invoices and other records and materials relating to any or all income taxes
of Seller with respect to the Business;

(c) any books or records relating to the Assets or the Business, which
were not customarily located at the Facilities on or before the Closing
Date; provided, however, that Seller shall permit Purchaser to have
reasonable access to such books and records and permit Purchaser to copy the
same to the extent reasonably required for the operation of the Business
after the Closing;

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<PAGE> 5
(d) except for any name or logo listed in Schedule 4.6(a), any right to
use any name or logo of Seller or its Affiliates (as defined in Section 4.7
hereof) or any variant or derivative thereof, including but not limited to
"Allied-Signal," "AlliedSignal," "Allied," "Allied Chemical," "Signal,"
"Oak Materials" or "Oak" whether or not such logo, name, variant or
derivative was used by the Business, other than in connection with the
Inventory being purchased hereunder;

(e) the insurance policies of Seller pertaining to the Business and/or
the Facilities, and the rights of Seller thereunder;

(f) all intellectual property not exclusively used in the Business;
provided, however, that with respect to any such intellectual property which
is used in the Business as of the Closing Date, Seller and Parent will grant
to Purchaser a non-exclusive, paid up, worldwide, royalty free, freely
assignable (without Seller's or Parent's consent) license to use such
intellectual property in the Business in the form attached as Schedule
1.3(f) hereto (the "LICENSE");

(g) all prepaid corporate insurance and taxes related to the Business
as set forth on Schedule 1.1(h);

(h) the real property and any other assets identified in Schedule
1.3(h) hereto; and

(i) any and all assets at Seller's LaCrosse, Wisconsin plant not
exclusively used in the Business.

1.4 Transfer of Title to the Assets. Seller shall sell, assign, convey,
transfer and deliver the Assets to Purchaser at the Closing by means of bills of
sale and assignments in the forms attached as Schedule 1.4.1 hereto and such
other endorsements, certificates and instruments of transfer as shall be
necessary or appropriate to vest good and marketable title to the Assets in
Purchaser, free and clear of any liens, charges and encumbrances, except as
otherwise set forth in this Agreement or in the Schedules hereto, provided that
title to the

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<PAGE> 6
Real Property shall be transferred by deed in the form of Schedule 1.4.2
attached hereto.

1.5 Lease Agreement. At the Closing, Seller and Purchaser will enter
into lease agreements (the "LEASE AGREEMENTS") in the forms of Schedules 1.5.1
and 1.5.2 attached hereto, pursuant to which Seller will lease to Purchaser the
real property identified therein. The real property being leased pursuant to the
Lease Agreements together with the Real Property being sold pursuant to this
Agreement are sometimes collectively referred to herein as the "TRANSFERRED
FACILITIES."

2. PURCHASE PRICE

2.1 Purchase Price. The purchase price to be paid by Purchaser for the
Assets shall be Nineteen Million Dollars ($19,000,000) (the "PURCHASE PRICE")
and shall be adjusted in accordance with Section 2.2. The Purchase Price shall
be paid by Purchaser in full at Closing.

2.2 Post-Closing Adjustment.

(a) The Purchase Price shall be adjusted dollar-for-dollar following
the Closing Date to the extent that the Final Net Assets (as defined below)
of the Business as of the Closing Date do not equal the Reference Net Assets
(as defined below). The "FINAL NET ASSETS" means the aggregate amount of the
Assets, minus the aggregate amount of the Assumed Liabilities (as defined
below), recorded on the statement of assets and liabilities of the Business
as of the Closing Date prepared and audited in accordance with the
procedures set forth herein (the "CLOSING STATEMENT OF ASSETS AND
LIABILITIES"). The "REFERENCE NET ASSETS" means the amount identified as
"Assets in Excess of Liabilities" recorded on the audited statement of
assets and liabilities of the Business as of March 25, 1995 which is set
forth in Schedule 4.4(a)(1) (the "REFERENCE STATEMENT OF ASSETS AND
LIABILITIES"). It is agreed that the Reference Statement of Assets and
Liabilities does not reflect the items set forth on Schedule 2.2(a) which
are recorded on the audited balance sheet dated December 24, 1994 set forth
in Schedule 4.4(a)(1). The Purchase Price as adjusted pursuant to this

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<PAGE> 7
Section 2.2 is hereinafter referred to as the "ADJUSTED PURCHASE PRICE."

(b) Seller shall prepare and furnish to Price Waterhouse LLP, Seller's
independent public accountants ("PRICE WATERHOUSE"), a proposed Closing
Statement of Assets and Liabilities no later than 90 days following the
Closing Date. The proposed Closing Statement of Assets and Liabilities shall
be audited by Price Waterhouse to establish that it has been prepared in
accordance with the accounting principles used in the Reference Statement of
Assets and Liabilities applied on a consistent basis, using the same
accounting principles, methods, practices, procedures and policies used in
preparing the Reference Statement of Assets and Liabilities except as
otherwise provided in Schedule 2.2(b) attached hereto and except for the
purchase accounting relating to Seller's purchase of Oak Materials Group.
Seller will retain Price Waterhouse to perform the audit of the Closing
Statement of Assets and Liabilities for such fees and expenses reasonably
acceptable to Purchaser. Purchaser shall be responsible for such fees and
expenses and will reimburse Seller for such fees and expenses within ten
(10) days after receipt from Seller of an invoice therefor. Price Waterhouse
will deliver the audited Closing Statement of Assets and Liabilities to
Purchaser and Seller within thirty (30) days of its receipt of the proposed
Closing Statement of Assets and Liabilities from Seller. Purchaser shall
give representatives of Seller access to the books and records of the
Business for purposes of preparing the Closing Statement of Assets and
Liabilities and will cause appropriate Purchaser personnel to assist Seller,
at no cost to Seller, in the preparation of such Closing Statement of Assets
and Liabilities. In connection with the preparation of the Closing Statement
of Assets and Liabilities, Seller and Purchaser will rely upon a roll
forward of the physical inventory observed by Price Waterhouse during the
period of August 17-19, 1995. The audited Closing Statement of Assets and
Liabilities shall be conclusive and binding upon Purchaser and Seller,
unless Purchaser or Seller notifies the other, in writing, within 30 days of
its receipt of the audited Closing Statement of Assets and Liabilities from
Price Waterhouse, of such party's disagreement with the audited Closing
Statement of

7
<PAGE> 8
Assets and Liabilities, setting forth all of such party's disagreements and
an explanation therefor including but not limited to the dollar amount of
each item in dispute. Purchaser and Seller shall promptly attempt to resolve
their differences with respect thereto within 30 days after receipt of
written notice of disagreement. If any such difference is not resolved
within such 30 day period, either party may refer the difference for
resolution to an accounting firm mutually acceptable to both Seller and
Purchaser or, in the absence of agreement, within 15 days, to a "national"
accounting firm selected by lot after eliminating Purchaser's and Seller's
principal outside accountants and one additional firm designated as
objectionable by each of Purchaser and Seller (hereinafter, the "FIRM"). The
Firm shall make a determination on the disputes so submitted and shall make
such modifications, if any, to the Closing Statement of Assets and
Liabilities and the Final Net Assets to reflect such determination, and the
same shall be conclusive and binding upon the parties, provided that the
Firm may not award an amount exceeding the amount in dispute. The fees and
expenses of the Firm shall be shared equally by Seller and Purchaser.

(c) Not later than 30 days after the engagement of the Firm (as
evidenced by the date of its written acceptance by facsimile or as otherwise
designated by the Firm to both parties), the parties shall submit
simultaneous briefs to the Firm (with a copy to the other party) setting
forth their respective positions regarding the issues in dispute, and not
later than 15 days after the submittal of such briefs the parties shall
submit simultaneous reply briefs (with a copy to the other party). The Firm
shall issue its decision within 30 days after the due date for the reply
briefs. If additional briefing, a hearing, or other information is required
by the Firm, the Firm shall give notice thereof to the parties as soon as
practicable before the expiration of such 30 day period, and the parties
shall promptly respond to all requests of the Firm with a view to minimizing
any delay in the decision date.

(d) If the Reference Net Assets are greater than the Final Net Assets,
then Seller shall pay to Purchaser an amount equal to the difference. If the
Final Net Assets are

8
<PAGE> 9
greater than the Reference Net Assets, Purchaser shall pay Seller an amount
equal to the difference. Any amount not in dispute under this Section 2.2
shall be due and payable immediately. Any amount in dispute under this
Section 2.2 shall be due and payable within five days of the resolution of
the dispute as set forth in this Section 2.2, and shall include any interest
required by Section 2.3.

2.3 Payments. All payments required to be made pursuant to this Article
2 and any other provisions of this Agreement shall be made in United States
dollars in immediately available funds by wire transfer to an account
designated, in writing, by the recipient. Interest shall accrue on any payment
required to be paid pursuant to Article 2, beginning on the Closing Date, at a
rate equal to the prime rate, as quoted by The Wall Street Journal, in effect
from time-to-time, until the time of payment.

2.4 Allocation of Purchase Price.

(a) Seller and Purchaser agree that the Purchase Price shall be
allocated to the Assets pursuant to an allocation schedule to be agreed upon
by Seller and Purchaser after the Closing (the "ALLOCATION"). The parties
agree that the Allocation will be in accordance with Section 1060 of the
Internal Revenue Code of 1986, as amended (the "CODE"), and will be
reasonably determined in good faith pursuant to arm's-length bargaining
between the parties regarding the fair market value of the Assets. Seller
and Purchaser shall make any adjustments to the Allocation with respect to
the Purchase Price that are necessary to reflect any adjustments to the
Purchase Price made pursuant to Section 2.2 (the "ADJUSTMENTS"). In the
event the parties cannot agree on the Allocation or the Adjustments to the
Allocation, such dispute shall be resolved in accordance with the procedures
set forth in Section 2.2.

(b) Seller and Purchaser shall prepare and file their respective income
tax returns and Internal Revenue Service ("IRS") Form 8594, or such other
form or statement as may be required of the respective parties by law, and
any comparable state or local income tax form, in a manner consistent with
the Allocation and will not, in connection

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<PAGE> 10
with the filing of such returns, make any allocation of the Purchase Price,
as the same may be adjusted herein, which is contrary to the Allocation.

3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS

3.1 Assumed Liabilities. Upon the terms and subject to the conditions
contained herein, on the Closing Date Purchaser shall assume the following
liabilities and obligations of Seller (the "ASSUMED LIABILITIES"):

(1) all liabilities of the Business as of the Closing Date of the type
recorded in the Reference Statement of Assets and Liabilities as "Accounts
Payable - Trade", "Other Accrued Liabilities" and "Intercompany - Trade
Related", but only to the extent of the amount recorded on the Closing
Statement of Assets and Liabilities;

(2) all obligations of Seller to perform each of the Contracts in
accordance with their terms after the Closing Date to the extent (a) either
(x) such Contract is listed in Schedule 4.7 (as updated through the Closing
Date and which is reasonably acceptable to Purchaser) and a true and
complete copy has been provided to Purchaser or Purchaser's counsel on or
before the Closing Date or (y) such Contract is not required to be listed in
Schedule 4.7 pursuant to the terms of Section 4.7, provided that Purchaser
shall not be obligated to assume payment obligations under such undisclosed
Contracts (excluding any orders for the sale of Products or purchase of
goods or services entered into in the ordinary course of the Business and
consistent with past practices) to the extent that such obligations in the
aggregate exceed $50,000, and further provided that if Purchaser elects not
to assume any such obligation Purchaser shall not be entitled to any of the
rights or benefits under such Contract and Seller may take all steps to
minimize its obligations under any such Contract notwithstanding any other
provision of this Agreement, and (b) such obligations arise out of or
otherwise apply to the conduct of the Business subsequent to the Closing and
are not the result of a breach of any such Contract occurring on or prior to
the Closing Date;

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(3) all obligations to repair or replace any defective Product which is
returned following the Closing and was sold within 360 days prior to the
Closing, provided that the maximum aggregate liability assumed by Purchaser
pursuant to this Section 3.1(3) shall not exceed $164,000;

(4) any obligation or liability for any claim in which damages are
sought for defective Product and/or for bodily injury or death to any person
or for injury to or destruction of property or the like in respect of any
Product with respect to which the book value has been written down to zero
or scrap value on or before the Closing Date, which was manufactured by
Seller prior to the Closing Date and sold by Purchaser after the Closing
Date; and

(5) all sums payable pursuant to the retention bonus agreements
specified on Schedule 6.1(d) in respect of the period commencing on the
Closing Date, provided that in no event will Purchaser's obligations
therefor exceed $35,000 in the aggregate.

