<PAGE>

                           STOCK PURCHASE AGREEMENT
                                       
                                       
                                       
                                 BY AND AMONG
                                       
                                       
                                       
                            BURKE INDUSTRIES, INC.,
                                   ("BUYER")
                                       
                                       
                                       
                         MERCER PRODUCTS COMPANY, INC.
                                  ("MERCER")
                                       
                                       
                                       
                                      AND
                                       
                                       
                                       
                      SOVEREIGN SPECIALTY CHEMICALS, INC.
                                  ("SELLER")
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                           DATED AS OF MARCH 5, 1998
                                       
                                       
<PAGE>                                 

<TABLE>
<CAPTION>
                               TABLE OF CONTENTS
<S>                                                                        <C>
                                                                           PAGE
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1
2. Purchase and Sale of the Mercer Shares  . . . . . . . . . . . . . .        6
     (a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . .        6
     (b) Purchase Price  . . . . . . . . . . . . . . . . . . . . . . .        6
     (c) Working Capital Adjustment. . . . . . . . . . . . . . . . . .        6
     (d) The Closing . . . . . . . . . . . . . . . . . . . . . . . . .        6
     (e) Deliveries at the Closing . . . . . . . . . . . . . . . . . .        6
     (f) Closing Review. . . . . . . . . . . . . . . . . . . . . . . .        7
     (g) Post-Closing Purchase Price Adjustment. . . . . . . . . . . .        7
3. Representations and Warranties Concerning the Transaction . . . . .        8
     (a) Representations and Warranties of Seller. . . . . . . . . . .        8
          (i) Organization of the Seller . . . . . . . . . . . . . . .        8
          (ii) Authorization of Transaction. . . . . . . . . . . . . .        8
          (iii) Noncontravention . . . . . . . . . . . . . . . . . . .        8
          (iv) Broker's Fees . . . . . . . . . . . . . . . . . . . . .        8
          (v) Mercer Shares. . . . . . . . . . . . . . . . . . . . . .        9
     (b) Representations and Warranties of the Buyer . . . . . . . . .        9
          (i) Organization of the Buyer. . . . . . . . . . . . . . . .        9
          (ii) Authorization of Transaction. . . . . . . . . . . . . .        9
          (iii) Noncontravention . . . . . . . . . . . . . . . . . . .        9
          (iv) Brokers' Fees . . . . . . . . . . . . . . . . . . . . .       10
          (v) Investment . . . . . . . . . . . . . . . . . . . . . . .       10
4. Representations and Warranties Concerning Mercer. . . . . . . . . .       10
     (a) Organization, Qualification and Corporate Power . . . . . . .       10
     (b) Capitalization  . . . . . . . . . . . . . . . . . . . . . . .       10
     (c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . .       11
     (d) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . .       11
     (e) Financial Statements. . . . . . . . . . . . . . . . . . . . .       11
     (f) Events Subsequent to the Most Recent Financial Statements . .       11
     (g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . .       13
     (h) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . .       13
     (i) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . .       14
     (j) Real Property . . . . . . . . . . . . . . . . . . . . . . . .       15
     (k) Intellectual Property . . . . . . . . . . . . . . . . . . . .       15
     (l) Warranties. . . . . . . . . . . . . . . . . . . . . . . . . .       16
     (m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . .       17
     (n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .       17
     (o) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .       18

                                       i

<PAGE>

                                                                           PAGE
     (p) Employees . . . . . . . . . . . . . . . . . . . . . . . . . .       18
     (q) Employee Benefits . . . . . . . . . . . . . . . . . . . . . .       18
     (r) Environment, Health and Safety. . . . . . . . . . . . . . . .       19
     (s) Legal Compliance. . . . . . . . . . . . . . . . . . . . . . .       20
     (t) Certain Business Relationships with Mercer. . . . . . . . . .       21
     (u) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . .       21
     (v) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . .       21
     (w) Accounts Receivable . . . . . . . . . . . . . . . . . . . . .       21
     (x) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . .       21
     (y) Customers and Suppliers . . . . . . . . . . . . . . . . . . .       21
     (z) Certain Business Practices. . . . . . . . . . . . . . . . . .       22
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . .       22
     (a) General . . . . . . . . . . . . . . . . . . . . . . . . . . .       22
     (b) Notices and Consents. . . . . . . . . . . . . . . . . . . . .       22
     (c) Operation of Business . . . . . . . . . . . . . . . . . . . .       22
     (d) Preservation of Business. . . . . . . . . . . . . . . . . . .       23
     (e) Access. . . . . . . . . . . . . . . . . . . . . . . . . . . .       23
     (f) Notice of Developments. . . . . . . . . . . . . . . . . . . .       23
     (g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . .       23
     (h) HSR Act Filing. . . . . . . . . . . . . . . . . . . . . . . .       23
     (i) Plant Closing Notification. . . . . . . . . . . . . . . . . .       24
     (j) Intercompany Items. . . . . . . . . . . . . . . . . . . . . .       24
     (k) 1996 Audit. . . . . . . . . . . . . . . . . . . . . . . . . .       24
     (l) Transitional Services . . . . . . . . . . . . . . . . . . . .       24
6. Additional Covenants. . . . . . . . . . . . . . . . . . . . . . . .       25
     (a) General . . . . . . . . . . . . . . . . . . . . . . . . . . .       25
     (b) Litigation Support. . . . . . . . . . . . . . . . . . . . . .       25
     (c) Transition. . . . . . . . . . . . . . . . . . . . . . . . . .       25
     (d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . .       25
     (e) Additional Tax Matters. . . . . . . . . . . . . . . . . . . .       26
     (f) Covenant Not to Compete . . . . . . . . . . . . . . . . . . .       28
     (g) Employee Benefit Plans. . . . . . . . . . . . . . . . . . . .       28
          (i) Pension Benefits Provided by the Seller. . . . . . . . .       28
          (ii) Welfare Benefits Provided by the Seller . . . . . . . .       29
          (iii) Back Service Credit. . . . . . . . . . . . . . . . . .       29
     (h) Disability Workers' Compensation. . . . . . . . . . . . . . .       29
     (i) Severance Policy. . . . . . . . . . . . . . . . . . . . . . .       29
     (j) Collective Bargaining Agreement . . . . . . . . . . . . . . .       30
7. Conditions to Obligations to Closing. . . . . . . . . . . . . . . .       30
     (a) Conditions to Obligation of the Buyer . . . . . . . . . . . .       30
     (b) Conditions to Obligations of the Seller . . . . . . . . . . .       31
8. Remedies for Breach of This Agreement . . . . . . . . . . . . . . .       32

                                      ii

<PAGE>

                                                                           PAGE
     (a) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . .       32
     (b) Indemnification Provisions for Benefit of the Buyer . . . . .       33
     (c) Indemnification Provisions for Benefit of the Seller. . . . .       34
     (d) Matters Involving Third Parties . . . . . . . . . . . . . . .       35
     (e) Determination of Loss . . . . . . . . . . . . . . . . . . . .       36
     (f) Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . .       36
     (g) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . .       36
     (h) Reservation and Nonwaiver of Rights and Remedies. . . . . . .       36
     (i) Arbitration with Respect to Certain Indemnification Matters .       36
     (j) Adjustment to Purchase Price. . . . . . . . . . . . . . . . .       37
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . .       37
     (a) Termination of Agreement. . . . . . . . . . . . . . . . . . .       37
     (b) Effect of Termination . . . . . . . . . . . . . . . . . . . .       38
10. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . .       38
     (a) Press Releases and Announcements. . . . . . . . . . . . . . .       38
     (b) No Third-Party Beneficiaries. . . . . . . . . . . . . . . . .       38
     (c) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . .       38
     (d) Succession and Assignment . . . . . . . . . . . . . . . . . .       38
     (e) Facsimile/Counterparts. . . . . . . . . . . . . . . . . . . .       38
     (f) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . .       39
     (g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .       39
     (h) Submission to Jurisdiction. . . . . . . . . . . . . . . . . .       40
     (i) Amendments and Waivers. . . . . . . . . . . . . . . . . . . .       41
     (j) Severability. . . . . . . . . . . . . . . . . . . . . . . . .       41
     (k) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .       41
     (1) Construction. . . . . . . . . . . . . . . . . . . . . . . . .       41
     (m) Incorporation of Exhibits, Annexes and Schedules. . . . . . .       42
     (n) Specific Performance. . . . . . . . . . . . . . . . . . . . .       42
</TABLE>
                                      iii

<PAGE>
                                       
                    LIST OF EXHIBITS, ANNEXES AND SCHEDULES

EXHIBITS

Exhibit A      Financial Statements
Exhibit B      Form of Opinion of Buyer's Legal Counsel
Exhibit C      Form of Opinion of Seller's Legal Counsel

ANNEXES

Annex I        List of Stay-on Bonuses


SCHEDULES

Disclosure Schedule



                                       iv

<PAGE>
                           STOCK PURCHASE AGREEMENT
                                       
     
     This STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of the
5th day of March, 1998, by and among BURKE INDUSTRIES, INC., a California
corporation (the "BUYER"), MERCER PRODUCTS COMPANY,  INC., a New Jersey
corporation ("MERCER"), and SOVEREIGN SPECIALTY CHEMICALS, INC., a Delaware
corporation (the "SELLER").  The Buyer and the Seller are referred to herein
individually as a "PARTY" and collectively as the "PARTIES."
                                       
                                   RECITALS
     
     WHEREAS, the Seller owns all of the outstanding capital stock of Mercer;
and,
     
     WHEREAS, this Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of Mercer.
                                       
                                   AGREEMENT
     
     Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
     
     1.   DEFINITIONS.
     
     "ADVERSE CONSEQUENCES" means all actual damages from complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions, damages, dues, penalties, fines,
costs, amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses and fees, including all reasonable attorneys' fees and court
costs.
     
     "AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
     
     "BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction that forms the basis for any specified
consequence.
     
     "BUSINESS" means the business of manufacturing extruded PVC into flooring
profiles sold to the construction industry.
     
     "BUSINESS DAY" means any day except a Saturday, Sunday or other day in
which commercial banks in the State of New York are authorized by law to close.
     
     "BUYER" has the meaning set forth in the preface above.
     
     "CLOSING" has the meaning set forth in SECTION 2(d) below.
     
<PAGE>

     "CLOSING DATE" has the meaning set forth in SECTION 2(d) below.
     
     "CODE" means the Internal Revenue Code of 1986, as amended.
     
     "CONFIDENTIAL INFORMATION" means all confidential information and trade
secrets of Mercer including, without limitation, the identity, lists or
descriptions of any customers, referral sources or organizations, Financial
Statements, cost reports or other Financial Information, contract proposals, or
bidding information, business plans and training and operations methods and
manuals, personnel records, fee structure and management systems, policies or
procedures, including related forms and manuals.
     
     "CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code Sec.
1563.
     
     "CURRENT EMPLOYEES" has the meaning set forth in SECTION 4(p)(i) below.
     
     "DISCLOSURE SCHEDULE" has the meaning set forth in SECTION 4 below.
     
     "DOJ" means the Antitrust Division of the United States Department of
Justice or any successor Governmental Body.
     
     "EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan) or (d) Employee Welfare Benefit Plan or Material fringe
benefit plan or program.
     
     "EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
     
     "EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
     
     "EQUITABLE EXCEPTIONS" has the meaning set forth in SECTION 3(a)(i) below.
     
     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
     
     "EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
     
     "FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
     
     "FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4(e) below.
     
     "FTC" means the United States Federal Trade Commission or any successor
Governmental Body.
     
     "GAAP" means generally accepted accounting principles as in effect from
time to time.

                                      2

<PAGE>
     
     "GOVERNMENTAL BODY" means any federal, state, county, city, town, village,
municipal or other governmental department, commission, board, bureau, agency,
authority, court or related judicial authority or instrumentality of any of the
foregoing.
     
     "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
     
     "INDEMNIFIED PARTY" has the meaning set forth in SECTION 8(d) below.
     
     "INDEMNIFYING PARTY" has the meaning set forth in SECTION 8(d) below.
     
     "INDEPENDENT ACCOUNTANTS" has the meaning set forth in Section 2(f) below.
     
     "INTELLECTUAL PROPERTY" means all (a) trademarks, service marks, trade
dress, logos, trade names and corporate names and registrations and
applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data and
documentation and (d) trade secrets and confidential business information
(including formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information).
     
     "IRS" has the meaning set forth in SECTION 4(q).
     
     "KNOWLEDGE" means, with respect to Mercer or the Seller, actual knowledge
after reasonable investigation and inquiry by the Seller, which inquiry shall
an inquiry of the following persons:  Michael Prude, Robert Covalt, Louis Pace,
Stephen Zavodny, Kevin Johnston, William Celentano, Thomas Keup, Kelly Bost and
Phil Riggins.
     
     "LAWS" means all laws, including the common law, statutes, codes, rules,
regulations, ordinances or Orders of any Governmental Body.
     
     "LIABILITY" means any liability, debt, obligation, amount or sum due
(whether known or unknown, whether absolute or contingent, whether liquidated
or unliquidated, and whether due or to become due) including any liability for
Taxes.
     
     "MATERIAL," "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse effect on the assets, financial condition or results of
operations of Mercer.
     
     "MERCER" has the meaning set forth in the preface above.
     
     "MERCER'S BUSINESS" means the manufacture and distribution of extruded
plastic and vinyl products.
     
     "MERCER SHARES" means all outstanding shares of the Common Stock, $.10 par
value per share, of Mercer.

                                      3

<PAGE>
     
     "MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
     
     "MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in
SECTION 4(e) below.
     
     "MOST RECENT FISCAL YEAR END" has the meaning set forth in SECTION (e)
below.
     
     "MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
     
     "NET WORKING CAPITAL OF MERCER" means an amount equal to (a) total current
assets of Mercer (other than cash and cash equivalents, intercompany
indebtedness (other than trade receivables), prepayments of any Taxes for which
Seller is liable pursuant to SECTION 6(e) and prepaid premiums for insurance
maintained for Mercer by Seller and/or its Affiliates), MINUS (b) total current
liabilities of Mercer (excluding intercompany indebtedness (other than
intercompany trade payables), premiums payable for insurance maintained for
Mercer by Seller and/or its Affiliates, accruals on account of stay-on bonuses
listed on ANNEX I hereto and Taxes for which Seller is liable pursuant to
SECTION 6(e), PLUS (c) the amount of Retained Cash Balances, in each case
calculated in accordance with GAAP, consistently applied on a basis consistent
with the application of accounting principles utilized in the preparation of
the Financial Statements.
     
     "ORDER" means any order, writ, injunction, decree, judgment, award,
determination or written direction of any court, arbitrator or Governmental
Body.
     
     "ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
     
     "PARTY" has the meaning set forth in the preface above.
     
     "PBGC" means the Pension Benefit Guaranty Corporation.
     
     "PERMITTED LIEN" means (a) mechanic's, materialmen's and similar liens,
(b) liens for Taxes not yet due and payable (or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings), (c) liens arising
under workers' compensation, unemployment insurance, social security,
retirement and similar legislation, (d) liens arising in connection with sales
of foreign receivables, (e) liens on goods in transit incurred pursuant to
documentary letters of credit and (f) purchase money liens and liens securing
rental payments under capital lease arrangements.
     
     "PERSON" means an individual, corporation, partnership, association, trust
or other entity or organization, including a Governmental Body or an agency or
instrumentality thereof.
     
     "POST-CLOSING TAX PERIOD" means any Tax period that commences after the
Closing Date.
     
     "PRE-CLOSING TAX PERIOD" means any Tax period that ends prior to the
Closing Date.
     
     "PRELIMINARY CLOSING BALANCE SHEET" has the meaning set forth in
SECTION 2(c) below.
     
                                      4

<PAGE>

     "PRODUCTS" means that group of products which has been designed, developed
and/or produced or which is presently sold or offered for sale by the Business.
     
     "PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
     
     "PURCHASE PRICE" has the meaning set forth in SECTION 2(b) below.
     
     "REAL PROPERTY" has the meaning set forth in SECTION 4(j) below.
     
     "REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
     
     "RETAINED CASH BALANCES" means the balances of all cash, deposit, money
market and the like accounts of Mercer immediately following the Closing.
     
     "SECTION 338 DELTA" has the meaning set forth in Section 6(e)(xi).
     
     "SECTION 338 ELECTIONS" has the meaning set forth in Section 6(e)(ix).
     
     "SECTION 338 TAXES" has the meaning set forth in Section 6(e)(xi).
     
     "SECURITIES ACT" means the Securities Act of 1933, as amended.
     
     "SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) mechanic's, materialmen's
and similar liens, (b) liens for Taxes not yet due and payable (or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings),
(c) liens arising under workers' compensation, unemployment insurance, social
security, retirement and similar legislation, (d) liens arising in connection
with sales of foreign receivables, (e) liens on goods in transit incurred
pursuant to documentary letters of credit, (f) purchase money liens and liens
securing rental payments under capital lease arrangements and (g) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
     
     "SELLER" has the meaning set forth in the preface above.
     
     "STRADDLE PERIOD" shall mean any Tax period that begins before and ends
after the Closing Date.
     
     "SUBSIDIARY" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
     
     "TAX" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value

                                      5

<PAGE>

added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty or addition thereto.
     
     "TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
     
     "WORKING CAPITAL TARGET" means $3,500,000.
     
     2.   PURCHASE AND SALE OF THE MERCER SHARES.
          
          (A)  BASIC TRANSACTION.  On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of the Mercer Shares for the consideration
specified below in this SECTION 2.
          
          (B)  PURCHASE PRICE.  The purchase price for the Mercer Shares to be
purchased by the Buyer from the Seller pursuant to the terms hereof shall be
the sum of $35,750,000, subject to adjustments as provided in Section 2(g)
herein, which shall be paid in cash (the "PURCHASE PRICE").  The Purchase Price
shall be paid by the Buyer to the Seller at the Closing by wire transfer or
delivery of other immediately available funds to an account or accounts
designated by the Seller not less than three (3) business days prior to the
Closing Date.
          
          (C)  WORKING CAPITAL ADJUSTMENT.  At the Closing, the Purchase Price
shall be adjusted upward on a dollar-for-dollar basis by the amount by which
the Net Working Capital of Mercer at Closing is more than $3,600,000, and the
Purchase Price shall be adjusted downward on a dollar-for-dollar basis by the
amount by which the Net Working Capital of Mercer at Closing is less than
$3,400,000.  The Net Working Capital of Mercer at Closing shall be
preliminarily determined by the Seller not less than five (5) days prior to the
Closing Date in good faith by preparation of an estimated balance sheet of
Mercer as of the Closing Date (the "PRELIMINARY CLOSING BALANCE SHEET").
          
