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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-K
(Mark One)
[  X ]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES AND EXCHANGE ACT OF 1934
                  For the fiscal year ended September 27, 1998
                                       OR
[     ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                  For the transition period from ________  to  _______

                         Commission file number 0-20686

                         UNIROYAL TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)

                   Delaware                               65-0341868
          (State or other jurisdiction of               (I.R.S. Employer
           incorporation or organization)              Identification No.)

           Two North Tamiami Trail, Suite 900
                 Sarasota, Florida                        34236-5568
         (Address of principal executive offices)         (Zip Code)

                                 (941) 361-2100
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class           Name  of  each  exchange  on  which registered    
       None                                 Not Applicable

Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, par value $.01 per share
                               (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X]   No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (29,405 of this chapter) is not contained herein, and will not
be contained,  to the best of  registrant's  knowledge,  in definitive  proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

As of November 30, 1998, the aggregate  market value of the voting stock held by
non-affiliates  of the registrant  (assuming for this purpose that all directors
and officers of the registrant and all holders of 5% or more of the common stock
of the registrant are affiliates)  was  approximately  $51,654,000  based on the
closing price for the stock on November 30, 1998. The foregoing aggregate market
value is based on  issuance  of only 97% of the shares  authorized  for  initial
issuance;  the  registrant  believes that the foregoing  aggregate  market value
would be  approximately  $54,994,000  if all  10,000,000  shares  authorized for
initial issuance had been issued.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE 
PRECEDING FIVE YEARS:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
 Yes [X]    No [ ]


As of November 30, 1998, 12,481,257 shares of the registrant's common stock were
outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

Parts III - Portions of the registrant's definitive proxy statement to be issued
in connection with the registrant's annual meeting of stockholders to be held in
1999.

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<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

    
<S>                                                                             <C>
Part 1..........................................................................1              
Item 1. Business................................................................1
     General....................................................................1
     Corporate Developments.....................................................1
       High Performance Plastics, Inc...........................................1
       CIT Borrowing............................................................2
       Acquisition of ViPlex Corporation........................................2
       Sale of the Automotive Operation of the Coated Fabrics Segment...........2
       Transaction with Emcore Corporation......................................2
       Investment in Emcore Corporation.........................................2
     Business Segments..........................................................3
       High Performance Plastics Segment........................................3
       Coated Fabrics Segment...................................................8
       Specialty Adhesives Segment..............................................10
     Employees..................................................................12
     Trademarks and Patents.....................................................12
     Research and Development...................................................13
     Backlog....................................................................13
     Working Capital Items......................................................13
     Environmental Matters......................................................14
     History of Company.........................................................15
       Predecessor Companies....................................................15
       Reorganization...........................................................16
Item 2. Properties..............................................................18
Item 3. Legal Proceedings.......................................................18
Item 4. Submission of Matters to a Vote of Security Holders.....................19
Part II.........................................................................19
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...19
Item 6. Selected Financial Data.................................................20
Item 7. Management's Discussion and Analysis of Financial Condition
        and Results of Operations...............................................21
     Results Of Operations......................................................21
       Comparison of Fiscal 1998 with Fiscal 1997...............................21
       Comparison of Fiscal 1997 with Fiscal 1996...............................22
       Liquidity and Capital Resources..........................................24
       Effects of Inflation.....................................................24
       Year 2000................................................................25
       Forward Looking Information..............................................25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.............25
Item 8. Consolidated Financial Statements and Supplementary Data................26
Item 9. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure................................................26
Part III....................................................................... 26
Item 10. Directors and Executive Officers of the Registrant.....................26
Item 11. Executive Compensation................................................ 26
Item 12. Security Ownership of Certain Beneficial Owners and Management.........26
Item 13. Certain Relationships and Related Transactions.........................26
Part IV.........................................................................27
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.........27

Signatures......................................................................

Index to Financial Statements and Financial Statement Schedule..................

Exhibit Index...................................................................
</TABLE>
<PAGE>


Item 1.  Business

         General

                  Uniroyal Technology Corporation (the "Company") is a leader in
         the  development,  manufacture  and sale of a broad range of  materials
         employing  plastics and specialty  chemicals  technologies  used in the
         production  of  consumer,   commercial  and  industrial  products.  Its
         products,  many of which are based on proprietary  technology,  include
         thermoplastic  sheet for use in the  manufacture  of seating,  interior
         paneling and other  applications in the  transportation,  recreational,
         agricultural   and  industrial   vehicle  and  computer   manufacturing
         industries;  acrylic  sheet  for  use in the  manufacture  of  aircraft
         canopies,  cabin windows and  windshields,  tanning  shields and bullet
         resistant  barriers;  acrylic rods and tubes used in the manufacture of
         orthopedic devices and hard contact lenses; a wide selection of plastic
         vinyl coated fabrics for use in automobile and furniture manufacturing;
         and liquid  adhesives  and sealants for use in the  commercial  roofing
         industry  and in the  manufacture  of  furniture,  truck  trailers  and
         recreational   vehicles.   The  Company's   technologies  allow  it  to
         incorporate into its specialized  materials,  such as thermoplastic and
         acrylic sheets,  performance  characteristics  such as fire retardancy,
         static dissipation,  weatherability,  optical clarity, high strength to
         weight ratio,  light  filtration  capability and others required in the
         specialty  markets  on which  it  focuses.  The  Company  is a  leading
         supplier in such markets due to its ability to provide  materials  with
         such  performance  characteristics,  to customize such materials and to
         provide  technical and customer  support in connection  with the use of
         its products in manufacturing.

