MEDITE CORP, S-1, 1995-03-01

MEDITE CORP
S-1, 1995-03-01

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1995
REGISTRATION NO. 33-_______

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___________
MEDITE CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 2493 93-0223870
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification
of incorporation or Classification Code Number)
organization) Number)

THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240
(214) 661-8028
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

MICHAEL A. SNETZER
CHIEF EXECUTIVE OFFICER
MEDITE CORPORATION
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240
(214) 661-8028
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
______________
Copies to:
ALAN C. LEET, ESQ. KRIS F. HEINZELMAN, ESQ.
ROGERS & HARDIN CRAVATH, SWAINE & MOORE
2700 CAIN TOWER WORLDWIDE PLAZA
229 PEACHTREE STREET, N.E. 825 EIGHTH AVENUE
ATLANTA, GEORGIA 30303 NEW YORK, NEW YORK 10019
(404) 522-4700 (212) 474-1000

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

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Securities to be Registered Registered(1) Price Per Share (2) Offering Price (2) Registration
Fee (3)

<S> <C> <C> <C> <C>
Common Stock, $.01 6,764,300 Shares $17.00 $114,993,100 $39,652.79
par value
</TABLE>

[FN]
(1) Includes 882,300 shares to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
(3) Registration fee calculated on the basis of 1/29 of 1% of the proposed
maximum offering price of $114,993,100.

______________

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

MEDITE CORPORATION

CROSS REFERENCE SHEET

PURSUANT TO ITEM 501(B) OF REGULATION S-K

FORM S-1 ITEM NUMBER AND HEADING PROSPECTUS CAPTION ON
PAGE

1. Forepart of Registration Statement
and Outside Front Cover Page of Outside Front Cover
Prospectus . . . . . . . . . . . . . Page of Prospectus

2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . Inside Front Page of
Prospectus

3. Summary Information and Risk Factors Prospectus Summary;
Investment
Considerations

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

5. Determination of Offering Price . . . Investment
Considerations;
Underwriters

6. Dilution . . . . . . . . . . . . . . Dilution

7. Selling Security Holders . . . . . . *

8. Plan of Distribution . . . . . . . . Underwriters

9. Description of Securities to be Description of Capital
Registered . . . . . . . . . . . . . Stock, Certain United
States Federal Tax
Considerations for
Non-U.S. Holders of
Common Stock

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

11. Information with Respect to Prospectus Summary;
Registrant . . . . . . . . . . . . Investment
Considerations; Use
of Proceeds;

Capitalization;
Dividend Policy;
Selected Financial
Data; Management's
Discussion and
Analysis of Financial
Condition and Results
of Operations;
Business; Management;
Security Ownership in
the Company and its
Affiliates; Certain
Relationships and
Transactions;
Description of
Capital Stock; Shares
Eligible for Future
Sale; Additional
Information;
Financial Statements

12. Disclosure of Commission Position on
Indemnification for Securities Act *
Liabilities . . . . . . . . . . . .

[FN]
* Inapplicable
EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be
used in connection with an underwritten offering in the United States and Canada
(the "U.S. Prospectus") and one to be used in a concurrent international
offering (the "International Prospectus"). The two prospectuses are identical
except for the cover pages. The cover page for the International Prospectus
appears in the Registration Statement following the last page of the U.S.
Prospectus.

PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MARCH __, 1995

5,882,000 Shares

MEDITE CORPORATION

COMMON STOCK

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

Of the 5,882,000 Shares of Common Stock offered hereby, 4,705,600 Shares are
being offered initially in the United States and Canada by the U.S. Underwriters
and 1,176,400 Shares are being offered initially outside of the United States
and Canada by the International Underwriters. All of the shares of Common Stock
offered hereby are being sold by the Company. See "Underwriters." Prior to
this offering, there has been no public market for the Common Stock of the
Company. It is currently estimated that the initial public offering price per
share will be between $_____ and $_____. See "Underwriters" for a discussion of
the factors considered in determining the initial public offering price. The
Company will apply for listing of the Common Stock on the NASDAQ National Market
System.

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

THIS OFFERING INVOLVES CERTAIN RISKS. SEE "INVESTMENT CONSIDERATIONS."

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

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

PRICE $_____ A SHARE

-----------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)

<S> <C> <C> <C>
Per Share . . . . . . . . . . . . . . . . . . $ $ $
Total(3) . . . . . . . . . . . . . . . . . . $ $ $

</TABLE>
- ---------------------------

[FN]
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $_____.
(3) The Company has granted to the U.S. Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
aggregate of 882,300 additional Shares at the price to public less
underwriting discounts and commissions, for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such
option in full, the total price to public, underwriting discounts and
commissions and proceeds to Company will be $________, $________ and
$________, respectively. See "Underwriters."
----------------------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Cravath,
Swaine & Moore, counsel for the Underwriters. It is expected that the delivery
of the Shares will be made on or about , 1995, at the office of Morgan
Stanley & Co. Incorporated, New York, New York, against payment therefor in New
York funds.
--------------------------

MORGAN STANLEY & CO. SALOMON BROTHERS INC SMITH BARNEY INC.
Incorporated
, 1995

(The following text appears along the left margin of this page)
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus, and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or by the

Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the Shares of Common
Stock offered hereby, nor does it constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby to any person in any
jurisdiction in which it is unlawful to make such an offer or solicitation to
such person. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstance imply that the information contained
herein is correct as of any date subsequent to the date hereof.

UNTIL , 1995 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
--------------------------------

TABLE OF CONTENTS

Page

Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 20
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Certain Relationships and Transactions . . . . . . . . . . . . . . . . . . . 52
Security Ownership in the Company and its Affiliates . . . . . . . . . . . . 54
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . 57
Shares Eligible for Future Sale . . . . . . . . . . . . . . . . . . . . . . . 60
Certain United States Federal Tax Considerations
for Non-U.S. Holders of Common Stock . . . . . . . . . . . . . . . . . . . . 61
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Index of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-1

The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and with quarterly reports
for the first three quarters of each year containing unaudited consolidated
financial information.

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

Medite(R) and Medex(R) are registered trademarks of the Company.
----------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Except where otherwise indicated, all share and per-share data in this

Prospectus and all other information relating to the Offering (i) assume no
exercise of the Underwriters' over-allotment option and (ii) give effect to the
11,000 for 1 stock split with respect to the Common Stock effected on February
28, 1995 (the "Stock Split").

THE COMPANY

Medite Corporation (the "Company") is an international engineered wood
products company focused primarily on the production and sale of medium density
fiberboard ("MDF"). MDF, an environmentally efficient engineered building board,
is a fiber-based product manufactured primarily from pre-commercial forest
thinnings and forest product industry residuals (wood chips, shavings and
sawdust) which are bonded together with resins to form a machineable composite
panel. Compared to traditional timber products, MDF offers end users lower unit
costs and physical characteristics that provide for less production waste and
higher production efficiencies. These cost-in-use advantages have promoted the
use of MDF in an increasing variety of applications, including furniture,
cabinetry, shop fittings and joinery. Recent improvements in MDF's
machinability, consistency and surface, coupled with specialty product
introductions, have expanded MDF applications to include substitution for
products used in millwork and moulding for both residential and commercial
applications. In 1994, approximately 71% of the Company's sales and 75% of
operating income were derived from its MDF operations.

The Company sells MDF principally under the Medite(R) and Medex(R)
trademarks to customers in North America (48% of 1994 MDF sales), Europe (43%),
and the Far East (9%). The Company offers an unsurpassed range of specialty
products, such as moisture resistant, flame retardant and formaldehyde-free MDF
products, which in 1994 sold for substantially higher prices than, and resulted
in operating margins approximately twice those of, the Company's standard MDF
products. The Company believes that Medite is the world's most recognized MDF
trademark. In Europe, where name brand recognition is expected to play an
increasingly important role in panel product marketing, Medite is well regarded
for quality, specialty grades and an active and successful marketing program.

The Company's MDF production facilities are located in the Republic of
Ireland, Oregon and New Mexico. The Company expects that a capacity addition
completed in late 1994 at its Ireland plant to increase the Company's annual
production capacity by 25% to approximately 635,000 M3 (300,000 M3 in Ireland
and 335,000 M3 in North America). With the recently completed capacity addition
in Ireland, the Company is the world's second largest MDF producer in terms of
rated capacity.

The Company believes MDF is among the world's fastest growing building
board products. According to MDF industry studies, MDF consumption in the
Company's primary markets in Europe and North America has increased over the
past ten years at 25% and 7% average annual rates, respectively. Increasing
demand for MDF during recent years has been driven primarily by increasing
product substitution principally resulting from (i) recent improvements in MDF
product characteristics that have expanded the range of MDF applications, (ii)
cost advantages relative to traditional timber products, (iii) the development
of specialty MDF products satisfying specialized customer requirements and (iv)
increased environmental awareness. In addition, MDF consumption growth in North
America in the past two years has benefitted from improved economic activity.

Recently MDF prices have increased notably and average prices for the
Company's standard MDF products have increased approximately 15% in 1994
compared to 1992. Additionally, during the first quarter of 1995, the Company
has implemented price increases of approximately 5% for all its MDF products in
Europe and approximately 4% for standard MDF products in North America.

The Company's strategy is to: (i) continue to focus on MDF; (ii) strive to
remain at the forefront of developing higher margin specialty MDF products;
(iii) continue to develop new commercial uses for MDF, including applications in
cabinetry, joinery, millwork and mouldings; (iv) continue to seek to expand its

MDF operations through acquisitions, strategic joint ventures and capacity
additions; and (v) manage its fee timber resources on a longer-term sustainable
basis and seek to maximize the operating contribution of its harvested timber.

In addition to its MDF operations, the Company produces and sells limited
quantities of traditional timber products, including logs, lumber, veneer and
wood chips, and owns 168,000 acres of timberland in Southern Oregon which
contain approximately 660 million board feet ("MMBF") of generally second growth
merchantable timber. The Company actively manages its fee timberlands, which
have become an increasingly valuable resource as the volume of timber offered
for sale in the Pacific Northwest by U.S. government agencies has declined
substantially over the past several years. Based upon reported sales of
comparable timber, the Company believes that its timber and timberlands have a
market value substantially in excess of their financial statement carrying value
of $53 million at December 31, 1994.

THE OFFERING

Common Stock offered . . . . . . . . . . . . . . . . . . 5,882,000 shares
Common Stock to be outstanding after the Offering . . . . . .17,982,000 shares
Use of Proceeds . . . . . . . . . . . . . . . . . . . . .See "Use of Proceeds."
Proposed NASDAQ National Market symbol . . . . . . . . . . . . . . .MDFX

INVESTMENT CONSIDERATIONS

Prospective investors should carefully consider the factors set forth under
"Investment Considerations," together with the other information set forth in
this Prospectus, before investing in the Common Stock.

CORPORATE ORGANIZATION

The Company is a Delaware corporation incorporated in 1932; its principal
corporate offices are located at Three Lincoln Centre, 5430 LBJ Freeway, Suite
1700, Dallas, Texas 75240-2697; its telephone number is (214) 661-8028. The
Company is a wholly-owned subsidiary of Valcor, Inc. ("Valcor"), a wholly-owned
subsidiary of Valhi, Inc. ("Valhi"). In 1993, (i) the Company (then known as
Medford Corporation) and a subsidiary of Valhi (then known as Medite
Corporation) merged, with the Company surviving the merger and changing its name
to Medite Corporation, and (ii) Valhi contributed the stock of the Company to
Valcor. See "Security Ownership in the Company and its Affiliates." Each of
Valhi, whose common stock is listed on the New York and Pacific Stock Exchanges,
and Valcor, whose senior notes trade in the over-the-counter market, are subject
to the periodic reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").

SUMMARY FINANCIAL INFORMATION

The following summary financial and other information should be read in
conjunction with the Financial Statements and the Unaudited Pro Forma Condensed
Financial Statements of the Company appearing elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
Years ended December 31,
Pro forma
1992 1993 1994 1994(1)
($ in millions, except
per share data)

<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales:
Medium density fiberboard $111.6 $112.1 $134.9 $134.9
Traditional timber products 85.4 63.7 56.2 56.2
Eliminations (2.2) (1.5) (1.2) (1.2)

$194.8 $174.3 $189.9 $189.9
Operating income:
Medium density fiberboard $ 12.1 $ 13.9 $ 27.1 $ 27.1
Traditional timber products 9.9 12.4 9.2 9.2
22.0 26.3 36.3 36.3
Business unit dispositions and other, net (2) 3.9 .5 (.2) (.2)
Interest expense (3.1) (3.1) (6.6) (3.8)
Income before income taxes 22.8 23.7 29.5 32.3
Income taxes 8.2 8.8 11.2 12.3
Income before cumulative effect of changes in
accounting principles 14.6 14.9 18.3 20.0
Cumulative effect of changes in accounting principles (3) 1.3 - - -

Net income $ 15.9 $ 14.9 $ 18.3 $ 20.0

Income before cumulative effect of changes in
accounting principles per common share (4) $ 1.20 $ 1.23 $ 1.52 $ 1.12

OTHER DATA
Operating income margin:
Medium density fiberboard 10.8% 12.4% 20.1%
Traditional timber products 11.6 19.5 16.5

EBITDA (5) $ 32.9 $ 34.8 $ 46.0
Depreciation and depletion:
Medium density fiberboard 6.2 6.7 7.4
Traditional timber products 4.8 1.8 2.3
Capital expenditures:
Medium density fiberboard 6.1 9.2 27.5
Traditional timber products 3.6 11.6 4.5
Dividends on common shares 12.0 67.0 22.8

MDF sales volumes (thousand M3):
Specialty MDF products 69.7 85.3 97.7
Standard grade MDF 393.0 389.8 382.7

</TABLE>

<TABLE>
<CAPTION>
As of December 31, As of December 31, 1994
1992 1993 Actual Pro forma (1)
($ in millions)

<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and other current assets $ 51.7 $ 43.6 $ 57.5 $ 59.0
Total assets 165.8 170.6 208.1 209.6
Current liabilities 33.2 24.7 31.5 23.5
Long-term debt, including current maturities (6) 31.5 74.0 107.6 66.6
Stockholder's equity 91.5 59.4 54.9 97.4

</TABLE>

[FN]
(1) Adjusted to give pro forma effect to (i) the payment of a dividend to
Valcor, Inc. on February 14, 1995 by distribution of 1,000 shares of
Series A Preferred Stock, $1 par value, having an aggregate redemption
value of $50 million (the "Stock Dividend"), and (ii) the Offering at an
assumed offering price of $__ per share and the application of the
estimated net proceeds therefrom. See "Use of Proceeds," "Capitalization"
and the Unaudited Pro Forma Condensed Financial Statements of the Company
included in this Prospectus.
(2) Includes in 1992 an $8.5 million gain related to insurance proceeds
received in connection with the destruction by fire of the Company's Rogue
River, Oregon veneer facility and a $5.0 million loss related to the

closure of the Company's plywood facility. See Note 3 to the Annual
Financial Statements of the Company included in this Prospectus.
(3) The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, Accounting for Income Taxes, and SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions ("OPEB"),
effective January 1, 1992. The cumulative effect of these changes in
accounting principles relates primarily to SFAS No. 109.
(4) Based upon 12,100,000 shares outstanding for each historical period
presented and 17,982,000 shares outstanding giving effect to the Offering.
(5) EBITDA as presented represents operating income plus depreciation and
depletion. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt. However,
EBITDA should not be considered by an investor as an alternative to (i)
operating income or net income as an indicator of a company's operating
performance or (ii) cash flows from operating activities as a measure of a
company's liquidity.
(6) Includes loans from parent company of $2.0 million at December 31, 1992 and
$5.0 million at December 31, 1994.

INVESTMENT CONSIDERATIONS

Before making an investment decision, prospective purchasers of the Common
Stock offered hereby should consider carefully the following information,
together with the other information set forth in this Prospectus.

POSSIBLE ADVERSE EFFECT OF INCREASED COSTS AND AVAILABILITY OF RAW
MATERIALS. The primary raw materials used in the Company's MDF operations are
wood fiber and resins. Wood fiber is derived primarily from wood chips,
shavings and sawdust that are obtained from various sources. The availability
and cost of wood fiber is influenced by various factors including the general
availability of timber, competing demand for wood chips from the pulp and paper
industry and competing demand for wood fiber raw materials from other wood
product manufacturers. Both the Company's future operating performance and its
ability to expand its MDF production capacity are dependent upon the
availability and cost of wood fiber. Through its Oregon timberlands, its long-
term wood supply agreements with the Irish Forestry Service and other sources,
the Company believes it has access to adequate supplies of fiber to meet current
and expected operating needs for its existing facilities. However, the Company
anticipates increasing competition for wood fiber in future years and,
accordingly, there can be no assurance that long-term future fiber supply will
be adequate, with respect to quantity and price, to maintain the Company's
recent MDF margins or to enable the Company to achieve its future expansion
plans.

The price of the urea formaldehyde resin used in the Company's standard MDF
products increased significantly during 1994 due principally to recent worldwide
shortages of methanol, a primary element in the manufacture of urea formaldehyde
resin. Some industry sources predict that the cost of urea formaldehyde will
continue to increase in the near term. To date, the Company has been able to
recover this increased cost through increased prices. There can be no
assurance, however, that future increases in the cost of urea formaldehyde resin
can continue to be recovered through additional product price increases.

COMPETITION AND ANNOUNCED MDF CAPACITY ADDITIONS. The MDF industry is
highly competitive. MDF producers compete, among other factors, on the basis of
quality, product breadth, customer service and delivered price. Recently,
global demand for MDF has exceeded availability and numerous producers,
including the Company, have placed customers on allocation. High MDF operating
rates and increasing prices, coupled with favorable forecasts for increasing MDF
demand, are expected to attract significant additional competition from
companies which may have greater financial strength and superior access to
critical fiber supplies than the Company. A survey by Wood Based Panels
International ("WBPI"), an MDF industry trade publication, projects average
annual capacity increases of 5%, 12% and 23% for Europe, North America and the
rest of the world, respectively, through 1996 (a 15% worldwide increase). No

assurance can be given that demand for MDF will increase by comparable
percentages in 1995 and 1996. Accordingly, were all planned MDF capacity
additions in fact brought on line at the levels reported, there could be excess
MDF production capacity in certain regional markets which could increase
competition and adversely affect the price of MDF in those markets. However,
based on its experience and on the technological difficulties traditionally
encountered with new MDF manufacturing facilities that generally adversely
impact their effective operating rates, the Company does not believe that all
announced or planned MDF capacity additions will in fact be built or, to the
extent built, operate at effective production levels equal to those announced.
In addition, the Company believes its specialty MDF products provide it with a
certain degree of insulation from the competitive effects of future MDF capacity
additions. However, there can be no assurance that potential future excess MDF
production capacity and increased price competition will not adversely affect
the Company's performance.

The traditional U.S. timber product markets in which the Company competes
are also highly competitive, with delivered price being a principal factor. In
this sector, the Company competes primarily with other producers located in the
Pacific Northwest, Canada and, increasingly, the Southern United States. While
the Company's fee timber in Oregon is a valuable resource which aids the
Company's ability to control product costs, companies with greater supplies of
fee timber may have a competitive advantage in terms of product cost.

GOVERNMENTAL AND ENVIRONMENTAL REGULATION. The Company's MDF and
traditional timber products manufacturing operations are subject to numerous
national, state and local laws and regulations relating to, among other things,
raw materials handling, production procedures, operating environment, emissions
and waste disposal, air and water quality, worker and product safety and
protection of the environment in general. As the Company engages in
manufacturing activities in the United States and Europe, it must at times
contend with differing regulatory standards and requirements. The Company
believes that it is in material compliance with all such existing regulations
and does not believe that future expenditures to comply with such regulations
will be material to the Company. There can be no assurance, however, that new
or more rigorous regulations affecting the Company's manufacturing operations
will not be adopted or that future expenditures to comply with existing or
future regulations will not be material.

The Company's traditional timber products operations are subject to a
variety of Oregon and, in some cases, U.S. federal laws and regulations dealing
with timber harvesting, reforestation and endangered species. These regulations
generally require the Company to obtain operating permits and, in some cases, to
file timber harvesting plans that must be approved by the Oregon Department of
Forestry prior to harvesting. The Company does not expect compliance with such
existing laws and regulations to have a material adverse effect on the Company's
timber harvesting practices. In addition, effective in 1990, the U.S. Fish and
Wildlife Service designated the Northern Spotted Owl as a threatened species
under the Endangered Species Act ("ESA"). Generally, habitat for Northern
Spotted Owls is found in old growth timber stands, and not in the Company's
predominantly second growth timber. Consequently, the designation of the
Northern Spotted Owl under the ESA has not to date had, and, the Company
believes, will not in the future have, a material adverse effect on its timber
harvesting practices. There can be no assurance, however, that future
legislation, governmental regulations or judicial or administrative decisions
will not adversely affect the Company or its ability to harvest timber and sell
logs in the manner currently contemplated.

Effective September 1, 1994, an amendment to the Oregon Forest Practices
Act imposed more restrictive regulations on the harvest of timber near rivers
and streams. The amendment specifically creates twenty-foot wide buffer zones
along rivers and streams, including intermittent stream beds, where timber
harvest is prohibited and further regulates timber harvest in additional buffer
zones. The Company believes that this amendment will not materially impact its
ability to harvest timber from its timberlands. There can be no assurance,
however, that future legislation or governmental regulations will not adversely

affect the Company or its ability to harvest timber in the manner currently
contemplated.

Urea formaldehyde resin is used as a binding agent in the production of
standard MDF products. Formaldehyde, which also occurs naturally in wood and
other natural resources, is listed as a "suspected" carcinogen by the U.S.
federal government based upon results of laboratory studies performed using
maximum tolerated doses. The Environmental Protection Agency (the "EPA") and
various industry groups have tested and are continuing to test MDF and products
fabricated using MDF to determine the levels of emissions of formaldehyde and
the effects, if any, of these emissions on human health. While the Company's
MDF products that contain urea formaldehyde resins currently meet applicable
regulations for acceptable levels of formaldehyde emissions in the geographic
and end user markets in which the Company sells its MDF products and the Company
produces and markets MDF products with reduced formaldehyde content as the
result of improved resin technology and post production treatment processes,
there can be no assurances that the Company will not be compelled to reduce or
to eliminate its use of urea formaldehyde resins in all its products in the
future on the basis of the findings of these or any future studies or because of
actual or perceived health risks associated with the use of MDF containing urea
formaldehyde resins. Any such change in the product formulation of standard-
grade MDF products, whether as a result of governmental regulation or consumer
preferences, could have a material adverse affect upon the MDF industry as a
whole, as MDF prices would consequently need to be significantly increased to
recover the higher cost of substitute formaldehyde-free resins and costs
associated with modifying existing MDF manufacturing processes. As the Company
is currently manufacturing a "formaldehyde-free" MDF product, to which no
formaldehyde is added during the manufacturing process, the Company believes
that the adverse impact of such changes on the Company would be less than for
certain of the Company's competitors. However, there can be no assurances that
any liabilities arising from actual health effects associated with the
historical use of urea formaldehyde in the Company's MDF products would not have
a material adverse effect on the Company's financial condition and results of
operations.

The Company's MDF manufacturing operations also release formaldehyde into
the atmosphere as a waste by-product. These emissions have been targeted for
increasingly stringent regulation under the U.S. Clean Air Act Amendments of
1990. Although the EPA is not scheduled to promulgate final regulations for
emissions of formaldehyde and other airborne substances until 1997, and the
Company currently meets air emission permit requirements at all its MDF
operating facilities, stringent future regulation of formaldehyde emissions
could require the Company to spend substantial amounts for air pollution control
technology and reconfiguration of its MDF plants to capture and treat these
emissions. Although the Company cannot predict what, if any, pollution control
technology will be required, the Company currently believes that the cost of
such technology could be significant in the years in which it is required to be
installed.

The Company manufactures a flame retardant MDF product, Medite FR, which
meets the specifications of certain European building regulations governing use
of Class 1 flame retardant products. Sales of Medite FR represented 4% of the
Company's 1994 total MDF sales dollars. There can be no assurance, however,
that future regulations or modifications of existing building regulations will
not change existing specifications or create new specifications, in either case
limiting the Company's ability to sell the Medite FR product without substantial
changes that the Company may or may not be able to achieve.

FOREIGN OPERATIONS AND CURRENCY FLUCTUATIONS. The Company, through its
wholly-owned subsidiary Medite of Europe Limited ("Medite/Europe"), has
substantial operations and assets located in the Republic of Ireland.
Approximately 30% of the Company's total 1994 net sales were denominated in
currencies other than the U.S. dollar, principally the United Kingdom Pound
Sterling and European Currency Unit ("ECU"). The percentages of non-U.S. dollar
sales and costs are expected to increase as a result of the additional
production capacity recently added to the Company's Irish facility. Fiber,

labor and production costs of the Company's Irish operations are denominated
principally in Irish punts while resins are purchased primarily in Sterling.
The U.S. dollar value of the Company's foreign sales, operating costs and net
income are subject to currency exchange rate fluctuations which may favorably or
adversely impact reported earnings and, accordingly, affect the comparability of
period to period operating results. During the three year period ending
December 31, 1994, the month-end exchange rates for the Irish punt in U.S.
dollar terms ranged from a high of $.738 on August 31, 1993 to a low of $.525 on
September 30, 1992. As of December 31, 1994, the exchange rate was $.645 per
Irish punt.

Although the Company's foreign operating experience has to date been
satisfactory, foreign operations may in the future be subject to a number of
other special risks, including duties on imports and exports and other trade
barriers.

CYCLICALITY. Demand for the Company's MDF products is in part derived from
the general level of economic activity in the principal geographic markets
served by the Company (North America and Europe). Economic activity in these
markets is currently expanding but in 1991 was at one of its lower levels since
World War II. In contrast to demand for MDF, demand for the Company's
traditional timber products is largely influenced by new U.S. construction,
which is highly cyclical in nature. For example, in 1991, new U.S. housing
starts were at their lowest level in the post-war era. The Company believes
that demand for its MDF products is significantly less cyclical than demand for
its traditional timber products due to more geographically dispersed production
and markets, the wide range and relative diversity of MDF applications, the
overall growth in MDF unit demand and the Company's broad range of specialty MDF
products. Nonetheless, the Company expects its future operating performance to
be affected in part by both general and industry specific economic conditions,
some of which are cyclical in nature.

RISK OF LOSS FROM FIRE OR OTHER CASUALTIES. The Company assumes
substantially all risks of loss from fire and other casualties on its
timberlands, as do the owners of most other timber tracts in the United States.
Consistent with timber industry practices, the Company does not maintain fire
insurance on standing timber. The Company participates with state agencies and
other timberland owners in cooperative fire fighting and aerial fire
surveillance programs. The extensive roads on the Company's acreage serve as
fire breaks and facilitate the use of fire control techniques and fire fighting
equipment. The Company's various timber tracts are somewhat geographically
dispersed, which reduces the possibility of significant fire damage. The only
forest fire of any significance on the Company's timberlands during the past
three years occurred in July 1994 and resulted in damage to approximately 1,200
acres, which the Company expects to salvage with minimal loss.

The Company's production facilities are susceptible to fire because of the
nature of their operations. In 1992, the Company's Rogue River, Oregon veneer
mill was completely destroyed by fire. Although the Company was covered by
property and business interruption insurance, the Company believes insurance
benefits did not fully compensate for the economic loss caused by the fire. To
reduce the risk of significant fire damage, the Company's present facilities
employ sophisticated fire monitoring and detection systems. The Company also
maintains property and business interruption insurance to cover potential risk
of loss arising from fires or other casualty losses.

CONTROL BY PRINCIPAL STOCKHOLDER. After the Offering, Valcor will own
approximately 67% of the Common Stock. All of Valcor's common stock is owned by
Valhi. Approximately 90% of Valhi's common stock is beneficially owned,
directly or indirectly, by Contran Corporation. Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit of Harold
C. Simmons' children and grandchildren. As sole trustee of these trusts,
Mr. Simmons has the power to vote and direct the disposition of the shares of
Contran stock held by the trusts even though Mr. Simmons disclaims beneficial
ownership thereof. As trustee Mr. Simmons has the power to elect the majority
of the directors of Contran and effectively has the power to determine the

policies of the Company, the persons constituting the management and Board of
the Company and the outcome of corporate actions requiring stockholder approval.
The principal stockholder could also cause the Company to enter into agreements,
take actions, refrain from taking actions or implement policies in the interest
of the principal stockholder that the Company might not otherwise elect to take
were it not controlled by Valcor and, ultimately, by Mr. Simmons. See "Security
Ownership in the Company and its Affiliates" and "Certain Relationships and
Transactions."

RESTRICTIONS IMPOSED BY TERMS OF THE VALCOR INDENTURE. In November 1993,
Valcor completed a public debt offering issuing Senior Notes (the "Valcor
Notes") that mature in 2003. Under the terms of the related indenture (the
"Valcor Indenture"), while the Valcor Notes are outstanding, Valcor and its
subsidiaries (including the Company) are subject to certain restrictions and
covenants. These restrictions affect, among other things, the Company's ability
to incur indebtedness, make acquisitions of or investments in related or
unrelated businesses, sell assets, place liens on its existing properties and
consent to further restrictions on its ability to pay dividends or make other
distributions in respect of its capital stock. Such restrictions may limit the
ability of the Company to expand its business or to take advantage of
opportunities to invest in new businesses, particularly through the use of debt
financing. The Company's ability to incur additional indebtedness may depend in
part on the operating results and levels of indebtedness of Valcor's other
business segments. The Company and Valcor do not believe, however, that the
restrictions of the Valcor Indenture will have a material affect on the
Company's ability to conduct its business as currently contemplated. See
"Certain Relationships and Transactions."

In the event of any default of any of the foregoing restrictions, holders
of the Valcor Notes could elect to declare all amounts outstanding in respect
thereof to be due and payable. If the Valcor Notes were to be accelerated,
there can be no assurance that Valcor would be able to repay in full all amounts
due and owing. In such case, there can be no assurance that there would be no
adverse effect on the Company, including the sale of the Common Stock held by
Valcor in order to pay the accelerated amounts. Such a sale could have an
adverse effect on the prevailing market price of the Common Stock.

EFFECT OF NO PRIOR PUBLIC TRADING MARKET. Prior to the Offering, there has
been no public trading market for the Common Stock. The public offering price
for the Common Stock will be determined by negotiations between the Company and
the Underwriters based upon several factors and will not necessarily bear any
relationship to the Company's assets, book value, results of operations or net
worth or any other generally accepted criteria of value, and should not be
considered as indicative of the actual value of the Company. Therefore, the
market price of the Common Stock may fall below the public offering price of the
Common Stock at any time following the Offering. See "Underwriters."

In addition, although the Company intends to include the Common Stock on
the NASDAQ National Market System, there can be no assurance that an active
trading market will develop. Further, if a market does develop, it may be
limited, and there can be no assurance that it will be sustained. To the extent
that an active trading market does develop, factors such as quarterly variations
in the Company's financial results, announcements by the Company or others,
general market conditions or certain regulatory pronouncements may cause the
market price of the Common Stock to fluctuate substantially.

EFFECT OF SALES OF SUBSTANTIAL AMOUNTS OF COMMON STOCK. No prediction can
be made as to the effect, if any, that future sales of outstanding Common Stock
or the availability of Common Stock for sale will have on the market price of
the Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock in the public market following the Offering, or the perception that
such sales could occur, could adversely affect prevailing market prices of the
Common Stock. Each of the Company and Valcor has agreed that, for a period of
180 days following the date of this Prospectus, it will not issue or sell any
shares of Common Stock or securities convertible into or exercisable for such
stock, held by it now or in the future without the prior written consent of the

Underwriters. The sale of a substantial number of additional shares of Common
Stock by the Company or Valcor, or the perception that such sales could occur,
could adversely affect the market price of the Common Stock. See "Shares
Eligible for Future Sale" and "Security Ownership in the Company and its
Affiliates."

DILUTION INCURRED BY INVESTORS. The offering price is substantially higher
than the net tangible book value per share of Common Stock. Accordingly,
investors purchasing the Common Stock offered hereby will incur immediate,
substantial dilution in the amount of $________ per share, assuming a public
offering price of $__ per share. See "Dilution."

USE OF PROCEEDS

Net proceeds of the Offering of approximately $________ will be used to
redeem all of the Company's Series A Preferred Stock and temporarily repay bank
indebtedness. The Offering will enhance the Company's financial flexibility to
pursue potential acquisitions, strategic joint ventures and internal growth
opportunities.

The Company intends to use $51.5 million of the net proceeds of the
Offering to redeem all of the outstanding shares of the Series A Preferred
Stock. These shares will be redeemed at the stated redemption price of $50,000
per share plus accrued and unpaid dividends.

The Company intends to use $41 million of the net proceeds of the Offering
to temporarily repay a portion of amounts outstanding under the Company's Timber
Credit Agreement. Amounts to be repaid are due 1997 through 2000 and, as of
December 31, 1994, bore interest at a weighted average interest rate of 7.8% per
annum. Amounts repaid under the Timber Credit Agreement may be reborrowed
subject to reducing availability.

The Company intends to add new MDF production facilities during the next
two to three years. Although the Company has no specific plan or arrangement in
place with respect to such MDF capacity additions, it is actively exploring
expansion opportunities through acquisitions, strategic joint ventures and new
construction. To the extent that it identifies appropriate opportunities, the
Company could use borrowings of additional funds (including credit availability
resulting from the repayment of the Timber Credit Agreement described above) to
fund such expansion opportunities. See "Business -- Strategy."

DIVIDEND POLICY

The Company intends to declare and pay regular quarterly cash dividends,
beginning with an initial such dividend of approximately $.05 per share with
respect to the fiscal quarter ending June 30, 1995. Determinations to pay cash
dividends, however, are at the discretion of the Board of Directors, and the
actual payment of any such dividends in the future will depend upon the
Company's results of operations, earnings, capital requirements and contractual
restrictions and upon other factors deemed relevant by the Company's Board of
Directors. Certain of the Company's and its subsidiaries' credit agreements
limit the payment of dividends. Additionally, commencing on February 1, 2001,
dividends may not be declared or paid on the Common Stock unless all cumulative
accrued and unpaid dividends on the Series A Preferred Stock are paid in full or
set aside for payment. However, the Company intends to use a portion of the net
proceeds of the Offering to redeem the Series A Preferred Stock, which will
eliminate this restriction on the payment of dividends. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Description of Capital Stock"
and the Financial Statements of the Company included in this Prospectus.

The Company paid dividends to its parent company aggregating $12 million in
1992, $67 million in 1993 and $22.8 million in 1994. Of such amounts, $60
million in 1993 was from the proceeds of borrowed funds and $20 million in 1994
represented a return of capital provided to the Company by Valcor in 1993. See

"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

As previously discussed, the Company declared and paid the Stock Dividend
on February 14, 1995 by distribution of 1,000 shares of Series A Preferred
Stock. The Company intends to utilize a portion of the net proceeds of the
Offering to redeem all 1,000 shares of the Series A Preferred Stock plus accrued
and unpaid dividends.

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of December 31, 1994 and as adjusted to give effect to (i) the
payment of the Stock Dividend to Valcor and (ii) the Offering at an assumed
public offering price of $__ per share and application of the estimated net
proceeds therefrom. See "Use of Proceeds."