          (D)  THE CLOSING.  The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Gibson, Dunn
& Crutcher LLP, 200 Park Avenue, in New York, New York, commencing at 8:00 a.m.
local time on a Business Day to be designated by the Buyer (the "CLOSING
DATE"); PROVIDED, HOWEVER, that the Closing Date shall be no earlier than the
third Business Day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby and no later than April 30, 1998, and PROVIDED, FURTHER, that the Buyer
shall give the Seller at least two Business Days advance notice of the Closing.
          
          (E)  DELIVERIES AT THE CLOSING.  At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in SECTION 7(a) below, (ii) the Buyer will deliver to the Seller
the various certificates, instruments and documents referred to in
SECTION 7(b) below, (iii) the Seller will deliver to the Buyer stock
certificates representing all of the Mercer Shares, endorsed in blank or
accompanied by duly executed assignment documents and (iv) the Buyer will
deliver to the Seller the consideration specified in SECTION 2(b) above as 

                                      6

<PAGE>

may be adjusted at the Closing pursuant to SECTION 2(c) above and subject to
further adjustment after the Closing pursuant to SECTION 2(g).
          
          (F)  CLOSING AUDIT.  Within 120 days following the Closing Date,
Ernst & Young LLP shall prepare and deliver to the Seller and Buyer an audit of
the balance sheet of the Company (the "AUDITED CLOSING BALANCE SHEET") at and
as of the Closing Date.  The cost to prepare the Audited Closing Balance Sheet
shall be borne by Buyer.  In the event that either Buyer or Seller disputes any
item(s) on the Audited Closing Balance Sheet within ten days after such party's
receipt thereof, the parties agree that another "Big Five" accounting firm
acceptable to Buyer and Seller (the "INDEPENDENT ACCOUNTANTS") will review the
disputed item(s) on the Audited Closing Balance Sheet.  In conducting such
review, the Independent Accountants shall be given access to the workpapers of
Ernst & Young, LLP and Buyer shall make available on a reasonable basis those
employees and representatives (including employees of Ernst & Young, LLP) who
participated in the preparation of the Audited Closing Balance Sheet and the
determination of Net Working Capital of Mercer contained therein.  The final
determination of such disputed item(s) by the Independent Accountants shall be
reflected on the Audited Closing Balance Sheet and shall be final and binding
on the parties for all purposes and all references to "Audited Closing Balance
Sheet" elsewhere in this Agreement shall be deemed to refer to the Audited
Closing Balance Sheet as modified by the Independent Accountants.  The cost of
retaining the Independent Accountants shall be borne by the disputing party;
provided however, that the non-disputing party shall reimburse the disputing
party for 50% of the cost of the Independent Accountants in the event that such
review results in an increase (if Seller is the disputing party) or decrease
(if Buyer is the disputing party) of more than $25,000 in the Net Working
Capital of Mercer as reflected on the Audited Closing Balance Sheet audited by
Ernst & Young LLP.
          
          (G)  POST-CLOSING PURCHASE PRICE ADJUSTMENT.  In the event that the
Net Working Capital of Mercer as reflected on the Audited Closing Balance Sheet
as finally determined ("FINAL WORKING CAPITAL") is less than the Net Working
Capital of Mercer as reflected on the Preliminary Closing Balance Sheet
("PRELIMINARY WORKING CAPITAL"), then the Purchase Price will be adjusted
downward, on a dollar-for-dollar basis, to reflect the lesser of (i) the
decrease in Final Working Capital from Preliminary Working Capital and (ii) the
sum of (A) the amount, if any, by which Final Working Capital is less than
$3,400,000 and (B) the amount, if any, by which Preliminary Working Capital
exceeded $3,600,000.  Conversely, in the event that the Final Working Capital
is more than the Preliminary Working Capital, then the Purchase Price will be
adjusted upward, on a dollar-for-dollar basis, to reflect the lesser of (i) the
increase, if any, in Final Working Capital from Preliminary Working Capital and
(ii) the sum of (A) the amount, if any, by which Final Working Capital exceeds
$3,600,000 and (B) the amount, if any, by which Preliminary Working Capital was
less than $3,400,000.  The post-closing adjustment to the Purchase Price, if
any, shall be paid by Seller to Buyer or by Buyer to Seller, as the case may
be, in immediately available funds within fifteen (15) days of delivery of the
Audited Closing Balance Sheet as finally determined.
     
     3.   REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.

                                      7

<PAGE>
          
          (A)  REPRESENTATIONS AND WARRANTIES OF SELLER.  The Seller represents
and Warrants to the Buyer that, subject to the specific qualifications and
limitations set forth below, the statements contained in this SECTION 3(a) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this
SECTION 3(a) with respect to itself.
               
               (I)  ORGANIZATION OF THE SELLER.  The Seller is a corporation
     duly organized, validly existing, and in good standing under the laws of
     the State of Delaware.
               
               (II) AUTHORIZATION OF TRANSACTION.  The Seller has full
     corporate power and authority to execute and deliver this Agreement and to
     perform its obligations hereunder and this Agreement has been duly
     executed and delivered by the Seller.  This Agreement constitutes the
     valid and legally binding obligation of the Seller, enforceable in
     accordance with its terms and conditions, except that (A) such
     enforceability may be subject to bankruptcy, insolvency, reorganization,
     moratorium or other laws, decisions or equitable principles now or
     hereafter in effect relating to or affecting the enforcement of creditors'
     rights or debtors' obligations generally, and to general equity principles
     and (B) the remedy of specific performance and injunctive and other forms
     of equitable relief may be subject to equitable defenses and to the
     discretion of the court before which any proceeding therefore may be
     brought (the terms of clause (A) and (B) are sometimes collectively
     referred to as the "EQUITABLE EXCEPTIONS").  Except for filings required
     by the HSR Act, the Seller need not give any notice to, make any filing
     with, or obtain any authorization, consent or approval of any Governmental
     Body in order to consummate the transactions contemplated by this
     Agreement.
               
               (III)     NONCONTRAVENTION.  Except for approvals required under
     the HSR Act, neither the execution and the delivery of this Agreement by
     the Seller, nor the consummation of the transactions contemplated hereby
     by the Seller, will (A) violate any Law or Order or other restriction of
     any Governmental Body to which the Seller is subject or (B) conflict with,
     result in a breach of, constitute a default under, result in the
     acceleration of, create in any part the right to accelerate, terminate,
     modify or cancel, or require any notice under any contract, lease,
     sublease, license, sublicense, franchise, permit, indenture, agreement or
     mortgage for borrowed money, instrument of indebtedness, Security Interest
     or other arrangement to which the Seller is a party or by which it is
     bound or to which any of its assets is subject.
               
               (IV) BROKER'S FEES.  The Seller has no Liability or obligation
     to pay any fees or commissions to any broker, finder or agent with respect
     to the transactions contemplated by this Agreement for which the Buyer
     could become liable or obligated.
               
               (V)  MERCER SHARES.  The Seller holds of record and owns
     beneficially all of the Mercer Shares, free and clear of any restrictions
     on transfer (other than any restrictions under the Securities Act and
     state securities laws), claims, Taxes, Security Interests (other than
     those to be removed prior to or concurrently with the Closing pursuant to
     SECTION 7(a)(xi)), options, warrants, rights, contracts, calls,
     commitments,

                                      8

<PAGE>

     equities, preemptive rights and demands.  The Seller is not a party to 
     any option, warrant, right, contract, call, put or other agreement or 
     commitment providing for the disposition by the Seller of any capital 
     stock of Mercer (other than this Agreement).  The Seller is not a party 
     to any voting trust, proxy agreement, stockholders' agreement or other 
     understanding (written or oral) with respect to the voting of any capital 
     stock of Mercer.
          
          (B)  REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller that the statements contained in this
SECTION 3(b) are correct and complete In all material respects as of the date
of this agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement throughout this SECTION 3(b).
               
               (I)  ORGANIZATION OF THE BUYER.  The Buyer is a corporation duly
     organized, validly existing, and in good standing under the laws of the
     State of California.
               
               (II) AUTHORIZATION OF TRANSACTION.  The Buyer has full corporate
     power and authority (including full corporate power and authority) to
     execute and deliver this Agreement and to perform its obligations
     hereunder and this Agreement has been duly executed and delivered by the
     Buyer.  This Agreement constitutes the valid and legally binding
     obligation of the Buyer, enforceable in accordance with its terms and
     conditions except for the Equitable Exceptions.  Except for filings made
     under the HSR Act, the Buyer need not give any notice to, make any filing
     with, or obtain any authorization, consent, or approval of any
     Governmental Body in order to consummate the transactions contemplated by
     this Agreement.
               
               (III)     NONCONTRAVENTION.  Except for approvals required under
     the HSR Act and as set forth on Schedule 3(a)(iii), neither the execution
     and the delivery of this Agreement by the Buyer, nor the consummation of
     the transactions contemplated hereby by the Buyer, will (A) violate any
     Law or Order or other restriction of any Governmental Body to which the
     Buyer is subject or any provision of its charter or bylaws or (B) conflict
     with, result in a breach of, constitute a default under, result in the
     acceleration of, create in any party the right to accelerate, terminate,
     modify or cancel, or require any notice under any contract, lease,
     sublease, license, sublicense, franchise, permit, indenture, agreement or
     mortgage for borrowed money, instrument of indebtedness, Security Interest
     or other arrangement to which the Buyer is a party or by which it is bound
     or to which any of its assets is subject and which has a Material Adverse
     Effect on the Buyer.
               
               (IV) BROKERS' FEES.  The Buyer has no Liability or obligation to
     pay any fees or commissions to any broker, finder or agent with respect to
     the transactions contemplated by this Agreement for which the Seller could
     become liable or obligated.
               
               (V)  INVESTMENT.  The Buyer is not acquiring the Mercer Shares
     with a view to or for sale in connection with any distribution thereof
     within the meaning of the Securities Act.

                                      9

<PAGE>

     4.   REPRESENTATIONS AND WARRANTIES CONCERNING MERCER.  The Seller 
represents and warrants to the Buyer that, subject to the specific 
qualifications and limitations set forth herein, the statements contained in 
this SECTION 4 are correct and complete as of the date of this Agreement and 
will be correct and complete as of the Closing Date (as though made then and 
as though the Closing Date were substituted for the date of this Agreement 
throughout this SECTION 4), except to the extent that such representations 
and warranties are expressed, made as of another specified date, and as to 
such representation, the same shall be true as of such date and except as set 
forth in the Disclosure Schedule delivered by the Seller to the Buyer on the 
date hereof (the "DISCLOSURE SCHEDULE").  The Disclosure Schedule may be 
updated one or more times prior to the Closing Date; provided that except as 
otherwise provided in Section 4(p)(i) any such updated Disclosure Schedule 
containing any material changes must be delivered to the Buyer not less than 
two business days prior to the date on which the filings required under the 
HSR Act are to be made pursuant to SECTION 5(h).

          (a)  ORGANIZATION, QUALIFICATION AND CORPORATE POWER.  Mercer is a 
corporation duly organized, validly existing and in good standing under the 
laws of the State of New Jersey.  Mercer is duly authorized to conduct 
business and is in good standing under the laws of the State of Florida and 
each other jurisdiction listed on SCHEDULE 4(a) of the Disclosure Schedule, 
which jurisdictions constitute all of the jurisdictions in which the nature 
of its businesses or the ownership or leasing of its properties requires such 
qualification, except where any such failure would not have a Material 
Adverse Effect.  Mercer has full corporate power and authority to carry on 
the businesses in which it is engaged and to own and use the properties owned 
and used by it.

          (b)  CAPITALIZATION.  The entire authorized capital stock of Mercer 
consists of 1,000 shares of common stock, 10 of which are issued and 
outstanding and held by the Seller.  None of the Mercer Shares is held in 
treasury.  The Mercer Shares have been duly authorized, are validly issued, 
fully paid, and nonassessable, and are held of record by the Seller.  There 
are no outstanding or authorized options, warrants, rights, contracts, calls, 
puts, rights to subscribe, conversion rights or other agreements or 
commitments to which Mercer is a party or which are binding upon Mercer 
providing for the issuance, disposition or acquisition of any of its capital 
stock.  There are no outstanding or authorized stock appreciation, phantom 
stock, or similar rights with respect to Mercer.

          (c)  NONCONTRAVENTION.  Except as set forth on SCHEDULE 4(c) of the 
Disclosure Schedule, neither the execution and the delivery of this 
Agreement, nor the consummation of the transactions contemplated hereby, will 
(i) violate any Law or Order or other restriction of any Governmental Body to 
which Mercer is subject or any provision of the charter or bylaws of Mercer 
or (ii) conflict with, result in a breach of, constitute a default under, 
result in the acceleration of, create in any party the right to accelerate, 
terminate, modify or cancel, or require any notice under any contract, lease, 
sublease, license, sublicense, franchise, permit, indenture, agreement or 
mortgage for borrowed money, instrument of indebtedness, Security Interest or 
other arrangement to which Mercer is a party or by which it is bound or to 
which any of its assets is subject (or result in the imposition of any 
Security Interest upon any of its assets).  Except for the filing under the 
HSR Act, Mercer does not need to give any notice to, make any filing with, or


                                       10


<PAGE>

obtain any authorization, consent or approval of any Governmental Body in 
order for the Parties to consummate the transactions contemplated by this 
Agreement.

          (d)  SUBSIDIARIES. Except as disclosed on SCHEDULE 4(D) of the 
Disclosure Schedule, Mercer has no Subsidiaries and does not control, 
directly or indirectly, or have any direct or indirect equity participation 
in any Person.

          (e)  FINANCIAL STATEMENTS.  Attached hereto as EXHIBIT A are the 
following financial statements (collectively, the "FINANCIAL STATEMENTS") of 
Mercer:  (i)  unaudited statement of operations and cash flows for the fiscal 
years ended December 3l, 1995 and 1996, (ii) unaudited balance sheet as of 
December 31, 1994, 1995 and 1996 (collectively, the Financial Statements 
contained in (i) and (ii) are collectively referred to herein as the 
"UNAUDITED FINANCIAL STATEMENTS"), (iii) an audited balance sheet and 
statement of operations, changes in stockholders' equity and cash flows as of 
and for the period commencing January 1, 1997 and ending August 4, 1997 
(prior to the acquisition by Seller) and (iv) a draft audited balance sheet 
and statement of operations, changes in stockholders' equity and cash flows 
as of and for the period commencing August 5, 1997 and ending December 31, 
1997 (the "Draft Statements," and collectively with the financial statements 
set forth in part (iii), the "MOST RECENT FINANCIAL STATEMENTS").  Except as 
set forth on Schedule 4(e) of the Disclosure Schedule, the Most Recent 
Financial Statements have been prepared in accordance with GAAP applied on a 
consistent basis throughout the periods covered thereby, are correct and 
complete in all material respects, fairly present the financial condition of 
Mercer as of such dates, and are consistent with the books and records of 
Mercer (which books and records are correct and complete in all material 
respects).  Except as set forth on Schedule 4(e) of the Disclosure Schedule, 
the Financial Statements for the fiscal years ended December 31, 1995 and 
1996 fairly present the financial condition of Mercer as of such dates, and 
are consistent with the books and records of Mercer (which books and records 
are correct and complete in all material respects).

          (f)  EVENTS SUBSEQUENT TO THE MOST RECENT FINANCIAL STATEMENTS. 
Except as set forth on SCHEDULE 4(F) of the Disclosure Schedule, since 
December 31, 1997, there has not been any adverse change in the assets, 
Liabilities, business, financial condition, operations or results of 
operations of Mercer.  Without limiting the generality of the foregoing since 
that date:

               (i)  Mercer has not sold, leased, transferred or assigned any of
     its assets, tangible or intangible, other than for a fair consideration in
     the Ordinary Course of Business;
               
               (ii) Mercer has not entered into any contract, lease, sublease,
     license or sublicense (or series or related contracts, leases, subleases,
     licenses and sublicenses) either involving more than $100,000 or outside
     the Ordinary Course of Business;
               
               (iii)     Mercer has not accelerated, terminated, modified or
     canceled any contract, lease, sublease, license or sublicense (or series
     of related contracts, leases, subleases, licenses and sublicenses)
     involving more than $100,000 to which Mercer is a party or by which it is
     bound;


                                       11


<PAGE>

               (iv) no party has notified Mercer of any acceleration,
     termination, modification or cancellation of any Material customer
     contract or any contract, agreement, lease, sublease, license or
     sublicense (or series of related contracts, leases, subleases, licenses
     and sublicenses), involving more than $100,000 to which Mercer is a party
     or by which it is bound;

               (v)  Mercer has not made any capital expenditure (or series of
     related capital expenditures) either involving more than $62,500
     individually or $162,500 in the aggregate, or outside the Ordinary Course
     of Business;
               
               (vi) Mercer has not made any capital investment in, any loan to,
     or any acquisition of the securities or assets of any other person (or
     series of related capital investments, loans, and acquisitions) either
     involving more than $50,000 individually or $162,500 in the aggregate;
               
               (vii)     Mercer has not delayed or postponed (beyond its normal
     practice) the payment of accounts payable and other Liabilities;
               
               (viii)    there has been no change made or authorized in the
     charter or bylaws of Mercer;
               
               (ix) Mercer has not experienced any damage, destruction or loss
     involving more than $100,000 (whether or not covered by insurance) to its
     Property;
               
               (x)  Mercer has not made any loan to, or entered into any other
     transaction with, any of its directors, officers and employees outside the
     Ordinary Course of Business or involving more than $50,000, giving rise to
     any claim or right on its part against the person or on the part of the
     person against it;
               
               (xi) Mercer has not entered into any employment contract or
     collective bargaining agreement, written or oral, or modified the terms of
     any existing such contract or agreement with any of its full-time staff
     employees;
               
               (xii)     Mercer has not granted an increase in the base
     compensation of any of its directors, officers and employees outside the
     Ordinary Course of Business and as set forth on SCHEDULE 4(F) of the
     Disclosure Schedule;
               
               (xiii)    Mercer has not adopted any (A) bonus, (B) profit-
     sharing, (C) incentive compensation, (D) pension, (E) retirement,
     (F) medical, hospitalization, life, or other insurance, (G) severance or
     (H) other plan, contract or commitment for any of its directors, officers
     and employees, or modified or terminated any existing such plan, contract
     or commitment;
               
               (xiv)     Mercer has not lost and does not have notice of any
     potential loss of any significant customer or supplier;
               
               (xv) Mercer has not changed its accounting, methods or
     principles;


                                       12


<PAGE>


               (xvi)     Mercer has not suffered any material shortages of raw
     materials used in the production of the Products;
               
               (xvii)    Mercer has not made any material provisions for
     inventory markdowns or inventory shrinkage;
               
               (xviii)   Mercer has not made or paid any non-cash dividends or
     distributions to Seller whether or not upon or in respect of its capital
     stock;
               
               (xix)     Mercer has not redeemed or otherwise acquired any
     shares of its capital stock or issued any capital stock or any option,
     warrant or right relating thereto or any securities convertible or
     exchangeable for any shares of its capital stock; and
               
               (xx) Mercer has not agreed to do any of the foregoing.
          