                  The  manufacturing  operations of the Company are conducted at
         twelve sites located in Florida, Indiana,  Delaware, Iowa, Connecticut,
         New Jersey,  California,  Georgia,  Ohio and  Wisconsin,  through  four
         business segments: High Performance Plastics, Coated Fabrics, Specialty
         Adhesives and Optoelectronics. The High Performance Plastics Segment of
         the  Company's   business   consists  of  the  Company's   wholly-owned
         subsidiary  High  Performance   Plastics,   Inc.  ("HPPI")  and  HPPI's
         wholly-owned  subsidiary,  ViPlex  Corporation.  Within  HPPI  are  two
         operating  divisions:   Royalite  Thermoplastics  ("Royalite"),   which
         manufactures   specialty  and  general  purpose   thermoplastic  sheet,
         injection molding resins,  color concentrates and extruded profiles and
         Polycast Technology ("Polycast"),  which manufactures acrylic sheet for
         the aerospace, specialty and general purpose markets as well as acrylic
         rods and tubes.  The Coated Fabrics Segment  manufactures the Company's
         line of vinyl  coated  fabrics  and  vinyl  laminated  composites.  The
         Specialty   Adhesives  Segment  (formerly,   the  Specialty  Foams  and
         Adhesives Segment),  manufactures liquid adhesives and sealants and the
         Optoelectronics  Segment will manufacture  epitaxial  wafers,  dies and
         package-ready dies used in high brightness light-emitting diodes (LEDs)
         once  planned   manufacturing   operations  commence.   See  "Corporate
         Developments - Transaction with Emcore Corporation."

                  The Company's Fiscal 1998 net sales were approximately  $220.6
         million.  Approximate  net  sales  for  each  of  the  Company's  three
         currently  operating  business  segments  during  such  period  were as
         follows:  High Performance Plastics - $128.6 million,  Coated Fabrics -
         $67.9 million,  and Specialty  Adhesives - $24.1  million.  For certain
         financial  information with respect to the Company's business segments,
         see "Note 18 to Consolidated  Financial Statements." The Company is the
         successor to an affiliated group of reorganized entities from which the
         Company acquired  substantially  all of its businesses in 1992 pursuant
         to a plan of reorganization adopted on September 27, 1992. See "History
         of the Company."

         Corporate Developments

                  The  following  are  certain  corporate   developments   which
         occurred in and  subsequent to Fiscal 1998.  The  descriptions  of such
         developments should be read in conjunction with the other parts of this
         Form 10-K and with the Consolidated  Financial  Statements and Notes to
         Consolidated Financial Statements and other financial information which
         form a part hereof.

                  High Performance Plastics, Inc.

                  On April 14, 1998, the Company  transferred  all of the assets
         of  its  High   Performance   Plastics   Segment  to  a  newly  created
         wholly-owned  subsidiary,  High Performance Plastics, Inc. On that same
         day HPPI as borrower, entered into a credit agreement with Uniroyal HPP
         Holdings, Inc. (the parent of HPPI and a wholly-owned subsidiary of the
         Company), the Company and certain banks, including Fleet National Bank,
         providing among other things, for the borrowing by HPPI of an aggregate
         principal  amount of up to $110 million.  On April 14, 1998,  HPPI paid
         approximately  $95  million  to the  Company,  which in turn  used such
         amount to defease the outstanding  11.75% Senior Secured Notes due June
         1,  2003  ("Senior  Secured  Notes")  including  the call  premium  and
         interest  accrued  through the call date and to pay down its  revolving
         line of credit with the CIT Group/Business  Credit,  Inc. ("CIT").  The
         redemption  of the  outstanding  Senior  Secured Notes was completed by
         June 1, 1998 at a call premium of 4.41%.

                  CIT Borrowing

                  On April 14, 1998,  the Company  entered into an Amendment and
         Consent  Agreement  with CIT whereby the Company's  existing  revolving
         credit  arrangement  was  amended to permit  the  Company to borrow the
         lesser of $10  million or the sum of 85% of eligible  receivables  plus
         55% of eligible inventories as defined in the agreement. The collateral
         securing the credit line does not include any assets of HPPI.

                  Acquisition of ViPlex Corporation

                  On May 22,  1998,  HPPI  acquired  100% of the common stock of
         ViPlex  Corporation,   an  acrylic  sheet  fabricator  for  the  marine
         industry, for $2.7 million, which was comprised of $1.7 million in cash
         and unsecured  promissory  notes  aggregating  $1.0 million  bearing an
         interest  rate of 6%.  ViPlex  Corporation  is being  merged  into HPPI
         effective December 31, 1998.