3.2 Excluded Liabilities. Except for the Assumed Liabilities, Purchaser
shall not assume, or otherwise be responsible for, any liabilities or
obligations (whether actual or contingent, matured or unmatured, liquidated or
unliquidated, or known or unknown) of Parent, Seller, any other owner or
operator of the Business or any Facility prior to the Closing Date, or any
Affiliate of any of the foregoing (collectively, the "EXCLUDED LIABILITIES"),
including but not limited to any liability or obligation as a result of, or
based upon or arising out of the conduct of the Business on or prior to the
Closing Date, including but not limited to the following:

(a) except as described in Section 3.1(4), any and all product
liability claims with respect to products manufactured by the Business (or,
in the case of Extruded PTFE Film-Unsintered, -Sintered, or -Low Density,
shipped by the Business) on or prior to the Closing Date, provided that no
act or omission by Purchaser after Closing is the primary cause of the
defect in such products;

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(b) the alleged or actual violation of any law, rule or regulation
(other than any Environmental Law (as hereinafter defined)), prior to the
Closing, by the Business;

(c) all claims, liabilities, or obligations, known or unknown (other
than those that constitute Assumed Liabilities), to the extent arising out
of the employment relationship existing prior to the Closing between the
Business and any and all current or former employees of the Business,
including but not limited to (i) work-related accidents or injuries, age and
sex discrimination, sexual harassment, violation of employment or safety
laws and wrongful discharge, where the act, omission, event, or occurrence
giving rise to the claim, obligation, or liability shall have taken place on
or prior to the Closing Date, (ii) medical or health care claims,
obligations and liabilities, under any plan, policy or program of the
Business or applicable law, and (iii) state workers' compensation claims
made against the Business by employees or former employees of the Business
arising from occurrences which took place on or prior to the Closing Date
but only to the extent caused by occurrences on or prior to the Closing
Date; and

(d) any liability or obligation under any Environmental Law as a result
of, or based upon or arising out of the operation of the Business or any
Facility prior to the Closing ("ENVIRONMENTAL EXCLUDED LIABILITIES").

4. REPRESENTATIONS AND WARRANTIES OF SELLER

Seller and Parent represent and warrant to Purchaser as follows:

4.1 Corporate Status. Seller is a corporation duly organized and
validly existing under the laws of the State of Delaware, the jurisdiction in
which it is incorporated, and has full power and authority to carry on the
Business as now conducted. Seller has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations and
consummate the transactions contemplated hereby

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<PAGE> 13
in accordance with the terms of this Agreement. Seller is duly qualified to do
business in each jurisdiction in which the failure to be so qualified would have
a material adverse effect on the Seller's conduct of the Business.

4.2 Authorization. All corporate and other proceedings required to be
taken by or on the part of Seller, including, without limitation, all action
required to be taken by the directors or stockholder of Seller to authorize
Seller to enter into and carry out this Agreement and the related documents
contemplated herein, have been, or prior to the Closing will be, duly and
properly taken. This Agreement has been, and each of the related documents will
be at Closing, duly executed and delivered by Seller and constitute, or will,
when delivered, constitute the valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and the rules of law governing specific performance, injunctive relief
and other equitable remedies.

4.3 Compliance. The execution and delivery of this Agreement and the
related documents by Seller do not, and the consummation of the transactions
contemplated hereby and thereby will not, (a) violate any provision of the
charter documents or bylaws of Seller, (b) result in a material breach (or an
event which, with the giving of notice or lapse of time or both, would
constitute a material breach) of any term or provision of, or constitute a
default under, or give rise to a right to terminate, any indenture, mortgage,
deed of trust or other material agreement or arrangement to which Seller is a
party or by which any of the Assets are bound or affected, (c) result in the
creation of any lien, charge or encumbrance on the Assets, or (d) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which Seller is subject or by which any of the
Assets are bound or affected.

4.4 Financial Statements; Changes.

(a) Schedule 4.4(a)(1) contains the balance sheet of the Business as of
December 24, 1994, the Reference Statement of Assets and Liabilities and the
related

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<PAGE> 14
statements of income for the Business for the year ended December 24, 1994
and the three-month period ended March 25, 1995, including the footnotes
thereto (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements
other than the statement of income for the three-month period ended March
25, 1995 have been audited by Price Waterhouse and include the report of
Price Waterhouse therein. Except as set forth in Schedule 4.4(a)(2), the
Financial Statements: (i) have been prepared based upon the books and
records of Seller, (ii) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied, and
(iii) fairly present in all material respects the financial position of the
Business and the results of operations as of their respective dates.

(b) Except as set forth in Schedule 4.4(b), since the date of the
Reference Statement of Assets and Liabilities, there has not been, occurred
or arisen:

(i) any change in or event affecting Seller or the Business that
has had or to Seller's Knowledge may reasonably be expected to have a
material adverse effect on the Business (including its results of
operations, financial condition and the Assets) other than as a result
of general economic conditions or industry-wide developments affecting
other companies engaged in similar businesses; or

(ii) any transaction entered into or carried out other than in the
usual and ordinary course of the Business.

4.5 Condition of Property; Sufficiency of Assets. Schedule 4.5(a)
attached hereto lists (i) all material items of Seller's Personal Property
located at the Facilities, and (ii) the machinery and equipment located at
Seller's plant in La Crosse, Wisconsin, utilized exclusively to produce
metal-clad PTFE/glass laminates for the Fluorglas Microwave Business. Except as
set forth in Schedule 4.5(a), the Personal Property, in the aggregate, has been
maintained in accordance with standard industry practices and is in reasonable
operating condition and repair (normal wear and tear excepted). Except as set
forth in Schedule 4.5(a), the improvements constructed on the Facilities

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<PAGE> 15
located at McCaffrey Street and Liberty Street are (i) to Seller's Knowledge
structurally sound in all material ways, with no known material defects, (ii)
have been maintained in the aggregate in accordance with standard industry
practices, (iii) are in reasonable operating condition and repair, and (iv) to
Seller's Knowledge are not in need of any material maintenance or repair except
for ordinary routine maintenance and repair, the cost of which would not be
material taking into account the operation of the Business as a whole. Except as
set forth in Schedule 4.5(b), the Assets are sufficient for the operation of the
Business as presently conducted.

4.6 Intellectual Property.

(a) Schedule 4.6(a) lists all material

(i) patents and patent applications (including those granted to or
applied for or owned by Seller),

(ii) intellectual property agreements (other than secrecy or
confidentiality agreements), and

(iii) trademark registrations and applications, registered
copyrights and applications therefor and currently used trade names,
exclusively used in or exclusively relating to the Business.

(b) Schedule 4.6(b) lists all material

(i) patents and patent applications (including those granted to or
applied for or owned by Seller),

(ii) intellectual property agreements (other than secrecy or
confidentiality agreements), and

(iii) trademark registrations and applications, registered
copyrights and applications therefor and currently used trade names,
used in, but not exclusively used in, the Business.

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<PAGE> 16

(c) Except as set forth on Schedule 4.6(c), Seller has not received
written notice alleging, and Seller has no Knowledge concerning existing
claims of, any current infringement of any material patent, trademark, trade
name, copyright or other intellectual property right relating to the
Business.

4.7 Contracts. Schedule 4.7 lists each Contract of the Business (other
than intellectual property agreements) or relating to any of the Assets or to
which the Business or any of the Assets is subject or bound that individually,
or together as a series of related Contracts involving the same party or
parties, or the successors to such party or parties: (a) obligates Seller or its
Affiliates to pay an amount of $25,000 or more, (b) has an unexpired term as of
the date of this Agreement in excess of six (6) months, (c) provides for an
extension of credit to any customer or client of the Business for any amount
over $25,000 (other than for sales in the ordinary course of business where
terms of such credit extension for domestic sales are for 30 days or less and
for foreign sales are for 60 days or less), (d) provides for the borrowing of
money by the Business other than credit agreements with banks having normal
credit terms, (e) was not made in the ordinary course of the Business, or (f) is
in any way otherwise material to the Business taken as a whole. To Seller's
Knowledge, each Contract is valid and existing. Seller has duly performed all
its obligations under the Contracts listed in Schedule 4.7 in all material
respects to the extent that such obligations to perform have accrued. Seller has
not received written notice of any alleged breach or default, and to Seller's
Knowledge, no event which would (with the passage of time, notice or both)
constitute a material breach or default by Seller or any other party or obligor
with respect thereto, has occurred. True and correct copies of the Contracts
listed in Schedule 4.7, including all amendments and supplements thereto, have
been delivered to Purchaser or Purchaser's counsel or are attached to Schedule
4.7.

It is understood that inclusion of a Contract on Schedule 4.7 shall not
be considered to be an admission that or evidence that a contract is material to
the operation of the Business taken as a whole. For purposes of this Agreement,
the term "AFFILIATE" of any person or entity means any corporation, partnership
or other entity of which more than 50% of the securities or other ownership
interests having by the terms thereof ordinary voting

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<PAGE> 17
power to elect more than 50% of the board of directors or others performing
similar functions with respect to such corporation, partnership or other entity
directly or indirectly controls, is controlled by, or is under common control
with such person or entity.

4.8 Title to Assets. Excluding the Real Property, and except as
disclosed in Schedule 4.8, Seller has good and marketable title to all of the
Assets free and clear of all liens, mortgages, pledges and encumbrances other
than liens for taxes not yet due and payable or being contested in good faith.

4.9 Litigation. Except as disclosed in Schedule 4.9, there is no
action, suit, proceeding, arbitration, litigation, or, to Seller's Knowledge,
product warranty claim, pending, or to Seller's Knowledge, Threatened against
Seller that relates to the Business or arises out of the ownership, use or
possession or condition of the Assets, or the operation or conduct of the
Business.

4.10 Environmental Matters.

(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:

(i) "HAZARDOUS SUBSTANCE" shall mean substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws as
"hazardous substances," "hazardous materials," "hazardous wastes" or
"toxic substances," or any other substance whose presence in the
ecosystem is regulated by any applicable Environmental Law, including,
without limitation, petroleum and petroleum products.

(ii) "ENVIRONMENTAL LAWS" shall mean all applicable laws relating to
the protection of the environment including: (A) all applicable
requirements for reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or
threatened releases of Hazardous Substances into the air, surface water,
groundwater or land; and (B) all applicable requirements for the

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<PAGE> 18
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances.

(iii) "ENVIRONMENTAL CONDITION" shall mean the presence in, on or
under the specified real property of any Hazardous Substance which
requires investigation or remediation pursuant to any Environmental Law.

(b) Environmental Information. To Seller's Knowledge, Schedule 4.10,
which has been delivered previously to Purchaser by Seller, contains all
material information with respect to (i) the use of Hazardous Substances upon
the Transferred Facilities, or in the operation of the Business, (ii) any
Environmental Condition existing upon the Transferred Facilities, or (iii)
the compliance of the Business or the Transferred Facilities with any
Environmental Laws, except for information that discloses a use of Hazardous
Substances, the existence of an Environmental Condition or a noncompliance
with Environmental Laws which would not have a material adverse effect on the
Assets or on the Business taken as a whole.

(c) Compliance with Environmental Laws. Except as disclosed in Schedule
4.10, to Seller's Knowledge the Business is, and since January 1, 1993 has
been, operated in all material respects in compliance with all Environmental
Laws.

(d) Environmental Conditions; Action by Governmental Agency. Except as
disclosed in Schedule 4.10, to Seller's Knowledge no investigation, inquiry
or other proceeding is pending or, to the Knowledge of Seller, Threatened by
any governmental entity with respect to the Transferred Facilities or the
Business and relating to any actual or alleged Environmental Condition or
failure to comply with any applicable Environmental Law that could reasonably
be expected to have a material adverse effect on the Business.