          (g)  UNDISCLOSED LIABILITIES.  Mercer does not have any Liability
which is individually in excess of $100,000, except for (i) Liabilities set
forth on the face of the Most Recent Financial Statements and (ii) Liabilities
which have arisen after the Most Recent Financial Statements in the Ordinary
Course of Business.
          
          (h)  TAX MATTERS.  Except as set forth on Schedule 4(h) of the
Disclosure Schedule:
               
               (i)  Mercer has filed all Tax Returns that it was required to
     file.  All such Tax Returns were correct and complete in all material
     respects.  All Taxes owed by Mercer (whether or not shown on any Tax
     Return) have been paid.  Mercer currently is not the beneficiary of any
     extension of time within which to file any Tax Return.  To Seller's
     Knowledge, no claim is currently pending by an authority in a jurisdiction
     where Mercer does not file Tax Returns that it is or may be subject to
     taxation by that jurisdiction.  There are no Security Interests on any of
     the assets of Mercer that arose in connection with any failure (or alleged
     failure) to pay any Tax.
               
               (ii) Neither the Seller nor any of the officers (or employees
     responsible for Tax matters) of Mercer has received any notice that any
     authority intends to assess any additional Taxes for any period for which
     Tax Returns have been filed.  There is no dispute or claim concerning any
     Tax Liability of Mercer either (A) claimed or raised by any authority in
     writing or (B) as to which the Seller or Mercer has Knowledge based upon
     personal contact with any agent of such authority.  SCHEDULE 4(H) of the
     Disclosure Schedule lists all federal, state and local income Tax Returns
     filed with respect to Mercer for taxable periods ended on or after
     December 31, 1993 that currently are the subject of an audit.
               
               (iii)     Mercer has not filed a consent under Code Sec. 341(f)
     concerning collapsible corporations.  Mercer has not made any payments, is
     not obligated to make any payments, nor is a party to any agreement that
     under certain circumstances could obligate it to make any payments that
     will not be deductible to Mercer under Code Sec. 280G.  Mercer has not
     been a United States real property holding corporation within the meaning

                                       13


<PAGE>

     of Code Sec. 897(c)(2) during the applicable period specified in Code Sec.
     897(c)(1)(A)(ii).  Mercer has disclosed on its federal income Tax Returns
     all positions taken therein that could give rise to a substantial
     understatement of federal income Tax within the meaning of Code Sec. 6662.
     Mercer is not a party to any Tax allocation or sharing agreement.
               
               (iv) Mercer has no liability for Taxes for any Tax period ending
     prior to the Closing Date other than Taxes for which there is an accrual
     for current taxes reflected on the Most Recent Balance Sheet.
               
               (v)  Mercer has no liability for Taxes of any other person or
     entity, has no Tax liability as a successor or transferee, and has no Tax
     liability pursuant to Section 1.1502-6 of the Treasury Regulations or
     similar provisions of state, local or foreign Tax laws.
               
               (vi) Mercer has no liability pursuant to any agreement to share,
     allocate or reimburse Taxes or Tax benefits.
               
               (vii)     There are no "excess loss accounts" or "intercompany
     items," within the meaning of Section 1-1502 of the Treasury Regulations,
     between Mercer and any member of the Seller affiliated group.
          
          (i)  TANGIBLE ASSETS.  SCHEDULE 4(I) of the Disclosure Schedule
includes a true and correct copy of the appraisal of the fixed assets of Mercer
obtained by the Seller at the time it acquired Mercer, which covers all of the
significant fixed assets of Mercer owned at such time.  Mercer owns or leases
all tangible assets necessary for the conduct of its businesses as presently
conducted.  To the Knowledge of the Seller, each such tangible asset is free
from Security Interests (other than Permitted Liens or the Security Interests
to be removed prior to or concurrently with the Closing pursuant to Section
7(a)(xi)) free from material defects (patent and latent), has been maintained
in accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
          
          (j)  REAL PROPERTY.  SCHEDULE 4(J) of the Disclosure Schedule sets
forth all real property owned or leased by Mercer (the "REAL PROPERTY").
Subject to the Permitted Liens and any Security Interests disclosed on
SCHEDULE 4(J), Mercer has good and marketable title to, or in the case of
leased Real Property has a valid leasehold interest in, the Real Property.  All
leases of Real Property are valid, binding and enforceable in accordance with
their respective terms.  Mercer is not in material default under any such
leases, and to the Seller's Knowledge, there does not exist under any such
lease any material default of any other party or any event which with notice or
lapse of time or both would constitute a material default.  To the Seller's
Knowledge, the Real Property is in good operating condition and repair, normal
wear and tear excepted, and is free from any defects that have, or reasonably
could have, a Material Adverse Effect.  Except as set forth on SCHEDULE 4(J) of
the Disclosure Schedule, to the Seller's Knowledge, there are no existing
structural defects in any of the Real Property.


                                       14


<PAGE>

          (k)  INTELLECTUAL PROPERTY.
               
               (i)  Except as set forth on Schedule 4(k) of the Disclosure
     Schedule, Mercer owns or has the right to use pursuant to license,
     sublicense, agreement or permission all Intellectual Property necessary
     for the operation of the business of Mercer as presently conducted.  Each
     item of Intellectual Property owned or used by Mercer immediately prior to
     the Closing hereunder will be owned or available for use by Mercer on
     identical terms and conditions immediately subsequent to the Closing
     hereunder.
               
               (ii) To the Knowledge of the Seller, Mercer has not interfered
     with, infringed upon, misappropriated or otherwise come into conflict with
     any Intellectual Property rights of third parties, and neither the Seller
     nor any of the officers (or employees with responsibility for Intellectual
     Property matters) of Mercer has received within the past year any charge,
     complaint, claim or notice alleging any such interference, infringement,
     misappropriation or violation.
               
               (iii)     SCHEDULE 4(K) of the Disclosure Schedule identifies
     each patent or trademark, tradename or copyright registration which has
     been issued to Mercer with respect to any of its Intellectual Property,
     identifies each pending patent application or application for trademark,
     tradename or copyright registration which Mercer has made with respect to
     any of its Intellectual Property, and identifies each license, agreement
     or other permission which Mercer has granted to any third party with
     respect to any of its Intellectual Property (together with any
     exceptions).  Except as identified in Schedule 4(k) of the Disclosure
     Schedule, with respect to each item of Intellectual Property that Mercer
     owns:
                    
                    (A)  the identified owner possesses all right, title and
          interest in and to the item;
                    
                    (B)  the item is not subject to any outstanding Order; and
                    
                    (C)  no charge, complaint, action, suit, proceedings,
          hearing, investigation, claim or demand is pending or, to the
          Knowledge of the Seller and the officers (and employees with
          responsibility for Intellectual Property matters) of Mercer, is
          threatened which challenges the legality, validity, enforceability,
          use or ownership of the item.
               
               (iv) SCHEDULE 4(K) of the Disclosure Schedule also identifies
     each item of Intellectual Property that any third party owns and that
     Mercer uses pursuant to license, sublicense, agreement or permission
     (other than general commercial software).  Except as identified in
     SCHEDULE 4(K) of the Disclosure Schedule, with respect to each such item
     of used Intellectual Property:
                    
                    (A)  to the Knowledge of Seller, the license, sublicense,
          agreement or permission covering the item is legal, valid, binding,
          enforceable and in full force and effect, subject to the Equitable
          Exceptions;


                                       15


<PAGE>

                    (B)  to the Knowledge of Seller, the license, sublicense,
          agreement or permission will continue to be legal, valid, binding,
          enforceable and in full force and effect on identical terms following
          the Closing;
                    
                    (C)  Mercer is not, and to the Knowledge of the Seller and
          officers (and employees with responsibility for Intellectual Property
          matters) of Mercer, no other party to the license, sublicense,
          agreement, or permission is in breach or default, and no event has
          occurred which with notice or lapse of time would constitute a breach
          or default or permit termination, modification or acceleration
          thereunder; and
                    
                    (D)  to the Knowledge of the Seller and officers (and
          employees with responsibility for Intellectual Property matters) of
          Mercer, no charge, complaint, action, suit, proceedings, hearing,
          investigation, claim or demand is pending or is threatened which
          challenges the legality, validity or enforceability of the underling
          item of Intellectual Property.
          
          (l)  WARRANTIES.  Except as disclosed on SCHEDULE 4(L) of the 
Disclosure Schedule, there is no outstanding action, suit, arbitration or 
other proceeding, or claim, demand, demand letter, lien or notice of 
noncompliance or violation has been asserted in writing against Mercer and, 
to the Knowledge of the Seller and Mercer, no event or circumstance has 
occurred that could reasonably be expected to constitute the basis of any 
claim against Mercer for injury to any person or any property suffered as a 
result of the manufacture, distribution or sale of any product or material by 
Mercer, including any claim arising out of the defective or unsafe nature, or 
allegedly defective or unsafe nature, of any such product or material, which 
individually or in the aggregate exceeds $162,500.  Due to the historically 
low warranty claims against the Business, Mercer has expensed such claims and 
has not set aside reserves on its balance sheet included as part of the Most 
Recent Financial Statements for all warranty and product liability claims.
          
          (m)  CONTRACTS.  SCHEDULE 4(M) of the Disclosure Schedule lists the
following contracts, agreements, customer contracts or agreements and other
arrangements (oral or written) to which Mercer is a party:
               
               (i)  any arrangement (or group of related written arrangements)
     for the lease of personal property from or to third parties providing
     lease payments in excess of $100,000 per annum;
               
               (ii) any arrangement (or group of related written arrangements)
     for the purchase or sale of Products, raw materials, commodities, supplies
     or other personal property or for the furnishing or receipt of services
     which either calls for performance over a period of more than one year
     after the Closing Date or involves more than the sum of $100,000;
               
               (iii)     any arrangement concerning a partnership or joint
     venture;


                                       16


<PAGE>

               (iv) any arrangement requiring noncompetition;
               
               (v)  any arrangement involving the Seller and its Affiliates; or
               
               (vi) any other arrangement (or group of related written
     arrangements) either involving or remaining outstanding one year after the
     Closing Date of more than $100,000 or not entered into in the Ordinary
     Course of Business.
          
          The Seller has delivered to the Buyer a correct and complete copy 
of each written arrangement (as amended to date) listed in SCHEDULE 4(M) of 
the Disclosure Schedule.  With respect to each arrangement so listed:  (A) 
the arrangement is legal, valid, binding, enforceable and in full force and 
effect, subject to the Equitable Exceptions; (B) to the Seller's Knowledge, 
the arrangement will continue to be legal, valid, binding, enforceable and in 
full force and effect, subject to Equitable Exceptions, on identical terms 
following the Closing; (C) Mercer is not, nor to the Knowledge of the Seller, 
any other party in breach or default, and no event has occurred which with 
notice or lapse of time would constitute a breach or default or permit 
termination, modification, or acceleration, under the arrangements; and (D) 
Mercer has not, nor to the Knowledge of the Seller, has any other party, 
repudiated any provision of any arrangement.
          
          (n)  INSURANCE.  SCHEDULE 4(N) of the Disclosure Schedule sets forth
an accurate and complete list of all policies of fire, liability, keyman life
insurance, worker's compensation, products liability and other forms of
insurance owned or held by or beneficially for Mercer.  All such policies are
in full force and effect, no premiums with respect thereto are past due and no
notice of cancellation or termination has been received by the Seller or Mercer
with respect to any such policy.  Neither the Seller nor Mercer has received
any notification that material changes are required in the conduct of the
Business as a condition to the continuation of coverage under or renewal of any
such policy.  True, correct and complete copies of such insurance policies have
been made available to the Buyer.
          
          (o)  LITIGATION.  SCHEDULE 4(O) of the Disclosure Schedule sets forth
each instance in which Mercer (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction or charge or (ii) is a party or, to the
Knowledge of the Seller and Mercer, is threatened to be made a party, to any
charge, complaint, action, suit, proceeding, hearing or investigation of or in
any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator.
          
          (p)  EMPLOYEES.
               
               (i)  SCHEDULE 4(P)(I) of the Disclosure Schedule lists all of
     the employees of Mercer currently on the Mercer payroll as of the date of
     this Agreement (including those on leaves of absence), which schedule will
     be updated at and as of the Closing Date to reflect any employees hired or
     terminated prior to the Closing Date ("CURRENT EMPLOYEES").
               
               (ii) To the Knowledge of the Seller, no key employee or full-
     time group of employees has any plans to terminate employment with Mercer
     (other than


                                       17


<PAGE>

     Michael Prude).  Except as set forth on SCHEDULE 4(P)(II) of
     the Disclosure Schedule, Mercer is not a party to or bound by any
     collective bargaining agreement, nor has it experienced any strikes,
     grievances, claims of unfair labor practices or other collective
     bargaining disputes.  To the Knowledge of the Seller, Mercer has not
     committed any unfair labor practice.
          
          (q)  EMPLOYEE BENEFITS.  SCHEDULE 4(Q) of the Disclosure Schedule
lists all Employee Benefit Plans in which any current or former employee of
Mercer participates, whether sponsored by Mercer or an affiliate of Mercer.
Copies of each such plan and related trust agreements, service agreements and
insurance policies and the three (3) most recent annual reports on Internal
Revenue Service ("IRS") Form 5500 for each plan shall be provided to Buyer.
               
               (i)  Each Employee Benefit Plan (and each related trust or
     insurance contract) substantially complies in form and in operation with
     its terms and the applicable requirements of ERISA and the Code.
               
               (ii) To the Knowledge of Seller, all contributions (including
     all employer contributions and employee salary reduction contributions)
     which are due have been paid to each Employee Pension Benefit Plan and all
     contributions for any period ending on or before the Closing Date which
     are not yet due have been paid to each Employee Pension Benefit Plan or
     accrued in accordance with the past custom and practice of Mercer.  All
     premiums or other payments which are due for all periods ending on or
     before the Closing Date have been paid with respect to each Employee
     Welfare Benefit Plan.
               
               (iii)     Each Employee Benefit Plan which is an Employee
     Pension Benefit Plan intended to be a qualified plan in fact meets the
     requirements of a "qualified plan" under Code Sec. 401(a), and Seller
     shall provide to Buyer a copy of the most recent IRS determination letter
     respecting such plan's qualification.
               
               (iv) No Employee Pension Benefit Plan (other than any
     Multiemployer Plan) has been completely or partially terminated or been
     the subject of a Reportable Event as to which notices would be required to
     be filed with the PBGC.  No proceeding by the PBGC to terminate any
     Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
     instituted or, to the Knowledge of the Seller and officers (and employees
     with responsibility for employee benefits matters) of Mercer, threatened.
               
               (v)  There have been no Prohibited Transactions with respect to
     any Employee Benefit Plan.  No Fiduciary has any Liability for breach of
     fiduciary duty or any other failure to act or comply in connection with
     the administration or investment of the assets of any Employee Benefit
     Plans.  No charge, complaint, action, suit, proceeding, hearing,
     investigation, claim or demand with respect to the administration or the
     investment of the assets of any Employee Benefit Plan (other than routine
     claims for benefits) is pending or, to the Knowledge of the Seller and the
     officers (and employees with responsibility for employee benefits matters)
     of Mercer, threatened.  Neither the Seller nor any of the officers (or
     employees with responsibility for litigation matters) of


                                       18


<PAGE>

     Mercer has any Knowledge of any Basis for any such charge, complaint,
     action, suit, proceeding, hearing, investigation, claim or demand.
          
          Mercer has not incurred, and neither the Seller nor any of the 
officers (or employees with responsibility for litigation matters) of Mercer 
has any reason to expect that Mercer will incur, any Liability to the PBGC 
(other than PBGC premium payments) or otherwise under Title IV of ERISA 
(including any withdrawal Liability) or under the Code with respect to any 
Employee Pension Benefit Plan that Mercer and the Controlled Group of 
Corporations which includes Mercer maintains or ever has maintained or to 
which any of them contributes, ever has contributed, or ever has been 
required to contribute.  Mercer does not maintain, nor has it ever maintained 
or contributed to, or ever has been required to contribute to any Employee 
Welfare Benefit Plan providing health, accident, or life insurance benefits 
to former employees, their spouses or their dependents (other than in 
accordance with Code Sec. 4980B).
          
          (r)  ENVIRONMENT, HEALTH AND SAFETY.  Except as disclosed on
SCHEDULE 4(R) of the Disclosure Schedule:
               
               (i)  Mercer has been and is in compliance with all Laws
     concerning the environment, public health and safety, and employee health
     and safety, and no charge, complaint, action, suit, proceeding, hearing,
     investigation, claim, demand or notice has been filed or commenced against
     it or, to the Knowledge of the Seller, is threatened alleging any failure
     to comply with any such Laws.
               
               (ii) Mercer has no Liability (and there is no Basis related to
     the past or present operations, properties or facilities of Mercer and its
     respective predecessors and Affiliates for any present or future charge,
     complaint, action, suit, proceeding, hearing, investigation, claim or
     demand against Mercer giving rise to any Liability) under the
     Comprehensive Environmental Response, Compensation and Liability Act of
     1980, the Resource Conservation and Recovery Act of 1976, the Federal
     Water Pollution Control Act of 1972, the Clean Air Act of 1970, the Safe
     Drinking Water Act of 1974, the Toxic Substances Control Act of 1976, the
     Refuse Act of 1899, or the Emergency Planning and Community Right-to-Know
     Act of 1986 (each as amended), or any other Law or Order of any
     Governmental Body, concerning release or threatened release of hazardous
     substances, public health and safety, or pollution or protection of the
     environment.
               
               (iii)     Mercer has no Liability (and Mercer and its
     predecessors have not handled or disposed of any substance, arranged for
     the disposal of any substance, or owned or operated any property or
     facility in any manner that could form the Basis for any present or future
     charge, complaint, action, suit, proceeding, hearing, investigation,
     claim, or demand (under any Law) against Mercer giving rise to any
     Liability) for damage to any site (including the Real Property), location,
     or body of water (surface or subsurface) or for illness or personal
     injury.
               
               (iv) Mercer has no Liability under the Occupational Safety and
     Health Act, as amended, or any other Law concerning employee health and
     safety.