                  Sale of the Automotive Operation of the Coated Fabrics Segment

                  On October 17, 1997, the Company agreed to sell certain assets
         of the automotive  operation of the Coated Fabrics  Segment  located at
         the  Company's  Port  Clinton,  Ohio  facility for  approximately  $5.3
         million  plus the  value  of  purchased  inventories  and plus or minus
         adjustments   contingent  upon  the  transfer  of  certain   automobile
         programs. The Company received $4.9 million in July 1998 and expects to
         receive  approximately  $1.1  million  on or before  June 1999 based on
         obtaining  certain  customer  approvals.  During the fiscal  year ended
         September 27, 1998, the Company  recognized  approximately  $512,000 of
         income  relating  to  the  sale  of  the  automotive  operation.  As of
         September  29,  1996,  the Company  had  established  reserves  for the
         impairment  of assets to be  disposed  of related to the Port  Clinton,
         Ohio  automotive  operation of the Coated Fabrics  Segment.  Other than
         potential contingent payments the Company may receive, the Company does
         not expect to incur any further  significant  gain or loss  relating to
         the  sale.  For  further  description  of the  sale  of the  automotive
         operation of the Coated Fabrics  Segment,  see "Note 14 to Consolidated
         Financial Statements."

                  Transaction with Emcore Corporation

                  As  of  September  29,  1997,  the  Company   entered  into  a
         Technology  Agreement  with Emcore  Corporation  ("Emcore")  to acquire
         certain technology for the manufacture of epitaxial wafers used in high
         brightness  light emitting  diodes (LEDs) for lamps and display devices
         for license fees  aggregating up to  approximately  $5 million.  During
         Fiscal 1998 the Company paid $4.5 million in licensing  fees to Emcore.
         Uniroyal  Optoelectronics,  Inc.,  a  wholly-owned  subsidiary  of  the
         Company, entered into a joint venture, Uniroyal  Optoelectronics,  LLC,
         with  Emcore,  which is  managed  by  Uniroyal  Optoelectronics,  Inc.,
         whereby  the  joint  venture  will  purchase  machines  from  Emcore to
         manufacture epitaxial wafers, dies and package-ready dies and sell such
         products.  On or about July 31, 1998, the joint venture  entered into a
         lease for a facility  in Tampa,  Florida.  It is  anticipated  that the
         joint venture will begin production in such facility in early 1999.

                  Investment in Emcore Corporation

                  On November 30, 1998, the Company  purchased 642,857 shares of
         the Series I Redeemable Convertible Preferred Stock ("Preferred Stock")
         of Emcore for approximately $9.0 million ($14.00 per share). The shares
         were offered pursuant to a private placement by Emcore.

                  Dividends on the Preferred  Stock are  cumulative  and will be
         payable,  at Emcore's option, in cash or additional shares of Preferred
         Stock on March 31, June 30,  September 30 and  December 31,  commencing
         December 31, 1998 at the annual rate of 2% per share of Preferred Stock
         on the liquidation  preference  thereof  (equivalent to $0.28 per annum
         per share of Preferred Stock).

                  Shares of the Preferred  Stock are convertible at any time, at
         the  option of the  holders  thereof,  into  shares of common  stock of
         Emcore  on a one for one  basis,  subject  to  adjustment  for  certain
         events.  On November  30,  1998,  the  closing  sales price of Emcore's
         common stock on the NASDAQ National Market was $12.875.

                  The Preferred Stock is redeemable, in whole or in part, at the
         option of Emcore at any time  Emcore's  common  stock has  traded at or
         above $28.00 per share for 30  consecutive  trading days, at a price of
         $14.00 per share plus  accrued  and unpaid  dividends,  if any,  to the
         redemption date. Emcore is required to provide no less than 30 days and
         no more than 60 days notice of the redemption.  The shares of Preferred
         Stock are subject to  mandatory  redemption  by Emcore on November  17,
         2003.

                  On November 30, 1998, Emcore also made a capital  contribution
         to Uniroyal Optoelectronics, LLC of $5.0 million. The Company will fund
         its   equivalent   capital   contribution   to  the  joint  venture  of
         approximately $5.2 million as cash is required by the joint venture.

         Business Segments

                  High Performance Plastics Segment

                  The  High  Performance   Plastics  Segment  of  the  Company's
         business accounted for approximately  $128.6 million  (approximately 58
         percent  (58%)) of the  Company's net sales in Fiscal 1998. It consists
         of two divisions of HPPI:  Royalite,  which manufactures  thermoplastic
         products and Polycast,  which  manufactures  acrylic  products.  ViPlex
         Corporation fabricates acrylic products.

         Royalite - Thermoplastic Products

                  General

                  Royalite  is a leading  manufacturer  of custom  thermoplastic
         products.  Thermoplastics are polymers, such as acrylonitrile butadiene
         styrene  and  polyvinyl  chloride,  made  from  the  polymerization  of
         monomers,  which can be  reshaped  after  they have been  formed by the
         application  of  heat  and  are  used  in  the  manufacture  of a  wide
         assortment of commercial and consumer products. The division's products
         include  thermoplastic  sheet,  injection  molding  resins and extruded
         profiles.

                  Thermoplastic  sheet is  manufactured  by the  Company  from a
         variety of polymers and chemical additives and is constructed either of
         solid plastic, a core of inexpensive  plastic covered with a thin layer
         of  high-quality  thermoplastic  or a base or substrate of plastic foam
         surrounded   by   solid   thermoplastic.   It  is  sold  to   equipment
         manufacturers,  who incorporate  the sheet into their products;  custom
         fabricators,  who cut and form the sheet for specific  applications and
         supply finished components to original equipment  manufacturers (OEMs);
         and  distributors,  who resell raw sheet to equipment  manufacturers or
         custom fabricators. The Company manufactures two types of thermoplastic
         sheet:  specialized  sheet,  which is made by varying  the  polymer and
         chemical  components  of the  sheet  in  order  to  achieve  particular
         performance  characteristics;  and general purpose sheet, which is used
         by  manufacturers  for a variety of products not  requiring  particular
         performance characteristics.