4.11 Employee Benefit Plans and Policies. All of the employee benefit
plans and policies maintained or contributed to by Seller for the Business, or
in which employees of the Business, including employees on disability, medical,
sick or

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other leave of absence (the "EMPLOYEES"), are entitled to participate, are
listed on Schedule 4.11 (collectively, the "BENEFIT PLANS") and copies of all
such written Benefit Plans have been made available to Purchaser. Except as
listed on Schedule 4.11 (a) such Benefit Plans comply in all material respects,
to the extent applicable, with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the "Code"; (b) none of
the Benefit Plans subject to Part 3, Subtitle B of Title I of ERISA has incurred
any "accumulated funding deficiency" within the meaning of Section 302 of ERISA
or Section 412 of the Code; (c) no material liability, other than required
premium payments, to the Pension Benefit Guaranty Corporation has been incurred
with respect to any of the Benefit Plans subject to Title IV of ERISA; (d)
Seller has not incurred any material liability for any tax imposed under Section
4975 of the Code or Part 4, Subtitle B of Title I of ERISA with respect to any
of the Benefit Plans; and (e) none of the Benefit Plans is a multiemployer plan
within the meaning of Section 3(37)(A) of ERISA.

4.12 Employees. Schedule 4.12 sets forth a list of the names and current
salary or wage rates of the employees of the Business employed as of five (5)
days prior to the date hereof, and the names and compensation arrangements with
any consultants or agents of the Business. Seller is not under any obligation to
recognize or bargain with any labor union with respect to such employees. Upon
termination of the employment of any such employees by Seller, Purchaser will
not, by reason of anything done by Seller prior to or at the Closing, be liable
to any of said employees for so-called "severance pay" or other similar
payments, except as expressly set forth in Section 6.1(d). Except as set forth
in Schedule 4.12, there are no pending or threatened employment claims or suits
under applicable federal or state fair employment laws (including claims arising
under workers' compensation laws) relating to or arising out of the conduct of
the Business.

4.13 Undisclosed Liabilities. Except as set forth in Schedule 4.13,
there are no liabilities or obligations of Seller, either direct or indirect,
matured or unmatured, absolute, contingent or otherwise, which are material to
the Business taken as a whole, except (a) those liabilities or obligations set
forth on the Reference Statement of Assets and Liabilities (including

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<PAGE> 20
the footnotes thereto) and not heretofore paid or discharged, (b) those
liabilities set forth in this Agreement or the Schedules attached hereto, (c)
those liabilities not required to be set forth in the Schedules attached hereto
because of an exception provided for in this Agreement, and (d) those
liabilities arising since the date of the Reference Statement of Assets and
Liabilities in the ordinary course of Business.

4.14 Compliance with Law. Except as set forth in Schedule 4.14, since
January 1, 1993 Seller has conducted the Business and operated and used the
Assets in accordance with all federal, state and local laws and regulations
(excluding Environmental Laws) applicable to the conduct of the Business, and
is not in violation of any such laws other than violations which would not have
a material adverse effect on the Assets taken as a whole, or on the Business
taken as a whole.

4.15 Consents. Except as otherwise provided in this Agreement or set
forth in Schedule 4.15, no action, approval, consent or authorization, including
but not limited to any action, approval, consent or authorization by any third
party, financial institution, governmental or quasi-governmental agency,
commission, board, bureau or instrumentality (i) material to the Business taken
as a whole is required for the transfer or assignment of any of the Assets or
(ii) is necessary to make this Agreement or any of the agreements or instruments
to be executed and delivered pursuant hereto a legal, valid and binding
obligation of Seller or to consummate the transactions contemplated hereunder.

4.16 Taxes. All Taxes (as hereinafter defined) with respect to the
Business which are due and payable prior to the Closing Date have been or will
be duly and properly computed, reported, fully paid and discharged or otherwise
adequately reserved in accordance with GAAP. There are no unpaid Taxes with
respect to any period ending on or before the Closing Date which are or would
become a lien on the Assets, except for current Taxes not yet due and payable.
As used herein, the term "Taxes" shall include all federal, state, local and
foreign taxes, assessments or other governmental charges (including, without
limitation, net income, gross income, excise, franchise, sales and value added
taxes, taxes withheld from employees' salaries and other withholding taxes and
obligations and all deposits

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<PAGE> 21

required to be made with respect thereto), levies, assessments, deficiencies,
import duties, licenses and registration fees and charges of any nature
whatsoever, including any interest, penalties, additions to tax or additional
amounts with respect thereto, imposed by any government or taxing authority
which are levied upon the Assets.

4.17 Permits and Licenses. Schedule 4.17 attached hereto lists all
material Permits and Licenses, or any waiver thereof, obtained by Seller in
connection with the conduct of the Business (other than Permits and Licenses the
failure to obtain which could not reasonably be expected to have a material
adverse effect on the Business) together with the name of the governmental
entity issuing such Permit and License. Seller has all Permits and Licenses
required for the conduct of the Business as presently conducted. Except as set
forth in Schedule 4.17, such Permits and Licenses are valid and in full force
and effect. To the extent any of such Permits and Licenses are not transferable
from Seller to Purchaser, Seller has no Knowledge of any reason or condition
which is likely to prevent Purchaser from obtaining such Permits and Licenses
upon application therefor to the appropriate governmental entity. To Seller's
Knowledge, no suspension, cancellation or termination of any Permits and
Licenses required by any governmental entity to permit the Business to be
conducted is threatened that could reasonably be expected to have a material
adverse effect on the Business.

4.18 Real Property.

(a) Schedule 4.18(a)(i) identifies all real property owned by Seller
that is currently used by Seller primarily for the conduct of the Business
(the "FACILITIES"). It is expressly understood and agreed that Seller's real
property in La Crosse, Wisconsin is not primarily used in the Business and is
not being sold to Purchaser under this Agreement. Schedule 4.18(a)(ii) lists
all real property leased for use in the conduct of the Business.

(b) Seller has not received written notice of any violation of any
applicable zoning or building regulation or ordinance relating to the
Transferred Facilities (as defined in Section 1.5) and, to the Knowledge of
Seller, there is no such violation. Except as otherwise indicated in Schedule

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<PAGE> 22

4.18(b), to the Knowledge of Seller, no fact or condition exists which is
reasonably likely to result in discontinuation of presently available water,
sewer, gas, electricity, telephone, drainage facilities and other utilities
or services for the Transferred Facilities. Seller has not received written
notice of any proposed material special assessments, or any proposed material
changes in property tax or land use laws, or condemnation proceedings
affecting any portion of the Transferred Facilities and, to the Knowledge of
Seller, there are no such proposals or proceedings.

(c) Seller has good and marketable fee simple title to all Real Property
subject to the state of facts set forth in Schedule 4.18(c), including the
title commitment attached as a part of Schedule 4.18(c).

(d) Except as otherwise set forth in Schedule 4.18(c), there are no
leases, subleases, licenses, occupancy agreements, options, rights,
concessions or other agreements or arrangements, written or oral, granting to
any person the right to purchase, use or occupy any of the Transferred
Facilities or any portion thereof or interest in any such Transferred
Facilities.

4.19 No Brokers or Finders. No agent, broker, finder, or investment or
commercial banker, or other person or firm engaged by or acting on behalf of
Seller or any of its Affiliates in connection with the negotiation, execution or
performance of this Agreement or the related documents, is or will be entitled
to any brokerage or finder's or similar fee or other commission as a result of
this Agreement or the transactions contemplated herein. Any fees or expenses
resulting from such engagement shall be the sole responsibility of Seller.

4.20 Product Warranty. The aggregate amounts of valid Product Warranty
claims of the Business in the years ended December 31, 1993 and 1994 were
$177,600 and $150,100, respectively.

4.21 Intercompany Payables. All intercompany trade payable balances
reflected on the Reference Statement of Assets and Liabilities have been
incurred for goods and services

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provided to the Business in the ordinary course of business at reasonable prices
and fees.

4.22 Construction of Certain Provisions.

(a) As used in this Article 4, the term "Knowledge" means the knowledge
of the executive officers of Parent's Engineered Materials Sector, and the
knowledge of the General Manager of the Business and his direct reports and
other key employees of the Business identified in Schedule 4.22.

(b) An action, suit, proceeding, arbitration or litigation shall be
considered "Threatened" if a written notice or communication has been
received, within two years prior to the date of the applicable disclosure
schedule, reasonably indicating that an action, suit or proceeding may be
commenced.

4.23 No Additional Representations. Notwithstanding anything to the
contrary contained in this Agreement, Seller makes no representation or warranty
whatsoever, express or implied, beyond those expressly given in this Agreement,
including but not limited to any implied warranty or representation as to
condition, merchantability or suitability as to any of the properties or assets
of Seller.

5. REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller as follows:

5.1 Corporate Status. Purchaser is a corporation duly organized and
validly existing under the laws of the State of California, the jurisdiction in
which it is incorporated and has full power and authority to carry on its
business and to own all of its properties and assets. Purchaser has all
requisite corporate power and authority to enter into, execute and deliver this
Agreement and to perform its obligations and consummate the transactions
contemplated hereby in accordance with the terms of this Agreement.

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<PAGE> 24

5.2 Authorization. All corporate and other proceedings required to be
taken by or on the part of Purchaser, including, without limitation, all action
required to be taken by the directors or shareholders of Purchaser to authorize
Purchaser to enter into and carry out this Agreement and the related documents
contemplated herein, have been, or prior to the Closing will be, duly and
properly taken. This Agreement has been, and each of the related documents will
be at Closing, duly executed and delivered by Purchaser and constitute, or will,
when delivered, constitute the valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their respective terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and the rules of law governing specific performance, injunctive
relief and other equitable remedies.

5.3 Compliance. The execution and delivery of this Agreement and the
related documents by Purchaser do not, and the consummation of the transactions
contemplated hereby and thereby will not (a) violate any provision of the
Restated Articles of Incorporation or Bylaws of Purchaser, (b) result in the
breach (or an event which, with the giving of notice or lapse of time or both,
would constitute a breach) of any term or provision of, or constitute a default
under, or give rise to a right to terminate, any material indenture, mortgage,
deed of trust or other agreement or arrangement to which Purchaser is a party,
or (c) violate any statute or law or any judgment, decree, order, regulation or
rule of any court or governmental authority to which Purchaser is subject.

5.4 Financing. Purchaser has funds of its own, or has binding
commitments from responsible banks or other financial institutions to provide
funds, which will be sufficient and available to pay the Purchase Price.

5.5 No Brokers or Finders. No agent, broker, finder or investment or
commercial banker, or other person or firm engaged by or acting on behalf of
Purchaser or any of its Affiliates in connection with the negotiation, execution
or performance of this Agreement and the related documents, is or will be
entitled to any broker's or finder's or similar fees or other commission as a
result of this Agreement or the transactions contemplated herein. Any fees or
expenses resulting

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from such engagement shall be the sole responsibility of Purchaser.

5.6 Consents. Except as otherwise provided in this Agreement or set
forth in Schedule 5.6, no action, approval, consent or authorization, including
but not limited to any action, approval, consent or authorization by any third
party, financial institution, governmental or quasi-governmental agency,
commission, board, bureau or instrumentality, is necessary to make this
Agreement or any of the agreements or instruments to be executed and delivered
pursuant hereto a legal, valid and binding obligation of Purchaser or to
consummate the transactions contemplated hereunder.

6. COVENANTS

6.1 Employment.

(a) Purchaser agrees to offer employment, effective immediately
following the Closing, to all employees of the Business who are then employed
by Seller, except for the employees listed in Schedule 6.1(a)(1). Seller
agrees in this regard to cooperate with Purchaser by permitting Purchaser
throughout the period prior to the Closing to meet with the employees of the
Business at reasonable times and to distribute to them such forms and other
documents relating to employment by Purchaser after the Closing as Purchaser
deems appropriate.

(b) To assist Purchaser during the post-Closing transition period,
Seller and Purchaser have agreed that Purchaser will be entitled to utilize
the services of Phil Guy on a full-time basis from the Closing Date through
December 31, 1995, provided that Purchaser reimburses Seller for the cost to
Seller of his salary and benefits incurred by Seller during such period, and
further provided that Phil Guy remains in the employ of Seller or one of its
Affiliates during such period.