Pro forma,
as
Actual Pro forma adjusted
($ in millions, except
share data)

<S> <C> <C> <C>
Current maturities of long-term debt $ 10.9 $ 10.9 $ 2.9

Long-term debt:
Medite (US):
Timber credit agreement:
Fixed term loan $ 44.0 $ 44.0 $ 26.0
Reducing revolving term loan (1) 23.0 23.0 -
Revolving working capital facility (1) 2.0 2.0 2.0
State of Oregon term loan 4.1 4.1 4.1
Other .2 .2 .2
73.3 73.3 32.3

Medite/Europe (Ireland):
Bank term loans 22.4 22.4 22.4
Revolving credit agreement (1) 6.8 6.8 6.8
Other .1 .1 .1
29.3 29.3 29.3

Total long-term debt, including current
maturities 102.6 102.6 61.6

Less current maturities 10.9 10.9 2.9

Total long-term debt 91.7 91.7 58.7

Loan from Valcor 5.0 5.0 5.0

Series A Preferred Stock, $1 par value; $6,000
per share annual cumulative dividend, 1,000
shares issued and outstanding, stated at $50,000
per share redemption price - 50.0 -

Stockholder's equity:
Preferred stock, $1 par value; 1,000,000 shares
authorized, none issued - - -
Common stock, $.01 par value; 50,000,000 shares
authorized, 12,100,000 shares issued and
outstanding (17,982,000 pro forma, as adjusted) .1 .1 .2
Additional paid in capital .8 .8 93.2
Retained earnings 54.0 4.0 4.0
Total stockholder's equity 54.9 4.9 97.4

Total capitalization $151.6 $151.6 $161.1

</TABLE>
[FN]
(1) These revolving credit facilities have, at December 31, 1994, available
formula-based borrowings of up to the following amounts: Medite (US) - $8
million and Medite/Europe - $4 million, and, pro forma as adjusted, an
additional $41 million on the Medite (US) reducing revolving term loan.

DILUTION

The net tangible book value of the Company at December 31, 1994 was $54.9
million, or $4.54 per share. Net tangible book value per share represents the
amount of total assets less total liabilities and intangible assets (consisting
primarily of goodwill and deferred costs), divided by the number of shares of
Common Stock outstanding. Net tangible book value dilution per share represents
the difference between the amount per share paid by purchasers of shares of
Common Stock in this Offering and the net tangible book value per share of
Common Stock immediately after completion of the Offering. After giving effect
to the sale of shares of Common Stock by the Company in this Offering at an
assumed offering price of $__ per share and the application of the estimated net
proceeds therefrom, the net tangible book value of the Company as of December
31, 1994 would have been $___ million, or $___ per share. This represents an
immediate increase in net tangible book value of $___ per share to existing
stockholders and an immediate dilution in net tangible book value of $___ per
share to purchasers of Common Stock in the Offering, as illustrated in the
following table:

Assumed public offering price per share . . . . . . . . . . . . $_____
Net tangible book value per share at
December 31, 1994 . . . . . . . . . . . . . . . . . $4.54
Increase per share attributable to new investors _____
Pro forma net tangible book value per share after the Offering ______
Net tangible book value dilution per share to new investors . . $

SELECTED FINANCIAL DATA

The following selected financial and other data should be read in
conjunction with the Financial Statements of the Company included in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

<TABLE>
<CAPTION>
Years ended December 31,
1990 1991 1992 1993 1994
($ in millions, except per share data)

<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales:
Medium density fiberboard $ 98.3 $ 98.0 $111.6 $112.1 $134.9
Traditional timber products 104.7 85.5 85.4 63.7 56.2
Eliminations (5.6) (3.8) (2.2) (1.5) (1.2)

$197.4 $179.7 $194.8 $174.3 $189.9

Operating income:
Medium density fiberboard $ 9.7 $ 1.6 $ 12.1 $ 13.9 $ 27.1
Traditional timber products 13.1 6.4 9.9 12.4 9.2
22.8 8.0 22.0 26.3 36.3

Business unit dispositions and other, net (1) .9 - 3.9 .5 (.2)
Interest expense (8.5) (6.0) (3.1) (3.1) (6.6)

Income before income taxes 15.2 2.0 22.8 23.7 29.5
Income taxes 5.8 .2 8.2 8.8 11.2

Income before cumulative effect of changes
in accounting principles 9.4 1.8 14.6 14.9 18.3
Cumulative effect of changes in accounting principles (2) - - 1.3 - -

Net income $ 9.4 $ 1.8 $ 15.9 $ 14.9 $ 18.3

Income before cumulative effect of changes
in accounting principles per common share (3) $ .77 $ .15 $ 1.20 $ 1.23 $ 1.52

OTHER DATA
Operating income margin:
Medium density fiberboard 9.9% 1.6% 10.8% 12.4% 20.1%
Traditional timber products 12.5 7.4 11.6 19.5 16.5

EBITDA (4) $ 41.2 $ 22.4 $ 32.9 $ 34.8 $ 46.0
Depreciation and depletion:
Medium density fiberboard 5.4 6.1 6.2 6.7 7.4
Traditional timber products 13.0 8.3 4.8 1.8 2.3
Capital expenditures:
Medium density fiberboard 5.9 1.5 6.1 9.2 27.5
Traditional timber products 5.8 3.3 3.6 11.6 4.5
Dividends on common shares 5.3 - 12.0 67.0 22.8

MDF sales volumes (thousand M3):
Specialty MDF products 48.5 55.8 69.7 85.3 97.7
Standard grade MDF 396.0 374.1 393.0 389.8 382.7

BALANCE SHEET DATA (AT END OF PERIOD)
Cash and other current assets $ 62.7 $ 48.0 $ 51.7 $ 43.6 $ 57.5
Total assets 184.8 159.5 165.8 170.6 208.1
Current liabilities 51.4 28.0 33.2 24.7 31.5
Long-term debt, including current maturities (5) 68.9 46.3 31.5 74.0 107.6
Stockholder's equity 85.8 87.6 91.5 59.4 54.9

</TABLE>

[FN]
(1) Includes in 1992 an $8.5 million gain related to insurance proceeds
received in connection with the destruction by fire of the Company's Rogue
River, Oregon veneer facility and a $5.0 million loss related to the
closure of the Company's plywood facility. See Note 3 to the Annual
Financial Statements of the Company included in this Prospectus.
(2) The Company adopted SFAS No. 109, Accounting for Income Taxes, and SFAS No.
106, Employers' Accounting for OPEB's, effective January 1, 1992. The
cumulative effect of these changes in accounting principles relates
primarily to SFAS No. 109.
(3) Based upon 12,100,000 shares outstanding for each period presented. See
Note 13 to the Annual Financial Statements of the Company included in this
Prospectus.
(4) EBITDA as presented represents operating income plus depreciation and
depletion. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt. However,
EBITDA should not be considered by an investor as an alternative to (i)
operating income or net income as an indicator of a company's operating
performance or (ii) cash flows from operating activities as a measure of a
company's liquidity.
(5) Includes loans from parent company of $7.5 million at December 31, 1990,
$2.0 million at December 31, 1992 and $5.0 million at December 31, 1994.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Overview

Results of operations in each period have been affected by the Company's
ongoing strategy to expand its emphasis on medium density fiberboard operations,
increase the relative proportion of higher margin specialty MDF products and to
downsize its commodity-type traditional timber products operations.
<TABLE>
<CAPTION>

Years ended December 31,
1992 1993 1994

<S> <C> <C> <C>
Net sales:
Medium density fiberboard 57.3% 64.3% 71.1%
Traditional timber products 43.9 36.6 29.6
Eliminations (1.2) (.9) (.7)

Total net sales 100.0% 100.0% 100.0%

Operating income margin:
Medium density fiberboard segment 10.8% 12.4% 20.1%
Traditional timber products segment 11.6 19.5 16.5
Aggregate operating income margin 11.3 15.1 19.1

</TABLE>

Medium Density Fiberboard

During the past decade the MDF industry has experienced significant growth
in product demand worldwide. MDF consumption in the Company's primary markets
of Europe and North America has over the 10 year period ending 1993 increased at
25% and 7% average annual rates, respectively. This growth has been driven
primarily by increasing substitution of MDF products for traditional timber
products in manufacturing applications due to recent improvements in MDF product
characteristics, cost advantages relative to traditional timber products and
development of specialty MDF products that satisfy specialized customer
requirements. The price of many traditional timber products has risen to record
levels due to environmentally related pressures on available global timber
supplies and cyclical demand recovery.

MDF prices remained relatively flat prior to 1993, with modest year-to-year
changes. Over the past two years, the increased cost of traditional timber
products has led to higher demand for substitute products such as MDF and
resulted in MDF operating rates approaching effective capacity. In this
environment, MDF prices have increased notably, and average prices for the
Company's standard MDF products increased approximately 15% in 1994 compared to
1992. The Company's increased emphasis on higher margin specialty products has
also favorably impacted the Company's aggregate MDF average selling prices which
have increased approximately 17% in 1994 compared to 1992. In the first quarter
of 1995, the Company implemented price increases of approximately 5% on all MDF
products produced in Europe and approximately 4% on standard MDF products
produced in North America.

In addition to increased selling prices over the past two years, operating
margins during 1992 through 1994 have been favorably influenced by (i) continued
improvement in operating efficiencies achieved at the Company's Las Vegas, New
Mexico MDF facility (acquired in 1989) and (ii) favorable effects of capital
expenditure programs focused on improving production efficiency and increasing
yield from existing productive capacity. As a result, the Company's MDF
operating income margin increased from approximately 11% in 1992 to
approximately 20% in 1994.

The U.S. dollar value of Medite's foreign sales and operating costs are
subject to currency exchange rate fluctuations which may favorably or adversely
impact reported results and, accordingly, affect the comparability of period to
period operating results. Approximately 30% of Medite's 1994 MDF sales were
denominated in currencies other than the U.S. dollar, principally the U.K. Pound
Sterling and the European Currency Unit. Fiber, labor and production costs of
Medite's Irish operations are denominated principally in Irish punts, while

Irish resins are purchased primarily in Sterling. The percentage of non-dollar
sales and costs are expected to increase as a result of the additional
production capacity recently added to the Irish MDF plant.

The Company's MDF plants have been operating at a high rate of capacity.
Consequently, increased production of specialty MDF products has displaced
production of standard grade MDF. The new production line at the Company's
Irish plant completed commissioning and became operational during the fourth
quarter of 1994. The new facility is expected to increase the Company's
effective MDF production capacity by about 15% to 580,000 M3 in 1995 and
eventually by 25% to 635,000 M3 by 1998, when full production capacity will be
reached. This new production line will enable the Company to increase both
standard and specialty product volumes and to more efficiently produce thin
board MDF.

Traditional Timber Products

Traditional timber products operations for 1992, 1993 and 1994 are not, in
certain respects, directly comparable due to the closure of the Company's
plywood operations in January 1993 and the fire at its Rogue River, Oregon
chipping and veneer plant in June 1992, as discussed below. Rogue River
chipping operations resumed in July 1993 and veneer operations resumed in
January 1994.

In response to declining availability of timber from government owned
timberlands in recent years, the Company has adjusted its manufacturing
operations by closing marginal production facilities and, consequently, the
Company's sales of traditional timber products have decreased from 48% of total
Company sales in 1991 to 29% in 1994. The Company's strategy has been to
maximize the operating contribution of its fee timberlands by allocating its
harvested timber between log sales and its traditional timber products
conversion facilities depending upon prevailing market conditions.

The Company owns 168,000 acres of timberland that contain approximately 660
MMBF of generally second growth merchantable timber. The Company's fee
timberlands have become an increasingly valuable resource as the shortage of
Pacific Northwest public timber available for harvest is expected to continue in
the foreseeable future.

YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

YEARS ENDED DECEMBER 31, % CHANGE
1992 1993 1994 1992-93 1993-94
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales:
Medium density fiberboard $111.6 $112.1 $134.9 + 0% +20%
Traditional timber products 85.4 63.7 56.2 -25% -12%
Eliminations (2.2) (1.5) (1.2)

$194.8 $174.3 $189.9 - 11% + 9%

Operating income:
Medium density fiberboard $ 12.1 $ 13.9 $ 27.1 + 15% +95%
Traditional timber products 9.9 12.4 9.2 + 26% -25%

$ 22.0 $ 26.3 $ 36.3 + 20% +38%

MDF sales volume (thousands
of M3):
Specialty products 69.7 85.3 97.7 + 22% +15%
Standard grade 393.0 389.8 382.7 - 1% - 2%

462.7 475.1 480.4 + 3% + 1%
</TABLE>

Year Ended December 31, 1994 compared to 1993

Net income for the year ended December 31, 1994 was $18.3 million, up 23%
from $14.9 million for 1993 as a 38% increase in operating income (on a 9%
increase in net sales) was partially offset by higher interest expense.

Medium density fiberboard. The significant improvements in MDF sales,
operating income and operating income margins were driven by both higher overall
selling prices and higher volumes of specialty MDF products. Average MDF
selling prices were up 19%, due to the combined effects of a 17% increase in
average selling prices of standard MDF products and the increased sales of
higher-priced/higher margin specialty products which in 1994 accounted for 29%
of total MDF sales dollars compared to 26% in 1993. Fluctuations in the value
of the U.S. dollar relative to other currencies contributed approximately 1% to
the increase in 1994 average selling prices compared to 1993.

Per-unit MDF costs increased approximately 6% in 1994 primarily as a result
of both a 14% increase in per-unit resin costs, due to increased prices for
resins used in standard MDF products and increased use of higher cost resins
associated with increased volumes of specialty products, and a 5% increase in
per-unit wood fiber costs. Fluctuations in the value of the U.S. dollar
relative to other currencies accounted for slightly less than 1% of the increase
in per unit MDF costs.

Operating income increased 95% in 1994 due to overall effects of higher
average MDF selling prices, offset by effects of higher per unit production
costs described above.

Traditional timber products. Primarily as a result of market-based volume
decisions made by the Company, including a relative reduction in the volume of
logs offered for sale and the curtailment of veneer and lumber production during
a portion of the second and third quarters of 1994, sales and operating income
declined in 1994 relative to 1993. Traditional timber products earnings in 1993
were aided by higher volumes early in the year related to reductions in log and
other inventories following the closure of the Company's plywood operations in
January 1993. Traditional timber products operating income in 1994 was
favorably impacted by lower log costs, which on a per-unit basis decreased
approximately 18% compared to 1993. This decrease in average log costs resulted
from the combined effects of log mix (31% of logs obtained from lower cost fee
timber in 1994 compared to 22% in 1993) and a $3 million favorable impact of
reductions in LIFO log inventories. The favorable effects of lower log costs on
operating income and operating income margins were substantially offset by lower
volumes and start-up costs of the Company's Rogue River veneer operations in the
first half of 1994.

Interest expense. Interest expense increased to $6.6 million in 1994 from
$3.1 million in 1993 due to both higher borrowing levels (resulting from $61
million of net additional borrowings in connection with the Company's Timber
Credit Agreement established in August 1993) and higher variable interest rates.
Capitalization of interest of $.6 million in 1994 related to financing of the
Irish plant expansion ceased in October 1994. Interest on related borrowings
will be expensed in future periods.

On a pro forma basis, assuming a portion of the proceeds from this Offering
were used to prepay $41 million of variable-rate debt (see "Use of Proceeds"),
interest expense for 1994 would have been reduced by $2.8 million from the
historical amount.

Provision for income taxes. The principal reasons for the difference
between the U.S. federal statutory income tax rate and the Company's effective
income tax rates are explained in Note 8 to the Company's Annual Financial
Statements included in this Prospectus.

Year Ended December 31, 1993 compared to 1992

While operating income in 1993 increased 20% from 1992, net income before
changes in accounting principles only increased slightly from $14.6 million for

1992 to $14.9 million for 1993 as the results for 1992 include a pre-tax gain of
$3.5 million related to business unit dispositions.

Medium density fiberboard. MDF sales in 1993, in U.S. dollar terms, were
only nominally higher than 1992. The positive effects on sales of higher total
volume, higher specialty products volume and price increases, in billing
currency terms, were substantially offset by the effects of fluctuations in
currency exchange rates. Average selling prices of standard MDF, in billing
currency terms, increased 7% in the U.S. and decreased less than 1% at the
Ireland facility.

Per-unit MDF costs declined approximately 4% in 1993 primarily due to the
combined effects of currency fluctuations and moderate improvement in operating
efficiency in the U.S. which more than offset a 2% increase in per-unit wood
costs and a 5% increase in per-unit resin costs resulting primarily from higher
percentage production of specialty products.

Operating income increased 15% in 1993 primarily due to lower per-unit MDF
costs as the effects of higher volumes of specialty MDF products and higher
total sales volumes were substantially offset by the effects of fluctuations in
currency exchange rates.

Traditional timber products. Average selling prices of traditional timber
products increased significantly in 1993 over 1992 levels (lumber up 29%; logs
up 46%) due primarily to the combined effects of the continuing Pacific
Northwest timber shortage, closure of certain competitor operations and
increased demand for building products. These factors also significantly
increased the Company's timber costs, as discussed below. Lower volumes more
than offset the effects of increased selling prices on 1993 sales of traditional
timber products.

The average unit cost of logs used in the Company's traditional timber
product operations increased about 25% in 1993 following a 28% increase in 1992.
These cost increases were due primarily to increases in the cost of timber from
government and other sources, offset in part by the favorable impact of the
Company's planned reductions in LIFO log and other inventory levels, which were
being reduced as a result of the closure of the plywood operations. The
favorable impact on operating income from the reduction of LIFO inventories was
$1.9 million in 1992 and $.5 million in 1993.

Business interruption insurance from the Rogue River fire recognized as a
component of operating income ($3.7 million in 1992 and $1.9 million in 1993)
had a significant favorable, non-recurring effect on the aggregate traditional
timber product operating income margins in 1992 and 1993 as this income had no
associated cost.

Business unit dispositions. The $3.5 million net gain on business
dispositions in 1992 consisted of an insurance gain related to the Rogue River
fire and an accrued loss related to the closure of the Company's plywood
operations. The $.5 million gain in 1993 relates to a change in the estimated
accrued plywood loss. See Note 3 to the Company's Annual Financial Statements
included in this Prospectus.

Interest expense. Interest expense of $3.1 million in 1993 approximated
that of 1992 as the combined effects of lower borrowing levels for the first
seven months of the year and lower interest rates effectively offset the effect
of higher borrowing levels during the last five months of the year, which
resulted from borrowings under the Company's Timber Credit Agreement in August
1993.

Cumulative effect of changes in accounting principles. The credit to
income in 1992 resulted from the adoption of SFAS No. 109 (income taxes) and
SFAS No. 106 (OPEB). See Note 7 to the Company's Annual Financial Statements
included in this Prospectus.

LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows

Operating activities. Trends in cash flows from operating activities,
before changes in assets and liabilities, for 1992, 1993 and 1994 are generally
similar to the trends in the Company's earnings. Depreciation and depletion
during 1993 and 1994 were impacted by lower depletion resulting from reductions
in the volume of fee timber harvested. Start up of the new MDF production line
in Ireland during the fourth quarter of 1994 will increase future depreciation,
which increase should be mitigated in part by certain production facilities
becoming substantially fully depreciated in 1996.

Changes in assets and liabilities result primarily from the timing of
production, sales and purchases. Such changes in assets and liabilities, which
provided cash in 1992, used cash in 1993 and provided cash in 1994, generally
tend to even out over time and result in trends in cash flows from operating
activities generally reflecting earnings trends. Changes in assets and
liabilities are expected to use cash in 1995 as net working capital assets are
increased to support production from the new MDF line in Ireland.

Investing activities. Capital expenditures in 1994 totalled $32 million,
of which $25 million is related to the Irish MDF plant expansion. Capital
expenditures totalling $11 million during 1992 and 1993 related to the
replacement of the Rogue River facilities and $6 million in 1993 related to the
Irish plant expansion. Other capital expenditures in the past three years
emphasized equipment which utilizes new technologies in the manufacture of MDF
to provide for increased productivity and related to environmental
compliance, primarily reforestation programs.

Capital expenditures for 1995 are estimated at approximately $14 million,
approximately one-half of which relate to projects that emphasize new technology
and focus on eliminating capacity constraints to improve production efficiency
and increase production capacity. Approximately 10% of estimated 1995 capital
expenditures relate to environmental protection and improvement programs,
principally reforestation activities. These estimates do not include, however,
any additional expenditures that may be required to comply with the U.S. Clean
Air Amendment of 1990 because the EPA is not scheduled to promulgate final
regulations on emissions of formaldehyde and other airborne substances under
this Act until 1997.

Net cash from business unit dispositions in 1992 included $11 million of
insurance proceeds received related to the fire at the Company's Rogue River
plant.

Financing activities. Net borrowings in 1994 included $21 million of new
bank term loans related to the Irish MDF plant expansion, a $7 million increase
in U.S. revolving term loan borrowings and a $5 million loan from Valcor. The
Valcor loan was made for overall cash management purposes at an interest rate
more favorable than the interest rates on the Company's revolving bank credit
facility. Net borrowings in calendar 1993 include $75 million of proceeds from
the Timber Credit Agreement which were utilized to prepay approximately $14
million of existing bank term loans and to pay a $60 million dividend to the
Company's parent. Valcor advanced $20 million to the Company, in the form of
equity capital, in the fourth quarter of 1993, which amount was returned to
Valcor in the form of a return-of-capital dividend in the first quarter of 1994.

The aggregate maturities of long-term debt are approximately $11 million
for the year ending December 31, 1995, $22 million in 1996, $13 million in both
1997 and 1998, $12 in 1999 and aggregate $31 million thereafter. On a pro forma
basis, assuming a portion of the proceeds from this Offering were used to prepay

$41 million of variable-rate debt (see "Use of Proceeds"), the aggregate
maturities of long-term debt would be approximately $7 million for the year
ending December 31, 1995, $14 million in 1996, $5 million in 1997, $11 million
in 1998, $9 million in 1999 and aggregate $18 million thereafter.

Other

The Company's expansion of its Irish MDF plant, which is expected to
eventually increase the Company's worldwide MDF capacity by approximately 25%,
was completed in October 1994. This $31 million project was financed in part by
a $22 million bank term loan. In connection with the expansion, the Company
obtained a $4 million grant from the Irish government. The Company received $1
million of the grant funds in 1994 and expects to receive the remainder during
1995. Approximately $2 million of the total grant funds will be used to reduce
bank borrowings.

At December 31, 1994, the estimated cost to complete capital projects in
process approximated $2 million, substantially all of which relates to the Irish
plant expansion. Firm purchase commitments for capital projects not commenced
at December 31, 1994 were not material.

At December 31, 1994, amounts available for borrowing under U.S. and non-
U.S. working capital credit agreements were $8 million and $4 million,
respectively. On a pro forma basis giving effect to the Offering and use of
proceeds therefrom, U.S. borrowing availability at such date would have
increased by $41 million. See "Use of Proceeds."

As a result of the closure of its plywood operations, the Company has a 105
acre site in Medford, Oregon which is believed to have alternative development
possibilities and is being held for sale.

At December 31, 1994, approximately 92% of the Company's consolidated cash
and equivalents were held by Medite/Europe. Medite/Europe's bank credit
agreements require it, among other things, to maintain specified levels of net
worth, as defined, which, at December 31, 1994, would have permitted $3 million
to be distributed to the Company.

The Company's Timber Credit Agreement requires the Company to maintain
specified levels of net worth and generally limits the payment of dividends by
the Company to 50% of net income, subject to maintenance of minimum net worth,
loan-to-value and cash flow ratios. At December 31, 1994, the Company had $7
million eligible for the payment of dividends.

On February 14, 1995, the Company declared and paid a $50 million dividend
to Valcor by distribution of 1,000 shares of Series A Preferred Stock,
redeemable at the Company's option, at a redemption price of $50,000 per share
plus cumulative accrued and unpaid dividends. A portion of the proceeds from
this Offering will be used to redeem all 1,000 shares plus accrued and unpaid
dividends. See "Use of Proceeds." The Company has obtained from its lenders
under the Timber Credit Agreeemnt a consent to the dividend and a waiver of the
technical default created by payment of the dividend and any remedies resulting
therefrom. The Company expects to complete a formal amendment to the Timber
Credit Agreement during March 1995.

Management believes that the net proceeds to the Company from the Offering,
together with cash generated from operations and borrowings available under the
Company's revolving credit agreements, will be sufficient to meet the Company's
liquidity needs for working capital, capital expenditures and debt service and
for anticipated annual dividend payments of approximately $ million. See
also "Dividend Policy."

BUSINESS

The Company is an international engineered wood products company focused
primarily on the production and sale of MDF. In 1994, approximately 71% of the
Company's sales and approximately 75% of the Company's operating income were
derived from MDF operations.

The Company sells MDF principally under the Medite(R) and Medex(R)
trademarks to customers primarily in North America (48% of 1994 MDF sales),
Europe (43%), and the Far East (9%). The Company offers an unsurpassed range of
specialty products, which in 1994 sold for substantially higher prices than, and
resulted in operating margins approximately twice those of, the Company's
standard MDF products. The Company believes that Medite is the world's most
recognized MDF trademark. In Europe, where name brand recognition is expected
to play an increasingly important role in panel product marketing, Medite is
well regarded for quality, specialty grades and an active and successful
marketing program.

The Company's MDF production facilities are located in the Republic of
Ireland, Oregon and New Mexico. The Company expects a capacity addition
completed in late 1994 at its Ireland plant will increase the Company's annual
production capacity by 25% to approximately 635,000 M3 (300,000 M3 in Ireland
and 335,000 M3 in North America). The expansion in Ireland has significantly
improved the Company's production efficiency of thin board MDF, a product
marketed as a substitute for thin particleboard, hardwood plywood and hardboard
in various applications. With the recently completed capacity addition in
Ireland, the Company is the world's second largest MDF producer in terms of
rated capacity.

The Company also owns 168,000 acres of timberland in Southern Oregon which
contain approximately 660 million board feet of merchantable timber and produces
traditional timber products, including logs, lumber, veneer and wood chips, at
two conversion facilities in the Medford, Oregon area.

INDUSTRY OVERVIEW

MDF

The Product. MDF, an environmentally efficient engineered building board,
is a fiber-based product manufactured primarily from pre-commercial forest
thinnings and forest product industry residuals (wood chips, shavings and
sawdust) which are bonded together with resins to form a machineable composite
panel. MDF's physical characteristics contribute to cost-in-use advantages over
traditional timber products in an increasing variety of applications, including
furniture, cabinetry and joinery. Recent improvements in MDF's machinability,
consistency and surface, coupled with specialty product introductions, have
expanded MDF applications to include substitution for products used in millwork
and moulding for both residential and commercial applications. According to
industry sources, MDF consumption in 1994 in Europe and the United States by end
use is estimated as follows:

Europe(1) United States(2)

Furniture 85% Household furniture 55%
Joinery 7 Residential construction 11
Building 3 Repairs & remodeling 10
Other 5 Office furniture & fixtures 8
Other manufacturing 6
Exports 10

MDF Consumption. MDF is among the fastest growing building board
products in the world. Consumption in Europe and North America has increased
over the 10 year period ended in 1993 at an average annual rate of 25%(3) and
7%(4), respectively. This growth in consumption has occurred despite a
worldwide recession which adversely influenced furniture and construction
activity, particularly in Europe. According to industry sources, MDF
consumption in Europe is projected to increase over the next decade at annual
average rates of 8%(5), while MDF consumption in North America is projected
to increase at annual average rates of 9%(6). The historical and projected
increases in consumption can be attributed in part to the following key factors:

[FN]
(1) Jaakko Poyry Consulting (UK) LTD ("Jaakko Poyry Consulting"), an economic
analysis firm headquartered in Surrey, England.
(2) Resource Information Systems, Inc. ("RISI"), an economic firm headquartered
in Bedford, Massachusetts.
(3) European Association of Medium Density Fiberboard Manufacturers, an industry
trade association located in Giessen, German ("EMB").
(4) RISI
(5) Jaakko Poyry Consulting.
(6) RISI

Recent Improvements in MDF Characteristics. MDF's desirable physical
characteristics include its machinability, consistency and smooth
surface, especially when compared to competing products such as
plywood, particleboard and lumber. Continuing improvements in such
characteristics, together with increasing cost advantages compared to
traditional timber products, have stimulated substitution in an
increasing variety of applications. For example, the Company has
recently commenced the manufacture and sale of homogeneous MDF board
(consistent structural integrity, composition and texture throughout
the board) which can be cut, routed, milled, shaved and shaped for a
variety of applications, including mouldings and millwork for
residential and industrial uses.

Relative Cost Advantages. In the past few years, the price of many
traditional timber products has risen to record levels due to
environmentally related pressures on available global timber supplies
and cyclical demand recovery. Restrictions on available timber
supply and resulting increases in traditional timber product prices
have forced manufacturers of furniture, cabinetry, joinery, millwork
and moulding to seek more cost-effective alternatives which retain
the appearance and desirable processing characteristics afforded by
traditional timber products. Compared to traditional timber
products, MDF offers end users lower unit costs and physical
characteristics that provide for less production waste and higher
production efficiencies. These cost-in-use advantages have
contributed to the use of MDF in an increasing variety of
applications.

Development of Specialty Products. The development of specialty MDF
products to meet specific customer needs has also contributed to the
growth in MDF demand by expanding the potential end-uses of MDF. The
Company has been at the forefront of the MDF industry's successful
development of new MDF products and applications satisfying
specialized customer requirements, such as weather-resistant board
for exterior use, flame-resistant board to meet advanced safety
standards and moisture-resistant board for use in humid interior
environments.

Environmentally Efficient Product. MDF can be produced from a number
of residual fiber sources, such as shavings and sawdust, which have
historically been disposed of as a waste product. Forest residue,
such as pre-commercial thinnings, are also chipped to provide raw
material for MDF. Recent technological advances in recycling and raw
material handling techniques have permitted the utilization in MDF
production of post-consumer fiber sources such as urban wood waste.

In addition, the Company expects that future consumption of MDF in Europe
will be favorably influenced by a growing commitment among certain European
countries, particularly Germany, the United Kingdom and the Netherlands, to
favor the importation of wood products that are derived from sustainable managed
resources. Moreover, future MDF consumption should also benefit from the
ongoing development in certain European markets of performance-based technical
and quality standards for many wood products, including MDF. As end users
become aware of such standards, MDF should become more readily accepted as a
substitute building board product in an increasing variety of applications.

MDF Capacity. As reported in annual surveys conducted by WBPI, an MDF
industry trade publication, worldwide MDF capacity has increased over the past
five years at an average annual rate of 10%. Forecasts of increasing MDF
consumption are expected to attract significant capacity additions and many new
MDF projects have been commenced or announced. WBPI survey projections through
1996 reflect average annual capacity increases of 5%, 12% and 23% for Europe,
North America and the rest of the world, respectively (a 15% worldwide
increase). Although significant additional capacity increases have been
announced for 1997 and beyond, the Company believes that announced additions to
capacity are not always reliable since, on a historical basis, announced new
projects are not always started or are delayed or deferred, and effective
productive capacity can be significantly below forecasted "name plate" capacity
levels. Industry experience indicates that the period from commencement of
construction of a new MDF facility to start-up is typically a minimum of two
years.

Actual production as a percentage of reported production capacity varies
widely between regions and producers and is further influenced by start-up rates
at new facilities. In North America, where MDF plants are considered highly
efficient and producers are relatively conservative in reporting production
capacity, capacity utilization (consumption as a percentage of reported
capacity) has in recent years been reported at more than 90%. European plants
in recent years have reported average utilization rates below 70%.

European MDF Pricing and Capacity Utilization. Recently, overall capacity
utilization in Europe (exclusive of Russia) has been low and pricing within
Europe has varied among countries. Based upon WBPI capacity data and EMB
consumption data, capacity utilization in Europe was approximately 73% in 1993.
Medite/Europe operated at approximately 97% and 100% of capacity in 1993 and
1994, respectively. During the past two years, increases in prices of
Medite/Europe's standard MDF, in billing currency terms, have been substantially
offset by effects of currency fluctuations. Consequently, the average price of
the Company's standard MDF in Europe, in U.S. dollar terms, is relatively flat
for 1994 compared to 1992. During the first quarter of 1995, Medite/Europe
implemented price increases of approximately 5% for all MDF products.

North American MDF Pricing and Capacity Utilization. Until 1993, MDF
prices had remained relatively flat for much of the previous ten years. Over
the past two years, however, as government regulations have permanently reduced
the availability of timber and, as a result, timber supplies for traditional
timber products have become increasingly restricted, prices for these products
have increased and MDF operating rates have approached effective capacity
levels. During 1993 and 1994, the Company implemented several U.S. price
increases, resulting in a 26% realized U.S. price increase for standard MDF in
1994 compared to 1992. Additionally, in the first quarter of 1995, the Company
implemented price increases of approximately 4% for standard MDF products
produced in North America.

The Company has achieved in the U.S. higher average standard MDF prices,
FOB mill, than those reported by RISI for the industry for the Western U.S. In
1994, the average price realized for the Company's standard U.S.-produced MDF
exceeded the Western U.S. average price reported by RISI by approximately 5%.
Additionally, the Company's overall average prices, FOB mill, have benefitted in
recent years from increases in the percentage of higher priced specialty
products sold by its U.S. mills. In 1994, the average price realized for all
MDF (standard and specialty) produced by the Company in the U.S. exceeded the
Western U.S. average price for the industry, as reported by RISI, by
approximately 10%.

According to RISI's analysis of the North American MDF industry, (i) 1995
capacity expansion will barely keep pace with anticipated increases in
consumption, (ii) the cost advantages of MDF compared to traditional timber
products in 1995 will reinforce current tight market conditions, (iii) 1995
prices will increase 15% over 1994 average levels and (iv) for the next several
years, while standard MDF prices may tend to decline as new capacity comes on-
line, MDF's penetration into relatively high value end-use markets (millwork and
moulding) should help stabilize MDF profitability. The Company can offer no
assurance, however, that any of RISI's analysis will prove accurate.

TRADITIONAL TIMBER PRODUCTS

Demand for traditional timber products such as lumber and plywood is
primarily affected by residential construction activity, which is cyclical due
to changes in economic conditions and demographic factors.

In recent years, the conflict between expanding demand for lumber and
plywood and a greatly reduced North American timber base, resulting primarily
from reductions in federal timber sales in the U.S. and reductions in the
allowable timber harvest in British Columbia, has forced the forest products
industry to make significant adjustments. From 1989 to 1993, plywood and lumber
capacity in the Western United States declined by 31% and 25%, respectively.
Lumber and plywood usage rates have dropped in key end-use markets as rising
demand responded to higher prices and increased volatility with product
substitution to achieve increased efficiencies in use. Market shares have
shifted away from higher cost timber products produced from the Pacific
Northwest's increasingly costly timber to lower cost-in-use products (e.g., MDF,
oriented strand board, industrial particleboard and engineered lumber) and to
regions with lower cost timber (e.g., British Columbia and the Southern United
States).

The Company expects the Pacific Northwest timber products industry to
continue to shift away from timber conversion activities to more profitable
timber harvesting activities. As the industry completes its adjustment to the
new realities of reduced timber supplies, the Company expects timber prices
across North America to stabilize at relatively high inflation adjusted levels
and the trend of substituting reconstituted fiber based products such as MDF for
lumber and plywood to continue.

STRATEGY

The Company's strategy is comprised of the following:

Strategic Focus on MDF. The Company has successfully implemented a long-
term strategy of directing its primary business to the international production
of MDF building board products and away from the regionalized production of
traditional timber products. In 1984, MDF represented 20% of the Company's
sales and made no contribution to operating income. For the year ended December
31, 1994, MDF represented 71% of the Company's sales and 75% of its operating
income. Based on 1994 MDF industry information, the Company has a 12% market
share in North America and a 5% market share in Europe. The Company will
continue to focus on expanding its MDF business.