                                       19


<PAGE>

               (v)  Mercer has obtained and been in compliance with all of the
     terms and conditions of all permits, licenses and other authorizations
     which are required under, and has complied with all other, Laws and Orders
     of any Governmental Body relating to public health and safety, worker
     health and safety, and pollution or protection of the environment,
     including laws relating to emissions, discharge, releases or threatened
     releases of pollutants, contaminants or chemical, industrial, hazardous or
     toxic materials or wastes into ambient air, surface water, ground water or
     lands or otherwise relating to the manufacture, processing, distribution,
     use, treatment, storage, disposal, transport or handling of pollutants,
     contaminants or chemical, industrial, hazardous or toxic materials or
     wastes.
               
               (vi) Mercer has delivered or caused to be delivered to the Buyer
     all environmental assessments, reports, audits and other documents in its
     possession or under its control that relate to Real Property that Mercer
     or any predecessor entity currently occupies or has occupied at any time
     in the past in connection with the Business.
          
          (s)  LEGAL COMPLIANCE.  Mercer has:
               
               (i)  complied with all non-environmental Laws.  No charge,
     complaint, action, suit, proceeding, hearing, investigation, claim, demand
     or notice has been filed or commenced against Mercer which is currently
     pending and alleges any failure to comply with any such non-environmental
     Law.
               
               (ii) not violated in any respect or received a notice or charge
     asserting any violation of the Sherman Act, the Clayton Act, the Robinson-
     Patman Act or the Federal Trade Act, each as amended.
               
               (iii)     filed in a timely manner all reports, documents, and
     other materials it was required to file (and the information contained
     therein was correct and complete in all material respects) under all
     applicable Laws.
          
          (t)  CERTAIN BUSINESS RELATIONSHIPS WITH MERCER.  Except as set forth
on SCHEDULE 4(T) of the Disclosure Schedule, neither the Seller nor its
Affiliates has been involved in any business arrangement or relationship with
Mercer within the past twelve (12) months, and neither the Seller nor
Affiliates owns any property or right, tangible or intangible, which is used in
Mercer's Business.
          
          (u)  BROKERS' FEES.  Mercer does not have any Liability or obligation
to pay any fees or commissions to any broker, finder or similar representative
with respect to the transactions contemplated by this Agreement.
          
          (v)  DISCLOSURE.  To the Knowledge of the Seller and the directors
and officers of Mercer, the representations and warranties contained in this
SECTION 4 as amended, modified and/or supplemented by the Disclosure Schedules
do not contain any untrue statement of a Material fact or omit to state any
Material fact necessary in order to make the statements and information
contained in this SECTION 4 not misleading.


                                       20

<PAGE>

          (w)  ACCOUNTS RECEIVABLE.  The accounts receivable of Mercer
reflected in the Most Recent Balance Sheet represent sales actually made in the
Ordinary Course of Business, represent valid and enforceable claims, and have
been properly accrued in accordance with GAAP, net of any reserves reflected in
the Most Recent Balance Sheet.  Schedule 4(w) of the Disclosure Schedule sets
forth an accurate aging schedule of all accounts receivable reflected in the
Most Recent Balance Sheet.
          
          (x)  INVENTORY.  As of the date of the Most Recent Financial
Statements, all inventory of Mercer consisted of a quality and quantity
consistent with the past practices of Mercer, net of any reserves reflected in
the Most Recent Balance Sheet.  The values reflected on the Most Recent Balance
Sheet of obsolete or substandard items of inventory, as determined by Mercer in
consultation with their accountants, have been written down to realizable
market values or written off, or adequate reserves therefor have been
established, all in accordance with GAAP.  There are no claims against Mercer
to return in excess of an aggregate of $50,000 of merchandise by reason of
alleged overshipments, defective merchandise or otherwise, or of merchandise in
the possession of customers under an understanding that such merchandise would
be returnable.
          
          (y)  CUSTOMERS AND SUPPLIERS.  Schedule 4(y) lists the ten largest
customers of Mercer and the ten largest suppliers of Mercer for the most recent
fiscal year.  To the Knowledge of Seller and Mercer, since January 1, 1997,
there has been no material adverse change in the business relationship of
Mercer with any customer or supplier named on Schedule 4(y).  To the Knowledge
of Seller and Mercer and other than in the Ordinary Course of Business, no
customer or supplier named on Schedule 4(y) has threatened or expressed an
intention to reduce materially the volume of its purchases from or sales to
Mercer or otherwise materially modify its business relationship with Mercer.
Notwithstanding the foregoing, no representation or warranty is made by Seller
that Mercer's relationship with any customer or supplier will not be affected
by the purchase of Mercer by Buyer.
          
          (z)  CERTAIN BUSINESS PRACTICES.  To Seller's Knowledge, neither
Mercer nor any of its directors, officers, agents or employees has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (iii) made any other unlawful payment.
     
     5.   PRE-CLOSING COVENANTS.  The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
          
          (a)  GENERAL.  Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement (including satisfying the closing conditions set forth in SECTION 7
below).  In the event that the Buyer notifies the Seller of its desire to
acquire Mercer by means of a reverse triangular merger of Mercer with and into
a wholly-owned Subsidiary of Buyer no less than five (5) business days prior to
the Closing Date, the Parties will cooperate with each other to amend this
Agreement to provide for, and to facilitate, such merger.


                                       21


<PAGE>

          (b)  NOTICES AND CONSENTS.  The Seller will cause Mercer to give any
notices to third parties, and will cause Mercer to use its reasonable best
efforts to obtain third-party consents, that the Buyer may reasonably request
in connection with the matters pertaining to Mercer disclosed or required to be
disclosed in the Disclosure Schedule.  Each of the Parties will take any
additional action (and the Seller will cause Mercer to take any additional
action) that may be necessary, proper or advisable in connection with any other
notices to, filings with, and authorizations, consents, and approvals of
Governmental Bodies, and third parties that he, she or it may be required to
give, make or obtain.
          
          (c)  OPERATION OF BUSINESS.  Except as contemplated hereby or as may
be incidental to or in furtherance of the transactions contemplated hereby or
as may have been set forth herein or in the Disclosure Schedule, the Seller
will not cause or permit Mercer to engage in any practice, take any action,
embark on any course of inaction or enter into any transaction outside the
Ordinary Course of Business or that would constitute a breach of the
representation and warranty contained in SECTION 4(F) if such action, inaction
or transaction occurred after December 31, 1997 and prior to the date of this
Agreement.
          
          (d)  PRESERVATION OF BUSINESS.  Except as contemplated hereby or as
may be incidental to or in furtherance of the transactions contemplated hereby
or as may have been set forth herein or in the Disclosure Schedule, the Seller
will cause Mercer to use its best efforts to keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers and employees.
          
          (e)  ACCESS.  Only in the event that neither the Buyer nor the 
Seller exercised its right to terminate this Agreement as provided in SECTION 
9 herein, the Seller will permit, and the Seller will cause Mercer to permit, 
representatives of the Buyer to have access at reasonable times, and in a 
manner so as not to interfere with the normal business operations of Mercer, 
to the headquarters and all other facilities of Mercer, to all books, 
records, contracts, Tax records and documents of or pertaining to Mercer and 
to all employees, customers and suppliers of Mercer.  During the Buyer's 
on-site investigation of Mercer, except as otherwise provided herein, the 
Buyer shall not discuss any aspects of the operation of Mercer with any 
employee of Mercer, and the Buyer shall direct all requests for information 
and material only through the Robert W. Baird & Co., unless otherwise agreed 
to by the Buyer and the Seller in writing.  Robert W. Baird & Co. shall 
proceed to arrange with the Seller a mutually agreeable time and place at 
which the Buyer may conduct interviews with key employees and/or customers of 
Mercer mutually agreed to by Robert W. Baird & Co. and the Seller.  Such 
interviews shall be in strict conformity with the format mutually agreed to 
by Robert W. Baird & Co. and the Seller.
          
          (f)  NOTICE OF DEVELOPMENTS.  The Seller will give prompt written 
notice to the Buyer of any Material development affecting the assets, 
Liabilities, business, financial condition, operations, results of operations 
or future prospects of Mercer.  Each Party will give prompt written notice to 
the others of any Material development affecting the ability of the Parties 
to consummate the transactions contemplated by this Agreement.


                                       22


<PAGE>

          (g)  EXCLUSIVITY.  The Seller will not (and the Seller will not 
cause or permit Mercer to) (i) solicit, initiate or encourage the submission 
of any proposal or offer from any person relating to any (A) liquidation, 
dissolution or recapitalization, (B) merger or consolidation, (C) acquisition 
or purchase of securities or assets or (D) similar transaction or business 
combination involving Mercer or (ii) participate in any discussions or 
negotiations regarding, furnish any information with respect to, assist or 
participate in or facilitate in any other manner any effort or attempt by an, 
person to do or seek any of the foregoing.  The Seller will notify the Buyer 
immediately if any person makes any proposal, offer, inquiry or contact with 
respect to any of the foregoing.
          
          (h)  HSR ACT FILING.  The Buyer and the Seller will use 
commercially reasonable efforts to file or cause to be filed with the FTC and 
the DOJ (it being understood that the Buyer will bear the expense of the 
filing fee to be paid by the acquiring person), as promptly as practicable 
but in no event later than ten (10) Business Days after the execution of this 
Agreement, the Notification and Report Form and related material required to 
be filed in connection with the transactions contemplated in this Agreement 
pursuant to the HSR Act, and to promptly file any additional information 
requested by the FTC or the DOJ as soon as practicable after receipt of a 
request therefor.  In addition, the Buyer shall use its commercially 
reasonable efforts to take or cause to be taken all actions necessary, proper 
or advisable to obtain any consent, waiver, approval or authorizations 
relating to the HSR Act that is required for the consummation of the 
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that the 
Buyer shall not be obligated hereby to accept any order providing for the 
divestiture by the Buyer of such of the assets relating to the Business (or, 
in lieu thereof, assets and businesses of the Buyer having an approximate 
equivalent value) as are necessary to fully consummate the transactions 
contemplated by this Agreement or an order to hold separate such assets and 
businesses pending such divestiture.
          
          (i)  PLANT CLOSING NOTIFICATION.  The Buyer shall be responsible 
for providing any notice of layoff or plant closing required with respect to 
any manufacturing facility of Mercer pursuant to the Federal Worker 
Adjustment and Retraining Notification Act of 1988, any successor federal law 
and any applicable state or local plant closing notification statute, for any 
such layoffs or plant closings which will commence effective on or subsequent 
to the Closing Date.
          
          (j)  INTERCOMPANY ITEMS.  The Seller shall, as of the date 
immediately preceding the Closing Date, by appropriate documentation and 
accounting entries, contribute to the paid in capital of Mercer, any 
intercompany payables, receivables and/or indebtedness to the Seller arising 
prior to the Closing Date.
          
          (k)  1996 AUDIT.  Seller shall cause Mercer to cooperate with Buyer 
in connection with the audit by KPMG Peat Marwick of Mercer's financial 
statements for the year ended (which audit shall be paid for by Buyer), and 
as of, December 31, 1996, including causing Mercer to provide Buyer with 
access to all related work papers and other documents of Mercer relating to 
such audit.


                                       23


<PAGE>

          (l)  TRANSITIONAL SERVICES.  Prior to the Closing, Buyer and Seller 
shall use their best efforts to identify and make appropriate arrangements 
for dealing with any transitional issues which may arise as a result of the 
purchase of Mercer by Buyer and shall negotiate in good faith to enter into a 
Transitional Services Agreement reasonably acceptable to both parties, which 
Agreement shall contemplate the provision to Buyer of certain computer, 
accounting and similar services and other services relating to the 
maintenance of Mercer's Employee Benefit Plans and related arrangements 
through December 31, 1998 or accommodations reasonably necessary for the 
conduct of Mercer's business for a period of up to six months after the 
Closing Date.  Buyer shall cause Mercer to reimburse Seller for all actual 
costs for such services in accordance with past practices.
          
          (m)  FINAL AUDITED FINANCIAL STATEMENTS.  On or before March 13, 
1998, Seller shall deliver to the Buyer the final audited financial 
statements ("FINAL AUDITED FINANCIAL STATEMENTS") covering the period shown 
in the Draft Statements.

     6.   ADDITIONAL COVENANTS.  The Parties further covenant and agree as
follows:

          (a)  GENERAL.  In case at any time after the Closing any further 
action is necessary or desirable to carry out the purposes of this Agreement, 
each of the Parties will take such further action (including the execution 
and delivery of such further instruments and documents) as any other Party 
reasonable, may request, all at the sole cost and expense of the requesting 
Party (unless the requesting Party is entitled to indemnification therefor 
under SECTION 8 below).  The Seller acknowledges and agrees that, from and 
after the Closing, the Buyer will be entitled to possession of all documents, 
books, records, agreements, and financial data of any sort relating to 
Mercer; provided that the Seller may retain any copies of the foregoing as 
shall be necessary to comply with applicable tax and other laws, regulations 
and ordinances.
          
          (b)  LITIGATION SUPPORT.  In the event and for so long as any Party 
actively is contesting or defending against any charge, complaint, action, 
suit, proceeding, hearing, investigation, claim or demand in connection with 
(i) any transaction contemplated under this Agreement or (ii) any fact, 
situation, circumstance, status, condition, activity, practice, plan, 
occurrence, event, incident, action, failure to act or transaction on or 
prior to the Closing Date involving Mercer, each of the other Parties will 
cooperate with him, her or it and his, her or its counsel in the contest or 
defense, make available their personnel, and provide such testimony and 
access to their books and records as shall be necessary in connection with 
the contest or defense, all at the sole cost and expense of the contesting or 
defending Party (unless the contesting or defending Party is entitled to 
indemnification therefor under SECTION 8 below).
          
          (c)  TRANSITION.  The Seller will not take any action that is 
designed or intended to have the effect of discouraging any lessor, licensor, 
customer, supplier or other business associate of Mercer from maintaining the 
same business relationships with Mercer after the Closing for a period of 12 
months thereafter as it maintained with Mercer prior to the Closing.  The 
Seller will refer all customer inquiries relating to Mercer's Business to the 
Buyer and/or Mercer from and after the Closing for a period of 12 months 
thereafter.


                                       24


<PAGE>

          (d)  CONFIDENTIALITY.  The Seller will treat and hold as such all 
of the Confidential Information, refrain from using any of the Confidential 
Information except in connection with this Agreement for a period of two (2) 
years from the Closing, and deliver promptly to the Buyer or destroy, at the 
request and option of the Buyer, all tangible embodiments (and all copies) of 
the Confidential Information which are in its possession.  In the event that 
the Seller is requested or required (by oral question or request for 
information or documents in any legal proceeding, interrogatory, subpoena, 
civil investigative demand or similar process) to disclose any Confidential 
Information, the Seller will notify the Buyer promptly of the request or 
requirement so that the Buyer may seek an appropriate protective order or 
waive compliance with the provisions of this SECTION 6(D).  If, in the 
absence of a protective order or the receipt of a waiver hereunder, the 
Seller is, on the advice of counsel, compelled to disclose any Confidential 
Information to any tribunal or else stand liable for contempt, the Seller may 
disclose the Confidential Information to the tribunal; PROVIDED, HOWEVER, 
that the Seller shall use its reasonable best efforts to obtain, at the 
reasonable request of the Buyer, an order or other assurance that 
confidential treatment will be accorded to such Portion of the Confidential 
Information required to be disclosed as the Buyer shall designate.  The 
foregoing provisions shall not apply to any Confidential Information which is 
generally available to the public immediately prior to the time of disclosure.
          
          (e)  ADDITIONAL TAX MATTERS.
          
          (i)   Seller shall be responsible for the preparation and filing of 
all Seller's federal consolidated income Tax Returns with respect to all 
Pre-Closing Periods, which shall include Mercer, and for the payment of all 
federal income Taxes with respect to such returns.
          
          (ii)  Seller shall be responsible for the preparation and filing of 
all state and local Tax Returns of Mercer that are required to be filed on or 
before the Closing Date, and for the payment of all Taxes with respect to 
such Tax Returns (less the portion of such Taxes that are specifically 
accrued as current taxes on Most Recent Financial Statements.)  Such Tax 
Returns shall be prepared in a manner consistent with prior practice, and 
shall utilize accounting methods, elections and conventions that do not have 
the effect of distorting the allocation of income or expense between 
Pre-Closing Tax Periods and Post-Closing Tax Periods.
          
          (iii) Buyer shall be responsible for the preparation and filing of 
all state and local Tax Returns of Mercer that relate to a Pre-Closing Tax 
Period and that are required to be filed after the Closing Date.  Seller 
shall pay Buyer, in immediately available funds, any Taxes that are required 
to be paid with such Tax Returns (less the portion of such Taxes that are 
specifically accrued as current taxes on Most Recent Financial Statements.)
          
          (iv)  Buyer shall be responsible for the preparation and filing of 
all Straddle Period Tax Returns with respect to Mercer, and for the payment 
of all Taxes with respect to such returns.  Seller shall reimburse Buyer, in 
immediately available funds, for the portion of any Tax relating to a 
Straddle Period that is allocable, in accordance with paragraph (vii) below, 
to the pre-Closing portion of such Straddle Period (less the portion of such 
Taxes that are specifically accrued as current taxes on Most Recent Financial 
Statements.)


                                       25


<PAGE>

          (v)   Buyer shall be responsible for the preparation and filing of
all Tax Returns and the payment of all Taxes with respect to Mercer for all
Post-Closing Tax Periods
          
          (vi)  To the extent permitted by law, Seller and Buyer shall use
their best efforts to cause any Tax period to close on the Closing Date.
          
          (vii) Taxes payable with respect to a Straddle Period shall be
allocated to the pre-Closing and post-Closing portions of a Straddle Period on
the basis of a closing of the books as of the Closing Date or any other method
agreed upon by Buyer and Seller, except that Taxes imposed on a periodic basis,
such as real and personal property Taxes, shall be prorated based on the number
of days before and after the Closing Date.
          
          (viii)    Seller shall pay any stock transfer taxes due as a result
of the sale of the Shares to Buyer pursuant to the transactions contemplated by
this Agreement.
          
          (ix)  At Buyer's request, Seller shall join Buyer in making elections
under Section 338(g) and Section 338(h)(10) of the Code and any state, local
and foreign counterparts with respect to Mercer (the "SECTION 338 ELECTIONS").
Seller shall provide to Buyer such information as may be reasonably requested
by Buyer for purposes of determining whether Buyer should make a Section 338
Election under any state or local law.  Seller and Buyer shall jointly complete
and make the Section 338 Elections on the applicable forms and in accordance
with applicable law.  Seller shall deliver such forms and related documents to
Buyer at least ninety (90) days prior to the due date for filing such elections
or forms.  Buyer shall deliver to Seller at least forty-five (45) days prior to
the due date for filing, such completed forms as are required to be filed with
respect to the Section 338 Elections.  Buyer and Seller shall timely file the
Section 338 Elections and any required forms and documents.
          