(c) Purchaser agrees to make available to each employee of the Business
who accepts employment with Purchaser as of the Closing Date and who is not
listed on Schedule 6.1(a)(1) (collectively, "TRANSFERRED EMPLOYEES"),
Purchaser's standard benefits package, including health benefits
substantially equivalent to the benefits currently provided by Seller to such

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employees, such benefits to become effective without a waiting period and
without regard to pre-existing conditions, except with respect to long term
disability benefits and supplemental life insurance to the extent such
benefits are made available through third-party insurance carriers and will
not cover pre-existing conditions. Nothing herein shall be deemed to require
Purchaser to retain any of the employees it hires for any specific period of
time or to maintain compensation rates or fringe benefit programs for any
specific period of time, however, Purchaser shall be responsible for all
actions taken or omitted to be taken with respect to such employees following
their hiring by Purchaser. Seller shall amend, effective on the Closing Date,
each Benefit Plan which is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) to fully vest all employees of the Business in their
accrued benefits as of the Closing Date.

(d) Purchaser agrees to be responsible for the payment of all sums
payable in respect of the period following the Closing pursuant to those
certain Retention Bonus Agreements specified on Schedule 6.1(d) attached
hereto; provided, however, Purchaser's payment obligations pursuant to this
sentence shall not exceed $35,000. Except as expressly provided in this
Agreement, Purchaser does not assume, and shall not be deemed to have
assumed, any liability or obligation of Seller relating to employment matters
involving current or former employees of Seller, including, without
limitation, any matters arising under any employee benefit plan of Seller or
its Affiliates. The term "Contract" as used in this Agreement does not
include any Benefit Plan.

6.2 Non-Solicitation. Seller covenants that for a period of two years
after the Closing, neither Seller nor any of its Affiliates will directly or
indirectly solicit, raid, entice, induce or in any other manner encourage any
Transferred Employee to discontinue his or her employment with Purchaser or to
seek employment with Seller or any of its Affiliates. The parties expressly
agree that advertisements addressed to the general public made in newspapers or
other periodicals of general circulation shall not constitute direct or indirect
solicitation for purposes of this Agreement. Seller agrees that for a period of
two years after the Closing, neither Seller nor any of its Affiliates without
the prior written consent of Purchaser which consent shall not unreasonably be
withheld will enter into any

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employment or consultant relationship with any Transferred Employee listed on
Schedule 6.2, unless Purchaser has previously terminated the employment of such
Transferred Employee.

6.3 COBRA Coverage. Seller shall timely provide all notices required to
be provided to any of Seller's employees, former employees, or the beneficiaries
or dependents of such employees or former employees, under Part 6 of Subtitle B
of Title I of ERISA or Section 4980B(f) of the Code (herein collectively
referred to as "COBRA"), to the extent such notices are required to be provided
by Seller by reason of events occurring prior to or on the Closing Date or by
reason of the transactions contemplated by this Agreement. For the purposes of
the foregoing, Seller shall treat any Transferred Employee and such employee's
beneficiaries and dependents, as of the Closing Date as having incurred a
"qualifying event" (within the meaning of ERISA Section 603 and Code Section
4980B(f)(3)) as of the Closing Date.

6.4 WARN Act. Purchaser agrees to pay and be responsible for all
liability, cost, expense and sanctions resulting from the failure to comply with
the Worker Adjustment and Retraining Notification Act ("WARN ACT"), and the
regulations thereunder, in connection with the consummation of the transactions
described in or contemplated by this Agreement.

6.5 Welfare and Pension Benefit Plans.

(a) For purposes of vesting and determining eligibility to participate
and benefits payable under Purchaser's "employee welfare benefit plans," as
defined in Section 3(1) of ERISA, Purchaser shall credit each Transferred
Employee with his or her service with Seller before the Closing Date.

(b) For purposes of vesting and determining eligibility to participate
and benefits payable under Purchaser's "employee pension benefit plans," as
defined in Section 3(2) of ERISA, Purchaser shall credit each Transferred
Employee with his or her service with Seller before the Closing Date.

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<PAGE> 28

(c) Purchaser agrees to make payroll deductions as requested by each
Transferred Employee for timely payment of loans outstanding at the Closing
Date under Seller's savings plans, and to remit such amounts withheld each
calendar month to the trustee of Seller's 401(k) Plan.

6.6 Title Insurance. Prior to the Closing, Seller shall deliver to
Purchaser a copy of the survey of the Liberty Street Site and a copy of the
survey of the McCaffrey Street Site, each prepared by David Barrass ("BARRASS")
in April 1995 (each, a "SURVEY"), certified to Purchaser by Barrass and
containing the embossed seal of Barrass. At the Closing and at Purchaser's
expense, Seller shall cause Lawyers Title Insurance Company (the "TITLE
COMPANY") to issue, or to be unconditionally committed to issue, to Purchaser an
ALTA Owner's Policy of Title Insurance (10-17-92) with a liability amount of
$4,000,000 insuring Purchaser as the owner of fee title to the Real Property.
Such policy (the "TITLE POLICY") shall contain only the conditions and
exceptions set forth in the form of the title commitment attached hereto as
Schedule 4.18(c).

6.7 Seller's Covenant Not to Compete.

(a) Restrictions. Parent and Seller each agrees that for a period of
three (3) years after the Closing Date, neither they nor their Affiliates
will engage in the business of manufacturing and selling pressure sensitive
adhesive tapes, PTFE flexible composites and fabrications, and PTFE films.
Parent and Seller further agree that during the term of the Toll Agreement,
neither they nor their Affiliates will engage in the business of
manufacturing and selling metal-clad PTFE/glass laminates for the microwave
laminates market, except as required for the performance of the Toll
Agreement. Nothing in this Agreement shall restrict Parent, Seller or any of
their Affiliates from engaging in the business of manufacturing and selling
metal-clad PTFE/glass laminates after the expiration or termination of the
Toll Agreement. Additionally, nothing in this Agreement is intended to
prevent Parent, Seller and/or their Affiliates from: (i) acquiring shares of
capital stock, partnership or other equity interests in any entity that is
engaged in the Business, provided that (a) the primary purposes of such
acquisition is not to acquire an

<PAGE> 29

interest in any entity engaged in the Business and (b) the annual revenues of
such entity from the Business are not more than 30% of such entity's
aggregate revenues; or (ii) acquiring shares of capital stock, partnership,
or other equity interests in any entity as investments in Seller's pension
funds or funds of any other employee benefit plan whether or not such entity
is engaged in the Business, provided that such interests are acquired and
held for investment purposes only.

(b) Special Remedies and Enforcement. Parent and Seller agree with
Purchaser that a breach by Parent, Seller or any of their Affiliates of any
of the covenants set forth in this Section 6.7 could cause irreparable harm
to Purchaser, that Purchaser's remedies at law in the event of such breach
would be inadequate, and that, accordingly, in the event of such breach, a
restraining order or injunction or both may be issued against Parent, Seller
and any of their Affiliates, in addition to any other rights and remedies
that are available to Purchaser. In connection with any such action or
proceeding for injunctive relief, Parent and Seller each hereby waives the
claim or defense that a remedy at law alone is adequate and agrees, to the
maximum extent permitted by law, to have each provision of this Section 6.7
specifically enforced against Parent and Seller.

(c) Severability. If this Section 6.7 is more restrictive than permitted
by the laws of any jurisdiction in which Purchaser seeks enforcement hereof,
this Section 6.7 shall be limited to the extent required to permit
enforcement under such laws. In particular, the parties intend that the
covenants contained in Section 6.7(a) shall be construed as a series of
separate covenants, one for each county and city in which the Business has
been carried on or in which Purchaser may conduct a similar business after
the Closing Date. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms. If, in any proceeding, a court or
arbitrator shall refuse to enforce any of the separate covenants, then such
unenforceable covenant shall be deemed eliminated from this Section 6.7 for
the purpose of those proceedings to the extent necessary to permit the

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<PAGE> 30

remaining separate covenants to be enforced. If the provisions of this
Section 6.7 shall ever be deemed to exceed the duration or geographic
limitations or scope permitted by applicable law, then such provisions shall
be reformed to the maximum time or geographic limitations in scope, as the
case may be, permitted by applicable law.

6.8 Tax Returns; Taxes.

(a) Purchaser and Seller shall cooperate in preparing and filing tax
returns relating to all sales, excise, real estate, use, transfer or license
tax due with regard to the transactions contemplated by this Agreement.
Purchaser and Seller shall each be responsible for and pay for one-half (1/2)
of all of such sales, excise, use, transfer or license taxes resulting from
the purchase, sale or transfer of the Assets and transactions contemplated
hereby.

(b) All of the other fees and charges which are payable by Seller or
attributable to the conduct of the Business or the ownership, possession or
use of the Assets, including rents, general and special assessments, street
surfacing and other municipal charges, fuel, water, sewer, electrical and
other utility charges and documentation, license and registration fees
(collectively, the "OTHER CHARGES") shall be prorated (as described below) as
of the Closing Date. After the Closing, Purchaser shall make or cause to be
made all necessary filings with respect to Taxes and the Other Charges.

(c) All Taxes related to the Transferred Facilities or to the Business
accrued or accruable with respect to events occurring prior to the close of
business on the Closing Date shall be borne by Seller. For this purpose, the
Closing Date shall be treated as the last day of a taxable period, whether or
not the taxable period in fact ends on such period. All Taxes related to the
Real Property, the real property subject to the Lease Agreements so long as
such Lease Agreements are in effect, or to the Business accrued or accruable
with respect to events occurring after the close of business on the Closing
Date will be borne by Purchaser.

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(d) Real and personal property taxes with respect to any Assets sold
pursuant to this Agreement shall be prorated based on the ratio of number of
days in the pre-closing period to the number of days in the actual taxable
period with respect to which tax is assessed, irrespective of when such taxes
are due, become a lien or are assessed; provided, however, nothing in this
Section 6.8(d) shall cause a duplication in the payment of real or personal
property taxes.

(e) Purchaser shall at its own cost and expense fully and accurately
complete and submit any tax data packages with respect to taxable years
ending on or prior to the Closing Date or for the 1995 taxable year
reasonably required by Seller by the earlier of March 15, 1996 or 180 days
after the Closing Date; provided, however, that if compliance with this
Section requires more than eighty (80) hours of service from Purchaser's
personnel, Seller shall reimburse Purchaser for the prorated wages, salaries
and fringe benefits of such personnel for each hour of service in excess of
such amount.

6.9 Preservation of Confidentiality. For a period of five (5) years from
the date of this Agreement, Seller agrees to treat all Confidential Information
(as defined below) of the Business, as confidential, to preserve the
confidentiality thereof and to not disclose any Confidential Information, except
(i) disclosures made to customers and vendors in the ordinary course of the
Business through the Closing Date, (ii) disclosure to its representatives who
need to know such confidential information in connection with the transactions
contemplated herein at any time before or after the Closing, (iii) disclosures
required by law or government authority, and (iv) with respect to any
Confidential Information used, but not exclusively used in the Fluorglas
Microwave Business, disclosures by Seller in the ordinary course of conducting
its laminates business after the Closing, which are consistent with the standard
of care Seller applies to its own confidential information. As used in this
Agreement, "CONFIDENTIAL INFORMATION" means any and all technical, manufacturing
or marketing information, ideas, methods, developments, inventions,
improvements, business plans, trade secrets, scientific or statistical data,
diagrams, drawings, specifications or other proprietary information

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<PAGE> 32

relating to the Business normally treated as confidential and proprietary by
Seller in the ordinary course of the Business consistent with past practice,
together with all analyses, compilations, studies or other documents, records
or data prepared by Seller or Purchaser or their respective representatives,
as the case may be, which contain or otherwise reflect or are generated from
such information, or which are generated in connection with the transactions
contemplated herein at any time before or after the Closing. Seller shall
have no obligations with respect to any portion of the Confidential
Information (i) which is now in the public domain or hereafter comes into the
public domain through no fault of Seller, (ii) which is hereafter disclosed
to Seller by a third party not in violation of any confidentiality obligation
to Purchaser, or (iii) which is hereafter independently developed by Seller's
employees without reference to the Confidential Information Seller is
obligated to maintain in confidence under this Section.