Development of Higher-Margin Specialty Products. The Company believes
that, with 29% of its 1994 MDF sales in specialty MDF products, it is the
world's leading producer of specialty MDF products. The Company offers an
unsurpassed range of higher-margin specialty MDF products. Sold under the
widely recognized trademarks of Medite(R) and Medex(R), these specialty products
include:

Specialty Product Description

Medex(R) Moisture-resistant
exterior grade

Medite 313 Moisture-resistant
interior grade

Medite FR Class 1 flame-
resistant grade

Medite II Formaldehyde-free
interior grade

In 1994, the average per unit sales price of the Company's specialty
products was approximately 60% higher than its standard MDF and resulted in
operating margins approximately twice those for its standard MDF products. Over
the past several years, the Company has differentiated itself in the MDF
industry by developing, testing and introducing a series of new MDF products.
The Company believes that the knowledge acquired during its many years of
producing a variety of MDF products at diverse locations and the experience it
has gained in selling these products in major world markets provide it with
competitive advantages.

Development of New Uses for MDF. Based upon expressed and perceived
customer needs, the Company actively seeks to develop new commercial
applications for MDF. For many years the Company has worked closely with
furniture manufacturers in developing applications for MDF. In addition to
furniture, MDF is used in industrial and residential fixtures, cabinets,
joinery, millwork, mouldings and architectural features. The Company has
devoted significant resources to the development of new applications and the
education of customers and prospective customers on the benefits of substituting
MDF for traditional timber products.

The Company has recently commenced the manufacture and sale of homogeneous
MDF board (consistent structural integrity, composition and texture throughout
the board) which can be cut, routed, milled, shaved and shaped for a variety of
applications, including mouldings and millwork for residential and industrial
uses. These uses include door frames, decorative panel trim, door panels,
picture frames, trim moulding for walls and decorative furniture components.
The Company expects significant growth in the use of MDF in the moulding market
because mouldings produced from MDF (i) offer cost-in-use advantages due to
lower unit cost and less production waste compared to traditional timber
mouldings and (ii) have, in many applications, a finished appearance that is
generally indistinguishable from traditional timber mouldings. Additionally,
the recently completed expansion at the Irish facility improves the Company's
ability to efficiently produce thin board MDF, which should enable the Company
to further penetrate the European thin hardwood plywood, particleboard and
hardboard markets.

Similarly, RISI forecasts that, for the period 1996 through 2000, the
percentage of MDF used in repair and remodeling and in residential construction
will increase as MDF quality improvements and specialty products enable MDF to
further penetrate these applications. The Company believes that other growth
opportunities for MDF include products sold in the retail "do-it-yourself"
market and "knock-down" or "ready-to-assemble" computer furniture market.

Growth Through MDF Capacity Additions and Acquisitions. The Company has
for the past two years been operating at high levels of MDF capacity
utilization. In 1994, the Company's capacity utilization was approximately 100%
in Europe and 93% in North America. The Company presently serves its MDF
customer requirements on an allocated basis. The recently completed addition of
a second production line at the Company's facility in Ireland is expected to
increase the Company's overall MDF production capacity by approximately 130,000
M3 or 25% and significantly improve the Company's production efficiency for thin
board MDF sold in the European market.

The Company intends to add additional MDF production capacity during the
next two to three years through capital additions to its existing production
facilities and the addition of new MDF production facilities. The Company
expects identified capital projects to further increase its existing MDF
productive capacity by approximately 20% at a cost of approximately $31 million
over the next five years. Additionally, the Company expects to expend an
equivalent amount of capital to maintain and replace components of its existing
facilities. The Company is actively exploring expansion opportunities through
acquisitions, strategic joint ventures and/or new construction. The Company
believes that expansion of its MDF operations is dependent upon its ability to
identify and secure adequate, long-term supplies of fiber. Accordingly, the
Company is presently considering joint ventures with prospective partners who
can provide, on a long-term committed basis, the supply of fiber required for

the sustained production of MDF. Potential joint venture partners include
forest product companies with substantial waste residuals (shavings and
sawdust), as these companies are under increasing pressure to address
environmental concerns over the disposal of these by-products.

Management is considering opportunities to expand in a variety of
geographic regions, including Canada, the Southeastern United States, Mexico,
Eastern Europe and New Zealand, among others. Management also may consider
entering new and different engineered wood markets in the U.S. and abroad, if
appropriate opportunities are identified.

Management of Fee Timber Resources. The Company has in recent years
downsized its traditional timber conversion facilities and acquired additional
timberlands to position its Oregon-based traditional timber products activities
to operate on a long-term, sustained-yield basis. Depending on prevailing
market conditions, the Company seeks to maximize the operating contribution of
its traditional timber products operations by adjusting its annual timber
harvest and by allocating its harvested timber between direct log sales and its
traditional timber products conversion facilities. The Company's fee
timberlands have become a valuable resource as the shortage of Pacific Northwest
public timber available for harvest is expected to continue in the foreseeable
future. Based upon recent reported sales of comparable timber, the Company
believes the market value of its fee timberlands is well in excess of the $53
million book value. The Company believes that its presence in the traditional
timber products market, and particularly its sale of logs to other conversion
facilities, has aided the Company in gaining access to certain sources of wood
residuals for its Oregon-based MDF operations.

OPERATIONS

MDF

The Company sells MDF principally under the Medite(R) and Medex(R)
trademarks. The Company's MDF products and their specific applications are
described below:

Medite(R), the Company's standard MDF product, was first introduced in 1975
and is produced exclusively for interior applications such as furniture. The
Company believes the Medite(R) trademark is the world's most recognized MDF
trademark. In 1994, standard Medite(R) accounted for approximately 71% of the
Company's total MDF sales. Applications which utilize standard MDF include
cabinet drawer sides and backs, substrate material components for "knock-down"
furniture and veneered furniture such as desks and tables, shelving, door
frames, cabinet doors and interior paneling.

Medex(R) is the Company's MDF panel product designed for exterior
applications. The Company believes that it is currently the leading exterior
grade MDF producer in the world. Medex(R) is used in facade application on
storefronts, decorative shop fronts in many areas in Europe, counter tops, doors
and window sills. The moisture resistance of Medex(R) products produced at the
Irish MDF facility carries a 10-year warranty provided it has been properly
sealed by the end user. The Company first produced Medex(R) in 1987 and it
accounted for approximately 8% of the Company's 1994 total MDF sales.

Medite 313 is a specialty MDF product designed for interior applications
that involve high-humidity environments, such as bathroom and kitchen cabinetry
and mouldings. Medite 313 was first introduced by the Company in 1987 and
accounted for approximately 13% of the Company's total MDF sales in 1994. The
principal markets for Medite 313 to date have been in the United Kingdom and the
Republic of Ireland.

Medite FR was developed by the Company primarily to address strict building
code requirements in Europe for flame/fire resistance. Medite FR meets Class 1
flame-retardant guidelines in France and Germany. Medite FR was first produced
by the Company in 1989 and accounted for 4% of the Company's 1994 total MDF
sales. Although substantially all 1994 sales of Medite FR were made into the

European market, the Company currently plans to introduce U.S. produced Medite
FR for sale in North America and other markets outside of Europe in 1995.

Medite II was developed by the Company in 1991 in order to meet the market
need for a low formaldehyde-content MDF product for use in sensitive interior
applications such as schools, museums and hospitals. Applications include
exhibition cases, cabinetry, desks and other fixtures. Medite II is produced
without the introduction of formaldehyde based resins (bonding agents) and
additives. Accordingly, the only formaldehyde present in the product is
attributable to the levels naturally inherent in wood fiber. The Company
believes it is a leader in production of interior MDF produced without
formaldehyde based resins. Medite II accounted for approximately 3% of the
Company's total MDF sales in 1994. Substantially all sales of the Medite II
have to date been made into the North American market.

The MDF Manufacturing Process. The Company believes MDF is among the most
technologically complex wood products to manufacture, with specialty products
requiring even more advanced technologies. The Company believes it has been a
pioneer in both MDF product and manufacturing process development, and that its
patented processes and technological expertise developed over the last twenty
years have enabled the Company to become an MDF industry leader. Medite
believes it is one of only a few MDF manufacturers in the world with the
technology and expertise to produce specialty MDF products, such as exterior
grade moisture resistant and fire retardant MDF.

The manufacturing process begins as wood fiber raw materials, primarily
wood chips, shavings and sawdust, are steamed under pressure and then extruded
through a refiner. The refined fibers are then dried and deposited on a moving
screen passing through a forming machine. Resins are introduced to the fibers
either as they enter the dryer or before the fibers are deposited on the forming
machine. The fibers used in standard MDF are bonded with urea formaldehyde (UF)
resin. Other types of resins are used by the Company as binders where improved
properties, such as moisture resistance, are desirable. Additives are
introduced by the Company at the same time as the resin binder to impart special
properties, such as flame retardancy.

The resulting fiber mat is then pressed. Generally, boards are pressed in
two stages. The first stage reduces the thickness of the fiber mat. The second
stage produces the finished board product and, at the Company's MDF facilities,
is completed either on a static multiopening press or a continuous press. In a
static multiopening press, the fiber mat is trimmed, cut to length and passed
into a preloading cage which, when filled, transfers the mats into the openings
of a multiopening press. The multiopening press, which is used at all of the
Company's MDF facilities, is more efficient in producing thicker width MDF (16
to 30 millimeters). In a continuous press, the fiber mat is trimmed and then
passed continuously through a double steel band press operating at high
temperature and pressure. The resulting board is then cut into lengths which
can be varied to suit particular customer requirements. The continuous press is
highly efficient in producing thin board MDF (three to 15 millimeters). The
Company operates a continuous press at its Clonmel facility.

Production Facilities. The Company's MDF manufacturing facilities are as
follows:

Annual
Capacity(1) Products Key Markets
(M3)

Medford, Oregon 175,000 Medite(R) Western U.S.
Medex(R) Asia/Pacific
Medite II
Medite FR

Las Vegas, New Mexico 160,000 Medite(R) Southwest U.S.
Medex(R) Mexico
Medite II

Clonmel, Republic of
Ireland 300,000 Medite(R) U.K.
Medex(R) Northern Europe
Medite II Ireland
Medite 313
Medite FR

[FN]
(1) Capacity data is total name plate capacity for 1995. The Company does not
expect to achieve full capacity for its new Irish production lines in 1995. As
the Company gains further operating experience with its newly installed
continuous press production line in Ireland, it expects combined annual capacity
of 300,000 M3.

The Company's Medford, Oregon MDF facility was constructed in 1974.
Production at this facility during 1994 amounted to approximately 165,000 M3
(94% of total capacity, approximately the same as in 1993), of which
approximately 83% consisted of the Company's standard Medite(R) product. The
Medford MDF facility employs the multiopening press manufacturing technology.
The primary fiber sources for the Medford facility are wood chips, shavings and
sawdust, almost all of which are purchased from sawmills located in close
proximity to the facility at spot market prices.

The Las Vegas, New Mexico MDF facility was originally constructed by a
third party in 1984 at a cost in excess of $55 million and was acquired by the
Company in 1989 for $29 million. At the time of the acquisition, the production
facilities were in poor operating condition, product quality did not meet Medite
standards and the plant had not achieved a sustained level of operating income.
In the 43 months ending December 31, 1992, the New Mexico facility incurred $16
million in aggregate operating losses and the Company spent $2.6 million on
capital expenditures before the facility achieved its first full profitable year
of operating income in 1993. Production at the Las Vegas facility during 1994
amounted to approximately 148,000 M3 (93% of total capacity), substantially all
of which consisted of the Company's standard Medite(R) product. The Las Vegas
facility utilizes a multiopening press. The primary fiber sources of the Las
Vegas facility are wood chips, shavings and sawdust produced within a 150-mile
radius of the facility, most of which are purchased pursuant to short-term
purchase contracts. Increasingly, however, the Las Vegas facility has acquired
its fiber from the "urban forest" (sawdust and shavings which are produced from
shipping crates, pallets and recycled lumber). In 1994, these "post-consumer"
fiber sources comprised approximately 14% of the total fiber supply of the Las
Vegas facility.

The Company's Clonmel, Ireland MDF facility produces standard and specialty
MDF products under the ISO 9000 quality management certification. It was
initially constructed in 1983, and a major expansion of that facility was
completed in the fourth quarter of 1994 at a cost of $31 million, raising
production capacity to 300,000 M3. Production at the Clonmel facility during
1994 (excluding the new production line) amounted to approximately 160,000 M3
(approximately 100% of the total capacity of the original production line, up
from 97% in 1993), of which approximately 43% consisted of the Company's
specialty MDF products. The 1994 expansion included the addition of a
continuous press, which is more efficient in the production of thin board MDF
than the multiopening press. The Company believes the Clonmel facility is the
only facility in the world that operates both a multiopening and continuous
press in one location, making it unique in its ability to offer to its customers
high quality products in the full range of MDF thicknesses (from three to 30
millimeters). The Company has what it considers to be an attractive long-term
supply contract with the Irish Forestry Service, pursuant to which the Company
has a reliable, fixed price supply of pre-commercial thinnings from Irish
forests. These and other private sources of pre-commercial thinnings accounted
for approximately 50% of the fiber raw materials used at Clonmel in 1994.
The balance of the fiber requirements of the Clonmel facility are provided by
wood chips acquired from local sawmill operators which the Company believes will
be available in adequate supply due to the continuing development of the Irish
forest products industry. Of total MDF production in 1994 at Clonmel,
approximately 50% was sold in the United Kingdom, 18% was sold within the
Republic of Ireland and the balance was sold primarily in other Northern
European countries.

The Company's U.S. facilities purchase urea formaldehyde resins for
standard MDF products from suppliers located in close proximity to the
facilities, while resins for specialty MDF products are purchased from suppliers
primarily in Texas and Louisiana. Resins for specialty MDF products for the
Irish facility are purchased from suppliers located primarily in the United
Kingdom, while urea formaldehyde resins for standard MDF products are purchased
from suppliers located in Ireland.

TRADITIONAL TIMBER PRODUCTS

Products. The Company produces and sells lumber used in residential and
commercial construction, veneer which is used in the production of plywood and
laminated veneer lumber ("LVL") and wood chips, which are a basic raw material
for the MDF and paper industries. Logs harvested from the Company's fee
timberlands are utilized in the production of lumber, veneer and wood chips.
Certain sizes and species of logs harvested by the Company that are not used in
its manufacturing operations are sold to other mills in the Northwest.

Timber Resources. The Company conducts substantial logging operations and
owns approximately 168,000 acres of timberland, including 77,000 acres added
since the Company was acquired by Valhi in 1984. The Company's timberlands
contain approximately 660 MMBF of generally second growth merchantable timber.
The dominant species is Douglas Fir. The Company's timber holdings are within
close proximity to its Oregon production facilities and are in relatively
accessible terrain. At December 31, 1994, the Company also had contracts to
purchase approximately 9 MMBF of timber under contracts with the U.S. Forest
Service and Bureau of Land Management expiring at various dates through 1996.
Government timber contracts, which are subject to competitive bidding, typically
require the purchaser to harvest and remove timber within a three-year period.

Production Facilities. The Company's traditional timber products
conversion facilities are as follows:

Annual
Capacity Products Key Markets

Rogue River, Oregon 80,000 square Veneer Western U.S.
feet 3/8"

40,000 bone dry Wood chips
units ("BDU")

White City, Oregon 70,000 board feet Lumber studs Western U.S.

30,000 BDU Wood chips

The Company completed the construction of its veneer and chipping facility
in Rogue River, Oregon in late 1993, replacing a similar facility destroyed by
fire in June 1992. The new veneer facility is designed to process cull
(defective) logs from throughout the surrounding southern Oregon area and the
smaller second-growth timber expected to be available from Company-owned
timberlands on a longer-term basis. Veneer from this plant is sold to the LVL
industry as well as to traditional soft-wood and hardwood plywood products
manufacturers.

The White City, Oregon stud mill facility produces primarily 2x4 studs used
principally in residential construction in California. The facility produces

lumber from small logs and "peeler cores", a by-product of veneer conversion
facilities.

DISTRIBUTION AND SALE OF PRODUCTS.

The Company's manufactured products are sold primarily to wholesalers of
building materials. The Company's major MDF markets include the United Kingdom,
Northern Europe and the Republic of Ireland; Western and Central United States;
the Pacific Rim and Mexico. In 1994, approximately 48% of the Company's MDF
production was sold in North America, 21% in the United Kingdom, 9% in Ireland,
11% in Northern Europe, and 9% in the Pacific Rim. The Company's U.S.
operations employ a sales force of 12 employees, while the Company's Irish
operations have sales offices in the United Kingdom and Holland with 7 and 5
employees, respectively. Sales personnel are responsible for product sales as
well as customer training and education in proper use of and applications for
MDF products. Distribution is accomplished primarily by rail and common carrier
trucking in the U.S. and by containerized ocean cargo shipment in Europe.
Transportation costs are borne by the customer.

Logs are sold primarily to other Oregon mills. Sales of traditional timber
products in the United States are largely dependent upon the strength of the
housing industry, which has historically been cyclical in nature. Although
logging operations are seasonal due to inclement weather conditions during
winter and spring months, the production and sale of forest products is not
particularly seasonal in nature.

The Company's operations are not dependent upon one or a few customers, the
loss of which would have a material adverse effect on its operations. The
Company's ten largest customers accounted for about one-fourth of sales in each
of the past three years and included six MDF customers in 1994, five in 1993 and
two in 1992. In 1992, two of the ten largest customers were primarily plywood
customers and, accordingly, the mix of large customers changed beginning in
1993.

COMPETITION

The Company operates in highly competitive industries. Within the MDF
segment, the Company competes on the basis of quality, product breadth, customer
service and price. In the traditional timber products segment, the Company
competes primarily on the basis of price. Transportation costs are also
significant and generally limit the geographic markets in which the Company's
and its competitors' products are sold.

The Company's MDF operations compete in North America principally with a
number of MDF and composite board producers. In the Pacific Rim, the Company's
MDF operations compete with Australian, New Zealand and other U.S. MDF
producers. In Europe, the Company competes principally with other European
producers of MDF and composite board products. Due to the significant cost of
shipping products, which is borne by the customer, the Company may operate at a
competitive disadvantage to certain other producers who are located closer to
key European markets. In addition, some of the Company's competitors may
possess greater financial resources, including in some cases the financial
support of the governments of the countries in which such competitors are
located. Due to periodic declines in the value of the U.S. dollar relative to
other currencies, the Company's operations in Ireland have also experienced
periodic competition from North American producers.

The Company's traditional timber products operations compete primarily with
numerous other producers in the Pacific Northwest. The Pacific Northwest
traditional timber products industry experiences competition from Canadian
imports and, to an increasing extent, from producers in southern states.

ENVIRONMENTAL MATTERS AND GOVERNMENTAL REGULATION

The Company's operations are subject to a number of national, state and
local laws and regulations with respect to raw materials handling, production

procedures, operating environment, emissions and waste disposal, worker and
product safety and environmental protection, among other things. In addition,
the Company conducts an extensive forest management programs on Company-owned
timberlands, including selective harvest, reforestation and fertilization
activities. While federal and state regulations governing the scope and timing
of timber harvest may result in some restrictions on the Company's harvesting
activities on Company-owned timberlands, the Company does not believe that such
restrictions will be material. The Company believes that it is in compliance in
all material respects with all laws and regulations affecting its operations and
that future compliance with any such laws and regulations, which may involve
significant capital expenditures, will not have a material adverse effect on its
results of operations or financial condition. See "Investment Considerations --
Governmental and Environmental Regulation."

TRADEMARKS AND PATENTS

The Company believes that the patents it holds for MDF products and
production processes are important to the Company's MDF business activities. The
Company's major MDF trademarks, Medite(R) and Medex(R), are protected by
registration in the United States and certain other countries. The Company also
has a non-exclusive worldwide license relating to the application of resins in
the manufacture of Medex(R) and a patent on the apparatus and method of
manufacture of Medex(R).

EMPLOYEES

As of December 31, 1994, the Company employed approximately 710 persons,
including 510 in the U.S. and 200 in Europe. Approximately 30% of U.S. employees
and 70% of non-U.S. employees were represented by various labor unions. The
collective bargaining agreement covering the employees of the Company's Oregon
MDF plant expires in September 1997. The collective bargaining agreement
covering the hourly employees at the Company's Irish plant expires in March
1997. The collective bargaining agreement covering the hourly employees at the
Company's Rogue River veneer facility expires in June 1996. The Company
believes that its labor relations are satisfactory.

PROPERTIES

The principal properties used in the Company's operations are described
above in the "Business -- Operations" section. The Company believes that its
facilities are adequate and suitable for their respective uses.

LEGAL PROCEEDINGS

The Company is involved in various environmental, contractual, product
liability and other claims and disputes incidental to its business. The Company
currently believes that the disposition of all claims and disputes, individually
or in the aggregate, should not have a material adverse effect on the Company's
consolidated financial condition, results of operations or liquidity.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Set forth below is certain information relating to the current directors
and executive officers of the Company. The Company intends to add an additional
non-employee director prior to completion of the Offering.

Name Age Position(s)

Michael A. Snetzer 54 Chairman of the Board, Chief Executive
Officer and Director

Jerry L. Bramwell 56 President, Chief Operating Officer and
Director

Rory G. Kirwan 45 Managing Director-Medite/Europe

Henry Snow 48 Vice President

Bobby D. O'Brien 37 Vice President-Finance and Treasurer

Theodore J. Bauer 64 Director

John J. Costonis 57 Director

Edward J. Hardin 51 Director

Harold C. Simmons 63 Director

MICHAEL A. SNETZER has served as Chairman of the Board, President and/or
Chief Executive Officer of the Company since 1985. Mr. Snetzer served as an
executive officer and/or director of Contran and related companies from 1977
until July 1994, when he resigned such positions to assume full-time duties as
Chairman of the Board and Chief Executive Officer of the Company. Prior to
joining Contran, Mr. Snetzer, who holds an MBA degree from Southern Methodist
University, was employed in various financial capacities within the computer
service industry and as an industrial engineer in the defense communications and
electronics industry. Mr. Snetzer is also a director of Valhi, Valcor, NL
Industries, Inc. (chemicals) and Tremont Corporation (titanium metals).

JERRY L. BRAMWELL has served as President and Chief Operating Officer of
the Company from the time he joined the Company in 1991. Prior to joining the
Company, Mr. Bramwell served as Executive Vice President of Stone Forest
Industries from 1988 to 1990. Mr. Bramwell has over 29 years of experience in
the forest products industry and holds an MBA degree from The University of
California at Berkeley.

RORY KIRWAN joined Medite/Europe in 1983 as Purchasing Agent and served in
technical market support and as technical director and operations director prior
to becoming Managing Director in 1992. Before joining the Company, he held
various supervisory and management positions with an Irish unit of Pfizer
Chemical Corporation. Mr. Kirwan is a board member of Wood Panel Producers
Federation, a U.K. organization that acts as an authoritative source of
technical information for wood-based panel products in the United Kingdom and
Ireland.

HENRY SNOW has served as Vice President of the Company since 1986. In
addition to a variety of general management responsibilities, he is presently
responsible for information systems, personnel and administration. Mr. Snow

began his career with the Company in 1967 in its plywood plant while completing
his degree in Mathematics at Southern Oregon State College. He is a graduate of
the 1989 Stanford Executive Management Program.

BOBBY D. O'BRIEN has served as Vice President - Finance of the Company
since December 1994 and as Treasurer of the Company since July 1993. He served
as Assistant Controller of Valhi, with forest products responsibilities, from
1988 to December 1994. Prior to joining Valhi, Mr. O'Brien, a certified public
accountant with a degree in Accounting from The University of Texas at
Arlington, was with a public accounting firm for 10 years.

THEODORE J. BAUER has served as a director of the Company since July 1993.
Prior to retiring in December 1994, Mr. Bauer served as Vice President of the
Company since 1985 and as an employee of the Company since 1967. Beginning in
1975, Mr. Bauer was assigned responsibility for the introduction and marketing
of MDF to the furniture and building products industries. Prior to his
retirement, Mr. Bauer was largely responsible for directing the development of
the Company's MDF business under the Medite(R) brand name.

JOHN J. COSTONIS has served as a director of the Company since February
1995. Mr. Costonis has served as Dean of the Vanderbilt University School of
Law since 1985, where he also serves as the Milton R. Underwood Professor of
Free Enterprise.

EDWARD J. HARDIN has served as a director of the Company since February
1995. Mr. Hardin has been a partner of the law firm of Rogers & Hardin since
its formation in 1976. Mr. Hardin also serves as a director of Valcor, Sybra,
Inc. (a wholly-owned subsidiary of Valcor), Trend Laboratories, Inc. (fragrances
and skin care products) and Westrup, Inc. (seed processing machinery).

HAROLD C. SIMMONS has served as a director of the Company since 1984. Mr.
Simmons has been an executive officer and/or director of Contran and related
companies since 1968 and has served as Chairman of the Board and Chief Executive
Officer of Valhi since prior to 1989, as Chairman of the Board and Chief
Executive Officer of Valcor since its formation in 1993, and as President of
each of Valhi and Valcor since 1994. Mr. Simmons is also Chairman of the Board
of NL and a director of Tremont.

Each of the above-named directors and executive officers will serve until
the next annual meeting of the stockholders of the Company or until his earlier
removal or resignation.

COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors has
established an audit committee (the "Audit Committee") and a management
development and compensation committee (the "MD&C Committee"). The Company does
not have a nominating committee.

The Audit Committee is comprised of Mr. Bauer, Mr. Costonis and Mr. Hardin,
with Mr. Hardin serving as its Chairman. The Audit Committee will convene when
deemed appropriate or necessary by its members. The primary functions of the
Audit Committee are to: (i) recommend an accounting firm to be employed by the
Company as its independent auditors; (ii) consult with the Company's independent
auditors regarding the audit plan; and (iii) determine that management places no
restrictions on the scope or implementation of the independent auditors'
examination.

The MD&C Committee is comprised of Mr. Bauer, Mr. Costonis, Mr. Hardin and
Mr. Simmons, with Mr. Simmons serving as its Chairman. The MD&C Committee will:
(i) set and approve the compensation (including salary, bonuses, incentive
compensation and certain other types of compensation or remuneration) of
executive officers and certain other highly compensated employees of the Company
and (ii) have authority to appoint a subcommittee to administer the Company's
1995 Stock Option - Stock Appreciation Rights Plan.

Certain Litigation. Certain directors of the Company are parties to a
purported derivative complaint filed in November 1991, in the Court of Chancery

of the State of Delaware, New Castle County (Alan Russell Kahn v. Tremont
Corporation, et al., No. 12339), in connection with Tremont's agreement to
purchase 7.8 million shares of NL common stock from Valhi on October 30, 1991
(the "NL Stock Purchase"). Immediately prior to the NL Stock Purchase, Valhi
owned approximately 63% and 44% of the outstanding shares of common stock of NL
and Tremont, respectively. In addition to Valhi, the complaint names as
defendants Tremont and the members of the Board of Directors of Tremont,
including Harold C. Simmons and Michael A. Snetzer. The complaint alleges,
among other things, that the NL Stock Purchase constituted a waste of Tremont's
assets and that the Tremont Board of Directors breached its fiduciary duties to
Tremont's public stockholders and seeks, among other things, to rescind
Tremont's consummation of the NL Stock Purchase and award damages to Tremont for
injuries allegedly suffered as a result of the defendants' conduct. The Company
understands that Valhi and the other defendants believe that the action is
without merit, have denied all allegations of wrongdoing and liability and
intend to vigorously defend this action. The action is currently in discovery
and a May 31, 1995 trial date has been set by the Delaware Chancery Court.

Compensation of Directors. Directors of the Company who are not also
officers or employees of the Company or its affiliates will receive an annual
retainer of $15,000, payable in quarterly installments, plus $1,000 per day for
attendance at Board of Directors meetings and $500 per day for attendance at
Board committee meetings not held in conjunction with a full Board meeting or
another Board committee meeting and as a daily rate for services rendered on
behalf of the Board of Directors and any committee thereof. In the event of
death while serving as a director, the designated beneficiary or estate of such
directors shall be entitled to receive a one-time life insurance benefit equal
to $15,000. Any such director serving as a chairperson of a Board committee
shall also be entitled to an annual fee of $5,000 for such service. Mr.
Costonis, Mr. Hardin and Mr. Bauer are the only current directors eligible to
receive the foregoing amounts.

Summary of Cash and Certain Other Compensation of Executive Officers. The
Summary Compensation Table below provides certain summary information concerning
annual and long-term compensation paid or accrued by the Company to or on behalf
of the Company's Chief Executive Officer, the Company's other three executive
officers and the Managing Director of Medite/Europe for services rendered to the
Company during 1992, 1993 and 1994. Michael A. Snetzer and Bobby D. O'Brien
were not employees of the Company prior to January 1, 1995, and during the 1992-
1994 periods each was paid by parent corporations of the Company. The remainder
of the individuals who serve as executive officers of the Company are employees
of the Company and were paid by the Company during the periods presented.
Beginning in 1995, Mr. Snetzer and Mr. O'Brien have become employees of the
Company and are compensated directly by the Company.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation (7)
Awards
Valhi Valhi
Restricted Securities
Name Other Annual Stock Underlying All Other
and Principal Salary Bonus Compensation Awards Options Compensation
Position Year ($) ($) ($)(2) ($)(3) (#)(4) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Michael A. Snetzer, 1994 $ 76,923(1) $ - $ - $ - - $ -
Chairman of the 1993 76,923(1) - - - - -
Board and Chief 1992 76,923(1) - - - - -
Executive Officer

Jerry L. Bramwell, 1994 163,812 59,160 - - 20,000 11,280(5)
President and Chief 1993 163,812 54,914 - 15,113 - 9,473(5)
Operating Officer 1992 160,000 46,806 - - - 11,296(5)

Rory G. Kirwan, 1994 92,496 34,364 20,566 - 10,000 -
Managing Director - 1993 84,433 16,308 15,810 - - -
Medite/Europe 1992 88,618 13,789 16,788 - - -

Henry Snow, 1994 93,654 34,757 - - 10,000 9,068(6)
Vice President 1993 90,948 30,695 - 7,800 - 7,151(6)
1992 86,184 25,212 - - - 7,856(6)

Bobby D. O'Brien, 1994 66,462(1) - - - - -
Vice President - 1993 52,572(1) - - - - -
Finance and 1992 46,244(1) - - - - -
Treasurer

</TABLE>

[FN]
(1) The Company and Valhi are parties to an Intercorporate Services Agreement
(the "Valhi ISA"), which provides that Valhi will render certain services
to the Company. Such services included services provided to the Company
by Mr. Snetzer and Mr. O'Brien prior to 1995. The fees paid pursuant to
the Valhi ISA were based upon the estimated percentage of time individual
Valhi employees devoted to matters on behalf of the Company. See
"Certain Relationships and Transactions." The amounts shown as
compensation in the table for Michael A. Snetzer and Bobby D. O'Brien
represent the portion of the fees paid by the Company pursuant to the
Valhi ISA with respect to services rendered by Mr. Snetzer and Mr.
O'Brien to the Company. Mr. Snetzer and Mr. O'Brien became employees of
the Company effective January 1, 1995 and will be compensated directly by
the Company beginning in 1995. Mr. Snetzer's and Mr. O'Brien's base
salary for 1995 will be $275,000 and $92,500, respectively.

(2) Other Annual Compensation for Mr. Kirwan represents estimated value
attributed to use of a Company automobile of $13,966 for 1992, $13,127
for 1993 and $17,511 for 1994 and the cost of supplemental health
insurance coverage of $2,822 for 1992, $2,683 for 1993 and $3,055 for
1994. The only type of Other Annual Compensation for each of the other
named individuals was in the form of perquisites, which did not exceed
the lesser of $50,000 or 10% of the total annual salary and bonus
reported for each named individual and has therefore been omitted.

(3) Represents the dollar value on the day of grant of 3,100 and 1,600
restricted shares of Valhi common stock granted to Mr. Bramwell and Mr.
Snow, respectively, under the Valhi Stock Option/Stock Appreciation
Rights Plan. The Company will reimburse Valhi for the cost of shares of
restricted Valhi common stock awarded to executive officers who are also
employees of the Company. Such reimbursement is made at such time as the
restriction on such shares lapse, and is based on the market value of
Valhi common stock on such date. Such shares vest at a rate of 40% after
six months from the date of award, 30% after 18 months from the date of

award and 30% after 30 months from the date of award. Dividends are paid
to grantees on unvested shares. As of December 31, 1994, an aggregate of
2,700 shares of restricted Valhi common stock, for which the Company will
reimburse Valhi, were held by executive officers named in the Summary
Compensation Table. The aggregate number of shares and value of
restricted Valhi common stock held by each named employee executive
officer as of December 31, 1994 (at which time the market value was
$7.625 per share) were as follows: Mr. Bramwell, 1,800 shares and
$13,725; Mr. Snow, 900 shares and $6,863. Shares of restricted Valhi
common stock held by Mr. Snetzer and Mr. O'Brien are not included in the
table as such executive officers were not employees of the Company prior
to 1995 and, accordingly, the Company will not be obligated to reimburse
Valhi for restricted Valhi common stock awarded to such persons prior to
1995. See "Security Ownership in the Company and its Affiliates."

(4) Represents shares of Valhi common stock available for issuance upon the
exercise of options granted under the Valhi Stock Option/Stock
Appreciation Rights Plan. With respect to options to acquire Valhi
common stock granted to executive officers who were also employees of the
Company at the time of such award, the Company will reimburse Valhi for
the difference between the option exercise price and the market price of
Valhi common stock at the time of exercise. Options granted under the
Valhi Stock Option/Stock Appreciation Rights Plan generally vest at the
rate of 20% on each anniversary of the date of grant. The table does not
include options held by Mr. Snetzer and Mr. O'Brien, executive officers
of the Company who were not employees of the Company prior to 1995. The
Company will not be obligated to reimburse Valhi in connection with Valhi
stock options granted to Mr. Snetzer and Mr. O'Brien prior to 1995.

(5) All other compensation for Mr. Bramwell consists of a Valhi Employee
Stock Ownership Plan (the "ESOP") allocation of Valhi common stock valued
at $3,052 for 1992, $2,099 for 1993 and $2,280 for 1994 and a matching
contribution pursuant to the Company's Employees' Thrift Plan (the
"Thrift Plan") of $8,244, for 1992, $7,374 for 1993 and $9,000 for 1994.

(6) All other compensation for Mr. Snow consists of an ESOP allocation of
Valhi common stock valued at $1,496 for 1992, $1,167 for 1993 and $1,833
for 1994 and a matching contribution pursuant to the Thrift Plan of
$6,360 for 1992, $5,984 for 1993 and $7,235 for 1994.

(7) No payouts were made pursuant to long-term incentive plans during 1992,
1993 or 1994 and therefore the column for such compensation has been
omitted.

Bonuses. Bonus recommendations for senior U.S. employees, including
executive officers who are U.S. employees of the Company, are based upon
guidelines related to annual return on stockholders' equity compared to the
annual budgeted return. Bonus recommendations for senior Irish employees are
based upon the Irish operations' pretax income margins compared to budgeted
pretax income margins. Additional bonus recommendations for senior Irish
employees are related to the plant expansion project in Ireland. In 1994 these
recommendations were based upon project completion within specified capital
expansion guidelines. Further bonus recommendations in 1995 related to the
project will be based upon achievement of specified operating performance goals.
Final determination of annual bonus payments has, in the past, been made by non-
employee directors.