                  Specialty  thermoplastic  sheet  is  sold by  Royalite  into a
         number of niche markets, depending upon the performance characteristics
         of the sheet.  The following is a chart  setting  forth the  particular
         performance   characteristics  and  the  related  applications  of  the
         specialized sheet:

         Performance Characteristics                  Principal Uses
         ---------------------------                ------------------
         flame and smoke retardancy             mass transportation vehicle
                                                  seating and interior panels,
                                                  aircraft interior trim and
                                                  computer and other electronic
                                                  equipment component housings

         static dissipation and conductivity    computer chip carriers, hard
                                                  disc drive housings and
                                                  electronic tote boxes

         weatherability/temperature resistance   marine and recreational vehicle
                                                  instrument panels, interior
                                                  trim for agricultural and
                                                  other off road vehicles
                                                  and exterior boat trim

         buoyant, hydrodynamic and/or high
          strength-to-weight ratio              canoes, kayaks, other watersport
                                                  crafts, amusement park
                                                  vehicles and large exterior
                                                  equipment housings

                  The Company believes it has a substantial share of the markets
         in which it  competes  for  specialty  thermoplastic  sheet  due to its
         ability  to  manufacture  sheet with the wide  variety  of  performance
         characteristics set forth above; the performance  characteristics  are,
         in many cases,  customized to meet its customers' exact specifications.
         Net sales of specialty  thermoplastic sheet accounted for approximately
         64 percent (64%) of total net sales of thermoplastic  sheet by Royalite
         during Fiscal 1998.

                  The Company maintains a scientific and technical staff and the
         necessary  production  capabilities to design  specialty  thermoplastic
         sheet  with   performance   characteristics   to  suit  its  customers'
         specifications.  See "- Research and  Development."  In  addition,  the
         Company has advanced coloring technology, including a database of up to
         2,500 color formulas  developed by Royalite,  which enables it to color
         its thermoplastic sheet to match customer specifications  precisely and
         consistently.  The Company also has the ability to texturize  its sheet
         with what it believes  to be one of the most  extensive  selections  of
         embossing grains available in the market.

                  By contrast to specialty  thermoplastic sheet, general purpose
         thermoplastic sheet is used in the manufacture of numerous consumer and
         industrial products, such as luggage,  musical instrument and equipment
         cases, tote boxes and vehicle mud flaps,  which do not require that the
         thermoplastic  material  used in their  manufacture  possess any of the
         performance  characteristics  which  distinguish  specialty  sheet. The
         market for general purpose thermoplastic sheet is significantly broader
         than the market  for  specialty  thermoplastic  sheet due to the almost
         limitless  uses to which  such sheet can be put in the  manufacture  of
         products.   Such   market  is   generally   characterized   by  intense
         competition,  high volume and low margins.  The Company does not have a
         significant share of this market. Sales of general purpose sheet during
         Fiscal 1998 accounted for  approximately  36 percent (36%) of total net
         sales of Royalite.

                  In addition to the Company's extensive list of sheet products,
         it also produces  injection molding resins,  some of which use the same
         proprietary  formulations as the sheet products,  and extruded  profile
         products.

                  The Company  introduced  injection  molding resin  products as
         part of its "life cycle sourcing" strategy  implemented to satisfy each
         customer's  needs  for   thermoplastic   material  with  respect  to  a
         particular  product  from  the  product's   development  stage  through
         maturity,  including  matching  products to the  variety of  production
         methods  used at  different  volume  levels.  When a customer is in the
         initial  stages of  developing  a  product  requiring  a  thermoplastic
         component,  the Company  employs  its  technological  capabilities  and
         scientific  expertise  to design and produce  customized  thermoplastic
         sheet,  which the customer  then  generally  "thermoforms"  through the
         application of heat into  particular  applications  to be  incorporated
         into its final product. Due to its low cost, "thermoforming" is used in
         connection  with  the  manufacture  of  thermoplastic   components  not
         required in large volume  manufacturing  runs.  When a customer's  unit
         volume of a product  attains levels at which it becomes  economical for
         the customer to manufacture the thermoplastic  application by injection
         molding,   a  capital   intensive  but  more  efficient   process  than
         thermoforming, the Company can continue to supply the customer with the
         polymer resins and color  concentrates,  achieving the same  properties
         and color as when the application was produced  through  thermoforming.
         By using the Company's injection molding resins and color concentrates,
         which  have  been   customized  to  meet  the   customer's   particular
         specifications,  the customer  avoids any  disruption in its production
         that may result from having to qualify a  thermoplastic  material  from
         another manufacturer.

                  Although  injection  molding resins  constitute  less than one
         percent of net sales of Royalite for Fiscal 1998, the Company  believes
         that significant opportunities for growth exist in this market and that
         such product lines will enhance the division's specialty sheet lines by
         assuring  customers  that  the  Company  will be  able  to  meet  their
         specialized  thermoplastic  needs throughout every stage of a product's
         life cycle.