          (x)   Buyer and Seller shall act reasonably and in good faith to
reach an agreement promptly, but in no event later than ninety (90) days after
the Closing Date, on the allocation of the Purchase Price among the assets of
Mercer for purposes of the Section 338 Elections.  If Buyer and Seller are
unable to reach an agreement within such ninety (90) day period, they shall
submit the issue to arbitration by a nationally recognized accounting firm
mutually acceptable to Buyer and Seller, whose determination shall be final and
binding on both parties, and whose expenses shall be shared equally by Buyer
and Seller.
          
          (xi)  Seller shall be responsible for the payment of any Taxes of
Seller's affiliated group or Mercer that result from the Section 338 Elections
(the "SECTION 338 TAXES").  However, to the extent the state and local Taxes
payable by Seller as a result of making Section 338 Elections exceed the state
and local taxes payable by Seller in the absence of Section 338 Elections (such
excess hereinafter referred to as the "Section 338 Delta"), Buyer shall
reimburse Seller for the Section 338 Delta.
          
          (xii) Seller, Buyer and Mercer shall cooperate in good faith in
(a) preparing and filing all Tax Returns, (b) maintaining and making available
to each other all records necessary in connection with the preparation and
filing of all Tax Returns and the payment of all Taxes and (c) resolving all
disputes and audits with respect to any Tax Returns and Taxes.  Buyer

                                       26


<PAGE>


and Seller recognize that each may need access, from time to time, after the 
Closing Date, to certain accounting and Tax records and information held by 
the other; therefore, Buyer and Seller agree (A) to retain and maintain Tax 
records relating to Mercer for a period of five (5) years after the Closing 
Date, (B) to allow each other and their agents and representatives, at times 
and dates mutually acceptable to the parties, to inspect, review and make 
copies of such records, such activities to be conducted during normal 
business hours and at the requesting party's expense and (C) and to offer the 
other parties such records before destroying such records.
          
          (f)  COVENANT NOT TO COMPETE.  For a period of two (2) years from and
after the Closing Date, the Seller will not, directly or indirectly, as
principal, agent, trustee or through the agency of any corporation,
partnership, association or agent or agency, (i) participate or engage in the
Business existing as of the Closing Date, (ii) service or solicit any of
Mercer's business from any customer of Mercer, (iii) request or advise any
customer of Mercer to withdraw, curtail or cancel such customer's business with
Mercer or (iv) solicit for employment any person employed by Mercer on the
Closing Date (other than Michael Prude); PROVIDED HOWEVER, that (A) no owner of
less than five percent (5%) of the outstanding stock of any publicly traded
corporation shall, for purposes of this SECTION 6(f), be deemed to engage
solely by reason thereof in any of its businesses and (B) the future
acquisition by the Seller or its Affiliates of any Person or entity engaged in
the business of manufacturing floor coverings or related accessories (other
than specialty chemicals) (herein, a "Competitive Business") shall not be
deemed to violate this SECTION 6(F) if (x) less than thirty percent (30%) of
the total revenues of such acquired entity or Person are derived from the
Competitive Business and (y) Mercer is given (aa) an option to purchase the
Competitive Business on terms and conditions to be negotiated in good faith by
the parties at a purchase price reasonably related to the portion of the
purchase price of the acquired entity that is related to the Competitive
Business and (bb) a right of first refusal to acquire the Competitive Business
also on terms and conditions to be negotiated in good faith by the parties.
          
          (g)  EMPLOYEE BENEFIT PLANS.  From and after the Closing Date, the
Buyer shall be the plan sponsor for each and every Employee Benefit Plan which
is not a Welfare Benefit Plan and such other plans, programs, policies and
arrangements of Mercer and shall assume or retain all related trusts, insurance
contracts, other assets and documents that have been maintained by Mercer or
the Seller for the benefit of employees or former employees of Mercer (all of
which plans, trusts, policies, insurance contracts and other assets are set
forth on SCHEDULE 4(Q) of the Disclosure Schedule); PROVIDED, HOWEVER, that
with respect to:
               
               (i)  PENSION BENEFITS PROVIDED BY THE SELLER.  Prior to the
     Closing Date, the Buyer shall have established or designated a defined
     retirement plan of Buyer or Mercer with a Code Section 401(k) arrangement
     (the "BUYER'S 401(K) PLAN") and, as soon as practicable after the Closing
     Date, the Seller shall transfer to the Buyer's 401(k) Plan all of the
     assets and liabilities pertaining to employees and former employees of
     Mercer from the Sovereign 401(k) Plan (the "SOVEREIGN 401(K) PLAN").  The
     Buyer shall establish the Buyer's 401(k) Plan on terms substantially
     equivalent to the Sovereign 401(k) Plan.  With respect to notes evidencing
     plan loans, the Sovereign 401(k) Plan will assign such notes to the
     Buyer's 401(k) Plan.  The interests transferred to the Buyer's 401(k) Plan
     shall be fully vested effective for periods after the Closing Date or as
     otherwise provided pursuant to


                                       27


<PAGE>

     the applicable plan.  Current Employees shall cease to make contributions
     or have contributions made on their behalf under the Sovereign 401(k) 
     Plan.  The Seller will cause the Sovereign 401(k) Plan to vest fully all 
     Current Employees in their benefits under such plan, determined as of the 
     Closing Date.
               
               (ii) WELFARE BENEFITS PROVIDED BY THE SELLER.  Effective as of
     the Closing Date and through December 31, 1998, Seller shall maintain the
     Current Employees of Mercer who are retained as employees of Mercer after
     the Closing Date on the Welfare Benefits Plans of Seller (as set forth on
     Schedule 4(q) of the Disclosure Schedule) without any change in terms of
     such Plans.  Seller shall bill Buyer for the Mercer employees' share of
     premium costs and expenses from the Closing Date through December 31, 1998
     pursuant to Seller's normal procedures.  Effective as of January 1, 1999,
     the Buyer shall establish or designate a plan or plans to provide welfare
     benefits (but not retiree medical or life insurance) for Mercer's
     employees as of that date (collectively, the "BUYER'S WELFARE BENEFITS
     PLANS").  The Buyer's Welfare Benefits Plans shall provide benefits that
     are reasonably similar to the benefits provided under the Welfare Benefits
     Plans of Seller.  The Buyer shall cause the Buyer's Welfare Benefits Plans
     to waive any waiting period and restrictions or limitations for
     preexisting conditions with respect to Mercer employees.  In addition,
     effective as of the Closing Date and through December 31, 1998, Seller
     shall be responsible for the administration of "COBRA" for any Current
     Employee eligible for such benefits on or after the Closing Date and
     through December 31, 1998.  Effective as of January 1, 1999, the Buyer
     shall be responsible for the administration of "COBRA" for any Mercer
     employee eligible for such benefits on or after January 1, 1999.
               
               (iii)     BACK SERVICE CREDIT.  Service of each Current Employee
     shall be recognized by the Buyer's pension plans, the Buyer's 401(k) Plan
     and the Buyer's Welfare Benefit Plans for all purposes, including, without
     limitation, vesting, eligibility for benefits and level of benefits but
     not benefit accrual or optional forms of payment.
          
          (h)  DISABILITY WORKERS' COMPENSATION.  To the extent commercially
feasible, the Buyer and its plans shall assume all responsibility for unpaid
workers' compensation, short-term disability and long-term disability incurred
by a Current Employee after the Closing Date.  Any Current Employee on short-
term disability on the Closing Date shall continue short-term disability
coverage under Seller's Plan for the duration of the coverage period.
          
          (i)  SEVERANCE POLICY.  The Buyer shall establish and maintain, for
the period commencing on the Closing Date and terminating not less than one (1)
year following the Closing Date, a severance policy for Mercer which provides
severance benefits to the Current Employees who are retained by Mercer
following the Closing Date which are substantially similar to the severance
benefits described on SCHEDULE 6(I) of the Disclosure Schedule; PROVIDED THAT
nothing in this Agreement shall require the Buyer to retain any Current
Employee or prevent the Buyer from terminating any Current Employee at any time
to the extent not inconsistent with applicable Law.  The Buyer shall indemnify
the Seller against any and all Adverse Consequences the Seller may suffer after
the Closing Date as a result of Buyer's termination after the Closing Date of
any Current Employee who was retained by Mercer following the Closing Date.


                                       28



<PAGE>

          (j)  COLLECTIVE BARGAINING AGREEMENT.  The Buyer agrees to be bound
by the terms and conditions of the collective bargaining agreement covering
employees of Mercer described on SCHEDULE 4(p)(ii) of the Disclosure Schedule
and to continue to provide any compensation or employee benefits required to be
provided under the terms of Mercer's collective bargaining agreement.
     
     7.   CONDITIONS TO OBLIGATIONS TO CLOSING.
          
          (a)  CONDITIONS TO OBLIGATION OF THE BUYER.  The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction or waiver of the following conditions:
               
               (i)  the representations and warranties set forth in
     Section 3(a) and Section 4 above shall be true and correct in all Material
     respects at and as of the Closing Date;
               
               (ii) the Seller shall have performed and complied with all of
     its covenants hereunder in all Material respects through the Closing;
               
               (iii)     Mercer shall have procured all necessary third party
     consents specified in SECTION 5(B) above;
               
               (iv) no action, suit or proceeding shall be pending or
     threatened before any court or quasi-judicial or administrative agency of
     any federal, state, local or foreign jurisdiction wherein an unfavorable
     judgment order, decree, stipulation, injunction or charge would
     (A) prevent consummation of any of the transactions contemplated by this
     Agreement, (B) cause any of the transactions contemplated by this
     Agreement to be rescinded following consummation or (C) affect adversely
     the right of the Buyer to own, operate or control the Mercer Shares or
     Mercer (and no such judgment order, decree, stipulation, injunction or
     charge shall be in effect);
               
               (v)  the Seller shall have delivered to the Buyer a certificate
     (without qualification as to knowledge or Materiality or otherwise) to the
     effect that each of the conditions specified above in SECTION 7(a)(i)-
     (iv) is satisfied in all respects;
               
               (vi) the acquisition by the Buyer of the Mercer Shares shall
     represent one hundred percent (100%) of the issued and outstanding capital
     stock of Mercer and all of the Mercer Shares shall be free and clear of
     any Security Interests or other liens, claims or encumbrances of any
     nature whatsoever;
               
               (vii)     the Parties and Mercer shall have received all other
     authorizations, consents and approvals of Governmental Bodies including
     such authorizations, consents or approvals required under the HSR Act and
     set forth in the Disclosure Schedule;
               
               (viii)    the Buyer shall have received from counsel to the
     Seller an opinion with respect to the matters set forth in EXHIBIT B
     attached hereto, addressed to the Buyer and Buyer's financing sources and
     dated as of the Closing Date;


                                       29


<PAGE>

               (ix) the Buyer shall have received the resignations, effective
     as of the Closing, of (A) each director of Mercer and (B) each officer of
     Mercer designated by the Buyer, in each case prior to the Closing;
               
               (x)  no Material Adverse Change shall have occurred in Mercer's
     Business or its future prospects;
               
               (xi) all funded indebtedness of Mercer shall have been paid in
     full prior to or at the Closing and all Security Interests in the Shares
     and in any assets of Mercer except Permitted Liens shall have been fully
     released of record to the satisfaction of the Buyer and all mortgages and
     Uniform Commercial Code financing statements covering such funded
     indebtedness shall have been terminated or the Buyer shall be reasonably
     satisfied that all such Security Interests will be fully released of
     record within three (3) days thereafter;
               
               (xii)     all appropriate corporate and shareholder
     authorizations of Mercer shall have been obtained;
               
               (xiii)    except as set forth on the Disclosure Schedule, since
     August 5, 1997, Mercer shall not have transferred, conveyed, disposed of
     and/or sold any of Material assets, except in the Ordinary Course of
     Business; and
               
               (xiv)     On or before March 13, 1998, Seller shall have
     delivered to Buyer the Final Audited Financial Statements, which shall not
     change from the Draft Statements except for the allocation of goodwill
     amortization and the tax implications related thereto.
          
          The Buyer may waive any condition specified in this SECTION 7(A) if
it executes a writing so stating at or prior to the Closing.
          
          (b)  CONDITIONS TO OBLIGATIONS OF THE SELLER.  Obligations of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction or waiver of the following conditions:
               
               (i)  the representations and warranties set forth in
     Section 3(b) above shall be true and correct in all Material respects at
     and as of the Closing Date;
               
               (ii) the Buyer shall have performed and complied with all of its
     covenants hereunder in all Material respects through the Closing;
               
               (iii)     no action, suit or proceeding shall be pending or
     threatened before any court or quasi-judicial or administrative agency of
     any federal, state, local or foreign jurisdiction wherein an unfavorable
     judgment order, decree, stipulation, injunction or charge would
     (A) prevent consummation of any of the transactions contemplated by this
     Agreement or (B) cause any of the transactions contemplated by this
     Agreement to be rescinded following consummation (and no such judgment
     order, decree, stipulation, injunction or charge shall be in effect);


                                       30


<PAGE>

               (iv) the Buyer shall have delivered to the Seller a certificate
     (without qualification as to knowledge or Materiality or otherwise) to the
     effect that each of the conditions specified above in SECTION 702)(i)-(iii)
     is satisfied in all respects;
               
               (v)  the Parties and Mercer shall have received all other
     authorizations, consents, and approvals of Governmental Bodies including
     such authorizations, consents and approvals required under the HSR Act and
     set forth in the Disclosure Schedule;
               
               (vi) the Seller shall have received from counsel to the Buyer an
     opinion with respect to the matters set forth in EXHIBIT C attached
     hereto, addressed to the Seller and dated as of the Closing Date;
               
               (vii)     the Buyer shall have delivered to the Seller a
     certificate of Buyer addressed to Laporte Inc. pursuant to which Buyer
     agrees to be bound by the provisions of Section 8.4(a)(viii) of that
     certain Stock Purchase Agreement dated May 22, 1997, as amended, among
     Laporte Inc., Seller and Sovereign Specialty Chemicals, L.P.; and
               
               (viii)    all actions to be taken by the Buyer in connection
     with the consummation of the transactions contemplated hereby will be
     reasonably satisfactory in form and substance to the Seller.
          
          The Seller may waive any condition specified in this SECTION 7(b) if
it executes a writing so stating at or prior to the Closing.
     
     8.   REMEDIES FOR BREACH OF THIS AGREEMENT.
          
          (a)  SURVIVAL.  All of the representations and warranties of the 
Seller contained in SECTION 4 above (other than the representations and 
warranties of the Seller contained in SECTIONS 4(b), (h), (r), (u) and (z) 
above) shall survive the Closing hereunder (even if the Buyer knew or had 
reason to know of any misrepresentation or breach of warranty at the time of 
the Closing) and continue in full force and effect until the 90th day after 
receipt by the Buyer of audited financial statements of Mercer for the fiscal 
year ending December 31, 1998, but in no event later than June 30, 1999.  The 
representation and warranty of the Seller contained in SECTION 4(r) shall 
survive the Closing hereunder (even if the Buyer knew or had reason to know 
of any misrepresentation or breach of warranty at the time of the Closing) 
and continue in full force and effect until the 90th day after receipt by the 
Buyer of audited financial statements of Mercer for the fiscal year ending 
December 31, 1999, but in no event later than June 30, 2000.  The other 
representations, warranties, and covenants of the Parties contained in this 
Agreement (including the representations and warranties of the Seller 
contained in SECTION 3(a) and SECTIONS 4(b), (h), (u) and (z) above and the 
representations and warranties of the Buyer contained in SECTION 3(b) above) 
shall survive the Closing (even if the damaged Party knew or had reason to 
know of any misrepresentation or breach of warranty or covenant at the time 
of the Closing) and continue in full force and effect until the expiration of 
the applicable statute of limitations.

                                       31


<PAGE>

          (b)  INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
               
               (i)  In the event the Seller breaches any of its
     representations, warranties, agreements and covenants contained herein
     (other than those contained in SECTION 3(A) above), and provided that the
     particular representation, warranty, agreement or covenant survives the
     Closing and that the Buyer makes a written claim for indemnification
     against the Seller pursuant to SECTION 10(G) below within the applicable
     survival period, then the Seller agrees to indemnify the Buyer from and
     against the entirety of any Adverse Consequences the Buyer may suffer
     through and after the date of the claim for indemnification (including any
     Adverse Consequences the Buyer may suffer after the end of the applicable
     survival period; PROVIDED THAT the Buyer asserted its claim for
     indemnification prior to the end of the applicable survival period)
     resulting from, arising out of, relating to, in the nature of or caused by
     the breach; PROVIDED, HOWEVER, that the Seller shall not have any
     obligation to indemnify the Buyer from and against any Adverse
     Consequences resulting from, arising out of, relating to, in the nature of
     or caused by the breach of any representation or warranty of the Seller
     contained in SECTION 4 above (A) until the Buyer has suffered by reason of
     any breaches aggregate losses in excess of a $250,000 threshold (at which
     point the Seller will be obligated to indemnify the Buyer from and against
     all aggregate losses in excess of $25,000) and (B) if the Seller has
     already paid any claims for indemnification pursuant to this
     Section 8(b)(i) in excess of $5,000,000 (or the Purchase Price, as
     adjusted, in the case of Sections 4(b), (h), and (u)) individually or in
     the aggregate (after which point the Seller shall have no obligation to
     indemnify the Buyer from and against further such Adverse Consequences).
     Notwithstanding anything herein to the contrary, it is understood and
     agreed that the disclosures relating to environmental matters on
     Schedule 4(r) are included herein for informational purposes only and
     shall not be deemed to qualify or otherwise alter, affect or limit the
     representations and warranties made by the Seller in Section 4(r) hereof
     (and any purported breach of the representation and warranty contained in
     Section 4(r) shall be tested without regard to such disclosures relating
     to environmental matters on Schedule 4(r) for purposes of Section 8(b)).
     Notwithstanding anything herein to the contrary, it is understood and
     agreed that Seller will not be liable to Buyer for any breach of the
     representations and warranties contained in Sections 4(w) and 4(x) above
     to the extent that an appropriate adjustment to Mercer's accounts
     receivables or inventory entries to the Net Working Capital of Mercer at
     Closing has been made.
               
               (ii) In the event any Seller breaches any of its representations
     and warranties contained in SECTION 3(A) herein and provided that the
     Buyer makes a written claim for indemnification against such Seller
     pursuant to SECTION 10(G) below within the applicable survival period,
     then the Seller agrees to indemnify the Buyer from and against the
     entirety of any Adverse Consequences the Buyer may suffer through and
     after the date of the claim for indemnification (including any Adverse
     Consequences the Buyer may suffer after the end of the applicable survival
     period; PROVIDED THAT the Buyer asserted its claim for indemnification
     prior to the end of the applicable survival period) resulting from,
     arising out of, relating to, in the nature of or caused by the breach;
     PROVIDED, HOWEVER, that the Seller shall not have any obligation to
     indemnify the Buyer from and against any Adverse Consequences resulting
     from, arising out of, relating to or caused by the breach


                                       32


<PAGE>

     of any representation or warranty of the Seller contained in SECTION 3(a)
     if the Seller has already paid any claims for indemnification pursuant to 
     this SECTION 8(b)(ii) in excess of the Purchase Price, as adjusted.
               