Grants of Stock Options and Stock Appreciation Rights. The following
table provides information, with respect to the executive officers of the
Company listed in the Summary Compensation Table above, concerning the grant of
options to acquire Valhi common stock in 1994. No SARs were granted in 1994.
Options granted to executive officers who were not employees of the Company
prior to 1995 and for which the Company incurs no cost are not included in the
table.

Option/SAR Grants in 1994
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term ($) (1)
Percent of
Number of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Price Expiration
Name (#) 1994 (2) ($/Share)(3) Date 5% 10%

<S> <C> <C> <C> <C> <C> <C>
Jerry L. Bramwell 20,000 24% $5.75-$6.89 03/10/2004 $69,387 $185,169
Rory G. Kirwan 10,000 12 5.75- 6.89 03/10/2004 34,694 92,585
Henry Snow 10,000 12 5.75- 6.89 03/10/2004 34,694 92,585

</TABLE>

[FN]
(1) The closing sale price of the Valhi common stock on the date of grant was
$6.00 per share.

(2) Based on total shares pursuant to the grant of options to employees of the
Company.

(3) Options granted in 1994 become exercisable on the following dates at the
prices indicated.

<TABLE>
<CAPTION>
Percent Vesting Exercise
Vested Date Price

Stock Option Exercises and Holdings. The following table provides
information with respect to the executive officers of the Company listed in the
Summary Compensation Table above concerning the value of unexercised options to
acquire Valhi common stock held as of December 31, 1994. Options held by
executive officers who were not employees of the Company prior to 1995 and for
which the Company incurs no cost are not included in the table. During 1994, no
executive officer exercised any options. No SARs have been granted under any
incentive plan.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs Options/SARs
at 12/31/94 (#) at 12/31/94 ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable(1)

<S> <C> <C>
Jerry L. Bramwell 16,000/24,000 42,000/36,920
Rory G. Kirwan - /10,000 - /13,210
Henry Snow 38,000/12,000 21,000/18,460
</TABLE>

[FN]
(1) Based on Valhi's $7.625 per share closing price as of December 31, 1994 as
reported on the NYSE composite tape.

Stock Option-Stock Appreciation Rights Plan. On February 14, 1995, the
Board of Directors and Valcor, as the sole stockholder of the Company, adopted
the Medite Corporation 1995 Stock Option-Stock Appreciation Rights Plan (the
"Option Plan"). The Option Plan provides key employees (who may also be
directors) of the Company and its affiliates performance incentives and also

provides a means of encouraging stock ownership in the Company by such persons.
Under the Option Plan, key employees of the Company or its affiliates are
eligible to receive stock options to purchase shares of Common Stock,
appreciation rights ("SARs") or awards of restricted stock. The Option Plan
allows a maximum of 1,000,000 shares of Common Stock to be awarded in the form
of stock options, SARs and restricted stock awards. Options, SARs and
restricted stock awards are granted under the Option Plan on the basis of the
optionee's contribution to the Company and no option may exceed a term of ten
years from the date of grant. Options granted under the Option Plan may be
either incentive stock options or non-qualified stock options. A subcommittee
of the Company's MD&C Committee will be authorized to designate the recipients
of options, SARs and restricted stock awards, the dates of grants, the number of
shares subject to options or restricted stock awards, the option price, the
terms of payment on exercise of the options, the time during which the options
and SARs may be exercised and the vesting of restricted stock awards. The price
of incentive stock options granted under the Option Plan cannot be less than the
fair market value of the shares at the time the options are granted.

Pension Plan. The Medite Employees' Pension Plan (the "Retirement Plan")
is a plan qualified under the Internal Revenue Code of 1986, as amended (the
"Code"), that provides for a defined benefit upon retirement to the Company's
eligible and participating U.S. employees. Under the terms of the Retirement
Plan, the defined benefit for a participant is formulated on the basis of a
straight life annuity determined by the amount of a participant's earnings for
each year and the number of years of credited service under the Retirement Plan.
The compensation utilized for purposes of the Retirement Plan formula includes
the annual salary and does not include overtime, commissions, bonuses or
deferred compensation.

The following table lists annual benefits under the Retirement Plan for
the average annual earnings and years of credited service shown for a
participant retiring at the normal retirement age of 65. There is no provision
under the Retirement Plan providing for benefit reductions for Social Security
payments received by a participant after retirement. A participant accrues
reduced benefits under the Retirement Plan after thirty-five years of credited
service.
<TABLE>
<CAPTION>
Average annual Years of credited service
earnings 5 10 20 35

Jerry L. Bramwell and Henry Snow were the only current executive officers
of the Company eligible to participate in the Retirement Plan; Mr. Snetzer and
Mr. O'Brien became eligible to participate in the Retirement Plan in 1995. Mr.
Bramwell and Mr. Snow are credited with four years and 27 years, respectively,
of service under the Retirement Plan. Additionally, pursuant to an agreement
entered into between the Company and Mr. Bramwell at the time of his employment,
in addition to his benefits under the retirement plan, the Company will pay Mr.
Bramwell an additional monthly amount after retirement equal to the amount Mr.
Bramwell is entitled to receive pursuant to the Retirement Plan. The Company's
obligation under such agreement ceases upon Mr. Bramwell's death.

The Medite of Europe Limited Retirement and Death Benefit Plan (the
"Medite/Europe Plan") provides for a defined benefit upon retirement to the
Company's eligible and participating Irish employees. Under the Medite/Europe
Plan, the defined benefit for a participant is based upon the annual average
salary for the highest three consecutive year period in the ten year period
preceding retirement. The following table lists annual benefits under the

Medite/Europe Plan for average annual salary and years of credited service shown
for a participant retiring at the normal retirement age of 65.
<TABLE>
<CAPTION>

Average annual Years of credited service
earnings 5 10 20 35

<C> <C> <C> <C> <C>
$ 80,000 $13,333 $26,667 $40,000 $ 53,333
100,000 16,667 33,333 50,000 66,667
120,000 20,000 40,000 60,000 80,000
140,000 23,333 46,667 70,000 93,333
160,000 26,667 53,333 80,000 106,667
180,000 30,000 60,000 90,000 120,000
200,000 33,333 66,667 100,000 133,333

</TABLE>

CERTAIN RELATIONSHIPS AND TRANSACTIONS

Relationships with Related Parties. As set forth under the caption
"Security Ownership in the Company and its Affiliates," Harold C. Simmons,
through Valcor, Valhi and Contran, may be deemed to control the Company.
Messrs. Simmons, Snetzer and Hardin, each a director of the Company, are also
directors of the Company's parent company, Valcor, and of certain affiliates of
the Company and Valcor. See "Management -- Executive Officers and Directors."
It is the policy of the Company to engage in transactions with related parties
on terms, in the opinion of the Company, no less favorable to the Company than
could be obtained from unrelated parties.

Edward J. Hardin, a director the Company, is a partner in the law firm of
Rogers & Hardin, which serves as legal counsel to the Company. Rogers & Hardin
has also provided and may in the future provide legal services to other entities
which may be deemed to be controlled by Harold C. Simmons.

Loans and Advances. From time to time the Company makes advances to and
borrows from Valcor, Valhi and other related parties pursuant to term and demand
loans. Such loans and advances are made principally for cash management
purposes and at times when, although the Company had credit availability from
third party sources, the Company was able to borrow such funds from an affiliate
on terms comparable or more favorable to those available under such existing
third party credit facilities. During 1992, 1993 and 1994, the maximum
aggregate outstanding principal amount of loans payable to Valhi and Valcor were
$2 million, $2 million and $5 million, respectively, and the average interest
rate payable on such loans during such years were 7.8%, 7.5% and 5.25%,
respectively. As of December 31, 1994, outstanding loans payable to Valcor were
$5 million.

Contractual Arrangements. The Valhi ISA provides that Valhi will render
or provide certain management, financial, and administrative services to the
Company on a fee basis. Prior to 1995, these services included services
provided to the Company by Mr. Snetzer and Mr. O'Brien. The Company paid Valhi
fees for services rendered under the Valhi ISA of $321,000, $320,000 and
$316,000 in 1992, 1993 and 1994, respectively. In addition, the Company
reimbursed Valhi for out-of-pocket costs incurred in rendering such services.
The Valhi ISA is an annual agreement and may be extended on a quarter-to-quarter
basis, subject to termination by advance notice by either party and amendment by
mutual agreement.

Net charges from related parties for services provided in the ordinary
course of business, principally "pass-through" insurance charges for insuring
and other risks and for foreign sales corporations commissions aggregated
$2,041,000 in 1992, $1,605,000 in 1993 and $1,200,000 in 1994. Such charges, in
the Company's opinion, are not materially different from those that would have
been incurred on a stand-alone basis were such services provided by non-
affiliates.

The Company, Valcor, and Valhi have been members of Contran's
consolidated United States federal income tax group (the "Contran Tax Group").
Contran's policy for intercompany allocation of federal income taxes provides
that subsidiaries included in the Contran Tax Group compute the provision for
federal income taxes on a separate company basis. Subsidiaries of Valcor make
payments to, or receive payments from, Valcor in the same amount they would have
paid to or received from the Internal Revenue Service had they not been members
of the Contran Tax Group. The separate company tax provisions and payments are
computed using tax elections made by Contran. Upon consummation of the
Offering, the Company will become a separate United States taxpayer and will no
longer be a member of the Contran Tax Group.

Certain employees of the Company have been awarded shares of restricted
Valhi common stock and/or granted options to purchase Valhi common stock under
the terms of Valhi's stock option plans. The Company will reimburse Valhi for
the cost of shares of restricted Valhi common stock awarded to employees of the
Company as of the time the restrictions on such shares lapse, based on the
market value of Valhi common stock on such date. With respect to options to
acquire Valhi common stock granted to employees of the Company, the Company will
reimburse Valhi for the difference between the option exercise price and the
market price of Valhi common stock at the time of exercise. As of December 31,
1994, employees of the Company had been awarded 4,100 shares of restricted Valhi
common stock and options to acquire 359,000 shares of Valhi common stock. The
Company has recorded an expense (credit) of ($23,000) in 1992, nil in 1993 and
$221,000 in 1994 in connection with the grant of Valhi restricted stock and
stock options.

Valcor Indenture. The Valcor Indenture contains provisions which limit,
among other things, the ability of Valcor and its subsidiaries (including the
Company) to incur indebtedness, make acquisitions of or investments in new
businesses, sell assets, place liens on its existing properties or consent to
further restrictions on its ability to pay dividends so long as Valcor's Senior
Notes remain outstanding. These restrictions generally prohibit the Company
from incurring any new indebtedness secured by assets already owned, including
any assets which had previously secured indebtedness before such indebtedness
was repaid in full, except for the incurrence of permitted revolving working
capital indebtedness or the refinancing of any permitted indebtedness in
accordance with the Indenture. The Company is generally permitted to incur
additional indebtedness to finance the acquisition of businesses and capital
expenditures if, at the time such indebtedness is incurred, Valcor and its
subsidiaries meet a specified debt service coverage ratio, on a consolidated
basis. Accordingly, the ability of the Company to incur additional indebtedness
may depend in part on the operating results and levels of indebtedness of
Valcor's other business segments.

The Valcor Indenture also restricts the Company from (i) incurring any
new indebtedness which, among other things, restricts or limits its ability to
pay dividends or pay any indebtedness owed to Valcor; (ii) entering into a
sales/leaseback transaction unless the net proceeds from the sale are at least
equal to the fair value (as determined by Valcor's Board of Directors) of the
property sold and the Company applies an amount in cash equal to the net
proceeds of such sale to the retirement of any of its indebtedness; and (iii)
making an investment (such as a loan, advance or acquisition of an equity
interest) in any person in which any affiliate of Valcor (other than the
Company, its subsidiaries or any other Valcor subsidiary) has, or is making, an
investment.

SECURITY OWNERSHIP IN THE COMPANY AND ITS AFFILIATES

Prior to the Offering, all of the Company's outstanding capital stock was
held by Valcor, which is in turn a wholly-owned subsidiary of Valhi. Each of
Valcor and Valhi are subject to the informational requirements of the Exchange
Act. As set forth below, Contran holds, directly or through subsidiaries,
approximately 90% of the outstanding Valhi common stock. Harold C. Simmons,

Chairman of the Board, President and Chief Executive Officer of Valcor, Valhi
and Contran, may be deemed to control each of such companies.

The following table and notes set forth as of December 31, 1994 the
beneficial ownership, as defined by the regulations of the Securities and
Exchange Commission (the "Commission"), of Valhi common stock by (i) each person
or group of persons known to the Company to beneficially own more than 5% of the
outstanding shares of Valhi common stock, (ii) each director of the Company,
(iii) each executive officer of the Company listed in the Summary Compensation
Table above, and (iv) all executive officers and directors of the Company as a
group. See footnote (3) below for information concerning individuals and
entities which may be deemed to indirectly beneficially own those shares of
Valhi common stock directly held by Valhi Group, Inc. ("VGI"), National City
Lines, Inc. ("National") and Contran, as reported in the table below. Except as
set forth below, no securities of the Company's parent companies are
beneficially owned by any director or executive officer of the Company. All
information is taken from or based upon ownership filings made by such persons
with the Commission or upon information provided by such persons to the Company.
<TABLE>
<CAPTION>
Valhi Common Stock
Amount and nature
of beneficial Percent of
Name of beneficial owner ownership (1) class (2)

<S> <C> <C>
Valhi Group, Inc. 85,644,496 (3) 75.2%
National City Lines, Inc. 11,491,009 (3) 10.1%
Contran Corporation 6,212,058 (3) 5.5%
Theodore J. Bauer 1,373 -
Jerry L. Bramwell 20,161 (4) -
John J. Costonis - -
Edward J. Hardin 2,000 -
Harold C. Simmons 700,363 (3)(4)(5) .6%
Michael A. Snetzer 655,016 (3)(4)(6) .6%
Rory G. Kirwan - -
Henry Snow 40,605 (4) -
Bobby D. O'Brien 28,682 (3)(4) -
All directors and executive officers
as a group (8 persons) 1,448,200 (3)(4)(5)(6) 1.3%

</TABLE>

[FN]
(1) All beneficial ownership is sole and direct unless otherwise noted. The
business address of VGI, National and Contran is Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240.

(2) No percent of class is shown for holdings of less than 1%.

(3) National, NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie") are the
holders of approximately 73.3%, 11.4% and 15.3%, respectively, of the
outstanding common stock of VGI. Contran and NOA are the holders of
approximately 85.7% and 14.3%, respectively, of the outstanding common
stock of National. Contran and Southwest Louisiana Land Company, Inc.
("Southwest") are the holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA. Dixie Rice
Agricultural Corporation, Inc. ("Dixie Rice") is the holder of 100% of
the outstanding common stock of Dixie. Contran is the holder of
approximately 88.7% and 54.3% of the outstanding common stock of
Southwest and Dixie Rice, respectively. Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit of
Harold C. Simmons' children and grandchildren (the "Trusts"), of which
Mr. Simmons is the sole trustee. As sole trustee of the Trusts, Mr.
Simmons has the power to vote and direct the disposition of the shares of
Contran stock held by the Trusts; however, Mr. Simmons disclaims
beneficial ownership thereof. The Combined Master Retirement Trust (the
"Master Trust") holds approximately .1% of the outstanding shares of

Valhi common stock. The Master Trust is a trust formed by Valhi to
permit the collective investment by trusts which maintain the assets of
certain employee benefit plans adopted by Valhi and related companies.
Harold C. Simmons is sole trustee of the Master Trust and sole member of
the Trust Investment Committee for the Master Trust. The trustee and
members of the Trust Investment Committee for the Master Trust are
selected by Valhi's Board of Directors. Harold C. Simmons and Michael A.
Snetzer are members of Valhi's Board of Directors and are participants in
one or more of the employee benefit plans which invest through the Master
Trust; however, each such person disclaims beneficial ownership of the
shares of Valhi Common Stock held by the Master Trust, except to the
extent of his individual vested beneficial interest in the assets held by
the Master Trust. In addition, Bobby D. O'Brien is a participant in one
or more of the employee benefit plans which invest through the Master
Trust; however, Mr. O'Brien disclaims beneficial ownership of the shares
of Valhi Common Stock held by the Master Trust, except to the extent of
his individual vested beneficial interest in the assets held by the
Master Trust.

Harold C. Simmons is Chairman of the Board, President and Chief Executive
Officer of Valcor, Valhi, VGI, National, NOA, Dixie and Contran. Mr.
Simmons is also the chairman of the Board and Chief Executive Officer of
Dixie Rice and Southwest. By virtue of the stock ownership described
above and the holding of such offices, Mr. Simmons may be deemed to
control the Company, Valcor, Valhi, VGI, National, NOA, Dixie Rice,
Dixie, Southwest and Contran, and may be deemed to possess indirect
beneficial ownership of certain shares of Valhi Common Stock held by such
entities. However, Mr. Simmons disclaims beneficial ownership of the
shares of Valhi Common Stock beneficially owned, directly or indirectly,
by such entities.

(4) The shares of Valhi common stock shown as beneficially owned include
shares of Valhi common stock that such person or group could acquire upon
the exercise of options within 60 days of December 31, 1994. During such
period, options for 620,000, 510,000, 16,000, none, 38,000 and 26,000
shares are exercisable by Messrs. Simmons, Snetzer, Bramwell, Kirwan,
Snow and O'Brien, respectively, under Valhi's stock option plans. Also
included are shares of restricted Valhi common stock which include none,
none, 1,800, none, 900 and 1,600 shares held by Messrs. Simmons, Snetzer,
Bramwell, Kirwan, Snow and O'Brien, respectively, which such person has
the power to vote and the right to receive dividends. In addition,
included are the vested beneficial interests in shares of Valhi common
stock held as of December 31, 1994 by the ESOP which include 3,363,
3,356, 1,061, none, 1,005 and 1,082 shares held by Messrs. Simmons,
Snetzer, Bramwell, Kirwan, Snow and O'Brien, respectively. All of the
shares which could be acquired upon the exercise of options, shares of
restricted Valhi common stock and the vested beneficial interest in the
shares of Valhi common stock held by the ESOP are included in the amount
of shares outstanding for purposes of calculating the percent of class
owned by such person or group.

(5) The shares of Valhi common stock shown as beneficially owned by Harold C.
Simmons include 77,000 shares held by Mr. Simmons' wife, with respect to
all of which beneficial ownership is disclaimed by Mr. Simmons.

(6) The shares of Valhi common stock shown as beneficially owned by Michael
A. Snetzer do not include 2,000 shares held in an account for which Mr.
Snetzer has investment authority and 11,500 shares held in an account for
his minor son of which Mr. Snetzer is custodian, with respect to all of
which beneficial ownership is disclaimed by Mr. Snetzer.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 50 million shares
of Common Stock, par value $.01 per share, of which 12,100,000 shares are issued
and outstanding, and 1 million shares of preferred stock, par value $1.00 per
share (the "Preferred Stock"), of which 1,000 shares of a Series A Preferred
Stock are issued and outstanding. The following summary does not purport to be
complete and is subject to the detailed provisions of, and qualified in its
entirety by reference to, the Company's Restated Certificate of Incorporation
and Bylaws, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part, and to the applicable provisions
of the Delaware General Corporation Law.

COMMON STOCK

Upon completion of the Offering, the Company will have 17,982,000 shares
of Common Stock outstanding.

Voting Rights. Each share of Common Stock entitles the holder thereof to
one vote in elections of directors and all other matters submitted to a vote of
stockholders. The Common Stock does not have cumulative voting rights, which
means that holders of a majority of the outstanding shares of Common Stock
voting for the election of directors can elect all directors then being elected.
Since the purchasers of shares offered hereby will own less than a majority of
the outstanding shares after the Offering, such stockholders will be unable to
elect a director without the affirmative vote of Valcor.

Dividends. Each share of Common Stock has an equal and ratable right to
receive dividends to be paid from the Company's assets legally available
therefor when, as and if declared by the Board of Directors. Delaware law
generally requires that dividends are payable only out of the Company's surplus
or current net profits in accordance with the Delaware General Corporation Law.
On and after February 1, 2001, no dividend (other than dividends payable in
certain capital stock of the Company or certain rights to purchase capital stock
of the Company) may be paid or declared on the shares of Common Stock unless and
until the cumulative accrued and unpaid dividends on the Series A Preferred
Stock are paid in full or set aside for payment. See "Dividend Policy."

Liquidation. In the event of the dissolution, liquidation or winding up
of the Company, the holders of Common Stock are entitled to share equally and
ratably in the assets available for distribution after payments are made to the
Company's creditors and to the holder of any Preferred Stock of the Company that
may be outstanding at the time.

Other. The holders of shares of Common Stock have no preemptive,
subscription, redemption or conversion rights and are not liable for further
call or assessment. All of the outstanding shares of Common Stock are, and the
Common Stock offered hereby will be, fully paid and nonassessable.

Prior to the date of this Prospectus, there has been no established
public trading market for the Common Stock. It is expected that the Common
Stock will be approved for inclusion in the NASDAQ National Market System under
the symbol "MDFX".

PREFERRED STOCK

The Board of Directors of the Company is authorized, without further
stockholder action, to divide any or all shares of authorized Preferred Stock
into series and to fix and determine the designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereon, of any series so established, including voting powers,
dividend rights, liquidation preferences, redemption rights and conversion or
exchange privileges. As of February 14, 1995, the Board of Directors of the
Company designated 1,000 shares of its Preferred Stock as the "Series A
Preferred Stock" and issued such 1,000 shares of Series A Preferred Stock to
Valcor in the form of a stock dividend. See "Use of Proceeds." With the

exception of the Series A Preferred Stock, as of the date of this Prospectus,
the Board of Directors of the Company has not authorized any series of Preferred
Stock and there are no plans, agreements or understandings for the issuance of
any additional shares of Preferred Stock.

Series A Preferred Stock. Commencing on February 1, 1995, dividends
shall accrue on the Series A Preferred Stock at the annual rate of $6,000 per
share and shall be cumulative. Dividends shall only be payable on the Series A
Preferred Stock: (i) when, as and if declared by the Board of Directors of the
Company and (ii) at such times as permitted by certain provisions of the
Company's credit agreements. Prior to February 1, 2001, the declaration and
payment of dividends and distributions on the Common Stock shall not be
restricted or limited by the failure to pay cumulative accrued and unpaid
dividends on the Series A Preferred Stock. On and after February 1, 2001, no
dividend (other than dividends payable in certain capital stock of the Company
or certain rights to purchase capital stock of the Company) may be paid or
declared on the shares of Common Stock unless and until the cumulative accrued
and unpaid dividends on the Series A Preferred Stock have been paid in full or
set aside for payment.

In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, before any payment or distribution of the
assets of the Company shall be made or set apart for the holders of any capital
stock of Company junior to the Series A Preferred Stock, including the Common
Stock, the holders of the shares of Series A Preferred Stock shall be entitled
to receive $50,000 per share plus an amount equal to the cumulative accrued and
unpaid dividends as would be payable on such share were a dividend declared on
the Series A Preferred Stock on the date of final distribution to such holders.

Holders of the Series A Preferred Stock are not entitled to vote (except
as otherwise required by the General Corporation Law of the State of Delaware)
and have no preemptive, subscription, redemption or conversion rights and are
not liable for further call or assessment. All of the outstanding shares of
Series A Preferred Stock are fully paid and nonassessable.

Subject to compliance with certain provisions of the Company's credit
agreements, the Company may, at any time and from time to time, redeem the
shares of Series A Preferred Stock, in whole or in part, at a redemption price
equal to $50,000 per share plus all cumulative accrued and unpaid dividends that
would be payable on such share were a dividend declared on the Series A
Preferred Stock at the time of such redemption. The Company intends to use a
portion of the net proceeds of the Offering to redeem the Series A Preferred
Stock. See "Use of Proceeds".

LIMITATIONS ON DIRECTORS' LIABILITY

The Company's Restated Certificate of Incorporation provides that no
director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock purchases
or redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The effect of these provisions is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of fiduciary duty as a director (including breaches resulting from
grossly negligent behavior), except in the situations described above. These
provisions do not limit the liability of directors under federal securities laws
and do not affect the availability of equitable remedies such as an injunction
or rescission based upon a director's breach of his duty of care.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

Section 203 of the Delaware General Corporation Law ("DGCL") prohibits
certain transactions between a publicly held Delaware corporation and an
"interested stockholder," which is defined as a person who, together with any
affiliates and/or associates of such person, beneficially owns, directly or
indirectly, 15 percent or more of the outstanding voting shares of a Delaware
corporation. A Delaware corporation, pursuant to a provision in its certificate
of incorporation or by-laws, may elect not to be governed by Section 203 of the
DGCL. The Company has made such an election in its Restated Certificate of
Incorporation and, as a result, the Company is not subject to the provisions of
Section 203 of the DGCL. This provision prohibits certain business combinations
(defined broadly to include mergers, consolidations, sales or other dispositions
of assets having an aggregate value of 10 percent or more of the consolidated
assets of the corporation, and certain transactions that would increase the
interested stockholder's proportionate share ownership in the corporation)
between an interested stockholder and a corporation for a period of three years
after the date the interested stockholder acquired its stock, unless (i) the
business combination or the transaction whereby the person became an interested
stockholder is approved by the corporation's board of directors prior to the
date of such transaction; (ii) the interested stockholder acquired at least 85
percent of the voting stock of the corporation in the transaction in which it
became an interested stockholder; or (iii) the business combination is approved
by a majority of the board of directors and by the affirmative vote of two-
thirds of the outstanding voting stock owned by disinterested stockholders at an
annual or special meeting.

TRANSFER AGENT

Society National Bank will act as the transfer agent for the Common
Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
17,982,000 shares of Common Stock, without taking into account any options or
restricted stock granted to officers and employees of the Company. All
5,882,000 of the shares of Common Stock sold hereby are freely tradeable without
restriction or further registration under the Securities Act of 1933 (the
"Securities Act") by persons other than "affiliates" of the Company (defined in
Rule 144 under the Securities Act as a person who directly or indirectly through
the use of one or more intermediaries controls, is controlled by, or is under
common control with, the Company). The remaining 12,100,000 shares of Common
Stock held by Valcor will be deemed restricted securities within the meaning of
Rule 144. Shares of Common Stock acquired or to be acquired by officers and
employees of the Company pursuant to the exercise of options or restricted stock
grants will be freely tradeable without restriction or further registration
under the Securities Act by persons other than "affiliates." Sales of
restricted securities and shares of Common Stock held by "affiliates" are
subject to certain volume, timing and manner of sale restrictions pursuant to
Rule 144. Any sales of substantial amounts of these shares in the public market
might adversely affect prevailing market prices for the shares of Common Stock.

In general, under Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned shares for at least two years, including
"affiliates" of the Company, would be entitled to sell within any three-month
period that number of shares that does not exceed the greater of (i) 1% of the
number of shares of Common Stock then outstanding or (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding such
sale. Sales pursuant to Rule 144 are subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least three years, would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described

above. The Company is unable to estimate the number of restricted shares or
shares held by affiliates that will be sold under Rule 144 since this will
depend in part on the market price for the Common Stock, the personal
circumstances of the holders of the shares and other factors.

Each of the Company and Valcor has agreed with the Underwriters not to
issue or sell any of its shares of Common Stock, or shares convertible or
exchangeable or exercisable for its common stock, for a period of 180 days from
the date of this Prospectus. Thereafter, Valcor will be able to sell its shares
of Common Stock in reliance upon Rule 144, subject to the resale volume
limitations described above. In addition, it is possible that in the future
Valcor may cause the Company to register additional shares of Common Stock owned
by Valcor to permit a further distribution of such shares of Common Stock by
Valcor.

Prior to the Offering, there has been no public market for the Common
Stock. Trading of the Common Stock is expected to commence following the
completion of the Offering. There can be no assurance that an active trading
market will develop or continue after the completion of the Offering or that the
market price of the Common Stock will not decline below the initial public
offering price. No prediction can be made as to the effect, if any, that future
sales of shares of Common Stock, or the availability of shares for future sale,
will have on the market price prevailing from time to time. Sales of
substantial amounts of Common Stock in the public market, or the perception that
such sales could occur, could adversely affect the prevailing market price of
the Common Stock or the ability of the Company to raise capital through a public
offering of its equity securities.

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK

The following is a discussion of certain U.S. federal income and estate
tax consequences of the ownership and disposition of Common Stock by a "Non-U.S.
Holder." A "Non-U.S. Holder" is a person or entity that, for U.S. federal
income tax purposes, is a non-resident alien individual, a foreign corporation,
a foreign partnership, or a foreign estate or trust. An alien individual may be
deemed to be a resident alien (as opposed to a non-resident alien) by virtue of
being present in the U.S. on at least 31 days in the current calendar year and
for a weighted average of 183 days during a three-calendar year period ending
with the current calendar year (computed, for such purposes as the sum of all of
the days present in the current year, one-third of the days present in the
immediately preceding year, and one-sixth of the days present in the second
preceding year). In addition to the "substantial presence test" described in
the immediately preceding sentence, an alien may be treated as a resident alien
with respect to any calendar year if he (i) meets a lawful permanent resident
test (a so-called "green card" test) or (ii) is not otherwise a United States
resident in the calendar year or in the immediately preceding calendar year but
elects to be treated as a U.S. resident in the calendar year (the "election
year"). The election may be made if the alien individual is present in the U.S.
for a period of at least 31 consecutive days in the election year and for at
least 75 percent of the number of days beginning with the first day of such 31
day period and ending with the last day of the election year (treating the
individual for this purpose as present in the U.S. for up to five (5) days even
if absent from the U.S. on such days) and meets the "substantial presence test"
in the immediately following year. In addition, an alien may be treated as a
U.S. resident for only a portion of a calendar year, and as a nonresident for
the remainder of such year if during the remaining part of the year the
individual is not present in the U.S. and has a closer connection to a foreign
country than to the U.S. and if the individual is not a resident of the U.S. in
the following calendar year. Generally, resident aliens are subject to U.S.
federal tax as if they were U.S. citizens and residents.

This discussion is based on the Code, and administrative and judicial
interpretations as of the date hereof, all of which may be changed either
retroactively or prospectively. This discussion does not address all aspects of

U.S. federal income and estate taxation that may be relevant in light of any
Non-U.S. Holder's particular facts and circumstances (such as being a U.S.
expatriate) and does not address any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.

Prospective holders are urged to consult their tax advisors with respect
to the particular U.S. federal, state, local and non-U.S. income and other tax
consequences of holding and disposing Common Stock.

DIVIDENDS

Dividends paid to a Non-U.S. Holder of Common Stock generally will be
subject to U.S. federal income tax at a flat 30% rate or such lower rate as may
be specified by an applicable income tax treaty. The payor of such dividends is
required to withhold the U.S. income tax from the dividend payment. For
purposes of determining whether tax is to be withheld at a 30% rate or at a
reduced rate as specified by an income tax treaty, the Company ordinarily will
presume that dividends paid to an address in a foreign country are paid to a
resident of such country absent knowledge that such presumption is not
warranted. However, under proposed U.S. Treasury regulations which have not yet
been put into effect, to claim the benefits of a tax treaty, a Non-U.S. Holder
of Common Stock would be required to file certain forms with the Company.

There will be no withholding of U.S. federal income tax on dividends that
are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the U.S. provided that an Internal Revenue Service Form 4224 is
filed with the payor. Instead, the effectively connected dividends will be
subject to regular graduated U.S. income tax which is calculated and is payable
in the same manner as if the Non-U.S. Holder were a U.S. resident. A non-U.S.
corporation receiving effectively connected dividends also may be subject to an
additional "branch profits tax" which is imposed under certain circumstances, at
a rate of 30% (or such lower rate as may be specified by an applicable treaty)
of the non-U.S. corporation's effectively connected earnings and profits,
subject to certain adjustments.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal income
tax or withholding of such tax with respect to gain realized on a sale or other
disposition of Common Stock unless (i) the gain is effectively connected with a
trade or business of such holder in the U.S. (which gain, in the case of a
foreign corporation, must also be taken into account for branch profits tax
purposes), (ii) in the case of certain Non-U.S. Holders who are non-resident
alien individuals and hold the Common Stock as a capital asset, such individuals
are present in the U.S. for 183 or more days in the taxable year of the
disposition and (a) have a "tax home" in the U.S. for such year or (b) the gain
is attributable to an office or other fixed place of business maintained in the
U.S. by such individual, or (iii) the Company is or has been a "U.S. real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such
disposition or such Non-U.S. Holder's holding period. U.S. income tax (but not
withholding) applies, at regular graduated rates, for effectively connected
gains, and at a flat 30% rate, for U.S. source gains derived by a nonresident
alien present in the U.S. for at least 183 days in the calendar. The regular
graduated U.S. income tax rates apply with respect to the disposition of an
interest in a U.S. real property holding corporation and 10% of the amount
realized generally is withheld to be applied toward payment of this tax. The
Company believes that it currently is not a U.S. real property holding
corporation and does not anticipate that it will become one in the future.
Further, even if the Company were to become a U.S. real property holding
corporation, any gain recognized by a Non-U.S. Holder still would not be subject
to U.S. tax if the shares were considered to be "regularly traded" (within the
meaning of applicable U.S. Treasury regulations) on an established securities
market (e.g., the NASDAQ National Market System, on which the Company's Common
Stock is expected to be listed), and the Non-U.S. Holder did not own, directly
or indirectly, at any time during the five-year period ending on the date of the
disposition, more than five percent of the Common Stock.

Non-U.S. Holders should note that legislation has been proposed on
several occasions, including as recently as 1992, that would subject certain
Non-U.S. Holders owning a specified percentage of the stock of the Company to
U.S. tax on the gain realized from the sale (or other disposition) of the Common
Stock. Although to date this legislation has not been enacted, it is not
possible to predict whether such legislation will be enacted in the future, and,
if so enacted, in what form.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

Generally, the Company must report to the U.S. Internal Revenue Service
the amount of dividends paid, the name and address of the recipient, and the
amount, if any, of tax withheld. A similar report is sent to the holder.
Pursuant to tax treaties or other agreements, the U.S. Internal Revenue Service
may make its reports available to tax authorities in the recipient's country of
residence. Dividends paid to a Non-U.S. Holder at an address within the U.S.
may be subject to 31% backup withholding if the Non-U.S. Holder fails to
establish that it is entitled to an exemption or to provide a correct taxpayer
identification number and other information to the payor. Dividends paid to a
Non-U.S. Holder at an address outside the U.S. generally will not be subject to
backup withholding. The U.S. Internal Revenue Service, however, has indicated
that it is reconsidering whether the use of an address outside the U.S. is
sufficient to exempt such payments from backup withholding.

Information reporting and 31% backup withholding will apply to the
proceeds of a disposition of Common Stock paid to or through a U.S. office of a
broker unless the disposing holder certifies its non-U.S. status or otherwise
establishes an exemption. A Non-U.S. Holder may establish non-U.S. status by
filing a U.S. Internal Revenue Service Form W-8 with the broker. Generally,
U.S. information reporting and backup withholding will not apply to a payment of
disposition proceeds if the payment is made outside the U.S. through a non-U.S.
office of a non-U.S. broker. However, U.S. information reporting requirements
(but not backup withholding) will apply to a payment of disposition proceeds
outside the U.S. if (i) the payment is made through an office outside the U.S.
of a broker that is either (a) a U.S. person, (b) a foreign person which derives
50% or more of its gross income for certain periods from the conduct of a trade
or business in the U.S. or (c) a "controlled foreign corporation" for U.S.
federal income tax purposes, and (ii) the broker fails to maintain documentary
evidence that the holder is a Non-U.S. Holder and that certain conditions are
met, or that the holder otherwise is entitled to an exemption.

Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.

FEDERAL ESTATE TAX

An individual Non-U.S. Holder who is treated as the owner of or has made
certain lifetime transfers of an interest in the Common Stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.

UNDERWRITERS

Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof, the U.S. Underwriters named below have
severally agreed to purchase, and the Company has agreed to sell to them, and
the International Underwriters named below have severally agreed to purchase,

and the Company has agreed to sell to them, the respective number of shares of
Common Stock set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES

<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated . . . . . . . . . . . . . .
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . . .
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . 4,705,600

International Underwriters:
Morgan Stanley & Co. International Limited . . . . . . . . . .
Salomon Brothers International Limited . . . . . . . . . . . .
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . 1,176,400

Total . . . . . . . . . . . . . . . . . . . . . . . . . 5,882,000

</TABLE>

The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by their counsel and to certain other conditions. The
Underwriters are obligated to take and pay for all the shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below), if any are taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions,
(i) it is not purchasing any U.S. Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below) and
(ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any U.S. Shares or distribute any prospectus relating to the U.S.
Shares outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Agreement Between U.S. and
International Underwriters, each International Underwriter has represented and
agreed that, with certain exceptions, (i) it is not purchasing any International
Shares (as defined below) for the account of any United States or Canadian
Person and (ii) it has not offered or sold, and will not offer or sell, directly
or indirectly, any International Shares within the United States or Canada or to
any United States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement Between U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada, or any corporation, pension, profit sharing or other trust or other
entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person) and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Common Stock to be purchased by the
U.S. Underwriters and the International Underwriters are referred to herein as
the U.S. Shares and the International Shares, respectively.

Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of any
number of shares of Common Stock to be purchased pursuant to the Underwriting
Agreement as may be mutually agreed. The per share price of any shares sold
shall be the Price to Public set forth on the cover page hereof, in United

States dollars, less an amount not greater than the per share amount of the
concession to dealers set forth below.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of Common Stock in Canada
will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any shares of Common Stock a notice stating in substance that, by
purchasing such Common Stock, such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of such
Common Stock in Canada or to, or for the benefit of, any resident of Canada in
contravention of the securities laws of Canada or any province or territory
thereof and that any offer of Common Stock in Canada will be made only pursuant
to an exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer is made, and that such dealer will
deliver to any other dealer to whom it sells any of such Common Stock a notice
to the foregoing effect.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and will not offer or sell any shares of Common Stock in the United
Kingdom by means of any document (other than in circumstances which do not
constitute an offer to the public within the meaning of the Companies Act 1985);
(ii) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the shares of Common Stock offered hereby in, from or otherwise involving the
United Kingdom; and (iii) it has only issued or passed on and will only issue or
pass on to any person in the United Kingdom any document received by it in
connection with the issue of the shares of Common Stock, other than any document
which consists of, or is part of, listing particulars, supplementary listing
particulars or any other document required or permitted to be published by
listing rules under Part IV of the Financial Services Act 1986, to any person of
a kind described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988.

The Underwriters propose to offer part of the shares of Common Stock
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price which represents a concession not
in excess of $ per share under the public offering price. Any Underwriter may
allow, and such dealers may reallow, a concession not in excess of $ per share
to other Underwriters or to certain dealers. After the initial offering of the
shares of Common Stock, the offering price and other selling terms may from time
to time be varied by the Underwriters.

Pursuant to the Underwriting Agreement the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of 937,500 additional shares of
Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The U.S. Underwriters may exercise
such option to purchase solely for the purpose of covering over-allotments, if
any, made in connection with this Offering. To the extent such option is
exercised, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such U.S. Underwriter's name in the
preceding table bears to the total number of shares of Common Stock offered by
the U.S. Underwriters.

The Representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.

The Company will apply for listing of the Common Stock on the NASDAQ
National Market.

The Company has agreed in the Underwriting Agreement not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable for shares of Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated, provided that the Company may
issue shares and options to acquire shares under the Company's new Option Plan.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

PRICING OF THE OFFERING

Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price has been determined by negotiations
among the Company and the Representatives of the Underwriters. Among the
factors considered in determining the initial public offering price were the
future prospects of the Company and its industry in general, sales, earnings and
certain other financial and operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies engaged
in activities similar to those of the Company.

LEGAL MATTERS

Certain legal matters with respect to the shares offered hereby will be
passed upon for the Company by Rogers & Hardin, Atlanta, Georgia. Edward J.
Hardin, who is a partner in the law firm of Rogers & Hardin, serves as a
director of the Company and as a director of Valcor and one of its wholly-owned
subsidiaries. The Underwriters have been represented by Cravath, Swaine &
Moore, New York, New York.

EXPERTS

The financial statements and schedules included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included hereto in reliance upon the authority of said firm as
experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement on Form S-1, of which this
Prospectus is a part, under the Securities Act with the Commission, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, with respect to the
securities offered hereby. This Prospectus omits certain information contained
in the Registration Statement, and reference is made to the Registration
Statement, including the exhibits thereto, for further information with respect
to the Company and the securities offered hereby. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents; when any such document is an exhibit to the Registration Statement,
each such statement is qualified in its entirety by reference to the copy of
such document filed with the Commission. Copies of the Registration Statement
and the exhibits and schedules thereto are on file at the principal office of
the Commission in Washington, D.C. and may be obtained upon payment of the fee
prescribed by the Commission, or may be examined without charge at the public
reference facility of such office.

MEDITE CORPORATION

INDEX OF FINANCIAL STATEMENTS

UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS Page

Pro forma Condensed Balance Sheet - December 31, 1994 FA-2

Notes to Pro forma Condensed Balance Sheet FA-3

Pro forma Condensed Statement of Income - Year
ended December 31, 1994 FA-4

Notes to Pro forma Condensed Statement of Income FA-5

HISTORICAL ANNUAL FINANCIAL STATEMENTS

Report of Independent Public Accountants FB-1

Balance Sheets - December 31, 1993 and 1994 FB-2/FB-3

Statements of Income - Years ended December 31, 1992,
1993 and 1994 FB-4

Statements of Stockholder's Equity - Years ended
December 31, 1992, 1993 and 1994 FB-5

Statements of Cash Flows - Years ended December 31, 1992,
1993 and 1994 FB-6/FB-7

Notes to Financial Statements FB-8/FB-21

MEDITE CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following pro forma condensed consolidated financial statements are
based on the historical Annual Financial Statements of the Company included in
this Prospectus, adjusted to give pro forma effect to (i) payment of a dividend
to Valcor by distribution of 1,000 shares of Series A Preferred Stock of the
Company and (ii) the Offering and application of the net proceeds therefrom, as
of and for the periods indicated under the assumptions set forth in the
respective notes. The pro forma condensed consolidated financial statements do
not purport to represent what the Company's consolidated financial position or
results of operations would actually have been had such transactions in fact
occurred on such dates nor do such statements purport to be indicative of the
Company's consolidated financial position or results of operations at any date
or for any period in the future.

MEDITE CORPORATION

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 1994
(Unaudited)
(In millions)
<TABLE>
<CAPTION>
Pro forma Pro forma
adjustments adjustments Pro forma,
ASSETS Historical (a) Pro forma (b) as adjusted

<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 13.6 $ - $ 13.6 $1.5 $ 15.1
Other 43.9 - 43.9 - 43.9
57.5 - 57.5 1.5 59.0
Other assets 61.8 - 61.8 - 61.8
Property and equipment, net 88.8 - 88.8 - 88.8

$208.1 $ - $208.1 $1.5 $209.6

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current long-term debt $ 10.9 $ - $ 10.9 $(8.0) $ 2.9
Other current 20.6 - 20.6 - 20.6

31.5 - 31.5 (8.0) 23.5
Noncurrent liabilities:
Long-term debt 91.7 - 91.7 (33.0) 58.7
Other 30.0 - 30.0 - 30.0

121.7 - 121.7 (33.0) 88.7

Redeemable preferred stock - 50.0 50.0 (50.0) -

Stockholders' equity:
Preferred stock - - - - -
Common stock .1 - .1 .1 .2
Additional paid-in capital .8 - .8 92.4 93.2
Retained earnings 54.0 (50.0) 4.0 - 4.0
54.9 (50.0) 4.9 92.5 97.4

$208.1 $ - $208.1 $ 1.5 $209.6
</TABLE>

MEDITE CORPORATION

NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

Note 1 - Pro forma adjustments:

Pro forma adjustments described below reflect (i) payment of a dividend to
Valcor by distribution of 1,000 shares of Series A Preferred Stock of the
Company and (ii) the Offering and application of the net proceeds therefrom, as
described under the caption "Use of Proceeds," as if such transactions had
occurred on December 31, 1994.

(a) Payment of a dividend to Valcor by distribution of 1,000 shares of Series A
Preferred Stock, $1 par value, redeemable by the Company at the redemption
price of $50,000 per share.

Amount
(In millions)
(b) Proceeds of the Offering:
Issuance of the Common Stock $100.0
Less underwriting discount (6.5)
Less estimated expenses of the Offering (1.0)

92.5

Redemption of Series A Preferred Stock (50.0)

Repayment of borrowings under
the Timber Credit Agreement (41.0)

Net cash $ 1.5

MEDITE CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Year ended December 31, 1994
(Unaudited)

(In millions, except share data)
<TABLE>
<CAPTION>
Pro forma
Pro forma Adjustments Pro forma,
Historical Adjustments Pro forma (a) as adjusted

<S> <C> <C> <C> <C> <C>
Revenues and other income:
Net sales $189.9 $ - $189.9 $ - $189.9
Other, net 1.4 - 1.4 - 1.4

191.3 - 191.3 - 191.3
Costs and expenses:
Cost of sales 144.8 - 144.8 - 144.8
Selling, general and administrative 10.4 - 10.4 - 10.4
Interest 6.6 - 6.6 (2.8) 3.8

161.8 - 161.8 (2.8) 159.0

Income before income tax 29.5 - 29.5 2.8 32.3
Provision for income taxes 11.2 - 11.2 1.1 12.3
Income from continuing operations 18.3 - 18.3 1.7 20.0
Provision for preferred dividends - 6.0 6.0 (6.0) -

Income available to common stock $ 18.3 $ (6.0) $ 12.3 $ 7.7 $20.0

Per common share $ 1.52 $ 1.02 $1.12

Common Shares
outstanding (in thousands):
Historical 12,100 - 12,100 - 12,100
The Offering - - - 5,882 5,882
12,100 - 12,100 5,882 17,982
</TABLE>

MEDITE CORPORATION

NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Note 1 - Pro forma adjustments:

Pro forma adjustments described below reflect (i) payment of a dividend to
Valcor by distribution of 1,000 shares of Series A Preferred Stock of the
Company with a cumulative annual dividend of $6,000 per share and (ii) the
Offering and application of the net proceeds therefrom, as described under the
caption "Use of Proceeds," as if such transactions had occurred on January 1,
1994.

(a) Issuance of the Common Stock:
Decrease in interest expense due to repayment
of borrowings under the Timber Credit Agreement $ 2.8

Provision for income taxes, at the Company's
marginal federal and state income tax rate
of 38% (1.1)

$ 1.7

Pursuant to the Commission's requirements for pro forma information, no pro
forma adjustment has been made for assumed interest income on the $1.5 million
net proceeds of the Offering to be retained by the Company for the Company's
general corporate purposes.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholder and Board of Directors of Medite Corporation:

We have audited the accompanying balance sheets of Medite Corporation (a
Delaware corporation and a wholly-owned subsidiary of Valcor, Inc.) as of
December 31, 1993 and 1994, and the related statements of income, stockholder's
equity and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 1993 and 1994, and the results of its operations and cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.

As discussed in Note 7 to the financial statements, in 1992 the Company
changed its method of accounting for postretirement benefits other than pensions
and income taxes in accordance with Statements of Financial Accounting Standards
Nos. 106 and 109, respectively.

ARTHUR ANDERSEN LLP

Portland, Oregon,
January 27, 1995, except for
Note 13 as to which the date
is February 28, 1995

MEDITE CORPORATION

BALANCE SHEETS

December 31, 1993 and 1994

(In thousands)

ASSETS

1993 1994

<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,293 $ 13,633
Accounts and notes receivable, less allowance
for doubtful accounts of $798 and $482 16,470 17,507
Receivable from affiliates 349 2,211
Inventories 21,014 21,186
Deposits and other 4,426 2,743
Deferred income taxes 96 243

Total current assets 43,648 57,523

Other assets:
Timber and timberlands 51,868 53,114
Prepaid pension cost 3,899 4,363
Other 4,424 4,291

Total other assets 60,191 61,768

Property and equipment:
Land 4,125 4,125
Buildings 14,780 22,030
Equipment 87,946 125,808
Construction in progress 14,641 230
121,492 152,193
Less accumulated depreciation 54,727 63,404

Net property and equipment 66,765 88,789

$170,604 $208,080
</TABLE>

MEDITE CORPORATION

BALANCE SHEETS (CONTINUED)

December 31, 1993 and 1994

(In thousands, except share data)

LIABILITIES AND STOCKHOLDER'S EQUITY

1993 1994

<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 8,270 $ 10,882
Accounts payable 8,762 9,824
Accrued liabilities 7,358 10,634
Payable to affiliates 2 -
Income taxes 286 129

Total current liabilities 24,678 31,469

Noncurrent liabilities:
Long-term debt 65,766 91,691
Loan from affiliate - 5,000
Deferred income taxes 18,890 23,208
Other 1,877 1,772

Total noncurrent liabilities 86,533 121,671

Stockholder's equity:
Preferred stock, $1 par value; 1,000,000 shares
authorized, none issued - -
Common stock, $.01 par value; 50,000,000
shares authorized, 12,100,000 shares issued
and outstanding 121 121
Additional paid-in capital 20,855 855
Retained earnings 38,417 53,964

Total stockholder's equity 59,393 54,940

$170,604 $208,080
</TABLE>

Commitments and contingencies (Note 11).

MEDITE CORPORATION

STATEMENTS OF INCOME

Years ended December 31, 1992, 1993 and 1994

(In thousands, except per share data)

1992 1993 1994

<S> <C> <C> <C>
Revenues and other income:
Net sales $194,810 $174,304 $189,856
Business unit dispositions, net 3,490 500 -
Interest and other 4,938 2,034 1,418

203,238 176,838 191,274

Costs and expenses:
Cost of sales 166,788 140,320 144,740
Selling, general and administrative 10,511 9,724 10,422
Interest 3,127 3,125 6,584

180,426 153,169 161,746

Income before income taxes 22,812 23,669 29,528

Provision for income taxes 8,246 8,775 11,181

Income before cumulative effect of
changes in accounting principles 14,566 14,894 18,347

Cumulative effect of changes in
accounting principles 1,285 - -

Net income $ 15,851 $ 14,894 $ 18,347

Income per common share:
Before changes in accounting principles $1.20 $1.23 $1.52
Cumulative effect of changes in
accounting principles .11 - -

$1.31 $1.23 $1.52

Common shares outstanding 12,100 12,100 12,100

</TABLE>

MEDITE CORPORATION

STATEMENTS OF STOCKHOLDER'S EQUITY

Years ended December 31, 1992, 1993 and 1994

(In thousands)
<TABLE>
<CAPTION>

Additional Total
Preferred Common paid-in Retained stockholder's
stock stock capital earnings equity

<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $- $121 $ 35,855 $ 51,672 $ 87,648

Net income - - - 15,851 15,851
Cash dividends - - - (12,000) (12,000)

Balance at December 31, 1992 - 121 35,855 55,523 91,499

Net income - - - 14,894 14,894
Cash dividends - - (35,000) (32,000) (67,000)
Capital transaction - - 20,000 - 20,000

Balance at December 31, 1993 - 121 20,855 38,417 59,393

Net income - - - 18,347 18,347
Cash dividends - - (20,000) (2,800) (22,800)

Balance at December 31, 1994 $- $121 $ 855 $ 53,964 $ 54,940

</TABLE>

MEDITE CORPORATION

STATEMENTS OF CASH FLOWS

Years ended December 31, 1992, 1993 and 1994

(In thousands)

1992 1993 1994

<S> <C> <C> <C>
Cash flows from operating activities:
Net income $15,851 $ 14,894 $ 18,347
Depreciation and depletion 10,965 8,546 9,639
Deferred income taxes 3,835 3,342 3,942
Business unit dispositions, net (3,490) (500) -
Cumulative effect of changes in
accounting principles (1,285) - -
Other, net (310) (732) 120
25,566 25,550 32,048
Change in assets and liabilities:
Accounts and notes receivable 211 103 (403)
Inventories 1,742 1,111 (172)
Accounts payable and accrued
liabilities 2,719 (2,985) 1,940
Accounts with affiliates 2,287 (2,325) (1,714)
Income taxes 284 (161) (157)
Other, net (891) (507) 1,554

Net cash provided by operating
activities 31,918 20,786 33,096

Cash flows from investing activities:
Capital expenditures:
Property and equipment (8,422) (19,637) (29,776)
Timber and timberlands (1,253) (1,152) (2,226)
Business unit dispositions:
Insurance proceeds 10,887 - -
Other, net (1,231) (924) (756)
Disposition of property and equipment 158 132 30

Net cash provided (used) by
investing activities 139 (21,581) (32,728)
</TABLE>

MEDITE CORPORATION

STATEMENTS OF CASH FLOWS (CONTINUED)

Years ended December 31, 1992, 1993 and 1994

(In thousands)

1992 1993 1994

<S> <C> <C> <C>
Cash flows from financing activities:
Notes payable, long-term debt
and loans from affiliates:
Additions $ 18,723 $103,619 $ 57,675
Principal payments (33,497) (61,124) (24,138)
Dividends (12,000) (67,000) (2,800)
Capital transactions - 20,000 (20,000)
Other, net - (889) 1,235

Net cash provided (used) by
financing activities (26,774) (5,394) 11,972

Cash and cash equivalents:
Net increase (decrease) 5,283 (6,189) 12,340
Balance at beginning of year 2,199 7,482 1,293

Balance at end of year $ 7,482 $ 1,293 $ 13,633

Supplemental disclosures - cash
paid for:
Interest, net of amount capitalized $ 4,121 $ 2,652 $ 5,824
Income taxes 2,644 7,745 9,135

</TABLE>

MEDITE CORPORATION

NOTES TO FINANCIAL STATEMENTS

Note 1 - Organization and basis of presentation:

Medite Corporation (the "Company"), a Delaware corporation incorporated in
1932, is a wholly-owned subsidiary of Valcor, Inc., which is in turn a wholly-
owned subsidiary of Valhi, Inc. In 1993, (i) Medford Corporation and Medite
Corporation, each wholly-owned subsidiaries of Valhi, merged, with Medford
surviving the merger and changing its name to "Medite Corporation" and (ii)
Valhi contributed the stock of the Company to Valcor. For financial reporting
purposes, the merger was accounted for as a combination of entities under common
control in a manner similar to a pooling of interests. Accordingly, the
financial statements of the Company for periods prior to the merger represent
the combined financial position, results of operations and cash flows of the
entities comprising the Company following the merger, including the Company's
wholly-owned Irish subsidiary, Medite of Europe Limited. All material
intercompany accounts and balances have been eliminated.

Contran Corporation holds, directly or through subsidiaries, approximately
90% of Valhi's outstanding common stock. Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit of the
children and grandchildren of Harold C. Simmons, of which Mr. Simmons is sole
trustee. Mr. Simmons, Chairman of the Board of each of Contran, Valhi and
Valcor, may be deemed to control each of such companies and the Company.

Note 2 - Summary of significant accounting policies:

Foreign currency transactions. Medite/Europe does not have a single
functional foreign currency and, accordingly, its functional reporting currency
is deemed to be the U.S. dollar. Accordingly, adjustments resulting from the
translation of assets and liabilities denominated in foreign currencies and
other currency transaction gains and losses are recognized in income currently.
Gains or losses on specific currency contracts designated as hedge transactions
on asset purchases are deferred. See Note 12. The aggregate foreign currency
transaction gains (losses) were $35,000 in 1992, $(353,000) in 1993 and $420,000
in 1994.

Net sales. Sales are recorded when products are shipped.

Inventories and cost of sales. Inventories are stated at the lower of cost
or market. The last-in, first-out method is used to determine the cost of
substantially all U.S. inventories. Supplies and non-U.S. inventory costs are
generally based on average cost.

Cash and cash equivalents. Temporary cash investments, principally short-
term time deposits with original maturities of three months or less, are
classified as cash equivalents.

Timber, timberlands and depletion. Timber and timberlands are stated at
cost less accumulated depletion. Depletion is computed by the unit-of-
production method.

Property, equipment and depreciation. Property and equipment are stated at
cost. Maintenance, repairs and minor renewals are expensed; major improvements
are capitalized. Interest costs related to major long-term capital projects are
capitalized as a component of construction costs and were $410,000 in 1993 and
$616,000 in 1994 (nominal in 1992).

Buildings are depreciated primarily by the straight-line method over the
estimated useful lives of eight to 25 years. Equipment is depreciated
principally by the unit-of-production method using a base useful life of 8 to 12
years.

Employee benefit plans. Accounting and funding policies for retirement
plans and postretirement benefits other than pensions ("OPEB") are described in
Note 9.

Advertising costs. Advertising costs, expensed as incurred, were $670,000
in 1992, $674,000 in 1993 and $710,000 in 1994.

Income taxes. Medite, Valcor and Valhi are members of Contran's
consolidated United States federal income tax group (the "Contran Tax Group").
The policy for intercompany allocation of federal income taxes provides that
subsidiaries included in the Contran Tax Group compute the provision for federal
income taxes on a separate company basis. Subsidiaries of Valcor make payments
to, or receive payments from, Valcor in the amount they would have paid to or
received from the Internal Revenue Service had they not been members of the
Contran Tax Group. The separate company provisions and payments are computed
using tax elections made by Contran. Refundable income taxes of $330,000 at
December 31, 1993 and $2,069,000 at December 31, 1994 are included in amounts
receivable from affiliates.

Deferred income tax assets and liabilities are recognized for the expected
future tax consequences of temporary differences between the income tax and
financial reporting carrying amounts of assets and liabilities.

Note 3 - Operations:

The Company's operations are grouped into two segments: MDF operations
(engineered wood products) and traditional timber operations (logs, lumber and
other wood products). MDF operations are conducted in the U.S. and, through
Medite/Europe, in the Republic of Ireland. Traditional timber products
operations are conducted in the U.S.

<TABLE>
<CAPTION>
Years ended December 31,
1992 1993 1994
(In thousands)

<S> <C> <C> <C>
Net sales:
Medium density fiberboard $111,602 $112,131 $134,939
Traditional timber products 85,441 63,729 56,137
Eliminations (2,233) (1,556) (1,220)

$194,810 $174,304 $189,856

Operating income:
Medium density fiberboard $ 12,077 $ 13,876 $ 27,087
Traditional timber products 9,882 12,418 9,262
21,959 26,294 36,349
Business unit dispositions:
Insurance gain on plant destroyed
by fire 8,490 - -
Operations permanently closed (5,000) 500 -
General corporate items, net 490 - (237)
Interest expense (3,127) (3,125) (6,584)

Income before income taxes $ 22,812 $ 23,669 $ 29,528

Depreciation and depletion:
Medium density fiberboard $ 6,215 $ 6,738 $ 7,371
Traditional timber products 4,750 1,808 2,268

$ 10,965 $ 8,546 $ 9,639
Capital expenditures:
Medium density fiberboard $ 6,050 $ 9,248 $ 27,495
Traditional timber products 3,625 11,541 4,507

$ 9,675 $ 20,789 $ 32,002
</TABLE>

The 1992 insurance gain relates to the destruction by fire of the Company's
veneer and chipping plant in Rogue River, Oregon, as insurance proceeds exceeded
the net carrying value of the assets destroyed and cleanup costs. The aggregate
insurance proceeds of $16.5 million included $5.6 million attributable to
business interruption insurance. The amount attributable to business
interruption insurance, recognized as a component of operating income through
August 1993, was based upon estimates, negotiated with the insurance carrier, of
the expected operating profit of the Rogue River operations during each month
that the various operations were originally expected to be down.

In 1992 the Company accrued a loss related to its plywood facilities
permanently closed in January 1993, most of which related to the net carrying
value of property and equipment in excess of estimated net realizable sales
value, and includes a $.6 million pension curtailment cost. In 1993, the
Company changed its estimate of the aggregate loss primarily because auction
sale proceeds of certain equipment exceeded previously estimated net realizable
value.
<TABLE>
<CAPTION>
Years ended December 31,
1992 1993 1994
(In thousands)
<S> <C> <C> <C>
Geographic segments

Net sales:
Point of origin:
United States $139,952 $127,189 $131,055
Republic of Ireland 54,858 47,115 58,801

$194,810 $174,304 $189,856
Point of destination:
United States $115,855 $101,458 $109,107
Europe 54,374 43,448 57,933
Far East\Pacific Rim 19,182 22,275 13,872
Other 5,399 7,123 8,944

$194,810 $174,304 $189,856
Operating income:
United States $ 12,948 $ 19,904 $ 24,059
Republic of Ireland 9,011 6,390 12,290

$ 21,959 $ 26,294 $ 36,349

</TABLE>

<TABLE>
December 31,
1993 1994
(In thousands)
<S> <C> <C>
Indentifiable assets
Business segments:
Medium density fiberboard $ 80,033 $120,517
Traditional timber products 87,054 83,784
Corporate and eliminations 3,517 3,779

$170,604 $208,080

Geographic segments:
United States $132,172 $132,797
Republic of Ireland 38,432 75,283

$170,604 $208,080
</TABLE>

Corporate assets consist principally of property held for sale and deferred
financing costs. At December 31, 1994, the net assets of Medite/Europe included
in consolidated net assets approximated $34 million.

Note 4 - Inventories:
<TABLE>
<CAPTION>
December 31,
1993 1994
(In thousands)

<S> <C> <C>
Raw materials $14,724 $13,050
In process products 1,430 1,481
Finished products 1,260 2,711
17,414 17,242
Supplies 3,600 3,944

$21,014 $21,186
</TABLE>

The average cost of LIFO inventories exceeded their net carrying value by
approximately $7.5 million and $4.1 million at December 31, 1993 and 1994,
respectively. The effect of partial liquidations of the LIFO inventory base
increased traditional timber products operating income by approximately $1.9
million in 1992, $.5 million in 1993 and $3.2 million in 1994.

Note 5 - Long-term debt and loan from affiliate:
<TABLE>
<CAPTION>
December 31,
1993 1994
(In thousands)
<S> <C> <C>
Medite:
Bank credit agreements:
Fixed term loans $50,000 $ 44,000
Reducing revolving term facility 11,000 23,000
Revolving working capital facility - 2,000
State of Oregon term loan 4,328 4,141
Other 190 184
65,518 73,325
Medite/Europe:
Bank fixed term loan 1,700 22,411
Revolving working capital facility 6,741 6,802
Other 77 35
8,518 29,248
74,036 102,573
Less current maturities 8,270 10,882

$65,766 $ 91,691

Note payable to Valcor $ - $ 5,000

</TABLE>

Medite's U.S. bank credit agreement (the "Timber Credit Agreement") provides
for a $75 million term loan facility collateralized by the Company's timber and
timberlands, and a $15 million revolving working capital facility expiring
September 1996 collateralized by the Company's timber and timberlands and U.S.
inventories and receivables. Proceeds of the term loan were utilized in 1993 to
prepay existing bank term loans and to pay a $60 million dividend to Medite's
parent company.

The Timber Credit Agreement term loan consists of two tranches. Tranche A
in the amount of $50 million bears interest at LIBOR plus 2% and is repayable in
annual installments of $6 million from 1994 to 1999 with the balance due in
2000. Tranche B consists of a $25 million reducing revolving facility that
bears interest at the prime rate plus .5% or, at the Company's option, LIBOR
plus 1.75%, and is repayable in six annual installments of $2 million from 1994
to 1999 with the balance due in 2000. The Company has entered into interest
rate swap agreements to mitigate the impact of changes in interest rates for $26
million of the Tranche A term loan that effectively converts the interest rate
on such amount to a fixed rate of 7.6%. The swap agreements mature in 1998
through 2000. See Note 12.

The amount of credit available under the Timber Credit Agreement revolving
credit facility is based upon formula-determined amounts of accounts receivable
and inventories. Outstanding borrowings bear interest at the prime rate plus
.375% or, at the Company's option, LIBOR plus 1.5%.

At December 31, 1994, the weighted average interest rate on borrowings
outstanding under the Timber Credit Agreement, including the effect of interest
rate swaps discussed above, was 7.8%, and $8 million was available for
additional borrowing.

The State of Oregon term loan matures in monthly installments through March
2008, bears interest at 6.9% and is collateralized by certain property and
equipment of the Company's MDF plant in Medford, Oregon.

Medite/Europe has bank credit agreements providing for (i) a $22.4 million
bank term loan, obtained to finance a portion of a plant expansion, repayable in
installments from 1995 through 2000, and (ii) a $12 million multi-currency
revolving credit facility through April 1996. The amount of credit available
under the revolving facility is based upon formula-determined amounts of
accounts receivable and inventories, and bear interest at rates based upon LIBOR
while borrowings under the term facility bears interest at a weighted average
fixed interest rate of 8.4%. Borrowings under both facilities are
collateralized by substantially all of Medite/Europe's assets. At December 31,
1994, the weighted average interest rate on Medite/Europe's outstanding bank
borrowings was 7.9% and $4 million was available for additional borrowing.

The Company's credit agreements currently require the maintenance of levels
of tangible net worth (as defined), limit dividends and contain other provisions
and restrictive covenants customary in lending transactions of this type. At
December 31, 1994, (i) approximately $3 million of Medite/Europe's net assets
were eligible for repatriation to the Company and (ii) approximately $7 million
of the Company's consolidated stockholder's equity were eligible for payment of
dividends. The aggregate maturities of long-term debt at December 31, 1994 are
shown in the table below.

Years ending December 31, Amount
(In thousands)

1995 $ 10,882
1996 22,305
1997 13,519
1998 13,037
1999 11,555
2000 and thereafter 31,275

$102,573

A $5 million loan from Valcor bears interest at 5.25% and is due on demand.
This loan is classified as a noncurrent liability because Medite has the ability
to refinance such loan with borrowings under its long-term revolving bank credit
facility.

Note 6 - Accrued liabilities:
<TABLE>
<CAPTION>
December 31,
1993 1994
(In thousands)

<S> <C> <C>
Employee benefits $ 3,820 $ 4,590
Insurance claims and expenses 2,045 1,789
Environmental and other closing costs 535 630
Equipment purchases - 2,157
Other 958 1,468

$ 7,358 $10,634
</TABLE>

Note 7 - Changes in accounting principles:

The Company (i) elected early compliance with both Statement of Financial
Accounting Standards ("SFAS") No. 106 (OPEB) and SFAS No. 109 (income taxes) as
of January 1, 1992; (ii) elected to apply SFAS No. 109 prospectively and not
restate prior years; and (iii) elected immediate recognition of the OPEB
transition obligation. The cumulative effect of changes in accounting
principles adjustment is shown in the table below.

Amount
(In thousands)
Increase (decrease) in net assets at January 1, 1992:
Inventories $ 2,629
Timber and timberlands 8,606
Property and equipment 140
Accrued OPEB cost (226)
Deferred income taxes, net (9,864)

Income from cumulative effect of changes in accounting
principles in 1992 $ 1,285

Note 8 - Income taxes:

The geographic components of income before income taxes and cumulative
effect of changes in accounting principles ("pretax income"), the difference
between the provision for income taxes attributable to pretax income and the
amounts that would be expected using the United States federal statutory income
tax rate of 35% (34% in 1992), and the components of the provision for income
taxes are presented in the following tables.
<TABLE>
<CAPTION>
Years ended December 31,
1992 1993 1994
(In thousands)

<S> <C> <C> <C>
Pretax income:
United States $14,651 $17,865 $18,038
Republic of Ireland 8,161 5,804 11,490

$22,812 $23,669 $29,528

Provision for income taxes:
Expected tax expense $ 7,756 $ 8,284 $10,335
Non-U.S. tax rates (2,067) (2,022) (2,443)
Incremental U.S. tax on income
of Medite/Europe 2,833 2,090 2,443
State income taxes, net 317 410 776
Rate change adjustment of deferred taxes - 323 -
Reduction in prior years taxes (464) - -
Other, net (129) (310) 70

$ 8,246 $ 8,775 $11,181

Provision for income taxes:

Currently payable:
Federal $ 3,854 $ 5,274 $ 6,499
State and non-U.S. 557 159 740
4,411 5,433 7,239
Deferred taxes, principally U.S. 3,835 3,342 3,942

$ 8,246 $ 8,775 $11,181
</TABLE>

The Company is undergoing examinations of certain of its income tax returns
and tax authorities have or may propose tax deficiencies. The Company believes
the ultimate disposition of all such examinations should not have a material
adverse effect on the Company's financial position, results of operations or
liquidity. The reduction in prior years income taxes recorded in 1992 resulted
from completion of federal tax return examinations for 1986 through 1988.

The components of the net deferred tax asset (liability) are summarized
below.
<TABLE>
<CAPTION>
December 31,
1993 1994
(In thousands)

<S> <C> <C>
Tax effect of temporary differences relating to:
Inventories $ (1,817) $ (1,693)
Timber and timberlands (11,306) (11,094)
Property and equipment (6,004) (8,050)
Accrued liabilities and other deductible differences 2,861 3,328
Other taxable differences (3,534) (4,500)
Undistributed earnings of Medite/Europe 1,006 (956)
Valuation allowance - -

$(18,794) $(22,965)

Current deferred tax assets $ 96 $ 243
Noncurrent deferred tax liabilities (18,890) (23,208)

$(18,794) $(22,965)
</TABLE>

Note 9 - Employee benefit plans:

Defined contribution plans. Valhi maintains an unleveraged noncontributory
Employee Stock Ownership Plan covering approximately two-thirds of the Company's
U.S. employees, and approximately one-half U.S. salaried employees participate
in a Company-sponsored contributory savings plan with partial matching Company
contributions. Expense of these plans aggregated $442,000 in 1992, $357,000 in
1993 and 628,000 in 1994.

Defined benefit pension plans. The Company maintains defined benefit
pension plans covering substantially all of its employees. Defined pension
benefits are based on years of service and compensation, and the related cost
(credit) is based upon independent actuarial valuations. The Company's funding
policy for its U.S. plans is to contribute annually amounts equal to or
exceeding contributions required by the funding requirements ($533,000 in 1992,
$126,000 in 1993 and nil in 1994) of the Employee Retirement Income Security Act
of 1974, as amended. Medite/Europe's plan is contributory and is funded by
Medite/Europe and the participants based upon specified percentages of
compensation.

The rates used in determining the actuarial present value of the projected
benefit obligations were (i) discount rate - 8.5%, (1993 - 7.5%), (ii) expected
long-term rate of return on assets 7.5% to 10% and (iii) increase in future
compensation levels - 4%. The plans' assets are primarily mutual funds.