6.10 Removal of Underground Storage Tanks. At Seller's sole cost and
expense, Seller shall diligently proceed to remove and close in accordance with
all applicable Environmental Laws the underground storage tanks described in
Schedule 6.10 hereto (the "TANKS"), and shall provide Purchaser with written
evidence of its performance of this obligation. If Seller fails to diligently
perform the obligations set forth in this Section, Purchaser may, at Seller's
sole cost and expense, cause the removal and closure of the Tanks in accordance
with all applicable Environmental Laws.

6.11 Removal of Certain Assets. All assets which are located at the
Transferred Facilities but which are not being transferred by Seller to
Purchaser pursuant to this Agreement will be removed from the Transferred
Facilities by Seller on or before the Closing Date.

6.12 Environmental Reports. Purchaser shall deliver to Seller a true and
complete copy of the Phase I and Phase II environmental reports prepared by
Parsons Engineering Science ("PARSONS") in connection with Purchaser's
acquisition of the Real Property when and as such reports become available.
Purchaser shall, to the extent it has the power and authority to do so, make
available or cause Parsons to make available to Seller the field notes,
laboratory reports, sampling and test

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results and other relevant documentation relating to such reports to the extent
such information is not included in the reports.

Purchaser also agrees to grant to Seller the right to conduct sampling
at the Transferred Facilities (to the extent Purchaser retains control of such
Transferred Facilities) to confirm the results or conclusions presented in any
of the environmental reports delivered to Seller by Purchaser, provided that:

(i) Purchaser shall have the right to approve the scope and method
of sampling and testing, which approval shall not be unreasonably withheld
or delayed;

(ii) Seller shall use reasonable efforts to minimize any
interference with the business operations of Purchaser and shall not
materially interfere with such operations unless (y) no reasonable
alternative action is available that would cause less interference and (z)
the proposed action or alternative action must be taken to satisfy a
requirement of a governmental entity to investigate or remediate an
Environmental Condition;

(iii) Seller shall maintain or cause to be maintained insurance
coverage relating to the sampling to be performed as reasonably required by
Purchaser (provided such coverage is available at reasonable cost) and to
name Purchaser an additional insured with respect to such coverage; and

(iv) Seller shall provide to Purchaser a copy of all reports
obtained by Seller when and as received by Seller and shall, to the extent
it has the power and authority to do so, make available, or cause its
consultant to make available, to Purchaser the field notes, laboratory
reports, sampling and test results and other relevant documentation
relating to such reports to the extent such information is not included in
the reports.

6.13 Intercompany Receivables and Payables. Each of Seller and Purchaser
agrees to pay any and all intercompany trade receivables and payables,
respectively, of the Business outstanding as of the Closing Date within the time
period for

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<PAGE> 34

payment in the ordinary course of business but no later than thirty (30) days
after the Closing; provided, however, to the extent any such intercompany
receivable or payable is not recorded on the Closing Statement of Assets and
Liabilities (as finally agreed upon pursuant to Section 2.2) or the amount
recorded differs from the amount paid in respect thereof by Seller or Purchaser,
as the case may be, such party shall refund to the other party any overpayment
received, or shall pay any additional amount owing to the other party, as the
case may be, in each case together with interest at the rate specified in
Section 2.3 from the date payment was originally made or due.

6.14 Health and Safety Operational Issues. At Seller's sole cost and
expense, Seller shall diligently proceed to take reasonable action to correct
the items identified in Schedule 6.14 attached hereto. Purchaser acknowledges
that Seller may be able to provide Purchaser additional information concerning
the issues set forth in the referenced memorandum that reasonably establish that
one or more of such issues do not constitute a current violation or
noncompliance, in which case Seller shall have no obligation under this Section
6.14 with respect thereto.

7. TOLL AGREEMENT

At the Closing, Purchaser and Seller shall execute the Toll Agreement
attached hereto as Schedule 7, pursuant to which Seller will toll produce for
Purchaser metal clad PTFE/glass laminates utilizing the Personal Property
located at Seller's La Crosse, Wisconsin Laminated Products plant, for a period
of up to two years from the Closing Date.

8. PRE-CLOSING COVENANTS

8.1 Conduct of Business. During the period from the date hereof through
the Closing Date, and except as otherwise provided in this Agreement, Seller:

(i) Shall conduct the Business in the ordinary course, consistent with
past practice;

(ii) Shall refrain from disclosing or entering into any license or
agreement with respect to the Intellectual Property;

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<PAGE> 35

(iii) Shall use reasonable efforts to maintain the good relations of its
suppliers, customers and others with whom it has business relations;

(iv) Shall notify Purchaser of any material adverse change with respect
to the condition of the Assets or the Assumed Liabilities or the Business;

(v) Shall not grant any compensation increase or bonus, except in the
ordinary course of business, consistent with past practices;

(vi) Shall use reasonable efforts to preserve the business organization
of the Business intact, and to preserve for Seller the present relationship
between the Business and its employees, suppliers, clients and others having
business relations with them;

(vii) Shall comply with all laws, ordinances, rules, regulations and
orders applicable to the Business, or Seller's operations, assets or
properties in respect thereof, the noncompliance with which might materially
affect the Business or the Assets;

(viii) Shall not sell, assign, transfer, convey, lease, mortgage, pledge
or otherwise dispose of or encumber any of the Assets, or any interests
therein, except in the ordinary course of the Business; and

(ix) Shall not acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, or
otherwise acquire any material assets or business of any corporation,
partnership, association or other business organization or division thereof
if any such transaction could materially affect the Assets, the Business or
the consummation of the transactions contemplated hereby.

8.2 Access to Records and Properties. (a) From the date hereof until the
Closing Date or earlier termination of this Agreement, Seller will:

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<PAGE> 36

(i) provide Purchaser, its officers, counsel and other representatives
with reasonable access to the Assets, the principal personnel and
representatives of Seller, and such books and records pertaining to the
Business as Purchaser may reasonably request, during Seller's regular
business hours, provided that Purchaser has provided Seller with reasonable
prior written notice, and provided further that Purchase agrees that such
access will be requested and exercised with due regard to minimizing
interference with the operations of the Business;

(ii) furnish to Purchaser or its representatives such additional
financial and operating data and other information relating to the business
as may be reasonably requested, to the extent that such access and disclosure
would not violate the terms of any agreement to which Seller is bound or any
applicable law or regulation; and

(iii) make available to Purchaser for inspection and review all
documents, or copies thereof, listed in the Schedules hereto, and all files,
records and papers of any and all proceedings and matters listed in the
Schedules hereto, except to the extent prohibited or restricted by law,
regulation, contract with a third party or where the documents are subject to
the attorney client or work product privilege.

8.3 Consents. Seller and Purchaser each has made required filings with
the Federal Trade Commission ("FTC") and U.S. Department of Justice ("DOJ")
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT") (including, without limitation, responses to requests
for additional information). The parties shall not consummate the transactions
contemplated by this Agreement unless and until all applicable waiting periods
under the HSR Act have expired or are otherwise terminated and shall use good
faith efforts to demonstrate that such transactions should not be opposed by the
FTC or DOJ. All HSR Act filing fees are the responsibility of Purchaser.

8.4 Public Announcements. On and after the date hereof and through the
Closing Date, neither of the parties shall issue any press release or make any
public statement prior to

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obtaining the other party's approval, which approval shall not be unreasonably
withheld, except that no such approval shall be necessary to the extent that, in
the opinion of counsel to the party proposing to make such disclosure,
disclosure is required by law or by any listing agreement of either party
hereto. Such opinion of counsel shall be confirmed in writing and promptly
delivered to the other party. The parties may disclose information with respect
to the transactions contemplated hereby to their employees, agents and
consultants only to the extent such persons have a need to know and agree to be
bound by the terms hereof relative to the disclosure of such information.

9. CLOSING

9.1 Closing Date and Place. The consummation of the purchase and sale
contemplated hereby (the "CLOSING") will take place at the offices of Seller in
Morristown, NJ at 10:00 a.m. on the third business day following the later of
the execution of this Agreement or the date on which the conditions to the
Closing set forth in Sections 10.1(a) and (e) and Sections 10.2(a) and (e) have
been satisfied, or on such other date and time as may be mutually agreed upon by
the parties in writing. Either party may elect to effect the Closing via the
exchange of executed documents and certificates by telecopier or overnight mail.
The date upon which the Closing occurs is referred to herein as the "CLOSING
DATE".

10. CONDITIONS TO CLOSING

10.1 Conditions to the Obligations of Purchaser. The obligations of
Purchaser under this Agreement are subject to the fulfillment prior to or at the
Closing of each of the following conditions, any one or more of which may be
waived in writing by Purchaser in its sole discretion:

(a) No law or order shall have been enacted, entered, issued,
promulgated or enforced by any governmental entity, nor shall any action have
been instituted and remain pending or have been threatened and remain so at
what would otherwise be the Closing Date, which prohibits or restricts or
would (if successful) prohibit or restrict the transactions contemplated
herein.

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<PAGE> 38

(b) The representations and warranties of Seller contained in this
Agreement or in any certificate or document delivered to Purchaser pursuant
hereto shall be complete, true and correct in all material respects on the
Closing Date, with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date.

(c) Seller shall have performed all of its covenants, obligations and
agreements contained in this Agreement to the extent required to be performed
and complied with by it prior to the Closing Date.

(d) Purchaser shall have received all certificates, instruments,
agreements, deeds, title policies and other documents to be delivered by
Seller on or before the Closing Date pursuant to this Agreement.

(e) The waiting periods under the HSR Act applicable to the purchase of
the Business shall have expired without the initiation of legal action by the
FTC or the DOJ.

10.2 Conditions to the Obligations of Seller. The obligations of Seller
under this Agreement are subject to the fulfillment, prior to the Closing, of
each of the following conditions, any one or more of which may be waived in
writing by Seller in its sole discretion:

(b) The representations and warranties of Purchaser contained in this
Agreement or in any certificates or documents delivered to Seller pursuant
hereto shall in all material respects be complete, true and correct on the
Closing Date, with the same force and effect as though such representations
and warranties, had been made on and as of the Closing Date.

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<PAGE> 39

(c) Purchaser shall have performed all of its covenants, obligations and
agreements contained in this Agreement to the extent required to be performed
and complied with by the Closing Date.

(d) Seller shall have received all certificates, instruments, agreements
and other documents to be delivered on or before the Closing Date pursuant to
this Agreement.

(e) The waiting periods under the HSR Act applicable to the purchase of
the Business shall have expired without the initiation of legal action by the
FTC or the DOJ.

11. TERMINATION AND SURVIVAL

11.1 Termination. Both of the parties hereto shall use good faith
efforts to bring about the satisfaction of the conditions hereunder prior to and
at Closing. Notwithstanding anything to the contrary set forth herein, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing:

(a) by mutual written consent of Purchaser and Seller; or

(b) by Purchaser or Seller, upon written notice to the other, if such
party or its Affiliate has breached any material representation, warranty or
covenant contained in this Agreement in any material respect, if the
non-breaching party has notified the breaching party of the breach in writing
and the breach has continued without cure for a period of thirty (30) days
after notice of the breach; or

(c) by Purchaser or Seller, upon the earlier of three (3) months from
the date hereof or the issuance of a preliminary injunction enjoining the
Closing of the transactions contemplated herein.

11.2 Effect of Termination.

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<PAGE> 40

(a) If this Agreement is terminated pursuant to Section 11.1(a) or
Section 11.1(c), this Agreement shall become void and of no further force and
effect, and neither of the parties hereto (nor their respective Affiliates,
directors, shareholders, officers, employees, agents, consultants,
attorneys-in-fact or other representatives) shall have any liability in
respect of such termination.

(b) If this Agreement is terminated pursuant to Section 11.1(b), then
subject to Section 15.17, the nonbreaching party shall be entitled to
receive reimbursement from the breaching party for all reasonable fees, costs
and expenses (including legal and accounting) incurred by the non-breaching
party in connection with this Agreement and the transactions contemplated
hereby.