               (iii)     The Seller agrees to indemnify the Buyer from and
     against the entirety of any brokerage fees or investment banking
     commissions due by the Seller or Mercer by reason of the transactions
     contemplated by this Agreement.
               
               (iv) Seller shall indemnify Buyer and Mercer for (A) breaches of
     any representations and warranties in Section 4(h)(iv), (v) and (vi), (B)
     all liability for Taxes of the Seller and its subsidiaries, including
     Mercer, for all Pre-Closing Tax Periods and for the portion of all
     Straddle Periods that ends on the Closing Date, (C) all Section 338 Taxes
     other than Section 338 Delta and (D) all liability for reasonable legal
     and accounting fees and expenses incurred with respect to any item
     indemnified pursuant to clauses (A), (B) and (C) above.  The
     indemnification obligations of the parties set forth in this subsection
     (iv) shall survive until the expiration of the applicable statute of
     limitations relating to the Taxes that are the subject of the
     indemnification obligation.
               
               (v)  The Seller shall be liable for, and hereby agrees to
     indemnify, the Buyer for and all liability associated, directly or
     indirectly, with the stay-on bonuses.
               
               (vi) Seller shall be liable for, and hereby agrees to indemnify,
     subject to the dollar limitations of Section 8(b)(i), the Buyer, its
     successors, and successors in interest, from and against the entirety of
     any Adverse Consequences the Buyer, its successors, and successors in
     interest may suffer resulting from, arising out of, or relating to
     liability attributable to Laporte Inc. or any of its affiliates in respect
     to any contamination of the Real Property or facility thereon with
     hazardous materials, the existence, storage or presence of hazardous
     materials in, on or under the facility or the buildings, structures and
     all other improvements on any portion of such Real Property or the
     emission, disposal, deposit, release or discharge of hazardous materials
     (whether on or off such Real Property or facility).
          
          (c)  INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.  In the
event the Buyer breaches any of its representations, warranties and covenants
contained herein, and provided that the particular representation, warranty or
covenant survives the Closing and that the Seller make a written claim for
indemnification against the Buyer pursuant to SECTION 10(g) below within the
applicable survival period, then the Buyer agrees to indemnify the Seller from
and against the entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification, (including any
Adverse Consequences the Seller may suffer after the end of the applicable
survival period) resulting from, arising out of, relating to, in the nature of
or caused by the breach; PROVIDED, HOWEVER, that the Buyer shall not have any
obligation to indemnify the Seller from and against any Adverse Consequences
resulting from, arising out of, relating to or caused by the breach of any
representation or warranty of the Buyer contained in SECTION 3(b) if the Buyer
has already paid any claims for indemnification pursuant to this SECTION 8(c)
in excess of the Purchase Price, as adjusted.  In addition, Buyer shall
indemnify Seller for (A) all liability for Taxes of the Buyer and its
subsidiaries, including Mercer, for all Post-

                                       33

<PAGE>

Closing Tax Periods and for the portion of all Straddle Periods after the 
Closing Date, (B) all Section 338 Delta and (C) all liability for reasonable 
legal and accounting fees and expenses incurred with respect to any item 
indemnified pursuant to clauses (A) and (B) above.  The indemnification 
obligation of Buyer set forth in the previous sentence shall survive until 
the expiration of the applicable statute of limitations relating to the Taxes 
that are the subject of the indemnification obligation.

          (d)  MATTERS INVOLVING THIRD PARTIES.  If any third party shall 
notify any Party (the "INDEMNIFIED PARTY") with respect to any matter which 
may give rise to a claim for indemnification against any other Party (the 
"INDEMNIFYING PARTY") under this SECTION 8, then the Indemnified Party shall 
notify in writing each Indemnifying Party thereof promptly; PROVIDED, 
HOWEVER, that no delay on the part of the Indemnified Party in notifying any 
Indemnifying Party shall relieve the Indemnifying Party from any liability or 
obligation hereunder unless (and then solely to the extent) the Indemnifying 
Party thereby is damaged and prejudiced from adequately defending such claim. 
In the event any Indemnifying Party notifies the Indemnified Party within 30 
days after the Indemnified Party has given notice of the matter that the 
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying 
Party will defend the Indemnified Party against the matter with counsel of 
its choice reasonably satisfactory to the Indemnified Party, (ii) the 
Indemnified Party may retain separate co-counsel at its sole cost and expense 
and (iii) the Indemnified Party will not consent to the entry of any judgment 
or enter into any settlement with respect to the matter without the written 
consent of the Indemnifying Party (not to be withheld unreasonably).  In the 
event no Indemnifying Party notifies in writing the Indemnified Party within 
thirty (30) days after the Indemnified Party has given notice of the matter 
that the Indemnifying Party is assuming the defense thereof, however, the 
Indemnified Party may defend against or enter into any settlement with 
respect to, the matter in any manner it reasonably may deem appropriate.  At 
any time after commencement of any such action, any Indemnifying Party may 
request an Indemnified Party to accept a bona fide offer from the other 
Party(ies) to the action for a monetary settlement payable solely by such 
Indemnifying Party (which does not burden or restrict the Indemnified Party 
nor otherwise prejudice him or her) whereupon such action shall be taken 
unless the Indemnified Party determines that the dispute should be continued, 
the Indemnifying Party shall be liable for indemnity hereunder only to the 
extent of the lesser of (A) the amount of the settlement offer or (B) the 
amount for which the Indemnified Party may be liable with respect to such 
action.  In addition, the Party controlling the defense of any third party 
claim shall deliver or cause to be delivered, to the other Party copies of 
all correspondence, pleadings, motions, briefs, appeals or other written 
statements relating to or submitted in connection with the defense of the 
third party claim, and timely notices of, and the right to participate in (as 
an observer) any hearing or other court proceeding relating to the third 
party claim.

          (e)  DETERMINATION OF LOSS.  The Parties shall make appropriate 
adjustments for Tax benefits and insurance proceeds (reasonably certain of 
receipt and utility in each case) in determining the amount of any Adverse 
Consequence or loss for purposes of this SECTION 8.

          (f)  EXCLUSIVE REMEDY.  Except as set forth in SECTION 8(h), the 
Parties acknowledge and agree that the foregoing indemnification provisions 
in this SECTION 8 shall be the exclusive remedy of the Parties for any breach 
of the representations and warranties of the Parties contained in SECTION 3 
or SECTION 4 of this Agreement.

                                       34

<PAGE>

          (g)  PAYMENT.  The Indemnifying Parties shall promptly pay to the 
Indemnified Party as may be entitled to indemnity hereunder in cash the 
amount of any Adverse Consequences to which such Indemnified Party may become 
entitled to by reason of the provisions of this Agreement.
          
          (h)  RESERVATION AND NONWAIVER OF RIGHTS AND REMEDIES. 
Notwithstanding any other provision of this Agreement, the Parties reserve, 
and this Agreement is without prejudice to, any rights or remedies the 
Parties have or may have against each other under any state or federal 
statutory or common law.
          
          (i)  ARBITRATION WITH RESPECT TO CERTAIN INDEMNIFICATION MATTERS. 
The Parties agree to submit to arbitration, in accordance with these 
provisions, any disputed claim or controversy arising from or related to the 
alleged breach of this Agreement or any disputed indemnification claim made 
pursuant to this SECTION 8.  The Parties further agree that the arbitration 
process agreed upon herein shall be the exclusive means for resolving all 
disputes made subject to arbitration herein, but that no arbitrator shall 
have authority to expand the scope of these arbitration provisions.  Any 
arbitration hereunder shall be conducted under the procedures of the American 
Arbitration Association (AAA).  Either Party may invoke arbitration 
procedures herein by written notice for arbitration containing a statement of 
the matter to be arbitrated.  The Parties shall then have fourteen (14) days 
in which they may identify a mutually agreeable, neutral arbitrator who, in 
the case of any arbitration the subject matter of which is related to 
accounting matters, shall have extensive knowledge of accounting matters.  
After the fourteen (14) day period has expired, the Parties shall prepare and 
submit to the AAA a joint submission, with each Party to contribute half of 
the appropriate administrative fee.  In the event the Parties cannot agree 
upon a neutral arbitrator within fourteen (14) days after written notice for 
arbitration is received, their joint submission to the AAA shall request a 
panel of three arbitrators who are practicing attorneys with professional 
experience in the field of corporate law, and the Parties shall attempt to 
select an arbitrator from the panel according to AAA procedures.  Unless 
otherwise agreed by the Parties, the arbitration hearing shall take place in 
Chicago, Illinois, at a place designated by the AAA.  All procedures 
hereunder shall be confidential. Each Party shall be responsible for its 
costs incurred in any arbitration, and the arbitrator shall not have 
authority to include all or any portion of said costs in an award, regardless 
of' which Party prevails.  The arbitrator may include equitable relief.  Any 
arbitration awarded shall be accompanied by a written statement containing a 
summary of the issues in controversy, a description of the award, and an 
explanation of the reasons for the award.  The arbitration will be subject to 
the following conditions:

               (i)  that each party shall be entitled to discovery pursuant to
     the Federal Rules of Civil Procedure and Federal Rules of Evidence;
               
               (ii) that evidence shall be competent only if it is admissible
     in evidence, under the Federal Rules of Civil Procedure and Federal Rules
     of Evidence; and
               
               (iii)     that the losing Party shall pay the reasonable legal
     fees and costs of the prevailing Party, as shall be determined by the
     arbitrator.

                                       35

<PAGE>

          (j)  ADJUSTMENT TO PURCHASE PRICE.  Any payment under this Section 8
shall be treated for tax purposes as an adjustment of the Purchase Price to the
extent such characterization is proper and permissible under relevant Tax
authorities, including court decisions, statutes, regulations and
administrative promulgations.
     
     9.   TERMINATION.

          (a)  TERMINATION OF AGREEMENT.  The Parties may terminate this
Agreement as provided below:

               (i)  the Buyer and the Seller may terminate this Agreement by
     mutual written consent at any time prior to the Closing;
               
               (ii) the Buyer may terminate this Agreement by giving written
     notice to the Seller at any time prior to the Closing in the event the
     Seller is in breach of any representation, warranty or covenant contained
     in this Agreement and such breach has not been cured within fifteen (15)
     days of written notice thereof, and the Seller may terminate this
     Agreement by giving written notice to the Buyer at any time prior to the
     Closing in the event the Buyer is in breach of any representation,
     warranty or covenant contained in this Agreement and such breach has not
     been cured within fifteen (15) days of written notice thereof;
               
               (iii)     the Buyer may terminate this Agreement by giving
     written notice to the Seller at any time prior to the Closing if the
     Closing shall not have occurred on or before April 30, 1998 by reason of
     the failure of any condition precedent under SECTION 7(a) hereof (unless
     the failure results primarily from the Buyer itself breaching any
     representation, warranty or covenant contained in this Agreement); or
               
               (iv) the Seller may terminate this Agreement by giving written
     notice to the Buyer at any time prior to the Closing if the Closing shall
     not have occurred on or before April 30, 1998 by reason of the failure of
     any condition precedent under SECTION 7(b) hereof (unless the failure
     results primarily from the Seller itself breaching any representation,
     warranty or covenant contained in this Agreement).
          
          Nothing contained in this SECTION 9(a) shall alter, affect, modify or
restrict either Parties' rights to rely on and/or seek indemnification for a
breach of any of the representations and warranties and/or conditions or
covenants of any of the Parties contained in this Agreement.
          
          (b)  EFFECT OF TERMINATION.  If either the Buyer or the Seller
terminates this Agreement pursuant to SECTION 9(a) above, all obligations of
the Parties hereunder shall terminate without any Liability of any Party to any
other Party.
     
     10.  MISCELLANEOUS.
          
          (a)  PRESS RELEASES AND ANNOUNCEMENTS.  Except as may be required by
applicable securities laws or stock exchange requirements, no Party shall issue
any press release or announcement relating to the subject matter of this
Agreement prior to, at or about the Closing

                                       36

<PAGE>

without the prior written approval of the Buyer and the Seller, which 
written approval will not be unreasonably withheld; PROVIDED, HOWEVER, that 
any Party may make any public disclosure it believes in good faith is 
required by law or regulation (in which case the disclosing Party will advise 
the other Parties prior to making the disclosure).
          
          (b)  NO THIRD-PARTY BENEFICIARIES.  This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
          
          (c)  ENTIRE AGREEMENT.  This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements or representations by or among
the Parties, written or oral, that may have related in any way to the subject
matter hereof.
          
          (d)  SUCCESSION AND ASSIGNMENT.  This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns.  No Party may assign either this Agreement or
any of his, her or its rights, interests or obligations hereunder without the
prior written approval of the Buyer and the Seller; PROVIDED, HOWEVER, that the
Buyer may (i) assign any or all of its rights and interests hereunder to a
wholly-owned Subsidiary and (ii) assign its rights to indemnity hereunder as
additional collateral to its lenders.
          
          (e)  FACSIMILE/COUNTERPARTS.  This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.  A facsimile,
telecopy or other reproduction of this Agreement may be executed by one or more
parties hereto, and an executed copy of this Agreement may be delivered by one
or more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes.  At the request of any Party hereto,
all parties hereto agree to execute an original of this Agreement as well as
any facsimile, telecopy or other reproduction hereof.
          
          (f)  HEADINGS.  The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
          
          (g)  NOTICES.  All notices, requests, demands, claims, and other
communications hereunder will be in writing.  Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given if (and then
two Business Days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:

                                       37

<PAGE>

          If to Mercer or the Seller:
               
               C/O Sovereign Specialty Chemicals, Inc.
               W. Washington Street
               Suite 2200
               Chicago, Illinois  60606
               Attn: Lowell Johnson
                     Chief Financial Officer
               Tel:  (312) 419-7100
               Fax:  (312) 419-7151
          
          with a copy to:
               
               Christopher J. Hagan, Esq.
               Hogan & Hartson, L.L.P.
               555 Thirteenth Street, N.W.
               Washington, D.C.  20004
               Tel:  (202) 637-5771
               Fax:  (202) 637-5910
          
          If to the Buyer:
               
               Burke Industries, Inc.
               2250 South Tenth Street
               San Jose, California  95112
               Attn: Rocco C. Genovese
                     President and Chief Executive Officer
               Tel: (408) 297-3500
               Fax: (408) 995-5163
          
          with a copy to:
               
               Kenneth M. Doran, Esq.
               Gibson, Dunn & Crutcher LLP
               333 South Grand Avenue
               Los Angeles, California  90071
               Tel:  (213) 229-7537
               Fax:  (213) 229-7520
               
               J.F. Lehman & Company
               450 Park Avenue, Sixth Floor
               New York, New York 10022
               Attn: Donald P. Glickman
                     Partner
               Tel:  (212) 634-0100
               Fax:  (212) 634-1155

                                       38

<PAGE>

          Any Party may give any notice, request, demand, claim or other 
communication hereunder using any other means (including personal delivery, 
expedited courier, messenger service, facsimile, ordinary mail or electronic 
mail), but no such notice, request, demand, claim or other communication 
shall be deemed to have been duly given unless and until it actually is 
received by the individual for whom it is intended.  Any Party may change the 
address to which notices, requests, demands, claims and other communications 
hereunder are to be delivered by giving the other parties notice in the 
manner herein set forth.
          
          (h)  SUBMISSION TO JURISDICTION.  This Agreement and the rights and 
obligations of the Seller and the Buyer hereunder shall be construed in 
accordance with and be governed by the laws (and not the conflict of laws) of 
the State of Delaware.  Except as provided in SECTION 8(i), any legal action 
or proceeding against the Seller with respect to this Agreement may be 
brought and enforced in a federal or state court located in the Northern 
District of Illinois, and by execution and delivery of this Agreement, each 
of the Seller and the Buyer hereby irrevocably accepts for itself and in 
respect of its property, generally, irrevocably and unconditionally, the 
jurisdiction of the aforesaid courts.  Each of the Seller and the Buyer agree 
that a judgment, after exhaustion of all available appeals, in any such 
action or proceedings shall be conclusive and binding upon them, and may be 
enforced in any other jurisdiction by a suit upon such judgment, a certified 
copy of which shall be conclusive evidenced of this judgment.  The Seller 
hereby irrevocably designates, appoints and empowers CT Corporation System, 
with offices on the date hereof at 208 S. La Salle Street, Chicago, Illinois 
60604, so long as this Agreement is outstanding, as its designee, appointee 
and Agent with respect to any action or proceeding to receive, accept and 
acknowledge for and on its behalf, and in respect of its property, service of 
any mid all legal process, summons, notices and documents which may be served 
in any such action or proceeding and agree that the failure of any such agent 
to give any advice or any service of process to the Seller shall not impair 
or affect the validity of such service or of any judgment based thereon.  If 
for any reason such designee, appointee and agent shall cease to be available 
to act as such, the Seller agree to designate a new designee, appointee and 
agent in the State of Illinois on the terms and for the purposes of this 
provision satisfactory to the Buyer.  Each of the Seller and the Buyer 
further irrevocably consents to the service of process out of any of the 
aforementioned courts in any such action or proceeding by the mailing of 
copies thereof by registered or certified mail, postage prepaid, to the 
Seller or Buyer, as the case may be, at its address set forth in SECTION 
10(g) hereof, such service to become effective 30 days after such mailing.  
Nothing herein shall affect the right of the Buyer to serve process or to 
commence legal proceedings or otherwise proceed against the Seller in any 
other manner permitted by law.  Each of the Seller and the Buyer hereby 
waives irrevocably, to the fullest extent permitted by law, any objection to 
the laying of venue in Chicago, Illinois or any claim of inconvenient forum 
in respect of any such action in Chicago, Illinois to which it might 
otherwise now or hereafter be entitled in any actions arising out of or based 
on this Agreement.
          
          (i)  AMENDMENTS AND WAIVERS.  No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller.  No waiver by any Party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.

                                       39

<PAGE>

          (j)  SEVERABILITY.  Any term or provision of this Agreement that is 
invalid or unenforceable in any situation in any jurisdiction shall not 
affect the validity or enforceability of the remaining terms and provisions 
hereof or the validity or enforceability of the offending term or provision 
in any other situation or in any other jurisdiction.  If the final judgment 
of a court of competent jurisdiction declares that any term or provision 
hereof is invalid or unenforceable, the Parties agree that the court making 
the determination of invalidity or unenforceability shall have the power to 
reduce the scope, duration or area of the term or provision, to delete 
specific words or phrases or to replace any invalid or unenforceable term or 
provision with a term or provision that is valid and enforceable and that 
comes closest to expressing the intention of the invalid or unenforceable 
term or provision, and this Agreement shall be enforceable as so modified 
after the expiration of the time within which the judgment may be appealed.
          