<TABLE>
<CAPTION>
December 31,

1993 1994
(In thousands)

<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits obligations $18,120 $16,573
Nonvested benefits 1,524 1,102

Accumulated benefit obligations 19,644 17,675
Effect of projected future salary increases 1,267 1,558

Projected benefit obligations ("PBO") 20,911 19,233
Plan assets at fair value 22,492 21,080

Plan assets over PBO 1,581 1,847
Unrecognized net loss from experience different from
actuarial assumptions 2,727 2,703
Unrecognized prior service cost 494 448
Unrecognized net assets being amortized over 9 to 11
years (903) (635)

Prepaid pension cost $ 3,899 $ 4,363

</TABLE>

Years ended December 31,
1992 1993 1994
(In thousands)
<S> <C> <C> <C>
Net periodic pension cost (credit):
Service cost benefits earned $ 710 $ 459 $ 519
Interest cost on PBO 1,430 1,496 1,592
Actual return on plan assets (1,049) (2,395) 594
Net amortization and deferrals (1,287) (134) (2,922)

$ (196) $ (574) $ (217)
</TABLE>

Postretirement benefits other than pensions. Retirees receiving benefits
from the Company-sponsored U.S. salaried employees pension plan are eligible to
participate in the Company's group health program until age 65, and contribute
to the cost of such benefits.

The rates used in determining the actuarial present value of the accumulated
OPEB obligations were (i) discount rate - 8.5%, (1993 - 7.5%), (ii) rate of
increase in future compensation levels - 4% annually and (iii) rate of increase
in future health care costs - approximately 14% for 1995, gradually declining to
6% in 2016 and thereafter. If the health care cost trend rate was increased by
one percentage point for each year, OPEB expense would have increased $5,000 in
1994, and the actuarial present value of accumulated OPEB obligation at December
31, 1994 would have increased by $30,000.

<TABLE>
<CAPTION>
December 31,
1993 1994
(In thousands)

<S> <C> <C>
Actuarial present value of accumulated OPEB obligations:
Retiree benefits $ 25 $ 50
Other fully eligible active plan participants 59 20
Other active plan participants 244 203
328 273
Unrecognized net gain (loss) from experience
different from actuarial assumptions (37) 37

Total accrued OPEB cost 291 310
Less current portion 12 12

Noncurrent accrued OPEB cost $279 $298

</TABLE>

Years ended December 31,
1992 1993 1994
(In thousands)

<S> <C> <C> <C>
Net periodic OPEB cost:
Service cost $21 $28 $24
Interest cost 17 21 20

$38 $49 $44
</TABLE>

Multiemployer pension plans. Employees of certain former operations were
covered by union-sponsored, collectively-bargained multiemployer pension plans.
Contributions to multiemployer plans based upon collectively-bargained
agreements were $54,000 in 1992, $8,000 in 1993 and nil in 1994. Based upon
information provided by the multiemployer plans' administrators, such plans' had
no unfunded vested benefits at December 31, 1991 (the latest date available to
the Company).

Note 10 - Related party transactions:

The Company may be deemed to be controlled by Harold C. Simmons. See
Note 1. It is the policy of the Company to engage in transactions with related
parties on terms, in the opinion of the Company, no less favorable to the
Company than could be obtained from unrelated parties.

Loans and advances between the Company and various related parties pursuant
to term and demand notes, principally for cash management purposes, bear
interest at rates related to credit agreements with unrelated parties. Interest
expense on related party loans was $2,000 in 1992, $1,000 in 1993 and $117,000
in 1994. Interest income from Valhi related to prior years' income tax refunds
was $467,000 in 1992.

Under the terms of Intercorporate Services Agreements, Valhi performs
certain management, financial and administrative services for the Company on a
fee basis. Fees pursuant to these agreements were $321,000 in 1992, $320,000 in
1993 and $316,000 in 1994. Net charges from related parties for services
provided in the ordinary course of business, principally charges for insuring
property and other risks and for foreign sales corporation commissions
aggregated $2,041,000 in 1992, $1,605,000 in 1993 and $1,297,000 in 1994. Such
charges are principally pass-through in nature and, in the Company's opinion,
are not materially different from those that would have been incurred on a
stand-alone basis.

Certain employees of the Company have been awarded shares of restricted
Valhi common stock and/or granted options to purchase Valhi common stock under
the terms of Valhi's stock option plans. The Company will pay Valhi the
aggregate difference between the option price and the market value of Valhi's
common stock on the exercise date of such options. For financial reporting
purposes, the Company accounts for the expense (credit) of $(23,000) in 1992,
nil in 1993 and $221,000 in 1994 in a manner similar to accounting for stock
appreciation rights. At December 31, 1994, employees of the Company held
options to purchase 359,000 Valhi shares at prices ranging from $5 to $15 per
share (165,000 shares at prices less than the $7.63 market price of Valhi common
stock at December 31, 1994). Restricted stock is forfeitable unless certain
periods of employment are completed. The Company will pay Valhi the market
value of the restricted shares on the dates the restrictions expire, and accrue
the related expense over the restriction period. At December 31, 1994, 4,100
shares of Valhi common stock, restricted for periods of up to 30 months, were
held in escrow for employees of the Company. Expense related to restricted
stock was nil in 1992 and 1993 and $37,000 in 1994.

Edward J. Hardin, a director of the Company, is a partner in the law firm of
Rogers & Hardin, which serves as legal counsel to the Company. Rogers & Hardin
has also provided and may in the future provide legal services to other entities
which may be deemed to be controlled by Harold C. Simmons.

Note 11 - Commitments and contingencies:

Legal proceedings. The Company is involved in various routine legal
proceedings incidental to its normal business activities. The Company believes
none of such proceedings is material in relation to the Company's financial
condition, results of operations or liquidity.

Timber contracts. Deposits are made on timber cutting contracts with public
and private sources from which the Company obtains a portion of its timber
requirements. The Company records only the cash deposits and advances on these
contracts because it does not obtain title to the timber until it has been
harvested. At December 31, 1994, the Company had standing timber and log
purchase obligations aggregating approximately $9.5 million under agreements
expiring principally in 1995.

Capital expenditures. At December 31, 1994 the estimated cost to complete
capital projects in process approximated $2.4 million, substantially all of
which relates to the plant expansion project at Medite/Europe.

Concentrations of credit risk. The Company's sales are primarily to
wholesalers of building materials located principally in the Western United
States, Pacific Rim, Europe and Mexico. The Company's ten largest customers
accounted for approximately one-fourth of consolidated sales in each of the last
three years.

At December 31, 1994, 44% of the Company's cash and cash equivalents were
held by a single Irish bank (55% at December 31, 1993)

Note 12 - Financial instruments:
<TABLE>
<CAPTION>
December 31,
1993 1994
Book Fair Book Fair
Value Value Value Value
(In millions)

<S> <C> <C> <C> <C>
Cash and cash equivalents $ 1.3 $ 1.3 $ 13.6 $ 13.6

Long-term debt:
Variable rate debt $ 41.9 $ 41.9 $ 49.8 $ 49.8
Debt fixed via interest
rate swaps 26.0 26.1 26.0 23.3
Other fixed rate debt 6.2 6.2 26.8 25.9

$ 74.1 $ 74.2 $102.6 $ 99.0

Loan from Valcor $ - $ - $ 5.0 $ 5.0

</TABLE>

The fair value of variable interest rate long-term debt and the demand loan
from Valcor is deemed to approximate book value.

The fair value of debt on which interest rates have been effectively fixed
through interest rate swaps is deemed to approximate book value of the debt plus
or minus the fair value of the related swaps. The fair value of the interest
rate swap agreements (See Note 5) is estimated to be a $.1 million payable at
December 31, 1993 and to be a $2.7 million receivable at December 31, 1994.
Such fair values represent the estimated amounts the Company would pay or
receive if it were to terminate the swap agreements at such dates. The fair
value of the swap agreements is estimated by obtaining quotes from the counter
party financial institution. The Company is exposed to interest rate risk in
the event of nonperformance by the other parties to the agreements, although it
does not anticipate nonperformance by such parties.

The fair value of other fixed rate debt has been estimated based upon
relative changes in the Company's variable borrowing rates since the date
interest rates were fixed.

Medite/Europe has entered into certain currency forward contracts to hedge
exchange rate risk on the equivalent of approximately $1 million of equipment
purchase commitments related to the plant expansion at December 31, 1994 ($4
million at December 31, 1993). At December 31, 1993 and 1994, the fair value of
such currency contracts, estimated by obtaining quotes from the counter party
financial institution, approximated the contract amount.

Note 13 - Common stock and net income per common share:

Common shares outstanding and net income per common share for all periods
presented are based upon the 12,100,000 shares outstanding after the 11,000-for-
1 stock split effected as of February 28, 1995.

PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MARCH __, 1995

5,882,000 Shares

MEDITE CORPORATION

COMMON STOCK

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

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

THIS OFFERING INVOLVES CERTAIN RISKS. SEE "INVESTMENT CONSIDERATIONS."

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

PRICE $_____ A SHARE

-----------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)

<S> <C> <C> <C>
Per Share . . . . . . . . . . . . . . . . . . $ $ $
Total(3) . . . . . . . . . . . . . . . . . . $ $ $

</TABLE>
- ---------------------------

MORGAN STANLEY & CO. SALOMON BROTHERS SMITH BARNEY INC.
International INTERNATIONAL LIMITED
, 1995

(MEDITE CORPORATION LOGO)

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses to be paid in connection with the issuance and distribution of
the securities being registered are as follows and will be borne by the
Registrant:

SEC Registration Fee $39,653
NASD Fee 11,999
NASDAQ Listing Fee 34,411
Printing and Mailing Expenses *
Legal Fees and Expenses *
Accounting Fees and Expenses *
Transfer Agent's Fees and Expenses *
Blue Sky Fees and Expenses 4,125
Miscellaneous Expenses *
Total $ *

[FN]
* To be supplied by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102(b)(7) of the General Corporation Law of the State of Delaware
permits a Delaware corporation to limit the personal liability of its directors
in accordance with the provisions set forth therein. The Restated Certificate
of Incorporation of the Registrant provides that the personal liability of its
directors shall be limited to the fullest extent permitted by applicable law.

Section 145 of the General Corporation Law of the State of Delaware
contains provisions permitting Delaware corporations to indemnify directors,
officers, employees or agents against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person was or is a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, provided that (i) such person acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the corporation's best interest, and (ii) in the case of a criminal proceeding
such person had no reasonable cause to believe his or her conduct was unlawful.
In the case of actions or suits by or in the right of the corporation, no
indemnification shall be made in a case in which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
have determined upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses. Indemnification as
described above shall only be granted in a specific case upon a determination
that indemnification is proper in the circumstances because the indemnified
person has met the applicable standard of conduct. Such determination shall be
made (a) by a majority vote of the directors who are not parties to such
proceeding, even though less than a quorum, (b) if there are no such directors,
or if such directors so direct, by independent legal counsel in a written
opinion, or (c) by the stockholders of the corporation. Notwithstanding the
foregoing, to the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) or (b) of Section 145,
or in defense of any claim, issue or matter therein, he shall be indemnified

against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith. Additionally, a corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation could indemnify him against
such liability. The Restated Certificate of Incorporation and the Bylaws of the
Registrant provide for indemnification of its directors and officers to the
fullest extent permitted by applicable law.

The Company's directors and officers are also insured against claims
arising out of the performance of their duties in these capacities.

The form of Underwriting Agreement attached hereto as Exhibit 1.1, which
provides for, among other things, the Registrant's sale to the Underwriters of
the securities being registered herein, will obligate the Underwriters to
indemnify the Registrant and Registrant's officers and directors against certain
liabilities under the Securities Act of 1933.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On November 8, 1993, Valcor, Inc. acquired 1.3 million shares of the Common
Stock of the Registrant in consideration of $20 million. Such amount was
returned to Valcor, Inc. in the first quarter of 1994 as return of capital
dividend. This stock issuance was made pursuant to the exemption provided by
Section 4(2) of the Securities Act of 1933.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

The following exhibits are filed pursuant to Item 601 of Regulation S-K.

Exhibit
No. Description

1.1* Form of Underwriting Agreement.

3.1 Restated Certificate of Incorporation of Registrant.

3.1.1 Certificate of Designations of the Series A Preferred Stock.

3.1.2 Certificate of Amendment of Restated Certificate of Incorporation of
Registrant.

3.2 Bylaws of Registrant.

4.1 See Articles Four, Seven, Eight, Nine, Eleven and Twelve of the
Restated Certificate of Incorporation of Registrant filed as Exhibit
3.1 to this Registration Statement, Exhibits 3.1.1 and 3.1.2 to this
Registration Statement and Articles II, VI, VII and VIII of the Bylaws
of the Registrant filed as Exhibit 3.2 to this Registration Statement.

4.2* Form of Common Stock Certificate.

5.1 Opinion and Consent of Rogers & Hardin.

10.1 Agreement between the Minister for Fisheries and Forestry of Ireland
and Medite of Ireland Limited dated March 18, 1981, incorporated by
reference to Exhibit 10.2 of the Registration Statement on Form S-1
filed by Valcor, Inc. on May 20, 1993 (Registration No. 33-63044).

10.2 Agreement dated January 1, 1991 between the Registrant (formerly
Medford Corporation) and Jerry L. Bramwell, incorporated by reference

to Exhibit 10.7 of the Registration Statement on Form S-1 filed by
Valcor, Inc. on May 20, 1993 (Registration No. 33-63044).

10.3 Loan Agreement between the Registrant and United States National Bank
of Oregon dated July 16, 1993, incorporated by reference to Exhibit
10.1 of a Quarterly Report on Form 10-Q for the quarter ended June 30,
1993 filed by Valhi, Inc. (File No. 1-5467).

10.4 Indenture between Valcor, Inc. and Ameritrust Texas, N.A., as Trustee,
incorporated by reference to Exhibit 4.1 of the Registration Statement
on Form S-1 filed by Valcor, Inc. on May 20, 1993 (Registration No.33-
63044)

10.5 Loan Extension Agreement among the Registrant, United States National
Bank of Oregon, NationsBank of North Carolina, N.A. and Societe
Generale, Southwest Agency dated as of September 30, 1994.

10.6 Loan Agreement between Medite of Europe Limited and the Governor and
Company of the Bank of Ireland dated October 7, 1993, incorporated by
reference to Exhibit 10.9 of the Registration Statement on Form S-1
filed by Valcor, Inc. on May 20, 1993 (Registrant No. 33-63044).

10.7 Finance Contract between Medite of Europe Limited, the European
Investment Bank, the Governor and Company of the Bank of Ireland dated
October 7, 1993, incorporated by reference to Exhibit 10.10 of the
Registration Statement on Form S-1, as amended by Amendment No. 4
thereto, filed by Valcor, Inc. on October 27, 1993 (Registration No.
33-63044).

10.8 Intercorporate Services Agreement between the Registrant and Valhi,
Inc. effective as of January 1, 1994.

10.9 Medite Corporation 1995 Stock Option - Stock Appreciation Rights Plan.

10.10 Consent and waiver among the Registrant, United States National Bank
of Oregon, NationsBank of North Carolina, N.A. and Societe Generale,
Southwest Agency dated as of February 1, 1995.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Rogers & Hardin (included in Exhibit 5.1).

23.2 Consent of Arthur Andersen LLP

24.1 Powers of Attorney (included on the signature page to this
Registration Statement).

27.1 Financial Data Schedule for the year ended December 31, 1994.

(b) Financial Statement Schedules.

Page

Index of Financial Statement Schedules S-1
Report of Independent Public Accountant
on Financial Statement Schedules S-2
Schedule I - Condensed Financial
Information of Registrant S-3
Schedule II - Valuation and Qualifying
Accounts S-9

Schedule III and IV are omitted because
they are not applicable.

[FN]
* To be provided by amendment.

ITEM 17. UNDERTAKINGS.

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

The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required to permit prompt delivery
to each purchaser.

The undersigned Registrant hereby undertakes that:

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

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on the 1st day of March, 1995.

MEDITE CORPORATION

By:__________________________________
Michael A. Snetzer
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)

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

Each person whose signature appears below hereby authorizes Michael A.
Snetzer and Bobby D. O'Brien, and each of them, to file one or more amendments
(including post-effective amendments) to this Registration Statement, with all
exhibits thereto, which amendments may make such changes as any of such persons
deems appropriate, and each person, individually and in each capacity stated
below, hereby appoints each of such persons as attorney-in-fact and agent, with

full power of substitution and resubstitution, to execute in his name and on his
behalf any such amendments to the Registration Statement, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Signature Title Date

____________________________Chairman of the Board March 1, 1995
Michael A. Snetzer Chief Executive Officer and
Director (Principal Executive
Officer)

____________________________President, Chief Operating March 1, 1995
Jerry L. Bramwell Officer and Director

____________________________Treasurer and Chief Financial March 1, 1995
Bobby D. O'Brien Officer (Principal Financial Officer
and Principal Accounting Officer)

____________________________Director March 1, 1995
Theodore J. Bauer

____________________________Director March 1, 1995
John J. Costonis

____________________________Director March 1, 1995
Edward J. Hardin

____________________________Director March 1, 1995
Harold C. Simmons

MEDITE CORPORATION

INDEX OF FINANCIAL STATEMENT SCHEDULES

Page

Report of Independent Public Accountants S-2

Schedule I - Condensed Financial Information of Registrant S-3

Schedule II - Valuation and Qualifying Accounts S-8

Schedules III and IV are omitted because they are not applicable.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES

To the Stockholder and Board of Directors of Medite Corporation:

We have audited in accordance with generally accepted auditing standards,
the balance sheets of Medite Corporation (a Delaware corporation and a wholly-
owned subsidiary of Valcor, Inc.) as of December 31, 1993 and 1994, and the
related statements of income, stockholder's equity and cash flows for each of
the three years in the period ended December 31, 1994, and have issued our
report thereon dated January 27, 1995.

Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The financial statement schedules listed in the
accompanying Index of Financial Statement Schedules are the responsibility of
the Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not a required part of the
basic financial statements. These financial statement schedules have been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Portland, Oregon,
January 27, 1995.

MEDITE CORPORATION

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEETS

December 31, 1993 and 1994

(In thousands)

ASSETS

1993 1994

<S> <C> <C>
Current assets:
Cash and cash equivalents $ 437 $ 1,115
Accounts receivable 7,314 6,619
Receivable from affiliates 425 2,282
Inventories 16,497 14,547
Deposits and other 4,279 2,397
Deferred income taxes 32 154

Total current assets 28,984 27,114

Other assets:
Investment in Medite/Europe 24,408 34,225
Timber and timberlands 51,868 53,114
Prepaid pension cost 2,983 3,199
Other 4,424 4,291

Total other assets 83,683 94,829

Property and equipment 74,394 80,737
Less accumulated depreciation 30,405 35,587

Net property and equipment 43,989 45,150

$156,656 $167,093
</TABLE>

MEDITE CORPORATION

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEETS (CONTINUED)

December 31, 1993 and 1994

(In thousands)

LIABILITIES AND STOCKHOLDER'S EQUITY

1993 1994

<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 8,193 $ 8,206
Accounts payable 5,387 5,019
Accrued liabilities 6,611 7,046
Income taxes 221 -

Total current liabilities 20,412 20,271

Noncurrent liabilities:
Long-term debt 57,325 65,119
Loan from affiliate - 5,000
Deferred income taxes 17,649 20,391
Other 1,877 1,372

Total noncurrent liabilities 76,851 91,882

Stockholder's equity 59,393 54,940

$156,656 $167,093
</TABLE>

MEDITE CORPORATION

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF INCOME

Years ended December 31, 1992, 1993 and 1994

(In thousands)

1992 1993 1994

<S> <C> <C> <C>
Revenues and other income:
Net sales $139,952 $127,189 $131,055
Business unit dispositions, net 3,490 500 -
Interest and other 5,298 2,710 834
148,740 130,399 131,889

Costs and expenses:
Cost of sales 125,979 104,873 102,381
Selling, general and administrative 5,777 5,122 5,686
Interest 2,333 2,539 5,784
134,089 112,534 113,851

Equity in earnings of Medite/Europe 7,453 5,737 9,817

Income before income taxes 22,104 23,602 27,855

Provision for income taxes 7,538 8,708 9,508

Income before cumulative effect of
changes in accounting principles 14,566 14,894 18,347

Cumulative effect of changes in
accounting principles 1,285 - -

Net income $ 15,851 $ 14,894 $ 18,347

</TABLE>

MEDITE CORPORATION

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS

Years ended December 31, 1992, 1993 and 1994

(In thousands)
<TABLE>
<CAPTION>
1992 1993 1994

<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 15,851 $ 14,894 $ 18,347
Depreciation and depletion 8,248 5,805 6,236
Deferred income taxes 3,275 3,266 2,391
Undistributed earnings of Medite/Europe:
Equity in earnings (7,453) (5,737) (9,817)
Distributions - 8,950 -
Cumulative effect of changes in
accounting principles and other, net (4,918) (1,015) 247
15,003 26,163 17,404
Change in assets and liabilities, net 6,084 (6,007) 2,649
Net cash provided by operating
activities 21,087 20,156 20,053

Cash flows from investing activities:
Capital expenditures (8,380) (13,116) (8,644)
Business unit dispositions 9,656 (924) (756)
Collection of loan to Medite/Europe 3,542 - -
Other, net 71 77 18
Net cash provided (used) by
investing activities 4,889 (13,963) (9,382)

Cash flows from financing activities:
Long-term debt and loans from
affiliates, net (14,425) 40,433 12,807
Dividends (12,000) (67,000) (2,800)
Capital transaction - 20,000 (20,000)
Net cash used by financing
activities (26,425) (6,567) (9,993)

Net cash provided (449) (374) 678
Balance at beginning of year 1,260 811 437

Balance at end of year $ 811 $ 437 $ 1,115

Supplemental disclosures - cash
paid for:
Interest, net of amount capitalized $ 3,302 $ 2,038 $ 5,511
Income taxes 2,568 7,669 9,077

</TABLE>

MEDITE CORPORATION

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 1 - Basis of presentation:

The Consolidated Financial Statements of the Company are incorporated
herein by reference. The Company's investment in Medite of Europe Limited, its
wholly-owned Irish subsidiary, is presented herein by the equity method.

Note 2 - Inventories:
<TABLE>
<CAPTION>
December 31,
1993 1994
(In thousands)

<S> <C> <C>
Raw materials $13,469 $10,867
Work in process 1,180 957
Finished goods 900 1,535

15,549 13,359
Supplies 948 1,188

$16,497 $14,547
</TABLE>

Note 3 - Long-term debt and loan from affiliate:

Components of parent-company long-term debt are included in Note 5 to the
Consolidated Financial Statements. Maturities of parent-company long-term debt
at December 31, 1994 are summarized below:

Year ending December 31, Amount
(In thousands)

<S> <C>
1995 $ 8,206
1996 10,221
1997 8,237
1998 8,255
1999 8,273
2000 and thereafter 30,133

$73,325
</TABLE>

MEDITE CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(In thousands)
<TABLE>
<CAPTION>

Additions
Balance at charged to Balance
beginning costs and at end
Description of year expenses Deductions Recoveries of year

Allowance for doubtful accounts:

<S> <C> <C> <C> <C> <C>
Year ended December 31, 1992 $1,060 $ 85 $ (88) $- $1,057

Year ended December 31, 1993 $1,057 $ 52 $(322) $11 $798

Year ended December 31, 1994 $ 798 $166 $(482) $- $482

</TABLE>

EXHIBIT INDEX

SEQUENTIALLY NUMBERED
EXHIBIT NO. DESCRIPTION PAGE NO.

1.1* Form of Underwriting Agreement.

3.1 Restated Certificate of Incorporation of Registrant.

3.1.1 Certificate of Designations of the Series A Preferred Stock.

3.1.2 Certificate of Amendment of Restated Certificate of Incorporation of
Registrant.

3.2 Bylaws of Registrant.

4.2* Form of Common Stock Certificate.

5.1 Opinion and Consent of Rogers & Hardin.

10.2 Agreement dated January 1, 1991 between the Registrant (formerly
Medford Corporation) and Jerry L. Bramwell, incorporated by reference
to Exhibit 10.7 of the Registration Statement on Form S-1 filed by
Valcor, Inc. on May 20, 1993 (Registration No. 33-63044).

10.5 Loan Extension Agreement among the Registrant, United States National
Bank of Oregon, NationsBank of North Carolina, N.A. and Societe
Generale, Southwest Agency dated as of September 30, 1994.

10.8 Intercorporate Services Agreement between the Registrant and Valhi,
Inc. effective as of January 1, 1994.

10.9 Medite Corporation 1995 Stock Option - Stock appreciation Rights Plan.

10.10 Consent and waiver among the Registrant, United States National Bank
of Oregon, NationsBank of North Carolina, N.A. and Societe Generale,
Southwest Agency dated as of February 1, 1995.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Rogers & Hardin (included in Exhibit 5.1).

23.2 Consent of Arthur Andersen LLP

24.1 Powers of Attorney (included on the signature page to this
Registration Statement).

27.1 Financial Data Schedule for the year ended December 31, 1994.

[FN]
* To be provided by amendment.

RESTATED CERTIFICATE OF INCORPORATION
OF
MEDITE CORPORATION

Medite Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That the present name of the Corporation is Medite Corporation.
The Corporation was originally incorporated under the name Medford Corporation,
and its original certificate of incorporation was filed with the Secretary of
State of the State of Delaware on November 3, 1932.

SECOND: That by written consent of the entire Board of Directors of said
Corporation, pursuant to Section 141(f) of the General Corporation Law of the
State of Delaware, resolutions were duly adopted setting forth a proposed
restated certificate of incorporation of said Corporation (the "Restated
Certificate of Incorporation").

THIRD: That thereafter, by written consent in lieu of a special meeting
of the sole stockholder of the Corporation pursuant to Section 228 of the
General Corporation Law of the State of Delaware (the "GCL"), the sole
stockholder adopted a resolution approving the Restated Certificate of
Incorporation; as such written consent was unanimous, no notice of said
corporate action was required to be given, under Section 228 of the GCL.

FOURTH: That this Restated Certificate of Incorporation restates and
integrates and further amends the certificate of incorporation of the
Corporation, as the same heretofore has been amended, supplemented and/or
restated (the "Certificate of Incorporation"), and has been duly adopted in
accordance with Sections 242 and 245 of the GCL.

FIFTH: That the text of the Certificate of Incorporation is hereby
restated and integrated and further amended to read in its entirety as follows:

ARTICLE ONE

The name of the corporation is MEDITE CORPORATION.

ARTICLE TWO

The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.

ARTICLE THREE

The nature of the business or purpose to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.

ARTICLE FOUR

The total number of shares of all classes of stock which the Corporation
has authority to issue is 51,000,000 shares, 50,000,000 of which shall be Common
Stock, with a par value of $0.01 per share (the "Common Stock"), and 1,000,000
of which shall be preferred stock, with a par value of $1.00 per share (the
"Preferred Stock").

The board of directors of the Corporation (the "Board of Directors") is
expressly authorized, at any time and from time to time, to provide for the
issuance of shares of Preferred Stock in one or more series with such
designations, preferences and relative, participating, optional or other special
rights, and such qualifications, limitations or restrictions thereof, as shall
be expressed in the resolution or resolutions providing for the issuance thereof
adopted by the Board of Directors (a "Preferred Stock Designation") and as are
not inconsistent with this Certificate of Incorporation or any amendment hereto,
and as may be permitted by the General Corporation Law of the State of Delaware.
Except as otherwise expressly required by law and except for such voting powers
as may be expressly fixed by a Preferred Stock Designation relating to any
series of Preferred Stock, shares of Preferred Stock shall have no voting power
whatsoever.

ARTICLE FIVE

No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not apply
to any liability of a director i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, ii) for acts or omissions not in
good faith or which involved intentional misconduct or a knowing violation of
law, iii) under Section 174 of the General Corporation Law of the State of
Delaware, or iv) for any transaction from which the director derived an improper
personal benefit. This Article shall not eliminate or limit the liability of a
director for any act or omission occurring prior to the time this Article became
effective. Any repeal or modification of this Article shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.

ARTICLE SIX

The Corporation is to have perpetual existence.

ARTICLE SEVEN

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors shall have the power to make, adopt, amend and repeal the
bylaws of the Corporation, including, to the extent permitted by law, any bylaw
adopted by the stockholders of the Corporation unless such bylaw specifically
provides that it may not be amended or repealed by the Board of Directors.

ARTICLE EIGHT

Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the bylaws of the Corporation.
Election of directors need not be by written ballot unless the bylaws of the
Corporation so provide.

ARTICLE NINE

The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.

ARTICLE TEN

The Corporation shall indemnify, to the fullest extent permitted by law, as
the same now or hereafter exists, all persons whom it may indemnify pursuant
thereto. Any repeal or modification of this Article shall not adversely affect
any right to indemnification of a person entitled thereto existing at the time
of such repeal or modification.

ARTICLE ELEVEN

The Corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.

ARTICLE TWELVE

Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Any action taken pursuant to
such written consent of the stockholders shall have the same force and effect as
if taken by the stockholders at a meeting thereof.

IN WITNESS WHEREOF, said Corporation has caused this Restated Certificate
of Incorporation to be executed and acknowledged this 14th day of February,
1995.

MEDITE CORPORATION

/s/ Michael A. Snetzer
Michael A. Snetzer, Chairman
of the Board and Chief Executive Officer
ATTEST:

Margaret A. Mann
Margaret A. Mann, Secretary

(Corporate Seal)

CERTIFICATE OF DESIGNATIONS
OF SERIES A PREFERRED STOCK

MEDITE CORPORATION

PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE

MEDITE CORPORATION, a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), in accordance with
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:

That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware and pursuant to ARTICLE FOUR of the
Certificate of Incorporation of the Corporation, as the same heretofore has been
amended, supplemented, and/or restated (the "Certificate of Incorporation"), the
Board of Directors of the Corporation is authorized to issue from time to time
shares of the "Preferred Stock" class of the Corporation's stock, par value
$1.00 per share, in one or more series and to fix the designations, powers,
preferences, and rights, and the qualifications, limitations, and restrictions
thereof, of any such series, and has authorized the creation of the series of
Preferred Stock hereinafter provided for and has established the powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations, and restrictions thereof, of such series, by
adopting, and has adopted, in accordance with Section 141(f) of the General
Corporation Law of the State of Delaware, the following resolution:

RESOLVED, that pursuant to the authority expressly vested in the
Board of Directors of this Corporation in accordance with the
provisions of its Certificate of Incorporation, a series of the
"Preferred Stock" class of the Corporation's stock, par value $1.00
per share, be and it hereby is, created and that the designation and
number of shares thereof and the powers, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualifications, limitations and restrictions thereof
are as follows:

SECTION 1. NUMBER OF SHARES AND DESIGNATION.

One thousand (1,000) shares of the "Preferred Stock" class of the
Corporation's stock, par value $1.00 per share, are hereby constituted as a
series of such class designated as Series A Preferred Stock (the "Series A
Preferred Stock").

SECTION 2. DEFINITIONS.

For purposes hereof, the following terms shall have the meanings indicated:

"Board of Directors" shall mean the Board of Directors of the
Corporation or any duly designated and constituted committee of the Board
of Directors duly empowered and authorized by such Board of Directors to
perform any of the Board's responsibilities with respect to the Series A
Preferred Stock.

"Call Date" shall have the meaning set forth in paragraph (B) of
Section 4 hereof.

"Dividend Priority Date" shall mean February 1, 2001.

"Dividend Periods" shall mean consecutive twelve-month dividend
periods, the initial Dividend Period commencing on February 1, 1995 and
ending on and including January 31, 1996.
"Dividend Record Date" shall mean, with respect to a dividend declared
by the Board of Directors payable to the holders of shares of the Series A
Preferred Stock, the date described in paragraph (A) of Section 3 hereof.

"Junior Stock" shall mean the "Common Stock" class of the
Corporation's stock and any other class or series of stock of the
Corporation over which the Series A Preferred Stock has any preference or
priority in the payment of dividends and in the distribution of assets on
any liquidation, dissolution or winding up of the Corporation.

"Redemption Price" shall mean the redemption price per share of Series
A Preferred Stock, which shall be equal to Fifty Thousand Dollars
($50,000.00) per share of Series A Preferred Stock.

"Rights" shall mean any rights to purchase any shares of the capital
stock of the Corporation under any shareholder rights plan adopted by the
Corporation, as the same may be amended from time to time, or under any
successor or replacement shareholder rights plan.

"Series A Preferred Stock" shall have the meaning set forth in Section
1 hereof.

"Transfer Agent" means the agent or agents of the Corporation as may
be designated by the Board of Directors as the transfer agent for the
Series A Preferred Stock.

SECTION 3. DIVIDENDS.

(A) At such times as permitted by Section 5 hereof and then when, as and
if declared by the Board of Directors, the holders of shares of the Series A
Preferred Stock shall be entitled to receive out of funds legally available for
that purpose, dividends in an amount per share, payable in cash, which shall
equal the sum of the dividends payable with respect to each Dividend Period
which has commenced or been completed prior to the record date for such
dividends set by the Board of Directors in accordance herewith ("Dividend Record
Date"), with such dividends per share for each completed Dividend Period to be
Six Thousand Dollars ($6,000.00). Such dividends shall be cumulative from
February 1, 1995, whether or not in any Dividend Period or Periods there shall
have been funds of the Corporation legally available for the payment of such
dividends. Dividends shall be payable to the holders of record of shares of the
Series A Preferred Stock, as they appear on the stock records of the Corporation
at the close of business on such Dividend Record Dates, not more than 60 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors.

(B) If the calculation of a dividend payable in accordance with paragraph
(A) of this Section 3 requires that a dividend be calculated for a Dividend
Period that has commenced but not been completed prior to the Dividend Record
Date, the dividend with respect to such Dividend Period shall be calculated on a
pro rata, per diem basis, computed on the basis of twelve 30-day months and a
360-day Dividend Period. Holders of shares of Series A Preferred Stock shall
not be entitled to any dividends, whether payable in cash, property or stock, in
excess of the cumulative accrued and unpaid dividends, as herein provided, on
the Series A Preferred Stock. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on the Series A
Preferred Stock that may be in arrears.

(C) On and after the Dividend Priority Date and for so long as any shares
of the Series A Preferred Stock are outstanding, no dividends, except as
described in the next succeeding sentence, shall be declared or paid or set
apart for payment on any class or series of stock of the Corporation ranking, as
to dividends and amounts distributable upon liquidation, dissolution or winding
up, on a parity with the Series A Preferred Stock, for any period unless full

cumulative dividends have been, contemporaneously are, or are to be declared and
paid or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series A Preferred Stock for all Dividend Periods completed on or
prior to the date of payment of the dividends on such class or series of parity
stock. When dividends are not so paid in full or a sum sufficient for such
payment is not so set apart with respect to the Series A Preferred Stock as
aforesaid, all dividends declared upon shares of the Series A Preferred Stock
and all dividends declared upon any other class or series of stock ranking on a
parity therewith as to dividends and amounts distributable upon liquidation,
dissolution or winding up shall be declared and paid ratably in proportion to
the respective amounts of dividends accumulated and unpaid on the Series A
Preferred Stock and accumulated and unpaid on such parity stock.

(D) On and after the Dividend Priority Date and for so long as any shares
of the Series A Preferred Stock are outstanding, no dividends (other than (i)
the Rights and (ii) dividends or distributions paid in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Junior Stock) shall
be declared or paid or set apart for payment or other distribution declared or
made upon Junior Stock, nor shall any Junior Stock be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition of
shares of Common Stock made for purposes of an employee incentive or benefit
plan of the Corporation or any subsidiary of the Corporation) for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for Junior Stock), unless in
each case (i) the full cumulative accrued and unpaid dividends on all
outstanding shares of the Series A Preferred Stock and any other stock of the
Corporation ranking on a parity with the Series A Preferred Stock as to
dividends and amounts distributable upon liquidation, dissolution or winding up
shall have been paid or set apart for payment for all completed Dividend Periods
with respect to the Series A Preferred Stock and all completed dividend periods
with respect to such parity stock and (ii) sufficient funds shall have been paid
or set apart for the payment of the dividend for the current Dividend Period
with respect to the Series A Preferred Stock and the current dividend period
with respect to such parity stock.