12. CLOSING DOCUMENTS

12.1 Documents to be Delivered by Seller. At the Closing, Seller shall
deliver to Purchaser the following documents:

(i) Copies of resolutions of Seller certified by a Secretary,
Assistant Secretary or other appropriate officer of Seller, authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby;

(ii) Duly executed bills of sale and assignments in the forms
attached as Schedule 1.4.1 and such other appropriate instruments of transfer
with respect to all of the Assets not transferred or assigned by any other
documents or instruments described in this Section;

(iii) Duly executed and acknowledged deed in the form attached as
Schedule 1.4.2 and such other appropriate instruments of transfer with
respect to the Real Property;

(iv) Duly executed and acknowledged assignments sufficient to
transfer title to the Intellectual Property;

(v) Duly executed License in the form attached as Schedule 1.3(f);

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(vi) Duly executed assignment and assumption
agreement with respect to the Assumed Liabilities in the
form attached as Schedule 1.4.1;

(vii) Duly executed Lease Agreements in the forms
attached as Schedules 1.5.1 and 1.5.2;

(viii) Duly executed documents of assignment or transfer with
respect to each of the transferable Permits and Licenses listed in Schedule
4.17;

(ix) A certificate of an appropriate officer of Seller relating to
the representations, warranties and covenants of Seller made herein as
provided in Section 10.1(b) and (c);

(x) Duly executed Toll Agreement in the form attached hereto as
Schedule 7;

(xi) Intentionally Omitted;

(xii) The Title Policy; and

(xiii) Any other documents reasonably necessary to effectuate the
transactions contemplated hereby.

12.2 Documents to be Delivered by Purchaser. At the Closing, Purchaser
shall pay the Purchase Price to Seller by wire transfer and shall duly execute,
where applicable, and deliver to Seller the following documents:

(i) Copies of resolutions of the Purchaser, certified by the
Secretary or Assistant Secretary of Purchaser, authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby;

(ii) Duly executed assignment and assumption agreement with respect
to the Assumed Liabilities in the form attached as Schedule 1.4.1;

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(iii) Duly executed Lease Agreements in the forms attached as
Schedules 1.5.1 and 1.5.2;

(iv) A certificate of an appropriate officer of Purchaser relating
to the representations, warranties and covenants made herein by Purchaser, as
provided in Sections 10.2(b) and (c);

(v) Duly executed Toll Agreement in the form attached hereto as
Schedule 7;

(vi) Intentionally Omitted;

(vii) Duly executed License in the form attached as Schedule 1.3(f);
and

(viii) Any other documents reasonably necessary to effectuate the
transactions contemplated hereby.

13. POST CLOSING OBLIGATIONS

13.1 Further Assurances. From time to time after the Closing,
without further consideration, the parties shall cooperate with each other
and shall execute and deliver instruments of transfer or assignment, or such
other documents to the other party as such other party reasonably may request
to evidence or perfect Purchaser's right, title and interest to the Assets,
and otherwise carry out the transactions contemplated by this Agreement.
Recordation of any such instruments shall be at the sole expense of
Purchaser.

13.2 Access to Books and Records. After the Closing, Purchaser shall
permit Seller, at Seller's sole expense, to have access to and the right to
make copies of such of Seller's books, records and files as constitute part
of the Assets for any reasonable purpose at any time during regular business
hours, such as for use in litigation or financial reporting, tax return
preparation, or tax compliance matters. Prior to disposing of or destroying
any such information or records after the Closing Date, Purchaser shall
afford Seller a reasonable opportunity to segregate, remove or copy such
books, records and files as Seller may select. Purchaser shall not be
required to retain such

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<PAGE> 43

books, records and files beyond the expiration of any applicable statute of
limitations, including extensions thereof.

13.3 Cooperation in Litigation. The parties shall reasonably cooperate
with each other at the requesting party's expense in the prosecution or defense
of any litigation or other proceeding arising from or relating to the operation
of the Business.

13.4 Proprietary Information. Prior to the Closing Date, the Business
was routinely supplied copies of proprietary and confidential information
relating to strategic, technical, and/or marketing plans of Seller and its
Affiliates and their various operations. Although Seller has attempted to
recover such information from the Business, some may still be present within the
Business. Purchaser therefore agrees that it will not use such information for
any purpose whatsoever, and shall destroy any remaining copies.

14. INDEMNIFICATION

14.1 Indemnification by Seller and Parent. Seller and Parent
(collectively and individually referred to hereinafter in this Article 14 as
"Seller" unless otherwise expressly provided), jointly and severally, shall
defend, indemnify and hold harmless Purchaser and Purchaser's directors,
shareholders, officers, employees, agents, Affiliates, successors and assigns
from and against any and all claims, liabilities, obligations, losses, costs,
expenses (including, without limitation, interest, penalties and reasonable
attorneys' fees), fines, or damages of any kind or nature (individually a "LOSS"
and collectively "LOSSES"), as a result of, or based upon or arising out of:

(a) any breach or violation by Seller of any of the covenants made by
Seller in this Agreement or any agreement, certificate or similar document
delivered pursuant hereto;

(b) any breach of, or any inaccuracy or misrepresentation in, any of the
representations or warranties made by Seller in this Agreement or in any
Schedule, agreement, instrument, certificate or similar document required to
be delivered pursuant to the terms hereof;

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<PAGE> 44
(c) all Losses resulting from the assertion of claims made against the
Assets sold hereunder or against Purchaser by creditors of Seller under any
applicable bulk transfer law, including, but not limited to, the bulk
transfer provisions of the Uniform Commercial Code of any state, or any
similar statute, with respect to the transactions contemplated hereby;
provided, that this Subsection shall in no event apply to Losses resulting
from the assertion of claims included in the Assumed Liabilities; or

(d) any and all Excluded Liabilities (other than Environmental Excluded
Liabilities), it being understood that neither the Hazardous Substances
referred to in the last sentence of Section 14.2(e)(B) which may have been
present prior to the Closing Date, nor Purchaser's obligations under that
provision with respect thereto, are intended to or shall be deemed to
constitute an Excluded Liability;

(e) any and all of the following:

(A) the alleged or actual violation of any Environmental Law prior
to the Closing or subsequent to the Closing to the extent the violation
is a continuation of a violation that existed as of the Closing,
provided that Purchaser gives Seller a Notice of Claim (as hereinafter
defined) with respect to such continuing violation within two (2) years
after the Closing Date in which event the procedures set forth in
Schedule 14.1(e)(A) attached hereto shall apply;

(B) the presence, at any time on or prior to the Closing Date, of
Hazardous Substances on or in the soil, groundwater or surface water at
the Real Property or at any property or facility used in connection with
the Business (including any property or facility at which any Hazardous
Substances were disposed or treated), which presence constitutes an
Environmental Condition as of the Closing Date or which becomes an
Environmental Condition after the Closing Date due to a change in
Environmental Laws.

44
<PAGE> 45

14.1.1 Limitation on Environmental Indemnification. Notwithstanding the
foregoing, Seller's obligation to Purchaser with respect to any Losses as a
result of, or based upon or arising out of the circumstances described in
Section 14.1(e) shall be limited to (i) third party claims, (ii) performance of
investigation and remediation activities, (iii) reimbursement of or payment of
out-of-pocket costs Purchaser may incur in connection with investigation or
remediation activities or activities required to bring into compliance a
continuing violation of an Environmental Law existing as of the Closing, and
(iv) in the event any required investigation or remediation activities in
respect of a Notice of Claim given to Seller during the three (3) year period
following the Closing, or any compliance activities in respect of a Notice of
Claim given to Seller pursuant to Section 14.1(e)(A) during the two (2) year
period following the Closing, shall limit or shut down Purchaser's manufacturing
operations, fifty percent (50%) of any profits Purchaser can reasonably
establish that it lost as a result of such limitation on its manufacturing of
Products for sale, provided that in no event will Seller's obligation with
respect to such lost profits exceed $3,000,000 in the aggregate.

It is understood that Seller shall not be required to indemnify
Purchaser for any lost profits which Purchaser may claim as a result of delays
or changes in implementation of any of Purchaser's expansion plans due to the
performance of required investigation or remediation or compliance activities.
In no event will Seller be required to conduct remediation to standards more
strict than those then required by applicable governmental entities for a
manufacturing operation conducted at the Transferred Facilities similar to the
Business as conducted as of the Closing Date.

14.2 Indemnification by Purchaser. Purchaser shall indemnify and hold
harmless Seller, Parent and their respective directors, stockholder, officers,
employees, agents, consultants, representatives, Affiliates, successors and
assigns from and against any and all Losses, as a result of, or based upon or
arising out of:

(a) any breach or violation by Purchaser of any of the covenants made by
Purchaser in this Agreement or any agreement, certificate or similar document
delivered pursuant hereto;

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<PAGE> 46

(b) any breach of, or any inaccuracy in any of the representations or
warranties made by Purchaser in this Agreement, or in any Schedule,
agreement, certificate, instrument or similar documents required to be
delivered pursuant to the terms hereof;

(d) the operation of the Business by Purchaser after the Closing Date
except to the extent otherwise the obligation or responsibility of Seller
under this Agreement or otherwise covered by Section 14.2(e) or (f);

(e) any and all of the following:

(A) the alleged or actual violation by the Business of any
Environmental Law subsequent to the Closing, unless such violation
existed on or prior to the Closing and falls within Seller's
indemnification obligation under Section 14.1(e)(A), and

(B) the release or deposit, at any time subsequent to the Closing,
of Hazardous Substance(s) onto or into the soil, groundwater or surface
water at the Real Property or at any property or facility (excluding
Seller's Lacrosse, WI property and facility) used in connection with the
Business (including any property or facility at which any Hazardous
Substances were disposed or treated), unless the release or deposit does
not materially increase the cost of investigating or remediating an
Environmental Condition for which Seller is obligated to indemnify
Purchaser pursuant to Section 14.1(e), provided that, if such release or
deposit does materially increase the cost of investigating or
remediating an Environmental Condition for which Seller is obligated to
indemnify Purchaser pursuant to Section 14.1(e), the cost of
investigation and remediation shall be equitably allocated between
Seller and Purchaser taking into consideration their relative
contributions to the condition. (For the purposes of this subsection, an
additional cost shall be "material" if it adds more than $75,000 to the
cost

46
<PAGE> 47
of the investigation or remediation.) In the event such release or
deposit subsequent to the Closing gives rise to an Environmental
Condition which did not exist prior to such release or deposit, it is
agreed that Purchaser shall be responsible for the entire cost of
investigating and remediating such Environmental Condition, including
any Hazardous Substances comprising a portion of the Environmental
Condition, regardless of whether such Hazardous Substances were present
prior to the Closing Date; or

(f) Purchaser's hiring practices in connection with its compliance with
Section 6.1(a) to the extent arising from claims by any employee listed in
Schedule 6.1(a)(1) that Purchaser and/or Seller unlawfully discriminated
against such employee in connection with Purchaser's hiring decisions on the
basis of such employee's age, race, gender, religion or other legally
protected classification.

14.2.1 Limitation on Environmental Indemnification. Notwithstanding the
foregoing, Purchaser's obligation to Seller with respect to any Losses as a
result of, or based upon or arising out of the circumstances described in
Section 14.2(e) shall be limited to (i) third party claims, (ii) performance of
investigation and remediation activities, and (iii) reimbursement of or payment
of out-of-pocket costs Seller may incur in connection with investigation or
remediation activities or activities required to bring into compliance a
violation of an Environmental Law subsequent to the Closing. In no event will
Purchaser be required to conduct remediation to standards more strict than those
then required by applicable governmental entities for a manufacturing operation
conducted at the Transferred Facilities similar to the Business as conducted as
of the Closing Date.