                  Royalite also produces  extruded profile  products,  including
         both proprietary and general purpose  materials.  The products are used
         for  applications  requiring  flexibility and resilience,  such as boat
         dock bumpers and gaskets  which are sold to and used in  production  of
         acrylic sheet by Polycast.  This product line was  implemented to fully
         utilize the  division's  available  production  capacity at its Warsaw,
         Indiana  facility.  Even  though  sales of  extruded  profile  products
         constitute  less than two percent of net sales of  Royalite  for Fiscal
         1998, the Company  believes that significant  opportunities  for growth
         exist in this market.

                  Competition

                  The market  for  thermoplastic  sheet in the United  States is
         highly competitive,  with companies competing primarily on the basis of
         product specifications,  price, customer service and technical support.
         The Company  competes  in this market  principally  by  maintaining  or
         increasing  its  market  share  in the  specialty  thermoplastic  niche
         markets described above. See "- Royalite - General."  Royalite competes
         effectively in this market by providing new custom product development,
         state-of-the-art  color  technology and strong customer service through
         technical  support.   The  division   maintains  highly   knowledgeable
         technical  representatives  who work directly with  customers to ensure
         that the division's  materials used in the  manufacture of a customer's
         product conform to the customer's  specifications  and work efficiently
         with the customers'  manufacturing  processes. In addition, the Company
         has polymer expertise and custom compounding  capabilities to customize
         the  performance   characteristics   and  color  of  its  thermoplastic
         products,  whereas many of its competitors do not have this capability.
         Its  technological  capabilities  have also  permitted  the  Company to
         develop  successful new products which enhance its  competitiveness  in
         this segment. For example, recently, Royalite introduced low smoke, low
         heat, fire retardant  material for aircraft and mass transit  interiors
         and  graffiti-resistant  seating  material,   developed  for  the  mass
         transportation  market.  The addition of injection  molding  resins and
         profile  products  and  implementation  of  life  cycle  sourcing  have
         enhanced  Royalite's  competitiveness  by assuring  customers  that the
         Company will be able to meet their thermoplastic needs throughout every
         stage of a product's life.

                  The Company is also able to compete  effectively  with respect
         to  price  due in part to its low  production  costs,  its  ability  to
         produce its own color  concentrates and savings  resulting from its use
         of recycled material in the manufacture of thermoplastic  sheet. See "-
         Royalite - Raw Materials." The Company's ability to internally  produce
         and laminate a thin layer of high quality  colored  thermoplastic  film
         over a less costly substrate  allows it to compete  favorably with most
         other specialty  thermoplastic sheet manufacturers,  which use a single
         layer of  relatively  expensive  colored  plastic  sheet to produce the
         desired end product.

                  The  Company's  principal  competitors  in the flame and smoke
         retardant thermoplastic product market are Empire and Kleerdex Company.
         Goodrich and HMS are the Company's principal  competitors in the static
         control  thermoplastic  product  market,  and Primex Plastics Corp. and
         Spartech  Corporation  are the Company's  principal  competitors in the
         general purpose  thermoplastic sheet market. The Company's  competitors
         have in the past  increased  their market  shares in the  thermoplastic
         industry generally through acquisitions.

                  Marketing

                  Royalite's thermoplastic sheet products are marketed under the
         ROYALITE(R)  and  SPECTRUM(R)  brand  names.  Thermoplastic  sheet with
         specialized  characteristics  is also marketed under  individual  brand
         names, such as ROYALSTAT(R)  (thermoplastic sheet designed to dissipate
         or   conduct   static   electric   charges),   ROYALEX(R)   (multilayer
         thermoplastic sheet with a foam core and highly weather-resistant layer
         on one or both sides,  resulting  in a high  strength-to-weight  ratio,
         designed  for  recreational,  marine and  sporting  applications),  and
         ROYALTHOTIC(R)  (thermoplastic sheet designed to be thermoformed at low
         temperatures  to  permit  orthopedic  medical   practitioners  to  form
         individual patient orthopedic devices).

                  Royalite markets its thermoplastic  products primarily through
         a national sales force of approximately 14 sales  representatives,  who
         are employees of the Company,  and through  wholesale  distributors  to
         whom  it  supplies  its  products   for  resale  to   fabricators   and
         manufacturers.  Representative customers of Royalite and representative
         end  users  of  its  products   include:   American   Seating  Company,
         Bombardier,  Inc., Caterpillar,  Inc., Commercial Plastics and Supplies
         Corp.,  Curbell Plastics,  a division of Curbell,  Inc., General Motors
         Corporation,  Hewlett-Packard  Company, Laird Plastics, Inc., McDonnell
         Douglas  Corporation,   National  Railroad  Passenger  Corp.  (Amtrak),
         Seagate Technology,  Inc., Sensormatic  Electronics Corporation and the
         U.S. Navy. The Company has a broad customer base for its  thermoplastic
         products and it does not believe  that it is dependent  upon any single
         customer or group of customers for sale of its thermoplastic  products.
         Pricing and terms offered to customers are  generally  consistent  with
         those found in the industry.

                  Manufacturing Facilities

                  The Company  manufactures its thermoplastic  products at three
         wholly-owned  facilities,  the  largest  of which is located in Warsaw,
         Indiana.   The  Company's  other   thermoplastic   sheet  manufacturing
         facilities are located in Rome, Georgia and Redlands,  California.  See
         "Item 2. Properties."