(E) Prior to the Dividend Priority Date, the declaration and payment of
dividends and distributions upon Junior Stock shall not be restricted or limited
by paragraphs (C) and (D) of Section 3.

SECTION 4. REDEMPTION AT THE OPTION OF THE CORPORATION.

(A) At any time or times, and from time to time, the Corporation, at its
option, may redeem the shares of Series A Preferred Stock, in whole or in part,
as set forth herein, subject to Section 5 hereof and the provisions described
below.

(B) In order to exercise its redemption option hereunder, the Corporation
must give notice in writing to each holder of record of the shares to be
redeemed, as provided in paragraph (D) of this Section 4. The date upon which
any such redemption is to be effective (the "Call Date") shall be selected by
the Corporation, shall be specified in the notice of redemption and shall be not
less than 10 days or more than 60 days after the date on which the Corporation
gives the notice of redemption.

(C) Upon redemption of any shares of Series A Preferred Stock by the
Corporation on the Call Date, the Corporation shall pay the holders thereof, for
each share of Series A Preferred Stock so redeemed, in cash, the sum of: (i)
the Redemption Price and (ii) all cumulative accrued and unpaid dividends as
would be payable on such share pursuant to Section 3 hereof were the Call Date a
Dividend Record Date (regardless of whether before or after the Dividend
Priority Date) with respect to such share (such sum referred to as the
"Redemption Amount").

(D) If the Corporation shall redeem shares of Series A Preferred Stock
pursuant to this Section 4, notice in writing of such redemption shall be given

to each holder of record of the shares to be redeemed. Such notice shall be
provided by first class mail, postage prepaid, at such holder's address as the
same appears on the stock records of the Corporation. Neither the failure to
mail any notice required by this paragraph (D), nor any defect therein or in the
mailing thereof, to any particular holder, shall affect the sufficiency of the
notice or the validity of the proceedings for redemption with respect to the
other holders. Any notice which was mailed in the manner herein provided shall
be conclusively presumed to have been duly given on the date mailed whether or
not the holder receives the notice. Each such mailed notice shall state, as
appropriate: (1) the Call Date; (2) the number of shares of Series A Preferred
Stock to be redeemed and, if fewer than all the shares held by such holder are
to be redeemed, the number of such shares to be redeemed from such holder; (3)
the place or places at which certificates for such shares are to be
surrendered; and (4) the Redemption Amount. Notice having been mailed as
aforesaid, from and after the Call Date (unless the Corporation shall fail to
irrevocably deposit or set aside an amount of cash necessary to effect such
redemption), (i) except as otherwise provided herein, dividends on the shares of
the Series A Preferred Stock so called for redemption shall cease to accrue,
(ii) said shares shall no longer be deemed to be outstanding, and (iii) all
rights of the holders thereof as holders of such shares of the Series A
Preferred Stock of the Corporation shall cease (except the rights to receive
cash payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required). The Corporation's obligation
to deposit or set aside cash in accordance with the preceding sentence shall be
deemed fulfilled if, on or before the Call Date, the Corporation shall deposit
with a bank or trust company (which may be an affiliate of the Corporation) that
has an office in the City of Dallas, Texas or New York, New York and that has,
or is an affiliate of a bank or trust company that has, a capital and surplus of
at least $50,000,000, any cash necessary for such redemption, in trust, with
irrevocable instructions that such cash be applied to the redemption of the
shares of Series A Preferred Stock so called for redemption. No interest shall
accrue for the benefit of the holders of the shares of Series A Preferred Stock
to be redeemed on any cash so set aside by the Corporation.

As promptly as practicable after the surrender in accordance with said
notice of the certificates for any such shares so redeemed (properly endorsed or
assigned for transfer, if the Corporation shall so require and the notice shall
so state), such shares shall be exchanged for any cash (without interest
thereon) for which such shares have been redeemed. If fewer than all the
outstanding shares of Series A Preferred Stock are to be redeemed, shares to be
redeemed shall be selected by the Corporation from outstanding shares of Series
A Preferred Stock not previously called for redemption by lot or pro rata (as
nearly as may be) or by any other method determined by the Corporation in its
sole discretion to be equitable. If fewer than all the shares represented by
any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.

SECTION 5. LIMITATIONS ON PAYMENT OF DIVIDENDS AND REDEMPTION.

Notwithstanding anything else herein to the contrary, no dividends shall be
paid upon the Series A Preferred Stock and no redemption of shares of the Series
A Preferred Stock shall be permitted until and unless either: (i) all amounts
due and payable by the Corporation pursuant to that certain Loan Agreement dated
as of July 16, 1993 between the Corporation and United States National Bank of
Oregon ("US Bank"), as amended from time to time (the "Loan Agreement"), shall
have been paid in full and neither US Bank nor any of its assignees under the
Loan Agreement (collectively, the "Bank Lenders") shall have any further
obligation to loan or advance any further amount to or on behalf of the
Corporation pursuant to the Loan Agreement or (ii) the payment of such dividends
or amounts in connection with such redemption shall be permitted by Section
5.04(c) of the Loan Agreement and the Corporation shall not be in violation of
any of the financial covenants set forth in Section 5.03 of the Loan Agreement
after giving effect to such payment.

SECTION 6. LIQUIDATION PREFERENCE.

(A) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Stock, the holders of the
shares of Series A Preferred Stock shall be entitled to receive Fifty Thousand
Dollars ($50,000.00) per share of Series A Preferred Stock plus an amount equal
to all cumulative accrued and unpaid dividends (whether or not earned or
declared) as would be payable on such shares under Section 3 hereof were the
date of final distribution to such holders a Dividend Record Date (regardless of
whether before or after the Dividend Priority Date); but such holders shall not
be entitled to any further payment with respect to such shares. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of the shares
of Series A Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any other shares of
any class or series of stock ranking, as to dividends and liquidation,
dissolution or winding up, on a parity with the Series A Preferred Stock, then
such assets, or the proceeds thereof, shall be distributed among the holders of
shares of Series A Preferred Stock and any such other parity stock ratably in
accordance with the respective amounts that would be payable on such shares of
Series A Preferred Stock and any such other stock if all amounts payable thereon
were paid in full. For the purposes of this Section 6: (i) a consolidation or
merger of the Corporation with one or more entities, or (ii) a sale or transfer
of all or substantially all of the Corporation's assets, shall not be deemed to
be a liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.

(B) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to the Series A Preferred
Stock upon liquidation, dissolution or winding up, upon any liquidation,
dissolution or winding up of the Corporation, after payment shall have been made
in full to the holders of the Series A Preferred Stock, as provided in this
Section 6, any other series or class or classes of Junior Stock shall, subject
to the respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Series A Preferred Stock shall not be entitled to share therein.

SECTION 7. SHARES TO BE RETIRED.

All shares of Series A Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation and thereupon retired (excluding,
until the Corporation elects to retire them, shares which are held as treasury
shares) shall be restored to the status of authorized but unissued shares of
preferred stock, without designation as to series.

SECTION 8. RANKING.

Except as otherwise provided in paragraph (E) of Section 3 hereof with
respect to the declaration and payment of dividends and distributions on the
Junior Stock prior to the Dividend Priority Date, any class or series of stock
of the Corporation shall be deemed to rank:

(A) prior to the Series A Preferred Stock, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled with
respect to shares of such class or series to the receipt of dividends and
of amounts distributable upon liquidation, dissolution or winding up in
preference or priority to the holders of Series A Preferred Stock;

(B) on a parity with the Series A Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution
or winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those
of the Series A Preferred Stock, if the holders of such class of stock or
series and the Series A Preferred Stock shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation, dissolution or

winding up in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference or
priority one over the other; and

(C) junior to the Series A Preferred Stock, as to the payment of
dividends and as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Common Stock or
if the holders of Series A Preferred Stock shall be entitled to receipt of
dividends and of amounts distributable upon liquidation, dissolution or
winding up in preference or priority to the holders of shares of such class
or series.

SECTION 9. VOTING.

Except as provided by the General Corporation Law of the State of Delaware,
the Series A Preferred Stock shall have no voting rights whatsoever.

SECTION 10. RECORD HOLDERS.

The Corporation and the Transfer Agent may deem and treat the record holder
of any shares of Series A Preferred Stock as the true and lawful owner thereof
for all purposes, and neither the Corporation nor the Transfer Agent shall be
affected by any notice to the contrary.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be executed and acknowledged by its duly authorized officer this
14th day of February, 1995.

MEDITE CORPORATION

By:
/s/ Michael A. Snetzer
Michael A. Snetzer
Chairman of the Board and Chief Executive Officer

CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
MEDITE CORPORATION

Medite Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That at a meeting the Board of Directors of said Corporation,
resolutions were duly adopted setting forth a proposed amendment to the Restated
Certificate of Incorporation of said Corporation, declaring said amendment to be
advisable and directing that such amendment be presented to the sole stockholder
of said Corporation for its consideration thereof. The resolution setting forth
the proposed amendment is as follows:

"RESOLVED, that the Restated Certificate of Incorporation of this
Corporation be amended by adding the following paragraph to ARTICLE FOUR of the
Restated Certificate of Incorporation:

"As of the Effective Time (as hereinafter defined) each share of
Common Stock, of the Corporation issued and outstanding immediately
prior to the Effective Time (the "Old Common Stock") shall be
reclassified as and converted into and shall thereafter represent for
all corporate purposes eleven thousand (11,000) validly issued, fully
paid and nonassessable shares of Common Stock without any action on
the part of the holder thereof. As used herein, "Effective Time"
shall mean 11:59 p.m. (Eastern Standard Time) on the date that the
Certificate of Amendment of Restated Certificate of Incorporation of
the Corporation is filed with the Secretary of State of the State of
Delaware to effect the inclusion of this paragraph of ARTICLE FOUR.
Each certificate that theretofore represented a share or shares of Old
Common Stock shall thereafter represent that number of shares of
Common Stock into which the share or shares of Old Common Stock
represented by such certificate shall have been reclassified;
provided, however, that each record holder of a stock certificate or
certificates that represent a share or shares of Old Common Stock
shall receive, upon surrender of such certificate or certificates, a
new certificate evidencing and representing the number of shares of
Common Stock to which such record holder is entitled pursuant to the
foregoing reclassification."

SECOND: That thereafter, by written consent in lieu of a special meeting
of the sole stockholder of the Corporation pursuant to Section 228 of the
General Corporation Law of the State of Delaware, the sole stockholder adopted
and approved such resolution approving the amendment to the Restated Certificate
of Incorporation.

THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
executed and acknowledged this 28th day of February, 1995.

MEDITE CORPORATION

/s/ Michael A. Snetzer
Michael A. Snetzer, President

ATTEST:

/s/ Margaret A. Mann
Margaret A. Mann
Secretary

(Corporate Seal)

BYLAWS

MEDITE CORPORATION
(Formerly Valcor, Inc.)
(Formerly Medford Corporation)

A DELAWARE CORPORATION

As Restated July 14, 1993

ARTICLE I

OFFICES

1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be 1209 Orange Street, City of Wilmington, County of
New Castle, Delaware, 19801. The name of the corporation's registered agent at
such address shall be The Corporation Trust Company.

2. OTHER OFFICES. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the
corporation's board of directors may from time to time determine or the business
of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

1. PLACE AND TIME OF MEETINGS. All meetings of the stockholders
shall be held at such place as shall be determined, from time to time, by the
board of directors, and the place at which such meeting shall be held shall be
stated in the notice and call of the meeting or a duly executed waiver of notice
thereof. The annual meeting of the stockholders of the corporation for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date and at such time and
place as shall be fixed by a majority of the board of directors. Special
meetings of stockholders may be called by the chairman of the board, the
president, the board of directors, or the holders of at least 10% of the shares
of the corporation that would be entitled to vote at such a meeting.

2. BUSINESS TO BE TRANSACTED AT ANNUAL OR SPECIAL MEETINGS. At any
annual or special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the board of directors or by any stockholder of the corporation who is
entitled to vote with respect thereto.

3. NOTICE. Notice of the time and place of the annual meeting of
stockholders shall be given by mailing written or printed notice of the same not
less than ten, nor more than sixty, days prior to the meeting, and notice of the
time and place of special meetings shall be given by written or printed notice
of the same not less than ten, nor more than sixty, days prior to the meeting,
with postage prepaid, to each stockholder of record of the corporation entitled
to vote at such meeting, and addressed to the stockholder's last known post
office address, or to the address appearing on the corporate books of the
corporation.

- 1 -
4. LIST OF STOCKHOLDERS. The officer having charge of the stock
ledger of the corporation shall make, at least ten days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, specifying the address of and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

5. QUORUM. The holders of a majority of the votes entitled to be
cast at any meeting of stockholders, counted as a single class if there be more
than one class of stock entitled to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders except as otherwise provided by statute or by the certificate of
incorporation. If a quorum is not present, the holders of the shares present in
person or represented by proxy at the meeting, and entitled to vote thereat,
shall have the power, by the affirmative vote of the holders of a majority of
such shares, to adjourn the meeting to another time and/or place. Unless the
adjournment is for more than thirty days or unless a new record date is set for
the adjourned meeting, no notice of the adjourned meeting need be given to any
stockholder provided that the time and place of the adjourned meeting were
announced at the meeting at which the adjournment was taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting.

6. PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.

7. INFORMAL ACTION. Any action required to be taken at any annual
or special meeting of stockholders of the corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing. Any
action taken pursuant to such written consent of the stockholders shall have the
same force and effect as if taken by the stockholders at a meeting thereof.

8. APPOINTMENT OF INSPECTORS OF ELECTION. The board of directors
shall, in advance of sending to the stockholders any notice of a meeting of the
holders of any class of shares, appoint one or more inspectors of election
("inspectors") to act at such meeting or any adjournment or postponement thereof
and make a written report thereof. The board of directors may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is so appointed or if no inspector or alternate is
able to act, the chairman of the board shall appoint one or more inspectors to
act at such meeting. Each inspector, before entering upon the discharge of his
or her duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors may be directors, officers or employees of the
corporation.

ARTICLE III

DIRECTORS

1. NUMBER, QUALIFICATIONS AND TERM OF OFFICE. The business and
affairs of the corporation shall be managed by a board of directors consisting
of not less than three, nor more than nine, members. The exact number of
directors within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time (i) by the board of directors pursuant
to a resolution adopted by a majority of the entire board of directors, or
(ii) by the stockholders pursuant to a resolution adopted by a majority of the
holders of shares of the corporation entitled to vote for the election of
directors; provided, however, that if the stockholders have acted to fix the
number of directors, any action by the board of directors to fix another number
shall only become effective on or after the first annual meeting of stockholders
that follows such stockholder action. Each director shall be elected at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III, and each director elected shall hold office until the next annual
meeting of stockholders and until his or her successor is duly elected and
qualified or until his or her earlier death, resignation or removal as
hereinafter provided.

2. NOMINATION OF DIRECTOR CANDIDATES. Nominations of candidates for
election as directors of the corporation may be made at any meeting of the
stockholders called for election of directors. Such nominations may be made by
the board of directors or any stockholder entitled to vote with respect thereto.

3. REMOVALS. Subject to the rights of the holders of Preferred
Stock or any other class of capital stock of the corporation (other than common
stock) or any series of any of the foregoing which is then outstanding, any
director, or the entire board of directors, may be removed from office at any
time by stockholders, with or without cause, by the affirmative vote of the
holders of at least a majority of the voting power of all of the shares of the
corporation entitled to vote for the election of directors.

4. VACANCIES. All vacancies in the board of directors, whether
caused by resignation, death or otherwise, may be filled by a majority of the
remaining directors though less than a quorum; provided, however, that any
vacancy resulting from an increase in the number of directors which is the
result of a resolution adopted by the stockholders of the corporation may be
filled by the stockholders of the corporation in accordance with the Delaware
General Corporation Law, any other applicable provisions of the Amended and
Restated Certificate of Incorporation, and these bylaws. Each director so
chosen shall hold office for the unexpired term of his or her predecessor and
until his or her successor is elected and qualified.

5. ANNUAL MEETING. The annual meeting of the board of directors
shall be held without other notice than this bylaw immediately after the annual
meeting of stockholders at the location of the stockholders' meeting.

6. OTHER MEETINGS AND NOTICE. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board of directors. Special meetings of the board of directors may be
called by or at the request of the chairman of the board or president and shall
be called by the chairman of the board on the written request of a majority of
directors, in each case on at least twenty-four hours notice to each director.

7. QUORUM. A majority of the total number of directors shall be
necessary at all meetings to constitute a quorum for the transaction of
business; but less than a quorum may adjourn the meeting from time to time
without further notice, until a quorum shall be present.

8. COMMITTEES. Standing or temporary committees consisting of one
or more directors of the corporation may be appointed by the board of directors
from time to time, and the board of directors may from time to time invest such
committees with such powers as it may see fit, subject to limitations imposed by
statute and such conditions as may be prescribed by the board of directors. An
executive committee may be appointed by resolution passed by a majority of the
entire board of directors and if appointed it shall have all the powers provided

by statute, except as specially limited by the board of directors. All
committees so appointed shall keep regular minutes of the transactions of their
meetings and shall cause them to be recorded in books kept for that purpose in
the office of the corporation, and shall report the same to the board of
directors at its next meeting. The board of directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.

9. COMMITTEE RULES. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by the resolution of the board of
directors designating such committee, but in all cases the presence of at least
a majority of the members of such committee shall be necessary to constitute a
quorum. In the event that a member and that member's alternate, if alternates
are designated by the board of directors as provided in Section 8 of this
Article III, of such committee is/are absent or disqualified, the member or
members of such committee present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in place of any such absent or disqualified member.

10. TELEPHONIC MEETINGS. Members of the board of directors or any
committee designated by the board of directors may participate in any meeting of
the board of directors or such committee by means of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in such a meeting shall
constitute presence in person at such meeting.

11. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors or any committee thereof at which
action on any corporate matter is taken shall be deemed to have assented to the
action taken unless his dissent shall be entered in the minutes of the meeting
or unless he or she shall file his or her written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.

12. INFORMAL ACTION. Any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting if all members of the board of directors or such committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board of directors or committee.
Action taken pursuant to such written consent of the board of directors or of
any committee thereof shall have the same force and effect as if taken by the
board of directors or the committee, as the case may be, at a meeting thereof.

13. COMPENSATION. The board of directors shall have the authority to
fix the compensation of directors.

ARTICLE IV

OFFICERS

1. NUMBER. The officers of the corporation shall be a chairman of
the board, a vice chairman of the board, a president, one or more vice
presidents, a secretary, a treasurer, and such other officers and assistant
officers as the board of directors may, by resolution, appoint. Two or more
offices may be held by the same person, except that the office of president and
secretary shall not be held by the same person. In its discretion, the board of
directors may choose not to fill any office for any period as it may deem
advisable, except the offices of president and secretary.

2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the board of directors at the annual meeting of the
board of directors. If the election of officers shall not be held at such

meeting, such election shall be held as soon thereafter as may be convenient.
Each officer shall hold office until the next annual meeting of the board of
directors and until his or her successor is duly elected and qualified or until
his or her earlier death, resignation or removal as hereinafter provided.

3. THE CHAIRMAN OF THE BOARD. The chairman of the board shall
preside at all meetings of the stockholders and directors. He or she shall be
the chief executive officer of the corporation and shall have general and active
management of the business of the corporation, shall see that all orders and
resolutions of the board of directors are carried into effect and, in connection
therewith, shall be authorized to delegate to the vice chairman of the board,
president and other officers such of his or her powers and duties as chairman of
the board at such time and in such manner as he or she may deem to be advisable.

The chairman of the board may, from time to time, appoint an attorney-
in-fact or attorneys-in-fact, or an agent or agents, of the corporation in the
name and on behalf of the corporation to cast as a stockholder, in any other
corporation, any of the securities that may be held by the corporation, at
meetings of the holders of such securities of such corporation, or to consent in
writing to any such action by any such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such votes or the
giving of any consent, or may execute or cause to be executed on behalf of the
corporation and under its corporate seal or otherwise such written proxies,
consents, waivers, or other instruments as he or she may deem necessary or
proper, or he or she may attend any meeting of the holders of such securities of
any such other corporation and thereat vote or exercise any or all other powers
of the corporation as the holder of such securities of such corporation.

4. THE VICE CHAIRMAN OF THE BOARD. The vice chairman of the board
shall be the corporation's executive officer next in authority to the chairman
of the board. The vice chairman of the board shall assist the chairman of the
board in the management of the business of the corporation, and, in the absence
or disability of the chairman of the board, shall preside at all meetings of the
stockholders and the board of directors and exercise the other powers and
perform the other duties of the chairman of the board or designate the executive
officers of the corporation by whom such other powers shall be exercised and
other duties performed. The vice chairman of the board shall be an ex officio
member of all standing committees and he or she shall have such other powers and
duties as may from time to time be assigned by the board of directors or by the
chairman of the board. In addition to the foregoing, the vice chairman of the
board shall have such other powers, duties and authority as may be set forth
elsewhere in these bylaws.

5. THE PRESIDENT. The president shall be the corporation's
executive officer next in authority to the vice chairman of the board and shall
be its chief operating officer unless otherwise determined by the board of
directors. The president shall assist the chairman of the board in the
management of the business of the corporation, and, in the absence or disability
of the chairman of the board and the vice chairman of the board, shall preside
at all meetings of the stockholders and the board of directors and exercise the
other powers and perform the other duties of the chairman of the board or
designate the executive officers of the corporation by whom such other powers
shall be exercised and other duties performed. The president shall be an ex
officio member of all standing committees and he or she shall have such other
powers and duties as may from time to time be assigned by the board of directors
or by the chairman of the board. In addition to the foregoing, the president
shall have such other powers, duties, and authority as may be set forth
elsewhere in these bylaws.

6. VICE PRESIDENTS. Each vice president shall have such powers and
discharge such duties as may be assigned from time to time by the chairman of
the board. During the absence or disability of the president, one such vice
president, when designated by the board of directors, shall exercise all the
functions of the president.

7. THE SECRETARY AND ASSISTANT SECRETARY. The secretary or the
chairman of the board shall issue notices for all meetings, shall keep minutes
of all meetings, shall have charge of the seal and the corporate books and shall
make such reports and perform such other duties as are incident to the office,
and perform such other duties designated or properly required by the chairman of
the board. The assistant secretary shall be vested with the same powers and
duties as the secretary, and any act may be done or duty performed by the
assistant secretary with like effect as though done or performed by the
secretary. The assistant secretary shall have such other powers and perform
such other duties as may be assigned by the chairman of the board.

8. THE TREASURER AND ASSISTANT TREASURER. The treasurer shall have
the custody of all moneys and securities of the corporation and shall keep
regular books of account. He or she shall disburse the funds of the corporation
in payment of just demands against the corporation, or as may be ordered by the
chairman of the board or by the board of directors, taking proper vouchers for
such disbursements, and shall render to the board of directors from time to time
as may be required of him or her, an account of all transactions as treasurer
and of the financial condition of the corporation. The treasurer shall perform
all duties incident to the office, and perform such other duties designated or
properly required by the chairman of the board. The assistant treasurer shall
be vested with the same powers and duties as the treasurer, and any act may be
done, or duty performed by the assistant treasurer with like effect as though
done or performed by the treasurer. The assistant treasurer shall have such
other powers and perform such other duties as may be assigned by the chairman of
the board.

9. VACANCIES. Vacancies in any office arising from any cause may be
filled by the directors for the unexpired portion of the term with a majority
vote of the directors then in office. In the case of the absence or inability
to act of any officer of the corporation and of any person herein authorized to
act in his or her place, the board of directors may from time to time delegate
the powers or duties of such officer to any other officer or any director or
other person whom it may select.

10. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers,
assistant officers, and agents, if any, other than those whose duties are
provided for in these bylaws shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board of directors.

ARTICLE V

INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS

1. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interest of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.

2. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.

3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this Article V or
in defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.

4. Any indemnification under Sections 1 and 2 of this Article V
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standards of conduct set forth in Sections 1 and 2 of this
Article V. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, if a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.

5. Expenses (including attorneys' fees) incurred by a director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized in this Article V. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.

6. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article V shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any other bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office.

7. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.

8. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against

him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify him or her against such liability under the provisions of this
Article V.

9. For purposes of this Article V, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article V with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.

10. For purposes of this Article V, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article V.

ARTICLE VI

CERTIFICATES OF STOCK

1. FORM. Certificates of stock shall be issued in numerical order,
and each stockholder shall be entitled to a certificate signed by the chairman
of the board, the president or any vice president and the secretary, any
assistant secretary, the treasurer, or any assistant treasurer, certifying to
the number of shares owned by such stockholder. Where, however, such
certificate is signed by a transfer agent or an assistant transfer agent, or by
a transfer clerk acting on behalf of the corporation, and a registrar, or by an
agent acting in the dual capacity of transfer agent and registrar, the
signatures of any of the above-named officers may be facsimile. In the case of
any officer who has signed, or whose facsimile signature has been used on a
certificate, has ceased to be an officer before the certificate has been
delivered, such certificate may nevertheless be adopted and issued and delivered
by the corporation, as though the officer who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer of the corporation.

2. TRANSFERS. Transfers of stock shall be made only upon the
transfer books of the corporation or respective transfer agents designated to
transfer the several classes of stock, and before a new certificate is issued,
the old certificate shall be surrendered for cancellation.

3. LOST OR DESTROYED CERTIFICATES. The corporation may issue a new
certificate of stock in place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the corporation shall,
except as otherwise determined by the board of directors, the president or any
vice president, require the owner of the lost, stolen or destroyed certificate,
or his or her legal representative, to give the corporation a bond sufficient to
indemnify it against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.

4. FIXING A RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date
which shall be not more than sixty days nor less than ten days prior to the date
of such meeting, nor more than sixty days prior to any other action. If no
record date has been fixed by the board of directors, the record date for
determining the stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. If no record date
has been fixed by the board of directors, the record date for determining the
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the board of directors is required by the
Delaware General Corporation Law, shall be the first date on which a signed
written consent is duly delivered to the corporation. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.

5. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of the other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Delaware.

ARTICLE VII

CERTAIN BUSINESS COMBINATIONS

The provision of Section 203, Subchapter VI, Chapter 1, Title 8 of the
Delaware General Corporation Law shall not apply to the corporation.

This Article VII shall be amended, altered or repealed only as
provided in Section 203, Subchapter VI, Chapter 1, Title 8 of the Delaware
General Corporation Law.

ARTICLE VIII

GENERAL PROVISIONS

1. DIVIDENDS. Dividends upon the capital stock of the corporation,
subject to any applicable provisions of the Amended and Restated Certificate of
Incorporation, may be declared by the board of directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Restated
Certificate of Incorporation. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think in the best interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.

2. MONEYS. The moneys of the corporation shall be deposited in the
name of the corporation in such bank or banks or trust company or trust

companies as the board of directors shall designate, and shall be drawn out only
by check signed by the chairman of the board or the president and countersigned
by the secretary, assistant secretary, treasurer, or the assistant treasurer, or
signed and countersigned by such other persons as shall be designated by
resolution of the board of directors, except that the chairman of the board may
designate one or more officers to transfer by letter or wire funds from an
account of the corporation in one bank to an account of the corporation or a
subsidiary in another bank and the chairman of the board shall have the
authority on bank accounts to designate that one signature of an officer or
other person shall be sufficient.

3. FISCAL YEAR. The fiscal year of the corporation for financial
reporting purposes shall date from January 1 of each year, unless otherwise
provided by the board of directors.

4. SEAL. The corporate seal of the corporation shall consist of two
concentric circles, between which shall be the name of the corporation, and in
the center shall be inscribed the words "Corporate Seal, Delaware."

ARTICLE IX

NOTICES

Whenever the provisions of any statute or these bylaws require notice
to be given to any director, officer or stockholder, such notice may be given
personally or in writing by facsimile, by telegraph or by depositing the same in
the United States mail with postage prepaid addressed to each director, officer
or stockholder at his or her address, as the same appears in the books of the
corporation, and the time when the same shall be personally given, sent by
facsimile or telegraph, or mailed shall be deemed to be the time of the giving
of such notice. Whenever any notice whatever is required to be given under the
provisions of these bylaws, a waiver thereof in writing signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.

(The following text appears as letterhead:

Rogers & Hardin
Attorneys At Law
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 522-4700
TELEX: 54-2335
TELECOPIER: (404) 525-2224)

March 1, 1995

Medite Corporation
Three Lincoln Centre
5430 LBJ Freeway
Suite 1700
Dallas, Texas 75240-2697

Gentlemen:

We have acted as counsel to Medite Corporation (the "Company") in
connection with the registration by the Company on Form S-1 (hereinafter
referred to, together with any amendments thereto, as the "Registration
Statement") under the Securities Act of 1933, as amended, of an aggregate of
6,764,300 shares of common stock, $.01 par value per share, of the Company (the
"Shares"), of which (a) 5,882,000 shares will be purchased by certain
underwriters (the "Underwriters") from the Company and (b) up to 882,300
additional shares will be purchased by the Underwriters from the Company if the
Underwriters exercise the option granted to them by the Company solely to cover
over-allotments, if any.

In connection with this opinion, we have examined such corporate records
and documents and have made such examinations of law as we have deemed
necessary. In rendering this opinion, we have relied, without investigation,
upon various certificates of public officials and of officers and
representatives of the Company. In our examination of documents, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity with the originals of all
documents submitted to us as copies.

Based upon the foregoing and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that the
Shares have been duly authorized and, when sold as contemplated in the
Registration Statement and in the Underwriting Agreement to be entered into
among the Company and Morgan Stanley & Co. Incorporated, Salomon Brothers Inc
and Smith Barney Inc., as representatives of the several Underwriters, will be
legally issued, fully paid and non-assessable.

We consent to the filing of this opinion as an exhibit to the Registration
Statement and as an exhibit to applications to the securities commissioners of
the various states and other jurisdictions of the Untied States for registration
or qualification of the Shares in such states and other jurisdictions. We
further consent to the reference to our firm under the captions "Management,"

"Certain Relationships and Transactions" and "Legal Matters" in the Prospectus
which is a part of the Registration Statement.

Very truly yours,

/s/ Rogers & Hardin

ROGERS & HARDIN

LOAN EXTENSION AGREEMENT

This Loan Extension Agreement is dated as of September 30, 1994, and is among
MEDITE CORPORATION, a Delaware corporation (" Medite"), UNITED STATES NATIONAL
BANK OF OREGON, a national bank ("U. S. Bank"), NATIONSBANK OF NORTH CAROLINA,
N.A. ("NationsBank"), and SOCIETE GENERALE, SOUTHWEST AGENCY ("Soc Gen").

Recitals

A. U. S. Bank provided an Operating Line Facility in the maximum amount of
$15,000,000 and a Term Loan Facility in the maximum amount of $75,000,000
(collectively the "Credit Facilities") to Medite under a Loan Agreement dated
July 16, 1993 (the "Loan Agreement"), with Medite. Repayment of the Term Loan
Facility is secured by a perfected lien in certain Timberland and repayment of
the Operating Line Facility is secured by a perfected security interest in
certain personal property, including domestic inventory, accounts, chattel
paper, instruments, deposit accounts and related documents, all products and
proceeds thereof, and all Books and Records related thereto (the "Collateral").

B. U. S. Bank assigned and delegated to NationsBank and NationsBank purchased an
undivided 25% interest in U. S. Bank's rights and duties under the Credit
Facilities, the Loan Documents, and the Collateral in an Assignment and
Co-Lender Agreement dated as of April 5, 1994 (the "Co-Lender Agreement").

C. U. S. Bank assigned and delegated to Soc Gen and Soc Gen purchased an
undivided 22.22% interest in U. S. Bank's rights and duties under the Credit
Facilities, the Loan Documents, and the Collateral in the Co-Lender Agreement.

D. Medite, U. S. Bank, NationsBank, and Soc Gen desire to extend the Maturity of
the Operating Line Facility from September 30, 1995, to September 30, 1996.

NOW, THEREFORE, for value, it is agreed that:

1. Subject to the caveat contained in section 4.02 of the Loan Agreement, Medite
reaffirms the accuracy and completeness of the representations and warranties
made to Lenders in section 4.01 of the Loan Agreement.

2. The Maturity of the Operating Line (as described in the Loan Agreement and
the Operating Line Notes) is hereby extended from September 30, 1995, to
September 30, 1996.

3. Except as hereby modified, all of the terms and conditions of the Loan
Documents will continue in full force and effect. This Loan Extension Agreement
is one of the Loan Documents.

4. This Loan Extension Agreement may be executed in any number of counterparts,
each of which will be deemed an original and all of which will constitute one
and the same instrument.

UNITED STATES NATIONAL BANK NATIONSBANK OF NORTH
OREGON, as Lender and as Agent CAROLINA, N.A.

By:/s/Janice T. Thede By:/s/Michael O. Lincoln
Janice T. Thede Michael O. Lincoln
Vice President Vice President
National Corporate Banking

MEDITE CORPORATION SOCIETE GENERALE,
SOUTHWEST AGENCY

By:/s/Bobby D. O'Brien By:/s/ Richard M. Lewis
Bobby D.. O'Brien Richard M. Lewis
Treasurer Asst. Vice President

INTERCORPORATE SERVICES AGREEMENT

This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of
January 1, 1994, is made and entered into by and between VALHI, INC. ("Valhi"),
a Delaware corporation, and MEDITE CORPORATION ("Recipient"), a Delaware
corporation, and amends and supersedes that certain Intercorporate Services
Agreement dated as of January 1, 1993, by and between Valhi and the Forest
Products Division of Valcor, Inc., a Delaware corporation.

W I T N E S S E T H:

WHEREAS, employees and agents of Valhi and affiliates of Valhi perform
management, financial and administrative functions for Recipient without direct
compensation from Recipient; and

WHEREAS, Recipient does not separately maintain the full internal
capability to perform all necessary management, financial and administrative
functions which Recipient requires; and

WHEREAS, it is believed that the cost of maintaining the additional
personnel by Recipient necessary to perform the functions provided for by this
Agreement would exceed the fee set forth in Section 3 of this Agreement and that
the terms of this Agreement are no less favorable to Recipient than could
otherwise be obtained from a third party for comparable services; and

WHEREAS, Recipient desires to continue receiving the management, financial
and administrative services presently provided by Valhi and affiliates of Valhi
and Valhi is willing to continue to provide such services under the terms of
this Agreement.

NOW, THEREFORE, for and in consideration of the mutual premises,
representations and covenants herein contained, the parties hereto mutually
agree as follows:

1. Services to be Provided: Valhi agrees to make available to Recipient,
upon request, the following services (the "Services") to be rendered by
the internal staff of Valhi and affiliates of Valhi:

(a) Consultation and assistance in the development and implementation of
Recipient's corporate business strategies, plans and objectives.

(b) Consultation and assistance in management and conduct of corporate
affairs and corporate governance consistent with the Articles of
Incorporation and By-Laws of Recipient.
(c) Consultation and assistance in maintenance of financial records and
controls, including preparation and review of periodic financial
statements and reports to be filed with public and regulatory
entities and those required to be prepared for financial
institutions or pursuant to indentures and credit agreements.