14.3 Indemnification Procedure.

(a) Any party seeking indemnification hereunder (the "INDEMNITEE") shall
notify the party liable for such indemnification (the "INDEMNITOR") in
writing of any event, omission or occurrence which the Indemnitee has
determined has given or could give rise to Losses which are indemnifiable
hereunder (such written notice being

47
<PAGE> 48

hereinafter referred to as a "NOTICE OF CLAIM"); provided, that a Notice of
Claim in respect of any action at law or suit in equity by or against a third
person as to which indemnification will be sought shall be given promptly
after the action or suit is commenced. A Notice of Claim shall specify in
reasonable detail the nature and any particulars of the event, omission or
occurrence giving rise to a right of indemnification. Neither the failure of
any Indemnitee to give notice as provided in this Section 14.3 nor any defect
or error in the notices given shall relieve the Indemnitor of its obligations
under this Section 14.3, except to the extent that the Indemnitor is actually
prejudiced by such failure, defect or error. After the giving of a Notice of
Claim pursuant hereto, the amount of indemnification to which an Indemnitee
shall be entitled shall be determined: (i) by the written agreement between
the Indemnitee and the Indemnitor; (ii) by a judgment or decree of any court
of competent jurisdiction; or (iii) by any other means to which the
Indemnitee and the Indemnitor shall agree.

(b) The Indemnitor shall have the right to conduct and control, through
counsel of its choosing reasonably acceptable to the Indemnitee, the defense,
compromise or settlement of any third person claim, action or suit against
such Indemnitee as to which indemnification is sought by any Indemnitee from
any Indemnitor hereunder, provided that the Indemnitor (i) has acknowledged
and agreed in writing, within 14 days after the giving of a Notice of Claim
or such shorter period as may be required to avoid any prejudice to the right
of the Indemnitee, that, if the same is adversely determined, the Indemnitor
has an obligation to provide indemnification to the Indemnitee in respect
thereof and (ii) diligently and timely defends against such claim, action or
suit. In any such case the Indemnitee shall cooperate in connection therewith
and shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested by the Indemnitor in connection therewith; provided,
that the Indemnitor shall not, without the written consent of the Indemnitee
(which consent shall not be withheld unreasonably) compromise or settle any
such claim, action or suit. The Indemnified

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<PAGE> 49

Party shall have the right to employ separate counsel in any claim, action or
suit and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnitee unless (i) the
Indemnitor has agreed in writing to pay such fees and expenses, (ii) the
Indemnitor has failed to assume the defense and employ counsel, or (iii) the
named parties to any such claim, action or suit (including any impleaded
parties) include both the Indemnitor and the Indemnitee and the Indemnitee
shall have been advised in writing by its counsel that representation of the
Indemnitor and the Indemnitee by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or
potential differing conflicts of interest between them (in which case the
Indemnitor shall not have the right to assume the defense of such claim,
action or suit on behalf of the Indemnitee).

(c) In the event Purchaser gives Seller a Notice of Claim for
indemnification under Section 14.1(e), Seller shall notify Purchaser within
ninety (90) days of Seller's receipt of the Notice of Claim whether or not
Seller intends to conduct the required remediation and investigation
activities. During such ninety (90) day period, Purchaser shall permit Seller
and its consultants reasonable access to the relevant property for the
purposes of determining whether or not Seller agrees with the claim. In the
event a governmental authority requires action more quickly, Seller and
Purchaser will cooperate with each other in good faith in order to negotiate
a schedule reasonably acceptable to the governmental authority. Seller shall
have the right to reasonably conduct and shall have reasonable control over
any and all investigation and remediation activities that it undertakes,
provided that Seller diligently and timely commences and performs such
activities. Prior to the commencement of any such activities on the Real
Property, Seller shall provide to Purchaser for its review and approval,
which approval shall not unreasonably be withheld, the following:

(i) a work plan setting forth in reasonable detail the work to be
performed; and

<PAGE> 50
(ii) reasonably satisfactory evidence that Seller maintains, or has
caused the party performing the work to maintain, insurance reasonably
required by Purchaser (provided that such insurance is available at
reasonable cost), naming Purchaser as an additional insured.

Seller shall provide to Purchaser copies of all reports, studies and
sampling results, and drafts thereof, prepared with respect to the work
and the Environmental Condition when and as such reports, studies or
results become available.

14.(jjjj) In connection with the performance of any such
investigation or remediation activities, Purchaser shall provide Seller
and its representatives with access to the Transferred Facilities, and
shall cooperate with all reasonable requests of Seller, provided that
Seller shall reimburse Purchaser for reasonable out-of-pocket costs
incurred as a result of providing such assistance.

(e) Seller shall use reasonable efforts to minimize any interference
with the business operations of Purchaser and shall not materially
interfere with such operations unless (y) no reasonable alternative
action is available that would cause less interference, and (z) the
proposed action or alternative action must be taken to satisfy a
requirement of a governmental entity to investigate or remediate an
Environmental Condition.

14.4 Limitation on Certain Claims. Anything to the contrary contained
herein notwithstanding, (i) no party shall assert any claim against the other
for indemnification hereunder with respect to any Losses unless and until the
amount of such Losses or claims recoverable by the claiming party shall exceed
$200,000 calculated on a cumulative basis and not a per item basis, and then
only in respect to the excess over said amount; provided, however, any Losses
which arise pursuant to Sections 14.1(c), (d) or (e) or 14.2(c), (d), (e) or (f)
shall not be subject to the $200,000 minimum set forth in this Section 14.4; and
(ii) neither Purchaser nor Seller shall be entitled to recover from the other
party more than an aggregate of

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<PAGE> 51

$17,000,000 with respect to all claims for indemnity or damages in respect of
matters for which it is entitled to be indemnified under (x) Sections 14.1(a),
(b) or (c) in the case of Purchaser, and (y) Sections 14.2(a) or (b) in the case
of Seller, whether such claims are brought under this Article 14 or otherwise.

14.5 Term. This Article 14 shall survive the Closing and shall remain in
effect as follows: (i) as to any indemnification obligation arising pursuant to
Sections 14.1(a) or (b) or 14.2(a) or (b), this Article 14 shall survive the
Closing, and shall remain in effect for a period of two (2) years after the
Closing, (ii) as to any indemnification obligation arising pursuant to Sections
14.1(e) or 14.2(e), this Article 14 shall remain in effect for a period of
twenty (20) years after the Closing, and (iii) as to any indemnification
obligation arising pursuant to Sections 14.1(c) or (d) or 14.2(c), (d) or (f),
this Article 14 shall remain in effect indefinitely. The expiration of indemnity
obligations under Article 14 shall not be deemed to constitute an assumption of
liability by the party to whom the obligation ran or a waiver by such party of
any other right or claim.

15. MISCELLANEOUS

15.1 Expenses. Except as specifically set forth elsewhere herein, each
of the parties hereto shall pay its own expenses and costs incurred or to be
incurred by it in negotiating, closing and carrying out this Agreement. In the
event of any action for the breach of this Agreement or misrepresentation by any
party, the prevailing party shall be entitled to reasonable attorney's fees,
costs and expenses incurred in such action.

15.2 Notices. Any notice or communication given pursuant to this
Agreement by a party hereto to the other party shall be in writing and hand
delivered, or mailed by registered or certified mail, postage prepaid, return
receipt requested (notices so mailed shall be deemed effective on the third day
after mailing), or sent via facsimile (notices so transmitted shall be deemed
effective upon transmission), with an original mailed as follows:

If to Seller:

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<PAGE> 52

AlliedSignal Laminate Systems Inc.
c/o AlliedSignal Inc.
101 Columbia Road
Morristown, New Jersey 07962
Attention: Vice President and General Counsel
Engineered Materials
Fax No.: (201) 455-6840

If to Purchaser:

Furon Company
29982 Ivy Glenn Drive
Laguna Niguel, California 92677
Attention: Chairman of the Board and General
Counsel
Fax No.: (714) 363-6276

15.3 Confidentiality. Seller and Purchaser have entered into a
Confidentiality Agreement dated March 8, 1995, which notwithstanding any
provision herein to the contrary shall survive the execution and delivery of
this Agreement and any termination of this Agreement, but shall expire upon the
consummation of the Closing and thereafter be of no further force or effect.

15.4 Post Closing Services. Seller agrees that following the Closing
Date Seller will continue to provide those services set forth on Schedule 15.4
for the periods specified in Schedule 15.4, provided, however that Purchaser and
Seller shall agree on a fee to be paid to Seller which fully compensates for all
its costs in providing such services including wage and expenses of Seller's
employees and allocable overhead, and terms for the provision of such services.

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

15.6 Entire Agreement. Except for the Confidentiality Agreement referred
to in Section 15.3, this Agreement is the

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<PAGE> 53

entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior communication, representations, agreements and
understandings between the parties hereto, whether oral or written, including,
without limitation, any financial or other projections or predictions regarding
the Seller or the Business.

15.7 Construction. When the context so requires, references herein to
the singular number include the plural and vice versa and pronouns in the
masculine or neuter gender include the feminine. The headings contained in this
Agreement and the tables of contents, exhibits and schedules are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

15.8 Assignment. This Agreement may not be assigned without the prior
written consent of the other party hereto, which consent shall not unreasonably
be withheld.

15.9 Amendment. This Agreement may be amended only by written agreements
duly executed by representatives of both of the parties hereto.

15.10 Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of New York, disregarding its conflicts of laws
principles which may require the application of the laws of another
jurisdiction.

15.11 Failure to Close. If for any reason this Agreement is terminated
prior to Closing, Purchaser shall promptly upon the request of Seller return to
Seller all documents and other information (and notes made therefrom), including
all originals and all copies thereof, theretofore delivered to Purchaser by or
on behalf of Seller. Purchaser shall in any case comply with the terms of the
Confidentiality Agreement referred to in Section 15.3.

15.12 No Third Party Rights. This Agreement is not intended and shall
not be construed to create any rights in any parties other than Seller and
Purchaser and no other person shall assert any rights as a third party
beneficiary hereunder.

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15.13 Schedules. Schedules attached hereto are incorporated into this
Agreement and shall be deemed a part hereof as if set forth herein in full.
References herein to "this Agreement" and the words "herein," "hereof" and words
of similar import refer to this Agreement (including Schedules) as an entirety.
In the event of any conflict between the provisions of this Agreement and any
such Schedule, the provisions of this Agreement shall control.

15.14 Waivers. Any waiver of rights hereunder must be set forth in
writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive either
party's rights at any tine to enforce strict compliance thereafter with every
term or condition of this Agreement.

15.15 Severability. If and to the extent that any court of competent
jurisdiction holds any provisions (or any part thereof) of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.

15.16 Remedies Cumulative. Except with respect to remedies for the
breach of representations and warranties and except for the limitations on
recovery of damages set forth in Sections 14.1.1, 14.2.1 and 14.4, all rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available and Article 14 shall not be
deemed to preclude or otherwise limit in any way the exercise of any such other
rights or pursuit of other remedies.

15.17 Specific Performance. Seller and Purchaser each acknowledge that,
in view of the uniqueness of the Business and the transactions contemplated by
this Agreement, each party would not have an adequate remedy at law for money
damages in the event that this Agreement has not been performed in accordance
with its terms, and therefore agrees that the other party shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which it may be entitled, at law or in equity.

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[SIGNATURES ON FOLLOWING PAGE]

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<PAGE> 56
IN WITNESS WHEREOF, Seller and Purchaser have duly executed and
delivered this Agreement as of the day and year first above written.