                  Raw Materials

                  The  principal  raw  materials  used  by  the  Company  in the
         manufacture of thermoplastic  sheet,  injection  molding resins,  color
         concentrates and extruded profiles are acrylonitrile  butadiene styrene
         ("ABS") resins and polyethylene,  polypropylene and polyvinyl  chloride
         ("PVC") resins and alloys of such resins.  The Company has no long-term
         purchasing agreements with any suppliers for such raw materials,  other
         than GE Plastics (a division of General  Electric  Company)  from which
         the  Company  acquires a  substantial  portion of its ABS  resins.  The
         Company  purchases PVC resins and other raw materials from a variety of
         domestic and international suppliers.  These products are all currently
         readily available from a variety of suppliers.

                  The Company  recycles  scraps of  thermoplastic  material that
         result from  customers'  forming sheet for their specific  applications
         for use in the manufacture of new sheet. Recycled material is generally
         used by the Company to replace the raw materials  that would  otherwise
         be   required  to   manufacture   specialized   and   general   purpose
         thermoplastic sheet.  Recycled material is purchased from customers and
         brokers and is less expensive than new raw materials.

         Polycast - Acrylic Products

                  General

                  Polycast manufactures high performance acrylic sheet, rods and
         tubes which are sold  principally  to custom  fabricators  and original
         equipment  manufacturers,  who heat and form the Polycast  product into
         shapes  for  specific  applications,  such as  aircraft  window  units,
         furniture  components and  orthopedic  braces.  The division's  acrylic
         products  have  a  unique   combination  of  physical   properties  and
         performance characteristics which are required by the manufacturers who
         use them as a component  of their  products.  For  example,  they weigh
         considerably  less  than,  but  are  superior  in  clarity  and  impact
         resistance  to, common glass.  They are  thermoformable,  remain stable
         under  sustained  exposure  to the  elements  and can be  processed  to
         transmit   or  filter   ultraviolet   light,   depending   on  customer
         requirements.

                  The Company manufactures acrylic sheet for three markets - the
         aerospace market,  which includes the commercial and military aerospace
         industries  in  which  the  division's   products  are  used  for  such
         applications as aircraft cockpit canopies, cabin windows and helicopter
         windshields;  the  specialty  acrylic sheet  market,  which  includes a
         variety of niche markets in which the  division's  products are used in
         the manufacture of boat  windscreens  and enclosures,  bullet-resistant
         security barriers for banks,  convenience  stores and other businesses,
         hockey rink  protective  barriers,  furniture,  tanning bed shields and
         municipal aquarium  transparent  panels; and the general purpose market
         for acrylic sheet, in which acrylic sheet is used for such applications
         as store displays and signage,  where high performance  characteristics
         are  not  required  and  do  not  require   specialized   manufacturing
         techniques.  The  division's  acrylic  rods  and  tubes  are used for a
         variety  of   applications,   including  the  manufacture  of  lighting
         fixtures,  furniture, medical instruments,  orthopedic devices, such as
         orthopedic  braces and lens materials used to replace  defective lenses
         of the eye in  cataract  surgery  and  certain  types  of hard  contact
         lenses.

                  Polycast  manufactures  its acrylic products through cell cast
         manufacturing,  a process which enables it to customize the performance
         characteristics  of its acrylic aerospace sheet and specialized  sheet,
         in order to meet the exact specifications of its customers and to offer
         its products with a broader range of physical  characteristics than can
         be achieved through other manufacturing  processes,  such as continuous
         cast,  extrusion  and  calender  processes.  For  example,   Polycast's
         scientific  staff  have  used  the  cell  cast  process  to  develop  a
         specialized sheet which transmits rather than filters  ultraviolet rays
         for use in tanning beds and an aerospace sheet with  consistently  high
         optical  quality  and  exact  color  shading  for  use in  constructing
         aerospace   transparencies  such  as  aircraft  and  helicopter  window
         products. The division can manufacture acrylic products in more than 60
         colors and acrylic  sheet in gauges  ranging from 0.030 to 6.00 inches.
         Acrylic  sheet  manufactured  by the cell cast  process,  which is more
         labor intensive than continuous cast,  extrusion or calender processes,
         generally  yields higher  margins than acrylic  sheet  produced by such
         other processes.

                  The  division  markets  its  aerospace  acrylic  sheet  in the
         military and commercial  aerospace  industries,  which require products
         meeting  precise  specifications.  The division is one of a few acrylic
         manufacturers  in the United States  qualified to produce acrylic sheet
         meeting   military   manufacturing   standards,    specifications   and
         requirements  ("MIL SPEC"), a designation made by the U.S. Navy's Naval
         Air  Development  Center  which is a  prerequisite  for  supplying  the
         military aerospace industry. The division and the Predecessor Companies
         have maintained this qualification since 1976. The division's aerospace
         acrylic  sheet  is  also  qualified  by  several  commercial  aerospace
         manufacturers,  including Bell-Helicopter, a division of Textron, Inc.;
         Boeing  Company  including  its  new  McDonnell-Douglas  Division;  and
         Sikorsky Aircraft  Corporation,  which include a supplier's products on
         their  "qualified  product lists" only after such products have met MIL
         SPEC  requirements  and passed the  manufacturer's  additional and more
         stringent  testing and  approval  procedures.  Although  unlikely,  any
         failure of the  division's  aerospace  acrylic  products to continue to
         meet  required  specifications  under  which  they are  provided  to an
         aerospace  manufacturer  could  have a material  adverse  effect on the
         division.