          (k)  EXPENSES.  Each of the Parties and Mercer will bear his, her 
or its own costs and expenses (including legal fees and expenses and 
investment banking fees) incurred in connection with this Agreement and the 
transactions contemplated hereby.  Except as paid out of cash of Mercer prior 
to the Closing Date, the Seller acknowledges and agrees that Mercer has not 
borne or will bear any of the Seller's costs and expenses (including any of 
its legal fees and expenses and investment banking fees or liability for (or 
otherwise associated with) stay-on bonuses) in connection with this Agreement 
or any of the transactions contemplated hereby.
          
          (l)  CONSTRUCTION.  The language used in this Agreement will be 
deemed to be the language chosen by the Parties to express their mutual 
intent, and no rule of strict construction shall be applied against any 
Party.  Any reference to any federal, state, local or foreign statute or law 
shall be deemed also to refer to all rules and regulations promulgated 
thereunder, unless the context requires otherwise.  The Parties intend that 
each representation, warranty, and covenant contained herein shall have 
independent significance.  If any Party has breached any representation, 
warranty or covenant relating to the same subject matter as any other 
representation, warranty or covenant (regardless of the relative levels of 
specificity) which the Party has not breached, it shall not detract from or 
mitigate the fact that the Party is in breach of the first representation, 
warranty or covenant.

          (m)  INCORPORATION OF EXHIBITS, ANNEXES AND SCHEDULES.  The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
          
          (n)  SPECIFIC PERFORMANCE.  Each of the Parties acknowledges and 
agrees that the other Parties would be damaged irreparably in the event any 
of the provisions of this Agreement are not performed in accordance with 
their specific terms or otherwise are breached.  Accordingly, each of the 
Parties agrees that the other Parties shall be entitled to an injunction or 
injunctions to prevent breaches of the provisions of this Agreement and to 
enforce specifically this Agreement and the terms and provisions hereof in 
any action instituted in any court of the United States or any state thereof 
having jurisdiction over the Parties and the matter, in addition to any other 
remedy to which they may be entitled, at law or in equity.

                                       40

<PAGE>
     
     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
                                
                                
                                BUYER:
                                
                                BURKE INDUSTRIES, INC.
                                
                                
                                By:    /S/ ROCCO C. GENOVESE
                                   ------------------------------
                                   Name:  ROCCO C. GENOVESE
                                         ------------------------
                                   Title: PRESIDENT & CEO
                                         ------------------------
                                
                                MERCER:
                                
                                MERCER PRODUCTS COMPANY, INC.
                                
                                
                                By:    /S/ ROBERT B. COVALT
                                   ------------------------------
                                   Name:  ROBERT B. COVALT
                                         ------------------------
                                   Title: CHAIRMAN
                                         ------------------------
                                
                                SELLER:
                                
                                SOVEREIGN SPECIALTY CHEMICALS, INC.

                                By:    /S/ ROBERT B. COVALT
                                   ------------------------------
                                   Name:  ROBERT B. COVALT
                                         ------------------------
                                   Title: CHAIRMAN, PRESIDENT AND CEO
                                         ------------------------


                                       41
<PAGE>

BURKE INDUSTRIES, INC.
ANNEX 1 - List of Management Bonuses paid at Closing


<TABLE>
<CAPTION>

<S>                                              <C>  
          Rocco Genovese                            $168,000
          Reed Wolthausen                            112,000
          David Worthington                           70,000
          Robert Pitman                               50,000
          Robert Harrison                             50,000
          Hisham Alameddine                           40,000
          Craig Carnes                                40,000
          Robert Engle                                40,000
          Tom Sobol                                   20,000
          Roseann Dybas                               10,000
                                                 -------------
                                                    $600,000
                                                 -------------
                                                 -------------

</TABLE>


<PAGE>

                                    SCHEDULE 4(c)

                         AUTHORITY, APPROVALS AND CONSENTS


1.   Consent of RTC Properties, Inc. under the Agreement of Lease dated
     December 1, 1988 between RTC Properties, Inc. and Mercer.*

     -    Extension and First Amendment of Lease dated January 13, 1994 between
          RTC Properties, Inc. and Mercer.
          
     -    Extension and Second Amendment of Lease dated January 23, 1995 between
          RTC Properties, Inc. and Mercer.
          
     -    Extension and Third Amendment of Lease dated March 26, 1997 between
          RTC Properties, Inc. and Mercer.

2.   Consent of the Childs Family Trust u/t/a and A.G. Gardner Family Trust
     u/t/a under the Standard Industrial/Commercial Single-Tenant Lease-Gross
     dated June 22, 1994 between The Childs Family Trust u/t/a of April 30, 1981
     and The A.G. Gardner Family Trust u/t/a of March 3, 1981 dba LANDCO and
     Mercer.*
     
3.   Consent of Chase Manhattan Bank pursuant to that certain Amended and
     Restated Credit Agreement dated August 5, 1997 pursuant to which Mercer is
     a party.



GENERAL

     Amendments to or filings with respect to permits may have to be made as a
     result of consummation of the Closing.

<PAGE>

                                   SCHEDULE 4(d)
                                          
                                    SUBSIDIARIES
                                          
                                          
Mercer Products Company, Inc. owns one (1) share of Pine Meadows Golf Estates,
Inc./Stock Certificate NO. 1445 issued April 29, 1986.  This share is owned in
connection with a country club membership.

<PAGE>

                                   SCHEDULE 4(e)
                                          
                         EXCEPTIONS TO FINANCIAL STATEMENTS
                                          
                                          
     The Financial Statements fairly present the financial condition of Mercer
except as set forth below:

          1.   The Most Recent Financial Statements (the period from August 5,
1997 thorough December 31, 1997) which have been prepared in accordance with
GAAP may not be consistent with prior periods.

          2.   The Most Recent Financial Statements have been prepared on
Sovereign's basis of accounting in accordance with GAAP.  However, the Financial
Statements prior to August 5, 1997 (i.e., during the ownership by Laporte PLC)
(the "Laporte Financial Statements"), were accounted for on Laporte PLC's basis
of accounting (i.e., based on Laporte PLC's cost of its acquisition) and
reflecting Laporte PLC's accounting policies and procedures.

          3.   The information contained in the Laporte Financial Statements was
prepared based on Mercer's internal accounting records and do not include (i)
United States/United Kingdom GAAP adjustments and (ii) push-down accounting for
goodwill, debt and income taxes.

          4.   Certain of the expenses recognized by Mercer as allocated by 
Laporte PLC in the Laporte Financial Statements may or may not reflect the 
true operating expenses that Mercer would have incurred had it operated as a 
stand-alone entity during such time periods.

<PAGE>

                                    SCHEDULE 4(f)

                                    CERTAIN EVENTS


4(e)(ii)  Bayshore Vinyl Compounds Inc. supply contract for vinyl dated
          January 1, 1998.

4(e)(iii) Termination of contract with AlphaGary Corporation pursuant to
          settlement letter dated February 4, 1998.

<PAGE>

                                    SCHEDULE 4(h)

                                     TAX MATTERS


1.   Prior to August 5, 1997, Mercer was included in the consolidated federal
     income tax returns filed by the group of Laporte Inc.  Prior to January 1,
     1996, Mercer was included in an affiliated group filing consolidated
     federal income tax returns of which Evode U.S.A., Inc. was the common
     parent (the "EVODE GROUP"). 

2.   The Evode Group's federal income tax returns have been audited through the
     period ending December 31, 1993.  Amended California, Florida, New Jersey,
     and North Carolina state income tax returns reflecting those adjustments
     are being prepared for Mercer for the year ended October 31, 1992.

3.   The statute of limitations for Laporte Inc.'s consolidated federal tax
     return for the year ended December 31, 1993 has been extended to
     December 31, 1997.

<PAGE>

                                    SCHEDULE 4(j)

                                    REAL PROPERTY

OWNED BY MERCER

     1.   37235 State Road 19, Umatilla, Florida  32784


LEASED BY MERCER

     1.   Standard Industrial/Commercial Single-Tenant Lease-Gross dated June
          22, 1994 between The Childs Family Trust u/t/a of 4/30/81 and The A.G.
          Gardner Family Trust u/t/a of 3/5/81 dba LANDCO and Mercer.

     2.   Agreement of Lease dated December 1, 1988 between RTC Properties, Inc.
          and Mercer.

          -    Extension and First Amendment of Lease dated January 13, 1994
               between RTC Properties, Inc. and Mercer.
               
          -    Extension and Second Amendment of Lease dated January 23, 1995
               between RTC Properties, Inc. and Mercer.
               
          -    Extension and Third Amendment of Lease dated March 27, 1997
               between RTC Properties, Inc. and Mercer.

<PAGE>

                                    SCHEDULE 4(k)

                                INTELLECTUAL PROPERTY

PATENTS:

     None.

TRADEMARKS

-    DOCKSIDERS & DESIGN
          US Trademark Registration No. 1,372,591
          Registered November 26, 1985
          Expires November 26, 2005
     
-    MAXXI-TREAD
          US Trademark Registration No. 1,355,586
          Registered August 20, 1985
          Expires August 20, 2005
     
-    MERCER FRICTION GRIP
          US Trademark Registration No. 861,475
          Registered December 3, 1968
          Renewed September 19, 1989
     
-    MERCER & DESIGN
          US Trademark Registration No. 1,810,789
          Registered December 14, 1993
          Expires December 14, 2003
     
-    MERCER
          US Trademark Registration No. 1,851,484
          Registered August 30, 1994
          Expires August 30, 2004
     
-    MIRROR-FINISH
          US Trademark Registration No. 1,782,795
          Registered July 20, 1993
          Expires July 20, 2003

<PAGE>
     
-    RUBBERLYTE
          US Trademark Registration No. 1,524,506
          Registered February 14, 1989
          Expires February 14, 2009
     
-    RUBBERMYTE
          US Trademark Registration No. 1,641,500
          Registered July 23, 1991
          Expires July 23, 2001
     
-    UNICOLOR
          US Trademark Registration No. 1,829,424
          Registered April 5, 1994
          Expires April 5, 2004


LICENSES

-    Pursuant to the Tamms Supply Agreement dated March 4, 1997, Mercer granted
     Tamms Acquisition Corporation a royalty-free license to use the polymer and
     know-how to manufacture certain waterstop products.

-    Pursuant to the Segue Manufacturing, Distribution and Sales Sublicensing
     Agreement dated November 5, 1997, Segue, Inc. granted Mercer a sublicense
     to manufacture, distribute, sell and export the Step Loc II carpet base.


-    Pursuant to the License Agreement dated December 5, 1997 with Future
     Industries Corporation, Future licensed to Mercer the right to manufacturer
     and sell flexible transition mouldings.

<PAGE>

                                    SCHEDULE 4(l)

                                     WARRANTIES

                None.  See attached for a description of warranty 
             claims against Mercer in the aggregate amount of $34,460.

<PAGE>
                                    SCHEDULE 4(m)

                                  MATERIAL CONTRACTS

1.   Supply Agreement dated March 4, 1997 between Mercer and Tamms Acquisition
     Corporation.

2.   In connection with finding a buyer for Mercer, Laporte plc and Seller
     entered into various confidentiality agreements with potential buyers. 
     Although these agreements are not in the name of Mercer, Seller has the
     right and will cause Laporte plc to reasonably cooperate with Mercer at
     Mercer's expense in enforcing such agreements for the benefit of Mercer.

3.   The Biltrite Corporation Contract dated December 14, 1994 for the supply to
     Mercer of Private-label rubber stamp stair treads products.

4.   Master Truck Leases with Clark Rental Systems and Rollins Leasing Corp.

5.   Bayshore Vinyl Compounds Inc. supply contract to Mercer for PVC Compound.

6.   Purchase Order with OSI Sealants, Inc., an affiliate of Mercer.

7    Undertaking dated August 5, 1997 by Mercer, Evode-Tanner Industries, Inc.
     and Laporte Construction Chemicals North America, Inc. in favor of ATO
     Findley S.A.

8.   Segue Manufacturing, Distribution and Sales Sublicensing Agreement dated
     November 5, 1997, between Segue, Inc. and Mercer.

9.   Supply Agreement dated April 21, 1997 between American Biltrite (Canada)
     Ltd. and Mercer.

10   Non-Firm Electric Service Agreement dated May 20, 1996, between Florida
     Power Corporation and Mercer.

11.  StarNet Sales Agreement dated December 5, 1996, between StarNet Commercial
     Flooring, Inc. and Mercer.

12.  Non-Disclosure Agreement dated July 21, 1995, between Layman Plastics
     Corporation and Mercer.

13   Non-Disclosure Agreement dated July 21, 1995, between Polymer Recovery
     Corporation and Mercer.

14   Non-Disclosure Agreement with Benny Wood and Martin Anderson dated
     January 29, 1991.

SEE ALSO SCHEDULES 4(c) AND 4(p).

<PAGE>

                                    SCHEDULE 4(n)

                                      INSURANCE


Insurance provided by Laporte Inc. prior to August 5, 1997:


 CLASS                     INSURER                    POLICY NO.
 -----                     -------                    ----------

 All Risks                 Royal & Sun Alliance       0741/89

 Global Primary Liability  Royal Insurance            As applicable

 Global DIC/DIL            Royal & Sun Alliance       YMM 817193

 Excess Layers             AIG Europe & Others        3200799696

                           Zurich Ins. & Others       16/50962896

                           XL Europe                  XLEXS-1

 Fidelity Guarantee        AIG Europe                 3171007393

 Directors & Officers      AIG Europe                 33001182

 Liability


The All Risks and Primary Liability policies are part of Global programs with
local policies being issued by Royal & Sun Alliance, an affiliate of Laporte
plc.  Master policies in the UK provide DIC/DIL cover above the local policies


Insurance provided by Seller on and after August 5, 1997 is listed on the
attached Summary of Insurance.

<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                                      PROPERTY
<TABLE>
<S>                 <C>
NAMED 
INSURED:            Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:            National Union Fire Insurance Company of Pittsburgh, PA

POLICY NO.:         ST2604484

TERM:               August 4, 1997 to August 4, 1998

COVERAGE:           Property

LIMIT:              $29,246,701  Limit on:
                    Real and Personal Property,
                    Business Interruption,
                    Extra Expense,
                    Contingent Business Interruption,
                    Contingent Extra Expense for Chemical Manufacturers
                    $29,246,701  Boiler & Machinery Limit of Liability
                    BOILER & MACHINERY SUBLIMITS:
                    -----------------------------
                    $    50,000  Expediting Expenses Per Occurrence
                    $    50,000  Hazardous Substances Per Occurrence
                    $    50,000  Ammonia Contamination Per Occurrence
                    $    50,000  Water Damage Per Occurrence

DEDUCTIBLES 
(PER OCCURRENCE):   $    15,000  Property EXCEPT

                    $    25,000  Earthquake
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                         MERCER PRODUCTS COMPANY, INC.
                                   PROPERTY

<TABLE>
<S>                 <C>
DEDUCTIBLES 
(PER OCCURRENCE)
CONT.:              $    25,000 @ Locations: 
                    - Mercer Products, 9070 Bridgeport, Rancho Cucamonga 
                    California Earthquake - Business Interruption - 360 Hours 

                    $    25,000  Flood (Property Damage)
                    FLOOD ZONE A (PROPERTY DAMAGE):
                    -------------------------------
                    2% of TIV at risk, but not less than $500,000
                    Contents/$500,000 Bldgs.
                    FLOOD ZONE B (BUSINESS INTERRUPTION): - 360 Hours
                    -------------------------------------
                    Windstorm:
                    2% of TIV at risk, but not less than $25,000

                    120 Hours Business Interruption
                    120 Hours Contingent Business Interruption
                    120 Hours Extra Expense
                    120 Hours Contingent Extra Expense

                    $  5,000  Transit
                    $  5,000  Fine Arts
                    $  5,000  EDP Equipment/Media

                    BOILER & MACHINERY DEDUCTIBLES:
                    -------------------------------
                    $ 15,000    Property Damage
                    120 Hours   Business Interruption/Extra Expense

SUBLIMTS:           $15,000,000 Annual Aggregate - Earthquake
                    $ 1,000,000 Annual Aggregate - California Earthquake 
                                Excluding Unnamed or Newly Acquired Property 
                    $15,000,000 Annual Aggregate - Flood 
                    $10,000,000 Annual Aggregate - Flood Zone A 
                            25% Annual Aggregate - Debris Removal - The greater
                                of or $1,000,000
                    $    25,000 Annual Aggregate - Pollution - Real & Personal 
                                Property
                    $    25,000 Annual Aggregate - Business Interruption -
                                Pollution
                    $ 1,000,000 Per Occurrence - EDP Equipment/Media
                    $ 1,000,000 Per Occurrence - Transit
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                         MERCER PRODUCTS COMPANY, INC.
                                   PROPERTY

<TABLE>
<S>                <C>            <C>
SUBLIMITS CONT.:   $  1,000,000   Per Occurrence - Newly Acquired Real &
                                  Personal Property with One Hundred and Eighty 
                                  (180) day reporting excluding Flood and 
                                  Earthquake
                   $  1,000,000   Per Occurrence - Valuable Papers
                   $    500,000   Per Occurrence - Personal Property at Unnamed 
                                  Locations excluding Flood and Earthquake
                   $  1,000,000   Per Occurrence - Demolition
                   $  1,000,000   Per Occurrence - Increased Cost of 
                                  Construction
                   $  1,000,000   Per Occurrence - Contingent Liability from the
                                  operation of building laws combined property 
                                  damage/business Interruption
                   $  5,000,000   Per Occurrence - Off Premises Power
                                  Directly Supplying (Combined Property Damage/
                                  Business Interruption)
                   $  5,000,000   Extra Expense

COVERAGE
EXTENSIONS:        $    500,000   Newly Acquired EDP Equipment with One Hundred 
                                  (100) Day Reporting Excluding Flood and 
                                  Earthquake
                   $    250,000   Exhibition Floater
                   $     10,000   Trees, Shrubs and Plants
                   $  1,000,000   Unscheduled Contingent Business Interruption
                   $     25,000   Fire Department Service Charges
                   $  1,000,000   Expediting Expense Property
                   $  1,000,000   Temporary Removal
                   $    100,000   Inventory and Appraisals
                        14 Days   Interruption by Civil Authority
                   $  1,000,000   Rents and Rental Values/Lease Hold Interest
                   $  1,000,000   Fine Arts