"SELLER"

AlliedSignal Laminate Systems Inc.,
a Delaware corporation

By: /S/STANLEY R. STEVINSON
---------------------------------------
Name: Stanley R. Stevinson
Title:
---------------------------------

"PARENT"

AlliedSignal Inc.,
a Delaware corporation

By: /S/DANIEL K. CLIFT
---------------------------------------
Name: Daniel K. Clift
Title:
---------------------------------

"PURCHASER"

Furon Company,
a California corporation

By: /S/J. MICHAEL HAGAN
---------------------------------------
Name: J. Michael Hagan
Title:
---------------------------------

<PAGE> 57

ASSET PURCHASE AGREEMENT

BY AND AMONG

FURON COMPANY, AS PURCHASER,

ALLIEDSIGNAL LAMINATE SYSTEMS, INC., AS SELLER, AND

ALLIEDSIGNAL INC., AS PARENT

DATED AS OF NOVEMBER 9, 1995

<PAGE> 58
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. PURCHASE AND SALE................................................................................... 1
1.1 Purchase and Sale........................................................................ 1
1.2 Non-Assignable Assets.................................................................... 3
1.3 Excluded Assets.......................................................................... 3
1.4 Transfer of Title to the Assets.......................................................... 4
1.5 Lease Agreement.......................................................................... 5

ARTICLE 2. PURCHASE PRICE...................................................................................... 5
2.1 Purchase Price........................................................................... 5
2.2 Post-Closing Adjustment.................................................................. 5
2.3 Payments................................................................................. 7
2.4 Allocation of Purchase Price............................................................. 7

ARTICLE 3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS........................................................... 8
3.1 Assumed Liabilities...................................................................... 8
3.2 Excluded Liabilities..................................................................... 9

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER............................................................ 10
4.1 Corporate Status......................................................................... 10
4.2 Authorization............................................................................ 10
4.3 Compliance............................................................................... 11
4.4 Financial Statements; Changes............................................................ 11
4.5 Condition of Property; Sufficiency of Assets............................................. 12
4.6 Intellectual Property.................................................................... 12
4.7 Contracts................................................................................ 13
4.8 Title to Assets.......................................................................... 14
4.9 Litigation............................................................................... 14
4.10 Environmental Matters.................................................................... 14
4.11 Employee Benefit Plans and Policies...................................................... 15
4.12 Employees................................................................................ 15
4.13 Undisclosed Liabilities.................................................................. 16
4.14 Compliance with Law...................................................................... 16
4.15 Consents................................................................................. 16
4.16 Taxes.................................................................................... 16
4.17 Permits and Licenses..................................................................... 17
4.18 Real Property............................................................................ 17
4.19 No Brokers or Finders.................................................................... 18
4.20 Product Warranty......................................................................... 18
</TABLE>

i
<PAGE> 59

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.21 Intercompany Payables.................................................................... 18
4.22 Construction of Certain Provisions....................................................... 18
4.23 No Additional Representations............................................................ 19

ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................... 19
5.1 Corporate Status......................................................................... 19
5.2 Authorization............................................................................ 19
5.3 Compliance............................................................................... 19
5.4 Financing................................................................................ 20
5.5 No Brokers or Finders.................................................................... 20
5.6 Consents................................................................................. 20

ARTICLE 6. COVENANTS........................................................................................... 20
6.1 Employment............................................................................... 20
6.2 Non-Solicitation......................................................................... 21
6.3 COBRA Coverage........................................................................... 22
6.4 WARN Act................................................................................. 22
6.5 Welfare and Pension Benefit Plans........................................................ 22
6.6 Title Insurance.......................................................................... 22
6.7 Seller's Covenant Not to Compete......................................................... 23
6.8 Tax Returns; Taxes....................................................................... 24
6.9 Preservation of Confidentiality.......................................................... 25
6.10 Removal of Underground Storage Tanks..................................................... 26
6.11 Removal of Certain Assets................................................................ 26
6.12 Environmental Reports.................................................................... 26
6.13 Intercompany Receivables and Payables.................................................... 27
6.14 Health and Safety Operational Issues..................................................... 27

ARTICLE 7. TOLL AGREEMENT...................................................................................... 28

ARTICLE 8. PRE-CLOSING COVENANTS............................................................................... 28
8.1 Conduct of Business...................................................................... 28
8.2 Access to Records and Properties......................................................... 29
8.3 Consents................................................................................. 29
8.4 Public Announcements..................................................................... 30

ARTICLE 9. CLOSING............................................................................................. 30
9.1 Closing Date and Place................................................................... 30

ARTICLE 10. CONDITIONS TO CLOSING.............................................................................. 30
10.1 Conditions to the Obligations of Purchaser............................................... 30
10.2 Conditions to the Obligations of Seller.................................................. 31
</TABLE>

ii
<PAGE> 60
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 11. TERMINATION AND SURVIVAL........................................................................... 32
11.1 Termination.............................................................................. 32
11.2 Effect of Termination.................................................................... 32

ARTICLE 12. CLOSING DOCUMENTS.................................................................................. 32
12.1 Documents to be Delivered by Seller...................................................... 32
12.2 Documents to be Delivered by Purchaser................................................... 33

ARTICLE 13. POST CLOSING OBLIGATIONS.......................................................................... 34
13.1 Further Assurances....................................................................... 34
13.2 Access to Books and Records.............................................................. 34
13.3 Cooperation in Litigation................................................................ 35
13.4 Proprietary Information.................................................................. 35

ARTICLE 14. INDEMNIFICATION.................................................................................... 35
14.1 Indemnification by Seller and Parent..................................................... 35
14.1.1 Limitation on Environmental Indemnification.............................................. 36
14.2 Indemnification by Purchaser............................................................. 37
14.2.1 Limitation on Environmental Indemnification.............................................. 38
14.3 Indemnification Procedure................................................................ 38
14.4 Limitation on Certain Claims............................................................. 41
14.5 Term..................................................................................... 41

ARTICLE 15. MISCELLANEOUS...................................................................................... 41
15.1 Expenses................................................................................. 41
15.2 Notices.................................................................................. 42
15.3 Confidentiality.......................................................................... 42
15.4 Post Closing Services.................................................................... 42
15.5 Counterparts............................................................................. 42
15.6 Entire Agreement......................................................................... 43
15.7 Construction............................................................................. 43
15.8 Assignment............................................................................... 43
15.9 Amendment................................................................................ 43
15.10 Applicable Law........................................................................... 43
15.11 Failure to Close......................................................................... 43
15.12 No Third Party Rights.................................................................... 43
15.13 Schedules................................................................................ 43
15.14 Waivers.................................................................................. 44
15.15 Severability............................................................................. 44
15.16 Remedies Cumulative...................................................................... 44
15.17 Specific Performance..................................................................... 44
</TABLE>

iii
<PAGE> 61
SCHEDULES

Schedule A Products
Schedule l.1(b) Fluorglas Microwave Business

Accounts Receivable

Schedule 1.1(h) Excluded Prepaid Expenses
Schedule 1.3(f) License Agreement
Schedule 1.3(h) Certain Excluded Assets
Schedule 1.4.1 Forms of Assignment Documents
Schedule 1.4.2 Form of Deed
Schedule 1.5.1 Form of River Road Lease Agreement
Schedule 1.5.2 Form of John Street Lease Agreement
Schedule 2.2(a) Exclusions from the Reference
Statement of Assets and
Liabilities

Schedule 2.2(b) Closing Statement of Assets and
Liabilities Preparation Method

Schedule 4.4(a)(1) Financial Statements
Schedule 4.4(a)(2) Exceptions in Financial Statements
Schedule 4.4(b) Material Changes
Schedule 4.5(a) Personal Property
Schedule 4.5(b) Excluded Necessary Assets
Schedule 4.6(a) Intellectual Property Exclusively
Used in Business

Schedule 4.6(b) Dual Use Intellectual Property
Schedule 4.6(c) Intellectual Property Claims
Schedule 4.7 Contracts
Schedule 4.8 Liens and Encumbrances
Schedule 4.9 Litigation and Proceedings
Schedule 4.10 Environmental Information
Schedule 4.11 Benefit Plans
Schedule 4.12 Employee Information & Claims
Schedule 4.13 Undisclosed Liabilities
Schedule 4.14 Compliance with Law
Schedule 4.15 Consents
Schedule 4.17 Permits and Licenses
Schedule 4.18(a)(i) Facilities
Schedule 4.18(a)(ii) Leased Property
Schedule 4.18(b) Exceptions to Use of Transferred
Facilities
Schedule 4.18(c) Title Commitment; Title Exceptions

iv
<PAGE> 62
Schedule 4.22 Direct Reports
Schedule 5.6 Purchaser Consents
Schedule 6.1(a)(1) Non-Transferring Employees
Schedule 6.1(d) Retention Bonus Agreements
Schedule 6.2 High-level Salaried Employees
Schedule 6.10 Location of Tanks
Schedule 6.14 Health and Safety Memorandum
Schedule 7 Form of Toll Agreement
Schedule 14.1(e)(A) Continuing Violation Procedures
Schedule 15.4 Post-Closing Services

<PAGE> 1
EXHIBIT 11

FURON COMPANY

COMPUTATION OF NET INCOME PER SHARE

<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------------------
FEBRUARY 3, JANUARY 28, JANUARY 29,
1996 1995 1994
---------------------------------------------------------
<S> <C> <C> <C>
PRIMARY INCOME PER SHARE

Earnings
Net income $ 13,169,000 $ 11,438,000 $ 8,170,000
============== ============== ============
Shares
Weighted average number of common
shares outstanding 8,821,297 8,674,135 8,615,289

Shares issuable from assumed exercise
of stock options 218,965 318,791 243,911
--------------- -------------- ------------

Average shares as adjusted 9,040,262 8,992,926 8,859,200
============== ============== ============

Primary income per share $ 1.46 $ 1.27 $ 0.92
============== ============== ============

FULLY DILUTED INCOME PER SHARE

Earnings
Net income $ 13,169,000 $ 11,438,000 $ 8,170,000
============== ============== ============

Shares
Weighted average number of common
shares outstanding 8,821,297 8,674,135 8,615,289

Shares issuable from assumed exercise
of stock options 220,961 443,300 243,911
--------------- -------------- ------------

Average shares as adjusted
for full dilution 9,042,258 9,117,435 8,859,200
============== ============== ============

Fully diluted income per share $ 1.46 $ 1.25 $ 0.92
============== ============== ============
</TABLE>

<PAGE> 1
EXHIBIT 21

Furon Company Significant and Certain Other Subsidiaries

February 3, 1996

State or Other Jurisdiction of
Name of Subsidiary * Incorporation or Organization
- -------------------- -----------------------------

Bunnell Plastics, Inc. New Jersey

CHR Industries, Inc. Connecticut

Dixon Industries Corporation Rhode Island

Fluorocarbon Components, Inc. New York

Fluorocarbon Foreign Sales Corporation Barbados

Furon B.V. Netherlands

Furon Europe, S.A. Belgium

Furon Limited England

Furon Seals N.V./S.A. Belgium

Furon S.A. Belgium

Sepco Corporation California

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

* Each of Furon Company's domestic subsidiaries is a general business
corporation with a wholly owned domestic subsidiary.

<PAGE> 1
EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement, as
amended (Form S-8 No. 33-54031), pertaining to the Furon Company 1982 Stock
Incentive Plan and related Prospectus and in the Registration Statement, as
amended (Form S-8 No. 2-93028), pertaining to the Furon Company Employees'
Profit-Sharing/Retirement Plan and related Prospectus and in the Registration
Statement, as amended (Form S-8 No. 33-55535), pertaining to the Furon Company
Employee Stock Purchase Plan and related Prospectus and in the Registration
Statement, as amended (Form S-8 No. 33-53987), pertaining to the Furon Company
1993 Non-Employee Directors' Stock Compensation Plan and related Prospectus of
our report dated March 8, 1996, with respect to the consolidated financial
statements and schedule of Furon Company included in the Annual Report (Form
10-K) for the year ended February 3, 1996.

ERNST & YOUNG LLP
Orange County, California
March 21, 1996

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-K
FOR THE YEAR ENDED FEBRUARY 3, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> FEB-03-1996
<EXCHANGE-RATE> 1,000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 53,048
<ALLOWANCES> 1,367
<INVENTORY> 39,827
<CURRENT-ASSETS> 102,053
<PP&E> 147,745
<DEPRECIATION> 68,093
<TOTAL-ASSETS> 211,484
<CURRENT-LIABILITIES> 41,349
<BONDS> 0
37,575
0
<COMMON> 0
<OTHER-SE> 65,307
<TOTAL-LIABILITY-AND-EQUITY> 211,484
<SALES> 344,886
<TOTAL-REVENUES> 344,886
<CGS> 249,102
<TOTAL-COSTS> 327,439
<OTHER-EXPENSES> (3,866)
<LOSS-PROVISION> 724
<INTEREST-EXPENSE> 2,899
<INCOME-PRETAX> 18,414
<INCOME-TAX> 5,245
<INCOME-CONTINUING> 13,169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,169
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.46

</TABLE>