(d) Consultation and assistance in cash management and in arranging
financing necessary to implement the business plans of Recipient.

(e) Consultation and assistance in tax management and administration
including; preparation and filing of tax returns, tax reporting,
examinations by government authorities and tax planning.

(f) Consultation and assistance in performing internal audit and control
functions.

(g) Consultation and assistance with respect to insurance and risk
management.

(h) Consultation and assistance with respect to employee benefit plans
and incentive compensation arrangements.

(i) Such other services as may be requested by Recipient or deemed
necessary and proper from time to time.

2. Miscellaneous Services: It is the intent of the parties hereto that Valhi
provide only the Services requested by Recipient in connection with
routine management, financial and administrative functions related to the
ongoing operations of Recipient and not with respect to special projects,
including corporate investments, acquisitions and divestitures. The
parties hereto contemplate that the Services rendered in connection with
the conduct of Recipient's business will be on a scale compared to that
existing on the date of this Agreement, adjusted for internal corporate
growth or contraction, but not for major corporate acquisitions or
divestitures, and that adjustments may be required to the terms of this
Agreement in the event of such major corporate acquisitions, divestitures
or special projects. Recipient will continue to bear all other costs
required for outside services including, but not limited to, the outside
services of attorneys, auditors, trustees, transfer agents and registrars,
and it is expressly understood that Valhi assumes no liability for any
expenses or services other than those stated in Section 1. In addition to
the fee paid to Valhi by Recipient for the Services provided pursuant to
this Agreement, Recipient will pay to Valhi the amount of out-of-pocket
costs incurred by Valhi in rendering such Services.

3. Fee for Services: Recipient agrees to pay to Valhi $79,000.00 quarterly,
commencing as of January 1, 1994, pursuant to this Agreement.

4. Original Term: Subject to the provisions of Section 5 hereof, the
original term of this Agreement shall be from January 1, 1994 to December
31, 1994.

5. Extensions. This Agreement shall be extended on a quarter- to-quarter
basis after the expiration of its original term unless written
notification is given by Valhi or Recipient thirty (30) days in advance of
the first day of each successive quarter or unless it is superseded by a
subsequent written agreement of the parties hereto.

6. Limitation of Liability. In providing its Services hereunder, Valhi shall
have a duty to act, and to cause its agents to act, in a reasonably
prudent manner, but neither Valhi nor any officer, director, employee or
agent of Valhi or its affiliates shall be liable to Recipient for any
error of judgment or mistake of law or for any loss incurred by Recipient
in connection with the matter to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on
the part of Valhi.

7. Indemnification of Valhi by Recipient. Recipient shall indemnify and hold
harmless Valhi, its affiliates and their respective officers, directors
and employees from and against any and all losses, liabilities, claims,
damages, costs and expenses (including attorneys' fees and other expenses
of litigation) to which such party may become subject to arising out of
the Services provided by Valhi to Recipient hereunder, provided that such
indemnity shall not protect any such party against any liability to which
such person would otherwise be subject to by reason of willful
misfeasance, bad faith or gross negligence.

8. Further Assurances. Each of the parties will make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as the other party may reasonably request and as may reasonably
be required in order to effectuate the purposes of this Agreement and to

carry out the terms hereof.

9. Notices. All communications hereunder shall be in writing and shall be
addressed, if intended for Valhi, to Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240, Attention: President, or such
other address as it shall have furnished to Recipient in writing, and if
intended for Recipient, to P.O. Box 550, 1901 North Pacific Highway,
Medford, Oregon 97501, Attention: President, or such other address as it
shall have furnished to Valhi in writing.

10. Amendment and Modification. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated other than by agreement
in writing signed by the parties hereto.

11. Successor and Assigns: This Agreement shall be binding upon and inure to
the benefit of Valhi and Recipient and their respective successors and
assigns, except that neither party may assign its rights under this
Agreement without the prior written consent of the other party.

12. Governing Law: This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.

VALHI, INC.

By: /s/ Michael A. Snetzer
Michael A. Snetzer
President

MEDITE CORPORATION

By: /s/ Jerry L. Bramwell
Jerry L. Bramwell
President and Chief
Operating Officer

MEDITE CORPORATION
1995 STOCK OPTION-STOCK APPRECIATION RIGHTS PLAN

SECTION 1. TITLE AND PURPOSE. The plan described herein shall be known
as the "Medite Corporation 1995 Stock Option-Stock Appreciation Rights Plan"
(the "Plan"). The purpose of the Plan is to advance the interests of Medite
Corporation ("Medite") and any parent or subsidiary corporation of Medite
(together with Medite referred to collectively as the "Company") by
strengthening the Company's ability to attract and retain individuals of
training, experience and ability in the employ of the Company and to furnish
additional incentive to such key employees to promote the Company's financial
success. The Plan will be effected through the granting of stock options and/or
stock appreciation rights as herein provided, which stock options, it is
intended, may constitute "incentive stock options" ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code") or
stock options which do not constitute ISOs or as other options ("nonqualified
stock options" or "NSOs") (ISOs and NSOs being collectively referred to as
"Stock Options"), as specified by the Committee (as defined in Section 4 below).
Stock Options granted under the Plan may be accompanied by stock appreciation
rights ("Stock Rights") as hereinafter set forth. The Plan may also be effected
through the awarding of restricted stock ("Restricted Stock Awards or
"Restricted Stock") to key employees. As used herein "subsidiary corporation"
and "parent corporation" shall have the same meaning as such terms are defined
in Code Section 424.

SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN. Stock which may be
issued pursuant to Stock Options, Stock Rights and/or Restricted Stock Awards,
granted from time to time under the Plan, shall not exceed in the aggregate
1,000,000 shares of Medite common stock, $.01 par value, (the "Common Stock")
(subject to adjustment as provided in Section 16). The underlying shares
issuable pursuant to grants in any single fiscal year, of Stock Options, Stock
Rights and/or Restricted Stock Awards to a particular individual shall not
exceed 200,000 shares of Common Stock. It is contemplated that the shares to be
issued under the Plan will be approved for listing by each securities exchange
on which shares of Common Stock are then listed.

In the event that any outstanding Stock Option granted under the Plan for
any reason expires or is terminated without having been exercised in full or
surrendered in full in connection with the exercise of Stock Rights, or any
shares awarded as Restricted Stock are forfeited, the shares of Common Stock
allocable to the unexercised portion of such Stock Option or Stock Right or
forfeited portion of such Restricted Stock Award shall (unless the Plan shall
have been terminated) become available for subsequent grants of Stock Options,
Stock Rights and/or Restricted Stock Awards under the Plan.

SECTION 3. ELIGIBILITY. Stock Options, Stock Rights and/or Restricted
Stock Awards may be granted to key employees of the Company (including officers
of the Company who may also be directors of the Company) by the Committee (as
defined in Section 4 below). In determining the employees to whom Stock
Options, Stock Rights and/or Restricted Stock Awards will be granted and the
number of shares to be covered by each, the Committee shall take into account
the duties of the respective employees, their present and potential
contributions to the success of the Company, the anticipated number of years of
effective service remaining, and such other factors as they shall deem relevant
in connection with accomplishing the purposes of the purposes of the Plan.
Neither Stock options, Stock Rights nor Restricted Stock Awards may be granted
to an individual under this Plan at a time when such individual is serving as a
member of the Committee. An employee owning stock possessing more than ten (10)
percent of the total combined voting power or value of all of stock of Medite or
any parent or subsidiary corporation ("Ten Percent Stockholder") is not eligible
to receive an ISO unless the option price is at least 110 percent of the fair
market value of the Common Stock at the time the ISO is granted and the ISO

option by its terms is not exercisable more than five (5) years from the date it
is granted. Restricted Stock Awards and Common Stock which a grantee may
purchase under outstanding Stock Options shall be treated as stock owned by such
grantee for purposes of this calculation.

SECTION 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by the Option Committee (the "Committee") consisting of three or more
individuals appointed by the board of directors of Medite (the "Board of
Directors") or by the Management Development and Compensation Committee of the
Board of Directors. No individual may be appointed to the Committee who is not
a "disinterested person" with respect to the Plan or any other stock option,
stock appreciation, stock bonus, restricted stock or other stock plan of the
Company, so as to disqualify such individual as an administrator of the Plan
under Rule 16(b)-3 of the Securities and Exchange Act of 1934, as amended, or
any rules promulgated in substitution thereof (the "Rule"). One of the members
of the Committee shall be designated as its chairman and the Committee shall
hold its meetings at such times and places as it shall deem advisable. A
majority of the members of the Committee shall constitute a quorum. All action
of the Committee shall be taken by a majority of its members. Any action may be
taken by a written instrument signed by a majority of the members of the
Committee and any action so taken shall be fully effective as if it had been
taken by a vote of a majority of the members of the Committee at a meeting duly
called and held. The Committee may appoint a secretary, keep minutes of its
meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.

SECTION 5. POWERS OF THE COMMITTEE. The Committee shall have full
power and authority to determine the "key employees" of the Company to whom
Stock Options, Stock Rights and/or Restricted Stock Awards shall be granted, the
number of shares to be covered, the term period of each, the time or times at
which Stock Options, Stock Rights or Restricted Stock Awards shall be granted,
provided, with respect to ISOs, the term and the time are permitted by Section
422 of the Code, and to prescribe, amend and rules and regulations relating to
the Plan. Except as otherwise expressly provided in the Plan, the Committee
shall also have the power to determine, at the time of the grant of each Stock
Option, Stock Right or Restricted Stock Award or subsequently if permitted by
the Plan, all terms and conditions governing the rights and obligations of the
key employee with respect to such Stock Option, Stock Right or Restricted Stock
Award, including but not limited to: (a) the exercise price or the method by
which the exercise price shall be determined for the Stock Option or Stock
Right; (b) the length of the period during which the Stock Option or Stock Right
may be exercised and any limitations on the number of shares purchasable with
the Stock Option at any given time during such period; (c) the time at which the
Stock Option or Stock Right may be exercised; (d) any conditions precedent to be
satisfied before the Stock Option or Stock Right may be exercised; (e) the date
on which the restriction period of any Restricted Stock shall lapse; and (f) any
restrictions on resale of any Restricted Stock, any shares purchased upon
exercise of a Stock Option or any shares received upon exercise of a Stock
Right; and (g) the terms of any financing extended to a Stock Option grantee.
The Committee shall also have full and final authority; (i) to prescribe the
form of each agreement evidencing and Stock Options and Stock Rights (the "Stock
Option-Stock Appreciation Rights Agreement") and Restricted Stock Awards (the
"Restricted Stock Agreement"), which agreements need not be identical for each
grantee but shall be consistent with the Plan; (ii) to adopt, amend and rescind
such rules and regulations as may be advisable in the opinion of the Committee
to administer the Plan; (iii) to amend the terms of any Stock Option or Stock
Right in any manner the Committee could have determined at the time the Stock
Option or Stock Right was granted, including the acceleration of the time at
which the Stock Option or Stock Right may be vested or exercised, and to remove
any or all of the restrictions on any Restricted Stock; (iv) to correct any
defect or supply any omission or reconcile any inconsistency in the Plan,
including any correction or amendment which in the judgment of the Committee is
necessary to ensure compliance with the requirements of the rule; and (v) to
construe and interpret the Plan and any Stock Option - Stock Appreciation Rights
Agreements and Restricted Stock Agreements thereunder and any rules and
regulations relating thereto, and to make all other determinations deemed

necessary or advisable for the administration of the Plan. The Committee shall
not possess any authority, the possession or exercise of which would cause an
ISO granted hereunder to be disqualified as such under the Code without the
prior written consent of the grantee.

SECTION 6. LIABILITY OF THE COMMITTEE. In addition to such other
rights of indemnification as they may have as directors of Medite or as members
of the Committee or otherwise, members of the Committee shall be indemnified by
Medite as and to the fullest extent permitted by law, including without
limitation, indemnification against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any Stock
Options, Stock Rights or Restricted Stock Awards granted hereunder, and against
all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by Medite), or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for gross negligence, bad faith
or misconduct in his duties.

SECTION 7. PRICE OF STOCK OPTIONS. The purchase price of the shares of
Common Stick which shall be covered by each NSO shall be established by the
Committee in its sole discretion at the time of granting the NSO. The purchase
price of the shares which shall be covered by each ISO shall be no less than the
fair market value of the Common Stock at the time of granting the ISO. In the
event that any ISO is granted to a Ten Percent Stockholder, the price at which
shares of Common Stock shall be purchasable under such ISO shall not be less
than 110 percent of the fair market value of such shares at the time of the
grant. If the primary market of the Common Stock is a national securities
exchange, the NASDAQ National Market System, or other market quotation system in
which last sale transactions are reported on a contemporaneous basis, such fair
market value shall be deemed to be the last reported sale price of the Common
Stock on such exchange or in such quotation system on the day as of which the
option shall be granted, or, if there shall not have been a sale on such
exchange or reported through such system on such trading day, the closing or
last bid quotation therefor on such exchange or quotation system on such trading
day. If the primary market for the Common Stock is not such an exchange or
quotation market in which transactions are contemporaneously reported, such fair
market value shall be deemed to be the closing or last bid quotation in the
over-the-counter market on such trading day as reported by the National
Association of Securities Dealers through NASDAQ, its automated system for
reporting quotations, or its successor or such other generally accepted source
of publicly reported bid quotations as the Company may reasonably designate on
the day as of which the option shall be granted. In all other cases, such fair
market value shall be determined in good faith by the Committee as of the day
the option is granted. If the price so determined shall include a fraction of a
cent, it shall be rounded up to the next full cent.

SECTION 8. MEDIUM AND TIME OF PAYMENT UPON EXERCISE OF STOCK OPTIONS.
The purchase price payable upon the exercise of a Stock Option shall be payable
at the time of such exercise and may be paid in cash, by check, with shares of
Common Stock, or in any combination thereof. For purposes of making such
payment in shares of Common Stock, such shares be valued at their fair market
value as provided in such Section 7 on the day of exercise of the Stock Option
and shall have been held by the grantee for a period of at least six (6) months.

SECTION 9. LIMITATION ON GRANT OF ISOS. The aggregate fair market
value (determined as of the time the ISO is granted) of the shares with respect
to which ISOs are exercisable for the first time by a grantee during any
calendar year (under all such plans of the Company) shall not exceed $100,000.

SECTION 10. MAXIMUM TERM OF STOCK OPTION OR STOCK RIGHT. The period
during which each Stock Option or Stock Right granted hereunder may be exercised
will be determined by the Committee in each case, provided, however, that no

Stock Option or Stock Right shall by its terms be exercisable after the
expiration of ten (10) years from the date such Stock Option or Stock Right is
granted or with respect to any grantee who is subject to Section 16(b) of the
Securities Exchange Act of 1934 (an "Affected Grantee"), before six (6) months
from the date the Stock Option or Stock Right is granted. In the event that any
ISO is granted to a Ten Percent Stockholder the maximum expiration period
described above shall be reduced to five (5) years from the date the ISO is
granted.

SECTION 11. LIMITATIONS ON RIGHT TO EXERCISE. The exercisability of
Stock Options or Stock Rights granted under the Plan shall be subject to such
restrictions as the Committee may impose, which restrictions may differ with
respect to each grantee and which may be included in a Stock Option - Stock
Appreciation Rights Agreement or which the Committee may otherwise inform the
grantee. Absence or leave approved by the Company, to the extent permitted by
the applicable provisions of the Code, shall not be considered an interruption
of employment for any purpose under the Plan. The exercise of any Stock Option
or Stock Right granted under the Plan will be contingent upon the advice of
counsel to the Company that such shares have been duly registered or are exempt
from registration under the applicable securities laws, and upon receipt by the
Committee of cash, check, Common Stock or combination thereof in payment of the
full purchase price of such shares. Except upon the issuance of shares of
Common Stock upon the exercise of a Stock Option or Stock Right, the holder of a
Stock Option or Stock Right shall not have any of the rights of a stockholder
with respect to the shares covered by the Stock Option or Stock Right.

SECTION 12. AWARD OF STOCK RIGHTS.

(a) Stock Rights may be granted to such key employees holding Stock
Options granted under the Plan as the Committee may select and upon such terms
and conditions as the Committee may prescribe. Stock Rights may be granted in
tandem with Stock Options designated as being related to such Stock Rights or
may be granted on a stand alone basis. Each Stock Right which relates to a
specific Stock Option may be granted concurrently with the Stock Option to which
it relates or at any time prior to the exercise, expiration or termination of
such Stock Option (except as otherwise provided in Section 19 hereof) but, with
respect to an Affected Grantee, no later than six (6) months and one (1) day
prior to the end of the term of such Stock Option. A Stock Right shall entitle
the grantee, subject to the provisions of the Plan and the related Stock
Option - Stock Appreciation Rights Agreement, to receive from the Company an
amount equal to the excess of the fair market value on the exercise date, of the
number of shares of Common Stock for which the Stock Right is exercised over the
purchase price for such shares of Common Stock under the related Stock Option or
as stated in the separate Stock Right Award, as the case may be. For this
purpose, such fair market value shall be determined as provided in Section 7 on
the close of business on the day of exercise.

(b) A Stock Right shall be exercisable on such dates or during such
periods as may be determined by the Committee from time to time, except that in
no event shall such right granted in tandem with a related Stock Option be
exercisable when the related Stock Option is not eligible to be exercised or
when the fair market value per share of the Common Stock on the exercise date
does not exceed the exercise price per share of the related Stock Option.

(c) A Stock Right granted in tandem with a related Stock Option may be
exercised only upon surrender of the related Stock Option by the grantee which
shall be terminated to the extent of the number of shares for which the Stock
Right is exercised. Similarly, a Stock Option granted in tandem with a related
Stock Right may be exercised only upon surrender of the related Stock Right by
the grantee which shall be terminated to the extent of the number of shares for
which the Stock Option is exercised. Shares covered by such a terminated Stock
Option or Stock Right or portion thereof granted under the Plan shall not be
available for further grants under the Plan.

(d) The amount payable by the Company upon exercise of a Stock Right may
be paid in cash, in shares of Common Stock (valued at their fair market value on

the exercise date determined as provided in Section 7) or in any combination
thereof as the Committee shall determine from time to time. No fractional
shares shall be issued and the grantee shall receive cash in lieu thereof.

(e) The Committee may impose any other conditions upon the exercise of a
Stock Right, which conditions may include a condition that the Stock Right may
be exercised only in accordance with rules and regulations adopted by the
Committee from time to time. Such rules and regulations may govern the right to
exercise Stock Rights granted prior to the adoption or amendment of such rules
and regulations as well as Stock Rights granted thereafter.

(f) The Committee may at any time amend, terminate or suspend any Stock
Right theretofore granted under the Plan, provided that the term of any Stock
Right after any amendment shall conform to the provisions of the Plan. A Stock
Right shall terminate upon the termination or expiration of the related Stock
Option.

(g) Notwithstanding the provisions of this Section 12, a Stock Right may
not be exercised until the expiration of six (6) months from the date of grant
of such Stock Right unless, prior to the expiration of such six (6) month
period, the holder of such Stock Right ceases to be an employee of the Company
by reason of such holder's retirement, death or disability.

(h) The Company intends that this Section 12 shall comply with the
requirements of the Rule during the term of the Plan. Should any provision of
this Section 12 not be necessary to comply with the requirements of the Rule or
should any additional provisions be necessary for this Section 12 to comply with
the requirements of the Rule, the Board of Directors may amend the Plan to add
or to modify the provisions of the Plan accordingly.

SECTION 13. AWARD OF RESTRICTED STOCK.

(a) The Committee shall have the authority (i) to grant Restricted Stock
Awards, (ii) to issue or transfer Restricted Stock and (iii) to establish terms,
conditions and restrictions in connection with the issuance or transfer of
Restricted Stock.

(b) The grantee of a Restricted Stock Award shall execute and deliver to
the Committee a Restricted Stock Agreement satisfactory to the Committee with
respect to the Restricted Stock covered by such agreement as well as any other
documents that the Committee may require in connection with the Restricted Stock
Award. The Committee shall then cause stock certificates registered in the name
of the grantee to be issued and deposited, together with the related Restricted
Stock Agreement, with an escrow agent to be designated by the Committee, which
may be the Company.

(c) Restricted Stock Awards shall be subject to such restrictions as the
Committee may impose, which may differ with respect to each grantee and which
restrictions may be included in a Restricted Stock Agreement or which the
Committee may otherwise inform the grantee.

(d) The restriction period of Restricted Stock shall commence on the date
of grant and, unless otherwise established by the Committee in the Restricted
Stock Agreement setting forth the terms of the Restricted Stock Award, shall
expire five (5) years from the date of grant. Unless permitted by the Rule, no
Restricted Stock award to an Affected Grantee shall have a restriction period
shorter than six (6) months from the date of grant of such award.

(e) Subject to Section 21 and any requirement imposed by the Committee in
a Restricted Stock Agreement, or otherwise, at the expiration of a restriction
period and at the written request of a grantee, a stock certificate evidencing
the Restricted Stock with respect to which a restriction period has expired (to
the nearest full share) shall be delivered without charge to the grantee, or his
personal representative, free of all restrictions under the Plan.

SECTION 14. LIMITATIONS ON TRANSFER. No Stock Option, Stock Right or
Restricted Stock Award granted under the Plan shall be transferable otherwise
than by will or the laws of descent and distribution, and no Stock Option or
Stock Right granted under the Plan may be exercised by any person other than the
person to whom the Stock Option or Stock Right shall initially have been granted
during the lifetime of such original grantee (other than the person's guardian
or legal representative). After the death of such original grantee, the
"holder" or any Stock Option, Stock Right or Restricted Stock Award granted
under the Plan shall be deemed to be the person to whom the original grantee's
rights shall pas under the original grantee's will or under the laws of descent
and distribution.

SECTION 15. NO RIGHT TO EMPLOYMENT CONFERRED. Nothing in the Plan or in
any Stock Option-Stock Appreciation Rights Agreement or Restricted Stock
Agreement shall confer upon any employee any right to continue in the employ of
the Company or interfere in any way with the right of the Company to terminate
such employee's employment at any time.

SECTION 16. ADJUSTMENTS.

(a) In the event the outstanding shares of Common Stock, as constituted
from time to time, shall be changed as a result of a stock dividend or stock
split or other change in the capitalization of the Company or a combination,
merger, or reorganization of the Company into or with any other corporation, or
any other transaction with similar effects, there then shall be substituted for
each share of Common Stock theretofore subject, or which may become subject, to
issuance or transfer under the Plan, the number and kind of shares of Common
Stock or other securities or other property as are equitably determined by the
Committee. In the event of an equity restructuring transaction such as a spin-
off or recapitalization through an extraordinary, special and nonrecurring
dividend, or other distribution (including any distribution of shares of stock
of any subsidiary or other property to holders of shares of Common Stock) or
transactions with similar effects, the Committee shall make such adjustments to
the number of shares issuable pursuant to, and/or exercise price per share of,
any Stock Option or Stock Right theretofore granted and whether or not then
exercisable as are equitably determined by the Committee. Notwithstanding any
other provision contained herein, the Committee shall make such other equitable
adjustments to any outstanding Stock Options, Stock Rights and/or Restricted
Stock Awards granted pursuant to the Plan as the Committee determines
appropriate. Each adjustment made pursuant to this Section 16 shall be made
with a view toward preserving the value the affected Stock Option, Stock Right
or Restricted Stock Award had prior to the event or transaction giving cause to
such adjustment.

(b) In the event of any change in applicable laws or any change in
circumstances which results in or would result in any dilution of the rights
granted under the Plan, or which otherwise warrants equitable adjustment because
it interferes with the intended operation of the Plan, then, if the Committee
shall, in its sole discretion, determine that such change equitably requires an
adjustment in the number or kind of shares of stock or other securities or other
property theretofore subject, or which may become subject, to issuance or
transfer under the Plan or in the terms and conditions of any outstanding Stock
Option, Stock Right or Restricted Stock Award, such adjustment shall be made in
accordance with such determination. Any adjustment of an ISO under this
paragraph shall be made in accordance with such determination. Any adjustment
of an ISO under this paragraph shall be made only to the extent it does not
constitute a "modification" within the meaning of Section 425(h)(3) of the Code.
The Committee shall give notice to each grantee of any adjustment made under the
Plan and, upon such notice, such adjustment shall be effective and binding for
all purposes of the Plan.

SECTION 17. STOCKHOLDER APPROVAL. The Plan is expressly made subject to
the approval by the holders of a majority of the issued and outstanding shares
of Medite entitled to vote at a meeting of stockholders of Medite (the
"Stockholders") duly called in accordance with applicable law. If the Plan is
not so approved within one year after its adoption by the Board of Directors,

the Plan shall not come into effect, and any Stock Option, Stock Right or
Restricted Stock Award granted pursuant hereto shall terminate and end. No
option or right granted hereunder shall be exercisable nor restricted stock vest
unless and until such Stockholder approval is obtained and unless and until such
further Stockholder approval required pursuant to Section 19 is obtained.

SECTION 18. TIME OF GRANTING STOCK OPTIONS, STOCK RIGHTS OR RESTRICTED
STOCK AWARDS. Neither anything contained in the Plan nor in any
resolutions adopted or to be adopted by the Board of Directors or the
Stockholders nor any action taken by the Committee shall constitute the granting
of any Stock Option, Stock Right or Restricted Stock Award. The granting of a
Stock Option, Stock Right or Restricted Stock Award shall take place only when a
written Stock Option - Stock Appreciation Rights Agreement or Restricted Stock
Agreement shall have been duly executed and delivered by the Company and the
grantee.

SECTION 19. LISTING AND REGISTRATION OF SHARES OF COMMON STOCK. The
Committee, in its discretion, may postpone the issuance and/or delivery of
shares of Common Stock issuable upon any exercise of a Stock Option or a Stock
Right or upon the grant of a Restricted Stock award until completion of any
stock exchange listing, or registration, or other qualification or exemption of
such shares under any state and/or federal law, rule or regulation as the
Committee may consider appropriate, and may require any grantee to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in compliance with
applicable laws, rules and regulations.

SECTION 20. TERMINATION AND AMENDMENT OF THE PLAN. The Plan shall
terminate on the earlier of (i) ten (10) years from the date the Plan is adopted
by the Board of Directors or by the Stockholders, whichever is earlier, or (ii)
such time as a new stock option-stock appreciation rights and restricted stock
plan is adopted by the Board of Directors in replacement of the Plan. No Stock
Option, Stock Right or Restricted Stock Award shall be granted under the Plan
after its termination date, but the termination of the Plan shall not adversely
affect any Stock Option, Stock Right or Restricted Stock Award theretofore
granted under the Plan. Subject to the foregoing, the Plan may at any time or
from time to time be terminated, modified or amended by (1) the Board of
Directors and (2), if and to the extent that Stockholder approval is required
under Section 422 of the Code, under the Rule, or by any securities exchange on
which the shares of Common Stock are then listed, or if directed by the Board of
Directors, by the Stockholders.

SECTION 21. PLAN PROVISIONS CONTROL TERMS OF AGREEMENT. The terms of
the Plan shall govern all Stock Options, Stock Rights or Restricted Stock Awards
granted under the Plan and in no event shall the Committee have the power to
grant any Stock Option, Stock Right or Restricted Stock Award under the Plan
which is contrary to any of the provisions of the Plan.

SECTION 22. MODIFICATION OF TERMS. Any provision contained in this Plan
to the contrary notwithstanding, on and after the date that any Stock Option,
Stock Right or Restricted Stock award is granted hereunder, the Committee shall
have the authority to modify the terms and provisions of any such Stock Option,
Stock Right or Restricted Stock award including, but not limited to,
modifications that cause a previously granted Stock Option to cease, upon the
modification date, to qualify as an ISO; provided, however, that no such
modification shall (i) materially increase the benefits to participants as
provided for under this Plan (as such limitation is interpreted under Rule
16b-3, other applicable law or stock exchange regulations), or (ii) materially
decrease the benefits to a specific participant in this Plan without the prior
written consent of such participant. For purposes of clause (ii) of the
preceding sentence, any modification that would convert a previously granted ISO
into an NSO will be treated as causing a material decrease in the benefits
available to the holder of such Stock Option.

SECTION 23. AGREEMENT BY GRANTEE REGARDING WITHHOLDING TAXES. If the
Committee shall so require, as a condition of exercise of each Stock Option or

Stock Right and vesting of each Restricted Stock Award, each grantee shall agree
that:

(a) no later than the date of exercise of any Stock Option or Stock Right
granted hereunder, the grantee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any Federal, state or local
taxes of any kind required by law to be withheld upon the exercise of such Stock
Option or Stock Right;

(b) no later than the date of expiration of a restrictive period of any
Restricted Stock Award granted hereunder, the grantee will pay to the Company or
make arrangements satisfactory to the Committee regarding payment of any
Federal, state or local taxes of any kind required by law to be withheld upon
the vesting of such Restricted Stock; and

(c) the Company shall, to the extent permitted or required by law, have
the right to deduct from any payment of any kind otherwise due to the grantee,
Federal, state or local taxes of any kind required by law to be withheld upon
the exercise of such Stock Option or Stock Right or vesting of such Restricted
Stock.

SECTION 24. RIGHTS AS A STOCKHOLDER.

(a) A grantee of a Stock Option or a Stock Right or a transferee of such
grantee pursuant to Section 14 hereof shall have no rights as a stockholder with
respect to any shares of Common Stock related thereto until the issuance of a
stock certificate for such shares following the exercise of such Stock Option or
Stock Right. Except as otherwise provided for in Sections 16 and 17 hereof, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities, or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued.

(b) A grantee of Restricted Stock or a transferee of such grantee pursuant
to Section 14 hereof shall, upon the date certificates for the Restricted Stock
are issued, have all of the rights of a stockholder including the right to vote
such shares and to receive dividends, subject however to the restrictions
established pursuant to Section 13 hereof.

SECTION 25. COMPLIANCE WITH RULE 16B-3. The Company intends that this
Plan shall comply with the requirements of Rule 16b-3 during the term of this
Plan. Should any provision of this Plan not be necessary to comply with the
requirements of the Rule or should any additional provisions be necessary for
this Plan to comply with the requirements of Rule 16b-3, the Board may amend the
Plan to add or to modify the provisions of this Plan accordingly.

SECTION 26. PLAN FINANCING. Medite may extend and maintain, or arrange
for the extension and maintenance of, financing to any grantee (including a
grantee who is a director of Medite) to purchase shares pursuant to exercise of
a Stock Option granted hereunder on such terms as may be approved by the
Committee in its sole discretion. In considering the terms for extension or
maintenance of credit by Medite, the Committee shall, among other factors,
consider the cost to Medite of any financing extended by Medite.

SECTION 27. FUNDING. Except as provided under Section 13(b) hereof, no
provision of the Plan shall require or permit the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes.

SECTION 28. ERISA. The Plan is not an employee benefit plan which is
subject to the provisions of the Employee Retirement Income Security Act of
1974, and the provisions of Code Section 401(a) are not applicable to the Plan.

SECTION 29. EFFECTIVE DATE OF PLAN. The Plan is effective as of the
date of the consummation of Medite's initial public offering of its Common
Stock, subject to approval by the Stockholders pursuant to the provisions of
Section 17 hereof.

W I T N E S S E T H:

Pursuant to the authority granted to the undersigned by the Board of
Directors of Medite Corporation, the Medite Corporation 1995 Stock Option -
Stock Appreciation Rights Plan attached hereto be, and it hereby is, adopted as
of February 14, 1995.

Dated as of this 14th day of February, 1995.

MEDITE CORPORATION

By: /s/ Michael A. Snetzer
Michael A. Snetzer, Chairman of the
Board and Chief Executive Officer

February 9, 1995

Ms. Janice T. Thede Mr. Michael Lincoln
Vice President Senior Vice President
US Bank NationsBank of North Carolina, N.A.
P. O. Box 4412 Forest Products Group
Portland, OR 97208 233 South Wacker Drive, Suite 2800
Chicago, IL 60606
Mr. Richard M. Lewis
Vice President
Societe Generale, Southwest Agency
2001 Ross Avenue, Suite 4800
Dallas, TX 75201

Ladies and Gentlemen:

Medite Corporation ("Medite") and United States National Bank of Oregon, a
national bank (U. S. Bank), are parties to a Loan Agreement dated as of July 16,
1993 (the "Original Loan Agreement"). This Original Loan Agreement has been
amended by (i) an Assignment and Co-Lender Agreement dated as of April 5, 1994
providing for the participation of NationsBank of North Carolina, N.A. and
Societe Generale, Southwest Agency (collectively with U.S. Bank, the "Banks");
and, (ii) an Extension Agreement dated as of September 30, 1994. The Original
Loan Agreement together with the Assignment and Co-Lender Agreement and, the
Extension Agreement are hereinafter referred to as the Loan Agreement.

Medite desires to declare and pay, effective as of February 1, 1995, to
Valcor, Inc., the holder of 100% of Medite's common stock ("Valcor"), a dividend
in the form of 1,000 shares of Medite Corporation Series A, 12% Cumulative
Preferred Stock having a per share redemption value of $50,000 (the "Shares"),
such action hereinafter referred to as the Distribution. The form of the
Certificate of Designation of the Shares to be distributed is attached hereto.

Medite requests (i) the Banks consent to payment of the Distribution and
(ii) the Banks waiver, until January 2, 1996, of any defaults under the Loan
Agreement arising as a result of the Distribution (the "Consent and Waiver").
In consideration for the Consent and Waiver, Medite agrees that it will make no
payments (redemption, dividends or otherwise) to Valcor with respect to the
Shares without the prior written authorization of the Banks.

Please acknowledge your agreement as of February 1,1995, to the Consent and
Waiver contained herein by signing in the space provided below.

Very truly yours,

MEDITE CORPORATION

Bobby D. O'Brien
Vice President - Finance

UNITED STATES NATIONAL BANK NATIONSBANK OF NORTH
OREGON, as Lender and as Agent NORTH CAROLINA, NA.

By:___________________________ By:____________________________

Title:_________________________ Title:__________________________

SOCIETE GENERALE,
SOUTHWEST AGENCY

By:____________________________

Title:___________________________

EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT

Jurisdiction of % of Voting
Incorporation or Securities
Organization Held

Medite International Holdings Republic of Ireland 100
Medite of Europe Limited Republic of Ireland 100

Medite Timber Acquisitions Corporation Delaware 100

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
dated January 27, 1995 (except as to Note 13 of the financial statements, as to
which the date is February 28, 1995), included in or made part of this
registration statement and to all references to our firm included in this
registration statement.

ARTHUR ANDERSEN LLP

Portland, Oregon
March 1, 1995

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEDITE
CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 13,633
<SECURITIES> 0
<RECEIVABLES> 17,898
<ALLOWANCES> 482
<INVENTORY> 21,186
<CURRENT-ASSETS> 57,523
<PP&E> 152,193
<DEPRECIATION> 63,404
<TOTAL-ASSETS> 208,080
<CURRENT-LIABILITIES> 31,469
<BONDS> 91,691
<COMMON> 121
0
0
<OTHER-SE> 54,819
<TOTAL-LIABILITY-AND-EQUITY> 208,080
<SALES> 189,856
<TOTAL-REVENUES> 189,856
<CGS> 144,740
<TOTAL-COSTS> 144,740
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 166
<INTEREST-EXPENSE> 6,584
<INCOME-PRETAX> 29,528
<INCOME-TAX> 11,181
<INCOME-CONTINUING> 18,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,347
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.52

</TABLE>