                  The  division  sells  its  specialty  acrylic  sheet in a wide
         variety of niche markets,  including  manufacturers of boat windscreens
         and enclosures,  bullet resistant barriers and protective  barriers for
         athletic  facilities,  furniture and tanning bed shields and aquariums.
         The division  markets its acrylic  products to such industries  through
         customization  of the performance and physical  characteristics  of its
         specialty sheet to meet customer specifications.

                  Competition

                  The division faces continuing  competition from North American
         producers and from certain foreign  producers,  particularly from Asian
         and South American  countries.  Many of these  competitors have greater
         resources  than  the  Company.   These  competitors  primarily  produce
         standard  sizes of general  purpose  acrylic sheet by continuous  cast,
         extrusion  or calender  processes.  The  division  concentrates  on the
         production of aerospace and specialty  acrylic sheet,  which in certain
         cases has unique  characteristics that cannot be obtained by such other
         manufacturing  processes.  Net sales of aerospace and specialty acrylic
         sheet accounted for  approximately  60 percent (60%) of total net sales
         by Polycast.

                  The Company believes that the division has a significant share
         of the niche  markets  in which it sells its  aerospace  and  specialty
         acrylic  sheet.  See "- Polycast - General." The  division's  principal
         competitors in the specialty  acrylic sheet market are Cyro Industries,
         a division  of Cytec  Industries,  Inc.  ("Cyro"),  Elf  Atochem  North
         America,  Inc.  ("Atochem")  and ICI  Acrylics,  Inc., a subsidiary  of
         Imperial  Chemicals  Industries plc ("ICI").  The division's  principal
         competitors  in the acrylic  aerospace  sheet market are Cyro,  Nordam,
         Inc. ("Nordam"), Pilkington Aerospace Swedlow Division, a subsidiary of
         Pilkington plc ("Pilkington") and Rohm Darmstadt GmbH.

                  In order to compete with  vertically  integrated  companies in
         the aerospace acrylic sheet market,  such as Pilkington and Nordam, the
         division has formed alliances with certain customers to market products
         for sale into the commercial  aerospace  markets that compete  directly
         with these vertically integrated companies.

                  In the acrylic rod and tube market, the division's competitors
         are various small companies that typically produce only acrylic rod and
         tube products.

                  Atochem,  Cyro and ICI, which are North American  producers of
         acrylic sheet, also produce methyl  methacrylate  monomer ("MMA"),  the
         principal raw material used in the  manufacture of acrylic sheet,  rods
         and tubes, or certain of the components thereof, making it possible for
         them  to  absorb  increases  in the  cost  of  MMA  and  buy  in  large
         quantities,   thereby  availing  themselves  of  volume  discounts  not
         available to the  division.  Since the Company does not itself  produce
         MMA,  Polycast  is unable to  compete  effectively  with the low prices
         charged by these companies for general  purpose  acrylic sheet.  See "-
         Polycast - Raw Materials."

                  Marketing

                  Polycast's acrylic products are marketed under the POLYCAST(R)
         brand name. Acrylic products with special  performance  characteristics
         are  also  marketed  under  individual  brand  names,  such as  PILOTS'
         CHOICE(TM)  (aerospace  sheet with high optical quality) for helicopter
         windshields,  SOLACRYL(R)  (specialty sheet which transmits ultraviolet
         rays) for tanning bed shields,  POLYDOR(R)  (thermoformable sheet) used
         for  orthopedic   product,   S-A-R   coatings  for  specialty   acrylic
         applications  and  ViPlex(TM)   (specialized   fabrication  of  acrylic
         products) used in high end marine  applications.  The Company's acrylic
         rods and tubes are also marketed under the TOWNSEND/GLASFLEX(TM)  brand
         name.

                  The  division  markets  its  acrylic  sheets,  rods and  tubes
         primarily through five sales representatives,  who are employees of the
         division, and through wholesale distributors.

                  Representative    domestic    customers    of   Polycast   and
         representative end users of its acrylic products include Beech Aircraft
         Corp.,  Bell-Helicopter Textron, Inc., Boeing Company, Cadillac Plastic
         & Chemical Co., The Cessna Aircraft  Company,  Chris-Craft  Industries,
         Inc.,  Commercial  Plastics and Supply  Corp.,  Laird  Plastics,  Inc.,
         Llamas   Plastics,    Inc.,   Sensormatic   Electronics    Corporation,
         Sierracin/Sylmar  Corporation,  Sikorsky Aircraft Corporation,  Texstar
         Inc.,  Thunderbird Products Corp. and Wellcraft Marine.  Representative
         foreign  customers and end users  include  Airbus  Industries,  Augusta
         Helicopters,  Embraer - Empresa  Brasileira  de  Aeronautica  S.A.  and
         Hindustan  Aeronautics  Limited.  The Company is not  dependent  upon a
         single  customer  or  group  of  customers  for  sales  of its  acrylic
         products.