VALUATION:         Property - Replacement Cost
                   Business Interruption - Actual Loss Sustained
                   Stock - Manufacturer's Selling Price
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                       MERCER PRODUCTS COMPANY, INC.
                           STATEMENT OF VALUES

<TABLE>
<CAPTION>
                      MERCER PRODUCTS COMPANY
                      <C>           <S>
                      $ 12,702,990  Buildings, Machinery, Plant, Equipment and 
                                    other Contents
                      $  3,050,000  Stock/Inventory
                      $ 13,493,711  Business Interruption
                       -----------
                      $ 29,246,701
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                                 MOTOR TRUCK CARGO
<TABLE>
<S>            <C>
NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       Hartford Fire Insurance Company

POLICY NO.:    57MS FI6500

TERM:          October 14, 1997 to October 14, 1998

COVERAGE:      Motor Truck Cargo
               Risks of direct physical loss subject to policy terms, conditions
               and exclusions

LIMIT:         $ 100,000   Limit - Any One Truck

DEDUCTIBLE:    $   2,500
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------

<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                       GENERAL LIABILITY/POLLUTION LIABILITY
<TABLE>
<S>            <C>
NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       American Int'l Specialty Lines Ins. Co. (Non-Admitted) 
               AIG Group

POLICY NO.:    819 06 56

TERM:          August 4, 1997 to August 4, 1998

COVERAGE:      General Liability/Pollution Liability

LIMIT:         $ 2,000,000  General Aggregate Limit (Other than Prods/Comp. Ops)
               $ 2,000,000  Products/Completed Operations Aggregate Limit
               $ 1,000,000  Personal & Advertising Injury Limit
               $ 1,000,000  Pollution Legal Liability
               $ 1,000,000  Each Occurrence Limit (Coverages A, B, & C only)
               $   100,000  Fire Damage Limit
               $    10,000  Medical Expense

DEDUCTIBLE:    $    50,000  Deductible per loss applies to Coverage D
                            (Pollution Legal Liability)

SPECIAL
CONDITIONS:    Applicable to Coverages A, B, C:
               -  Total Pollution Exclusion
               -  Exclusion - Waste Disposal Sites
               -  Testing E&O Exclusion
               -  Radioactive Matter Exclusion
               -  Lead Exclusion
               -  Asbestos Exclusion
               -  Nuclear Energy Liability Exclusion
               -  Professional Liability Exclusion - All Professional Services
               -  Owned Underground Storage Tank Removal
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                         SOVEREIGN SPECIALTY CHEMICAL, INC.
                       GENERAL LIABILITY/POLLUTION LIABILITY

SPECIAL
CONDITIONS:    -  Owned Disposal Site Exclusion
               -  Employment Related Practice Exclusion
               -  Employee Bodily Injury Exclusion
               -  Blanket Additional Insured Endorsement
               -  Cancellation notice - 60 days except for non-pay
               -  Knowledge of Occurrence/Notice of Occurrence/Unintentional
                  E&O
               -  Cross Suits Exclusion
               -  Amendment to Pollution Exclusion with Products Exception

               APPLICABLE TO COVERAGE D (POLLUTION):
               ------------------------------------
               -  Third party claims for off-site cleanup of new conditions,
                  bodily injury and property damage.
               -  Retroactive Date:  8/1/97
               -  Covered manufacturing locations:
                  - Eutis, FL


THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------

<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                               COMMERCIAL AUTOMOBILE
<TABLE>
<S>            <C>
NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       AIG Environmental (AIG Group)

POLICY NO.:    CA2772058

TERM:          August 4, 1997 to August 4, 1998

COVERAGE:      Commercial Automobile

LIMIT:         $ 1,000,000  Combined Bodily Injury and Property Damage
               $ 1,000,000  Uninsured/Underinsured Motorists
                 Statutory  Personal Injury Protection
               $    10,000  Medical Payments
               $     1,000  Ded. Comprehensive and Collision on Private
                            Passenger Types
               $     1,000  Ded. Comprehensive and Collision on XHvy 
                            Trucks

SPECIAL
CONDITIONS:    Automobile Endorsements:
               -  Applicable State Forms
               -  Drive Other Car Coverage
               -  MCS-90
               -  Composite Rate Endorsement
               -  Broad Form Named Insured
               -  Knowledge/Notice/Unintentional E&O/Cross Liability
                  Endorsement
               -  Independent Counsel Endorsement
               -  Misdelivery of Liquid Products

VEHICLES:      9 Private Passenger
               5 Heavy Tractors
               8 Trailers
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>


                           MERCER PRODUCTS COMPANY, INC.
                                 UMBRELLA LIABILITY
<TABLE>
<S>            <C>
NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       National Union Fire Insurance Company of Pittsburgh, PA

POLICY NO.:    BE3570117

TERM:          August 4, 1997 to August 4, 1998

COVERAGE:      Umbrella Liability

LIMIT:         $ 50,000,000  Each Occurrence for Bodily Injury and
                             Property Damage
               $ 50,000,000  General Aggregate
               $ 50,000,000  Products/Completed Operations Aggregate

DEDUCTIBLE:    $     25,000  Self-Insured Retention each occurrence that
                             is not covered by Underlying Insurance
SPECIAL
CONDITIONS:    -  Named Peril & Time Element (7/21) Pollution excess of a
                  $1,000,000 indemnity payments only retention each occurrence
                  without aggregate
               -  Follow form Incidental Medical Malpractice Liability
                  Endorsement
               -  Follow form Employee Benefits Liability
               -  Uninsured Motorists Coverage Option
               -  Follow form Foreign Liability
               -  Notice of Occurrence
               -  Knowledge of Occurrence
               -  Unintentional Errors & Omissions
               -  MCS 90 as required
               It is also agreed that with respects to pollution liability
               coverage provided in the primary General Liability policy,
               defense expense is in addition to the limit of liability, subject
               to a sublimit of $250,000 annual aggregate.  This policy will
               recognize this fact and drop down over the possible reduced 
               limit in the event of a loss(es) that would be covered under 
               Named Peril and Time Element Pollution Endorsement.
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                                  EXCESS LIABILITY
<TABLE>
<S>            <C>
NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       Zurich American Insurance Group

POLICY NO.:    EUO 2809339-N

TERM:          August 4, 1997 to August 4, 1998

COVERAGE:      Excess Liability

LIMIT:         $50,000,000  Per Occurrence
               $50,000,000  Products/Completed Operations Aggregate
               $50,000,000  General Aggregate except for Auto

               Excess of 
               $50,000,000  Underlying Umbrella Policy 

ADDITIONAL
ENDORSEMENTS:  -  Form - Pay on Behalf of
               -  Delete Non-Concurrency wording in Section III (a) (ii) and 
                  VII.2
               -  Delete Item 7 of Declaration Page
               -  90 Days Notice of Cancellation
               -  Lead Exclusion

               General Aggregate applies separately in excess of each 
               aggregate limit provided by the policy of policies listed in the 
               schedule of underlying insurances, but Zurich will not provide 
               unaggregated limits except for auto.
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                         MERCER PRODUCTS COMPANY, INC.
                           POLLUTION LEGAL LIABILITY

NAMED
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       American International Specialty Lines Insurance Company

POLICY NO.:    PLS-8193264

TERM:          August 4, 1997 to August 4, 2002

COVERAGE:      Pollution Legal Liability

LIMIT:         $ 5,000,000      Each Incident Limit
               $ 5,000,000      Coverage Section Aggregate
               $ 5,000,000      Policy Aggregate Limit

DEDUCTIBLE:    $   500,000

SPECIAL
CONDITIONS:    Coverage Sections: 

               C - 3rd Party Claims for On-Site Cleanup of Pre-Existing
                   Conditions
               G - 3rd Party Claims for Off-Site Cleanup of Pre-Existing
                   Conditions
               I - 3rd Party Claims for Off-Site Property Damage
               J - 3rd Party Claims for Off-Site Bodily Injury

               Covered Location Only:

                    37236 State Road 19, Eustis, FL


THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO 
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                             POLLUTION LEGAL LIABILITY

SUDDEN AND GRADUAL POLLUTION WILL BE COVERED USING AMERICAN INTERNATIONAL
SPECIALTY LINES INSURANCE COMPANY (AISLIC) FORM #67852 (5/97) MODIFIED AS
FOLLOWS:

1.   No coverage will be provided for any underground storage tank(s) until
     satisfactory integrity testing results (AISLIC acceptable method)
     certifying that the tanks are tight to the NFPA standard of plus/minus 0.05
     gph, are received, approved and on file with the underwriter. Coverage will
     only be provided for those underground storage tanks specifically scheduled
     onto the policy by endorsement.

2.   No coverage will be provided for loss arising out of pollution conditions
     at or emanating from the covered locations occurring after August 4, 1997
     (inception of the EAGLE policy bound by AIG Environmental's NYC
     underwriting office).

3.   No coverage will be provided for loss arising out of pollution conditions
     at the 37235 State Road 19, Eustis, FL site as identified in the October
     1996 Environmental Review performed by Delta Environmental:

          -    lead contamination of soil and groundwater associated with the
               former cooling water discharge

          -    lead and cadmium contamination of soil and groundwater related to
               baghouse operations 

          -    soil and groundwater contamination arising out of the former
               practice of using waste oil for on-site dust control


THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                             COMMERCIAL CRIME COVERAGE
<TABLE>
<S>            <C>
NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       National Union Fire Insurance Company of Pittsburgh, PA

POLICY NO.:    486 09 92

TERM:          August 4, 1997 to August 4, 1998

COVERAGE:      Commercial Crime Coverage

LIMIT:         $ 1,000,000 Limit of Liability (Insuring Agreements I-V)

DEDUCTIBLE:    $    25,000 Retention
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                              PENSION TRUST LIABILITY

<TABLE>
<S>                 <C>
NAMED 
INSURED:            Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:            National Union Fire Insurance Company of Pittsburgh, PA

POLICY NO.:         486 09 94

TERM:               August 4, 1997 to August 4, 1998

COVERAGE:           Pension Trust Liability

LIMIT:              $ 1,000,000 Limit of Liability

DEDUCTIBLE:         $    10,000  Retention
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                          DIRECTORS' & OFFICERS' LIABILITY

NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       National Union Fire Insurance Company of Pittsburgh, PA

POLICY NO.:    486-09-15

TERM:          August 4, 1997 to August 4, 1998

COVERAGE:      Directors' & Officers' Liability

LIMIT:         $ 5,000,000   Limit of Liability

DEDUCTIBLE:    $   100,000   Retention

SPECIAL
CONDITIONS:    -    Coinsurance (Security Claims):  00%
               -    Continuity Dates:  Coverage A&B :  7/10/97
                                       Coverage B(i):  7/10/97


THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                   CORPORATE KIDNAP & RANSOM/EXTORTION INSURANCE
<TABLE>
<S>            <C>
NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       National Union Fire Insurance Company of Pittsburgh, PA

POLICY NO.:    646-6294

TERM:          August 4, 1997 to August 4, 1998

COVERAGE:      Corporate Kidnap & Ransom/Extortion Insurance

LIMIT:         $ 1,000,000 Each Loss
               $ Unlimited Each Policy Year Aggregate

DEDUCTIBLE:    Nil
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                           MERCER PRODUCTS COMPANY, INC.
                     WORKERS' COMPENSATION/EMPLOYERS LIABILITY

<TABLE>
<S>            <C>
NAMED 
INSURED:       Mercer Products Company, Inc., A New Jersey Corporation

COMPANY:       American Home Assurance Co. (AIG Group)

POLICY NO.:    WC5715890

TERM:          August 4, 1997 to August 4, 1998

COVERAGE:      Workers' Compensation/Employers Liability

LIMIT:         Statutory Benefits in State of Hire

               Employers Liability:
               $ 1,000,000  Each Accident
               $ 1,000,000  Disease - Policy Limit
               $ 1,000,000  Disease - Each Employee
               (Stop Gap Employers Liability applies in Monopolistic States)

SPECIAL
CONDITIONS:    Terms & Conditions:
               -  Voluntary Compensation
               -  Foreign Voluntary Compensation
                  -  Bodily Injury from Endemic Disease
                  -  $100,000 limit per employee Repatriation Expense
               -  Federal Employers Liability Act Coverage included
               -  Longshore & Harbor Workers Compensation Coverage
               -  Defense Base Act Coverage
               -  Maritime Employers Liability
               -  Federal Acts
               -  All Executive Officers covered for Bodily Injury
               -  60 Day Notice of Cancellation except for non-pay
</TABLE>

THE ABOVE SUMMARY IS PRESENTED AS A GENERAL COMMENTARY ON THE POLICY BUT IN NO
WAY AMENDS OR REPLACES THE WORDING OF THIS POLICY.  IN THE EVENT OF ANY
DISCREPANCY BETWEEN THIS SUMMARY AND THE POLICY, THE POLICY WORDING WILL
PREVAIL.
-------------------------------------------------------------------------------
<PAGE>

                                    SCHEDULE 4(o)

                                      LITIGATION


PENDING LITIGATION:

     -    JOHN J. IRWIN V. MERCER PRODUCTS COMPANY, INC., ET AL.

     -    BADALIANS V. ALEKNA CONSTRUCTION, INC., ET AL. V. UNITED STATES
          MINERAL PRODUCTS COMPANY V. ENJEM'S, INC. V. MERCER PRODUCTS COMPANY,
          INC. ET. AL. 

     -    HAMMOND V. ALEKNA CONSTRUCTION, INC., ET. AL. V. UNITED STATES MINERAL
          PRODUCTS COMPANY V. ENJEM'S, INC. V. MERCER PRODUCTS COMPANY, INC. ET.
          AL.

     -    JONES V. ALEKNA CONSTRUCTION, INC., ET. AL. V. UNITED STATES MINERAL
          PRODUCTS COMPANY V. ENJEM'S, INC. V. MERCER PRODUCTS COMPANY, INC. ET.
          AL.

     -    O'SHEA V. ALEKNA CONSTRUCTION, INC, ET AL. V. UNITED STATES MINERAL
          PRODUCTS COMPANY V. ENJEM'S, INC. V. MERCER PRODUCTS COMPANY, INC. ET.
          AL..

     -    SISTI V. ALEKNA CONSTRUCTION, INC, ET AL. V. UNITED STATES MINERAL
          PRODUCTS COMPANY V. ENJEM'S, INC. V. MERCER PRODUCTS COMPANY, INC. ET.
          AL..


THREATENED LITIGATION:

          None.

<PAGE>

                                    SCHEDULE 4(p)

                              EMPLOYEES; LABOR RELATIONS


Agreement dated November 16, 1995 between Mercer and the Glass, Molders,
Pottery, Plastics and Allied Workers International Union (AFL-CIO, CLC) and its
Local Union No. 211 Eustis, Florida

Effective Date:  December 1, 1995 through December 31, 1998.

Mercer has approximately 120 employees.

<PAGE>

                                    SCHEDULE 4(q)

                                EMPLOYEE BENEFIT PLANS


A.   BENEFIT PLANS

     SOVEREIGN

     1.   Sovereign 401(k) Plan
     
     2.   Healthcare
          -    Medical (pre-tax employee contributions)
          -    Dental  (pre-tax employee contributions)
          -    Prescription Drug

     3.   Flexible Spending Plans (pre-tax)
          -    Healthcare
          -    Dependent Care

     4.   Life Insurance
          -    Company provided (2x annual salary up to $50,000 maximum)
          -    Matching ADD
          -    Optional Life
          -    Optional Dependent Life
          -    Optional ADD
          -    Optional Dependent ADD


     5.   Long-Term Disability

     6.   Employee Assistance Plan

     7.   Workers Compensation

     8.   Tuition Assistance

     9.   Business Travel Accident Insurance

     MERCER

     1.   Bonus and Sales Incentive Plans

<PAGE>

     2.   Short-Term Disability Income (Salary Continuance)

     3.   Company cars

     4.   Severance

     5.   Vacation/Holidays

     6.   Leave of Absence (jury duty, bereavement, personal days)





B.   COMPLIANCE

     Mercer has a severance policy.  There is neither a written plan document
     nor a summary plan description for these policies.  These policies have
     been reported on the annual Form 5500 filed by Laporte Inc.  Generally, the
     policy is one week of severance per year of service with Mercer.


<PAGE>

                                    SCHEDULE 4(r)
                                ENVIRONMENTAL MATTERS

All matters disclosed in or arising out of facts and circumstances discussed in
the following environmental reports:

     -    Environmental Review
          Mercer Products Company, Inc.
          Eustis, Florida
          Delta Project No. E096-068
          Prepared by Delta Environmental Consultants, Inc.
          October 1996

     -    Environmental Review
          Mercer Products Company, Inc. &
          Laporte Construction Chemicals North America, Inc.
          Leased Warehouses/Richmond, Washington/
          South Kearny, New Jersey/Rancho Cucamonga, California
          Delta Project No. E096-068
          Prepared by Delta Environmental Consultants, Inc.
          October 1996

     -    Environmental Review
          Mercer Products Company, Inc.
          37235 State Road 19
          Bustis, Florida
          Project No. 771463.0204
          Prepared by IT Corporation
          Submitted to Sovereign Specialty Chemicals, L.P.
          July 1997

MERCER PERMITS

     -    Lake County (Florida) Occupational License No. 501-0000033

     -    See letter from the Florida Department of Environmental Regulation
          dated February 5, 1992 re: Plastic Extruding Baghouse (no air permit
          required).

     -    See letter from the Florida Department of Environmental Regulation
          dated April 7, 1992 re: Lake County - IW/Mercer Products Company/
          Closed Loop Cooling System/Request for Exemption (no water permit
          required).

<PAGE>

OSHA

The following issues are being addressed at the Mercer facility:

-    The use of flexible electrical cable will be replaced with fixed conduit or
     other compliant device to the extent required by OSHA regulations.

<PAGE>

                                    SCHEDULE 4(t)

                           TRANSACTIONS WITH AFFILIATES


Mercer has an arrangement with the AlphaGary Corporation, an affiliate of
Laporte Inc. pursuant to which Mercer purchases plastic from AlphaGary on a
purchase order basis.  There is no obligation on the part of either party to
continue this arrangement.  AlphaGary had tried to require Mercer to buy its
plastic requirements for 1998 from AlphaGary based on an alleged oral
agreement. This arrangement is now being settled by Mercer's purchase of up to
$81,415.81 worth of inventory from AlphaGary pursuant to a letter agreement
dated February 4, 1998.

OSI Sealants, Inc. is a customer of Mercer.


<PAGE>

                                    SCHEDULE 6(g)

                                  LIST OF EMPLOYEES



                                [PREVIOUSLY PROVIDED]

<PAGE>

                                   SCHEDULE 6(i)

                                 SEVERANCE POLICY




     One week of severance pay is provided for each year of service with Mercer.