                  Manufacturing Facilities

                  The  division  manufactures  acrylic  sheet at its facility in
         Stamford,  Connecticut and finishes and further processes acrylic sheet
         for  certain  applications  at its  facilities  in  Newport,  Delaware,
         Hackensack, New Jersey and Melbourne,  Florida. The Hackensack facility
         also serves as the  principal  warehouse  for acrylic  sheet  products.
         Acrylic sheet is also manufactured,  along with acrylic rods and tubes,
         at the division's facility in Stirling, New Jersey and acrylic rods and
         tubes at the division's  facility in Pleasant  Hill,  Iowa. The Company
         owns  the   manufacturing   and  processing   facilities  in  Stamford,
         Hackensack,  Stirling and Pleasant  Hill and leases its  facilities  in
         Newport, Delaware and Melbourne,  Florida. The manufacturing operations
         in Stirling,  New Jersey and Newport,  Delaware have been substantially
         consolidated  into the Stamford,  Connecticut  and Pleasant Hill,  Iowa
         facilities  during Fiscal 1998.  The division  leases office space used
         for its division  headquarters  adjacent to its  Stamford,  Connecticut
         manufacturing facility. See "Item 2. Properties."

                  Raw Materials

                  Since October 1, 1991, all of the division's  requirements  of
         MMA  have  been  purchased  from  ICI or its  predecessor  owner of the
         monomer business, E.I. duPont de Nemours & Co., currently pursuant to a
         supply  agreement which obligates the division to purchase from ICI and
         ICI to supply the division with its  requirements for MMA through March
         16, 2005,  subject to termination by the division upon eighteen months'
         advance notice or by ICI upon a three years' advance notice.  Under the
         supply  agreement,  the division is entitled to purchase MMA from other
         suppliers  that  offer the  product  at prices  lower than those ICI is
         willing to match. In addition,  the supply agreement  requires that any
         party that  acquires all or  substantially  all of ICI's assets used to
         manufacture  MMA assume the  obligations of ICI under the agreement and
         further requires that any party that acquires all or substantially  all
         of the Company's assets used to manufacture its acrylic sheet, rods and
         tubes assume the obligations of the division under the agreement.

                  In  the  event  that  ICI  elects  to  terminate   the  supply
         agreement, the Company believes that the division could obtain MMA from
         one or more alternate sources. However, each of the two major alternate
         domestic  manufacturers  and  certain  other  major  alternate  foreign
         manufacturers  of MMA  compete  (as does ICI) with the  division in the
         manufacture and sale of acrylic sheet.  Thus, there can be no assurance
         that the  division  would be able to obtain  MMA from  these  alternate
         sources  at  satisfactory  prices,  on a  reliable  basis  or on  terms
         otherwise satisfactory to the division.

                  Coated Fabrics Segment

                  The Company's  Coated  Fabrics  Segment,  which  accounted for
         approximately  $67.9  million (31 percent  (31%)) of the  Company's net
         sales for  Fiscal  1998,  is a  leading  manufacturer  of vinyl  coated
         fabrics and was a leading  manufacturer  of laminated  composites.  The
         segment's  product  lines  consisted  of  products  for the  automobile
         manufacturing  industry,  which accounted for 59 percent (59%) of total
         net  sales  of  the  segment  for  Fiscal  1998,  and  the  well  known
         Naugahyde(R)  brand name vinyl coated fabric products,  which accounted
         for 41 percent  (41%) of total net sales of the segment for such fiscal
         year. See "Corporate Developments - Sale of the Automotive Operation of
         the Coated  Fabrics  Segment"  and "Note 14 to  Consolidated  Financial
         Statements."

                  General

                  The  segment's  automotive  product line  consisted of plastic
         vinyl  coated   fabrics  and  vinyl   laminated   composites   used  by
         manufacturers and custom  fabricators in the production of vehicle seat
         coverings,  door panels, arm rests, consoles and instrument panels. Its
         coated   fabrics  were   durable,   stain   resistant,   cost-effective
         alternatives  to  leather  and cloth  coverings.  The  segment's  vinyl
         laminated   composites   were  durable,   easily   formed,   economical
         alternatives  to  fabric  coverings  used  for  applications   such  as
         automobile  instrument and door panels.  The materials  manufactured by
         the  segment  could be hand or machine  sewn or glued to an  underlying
         structure,   such  as  a  seat  frame  or  automobile  door  panel,  or
         thermoformed   to  cover   various   underlying   structures   or  into
         freestanding  shapes for a variety of applications,  and came in a wide
         range of colors and textures.  The Company sold the remaining  business
         of the automotive  operation of this segment during the last quarter of
         Fiscal 1998. The operation  consisted of the vinyl laminated  composite
         line  manufactured  in Port  Clinton,  Ohio.  The segment  continued to
         operate the Port Clinton,  Ohio facility under a supply agreement until
         November 11, 1998.

                  The segment's  Naugahyde(R) vinyl coated fabrics products have
         varying  performance  characteristics  and are sold in various  markets
         depending upon the performance  characteristics  required by end users.
         For example, for recreational products which are used outdoors, such as
         boats,  personal  watercraft,  golf carts and snowmobiles,  the segment
         sells  a   Naugahyde(R)   product  that  is  designed   primarily   for
         weatherability.  It also  manufactures  Naugahyde(R)  products that can
         withstand powerful cleaning agents,  which are widely used in hospitals
         and in other medical facilities. Flame and smoke retardant Naugahyde(R)
         vinyl  coated  fabrics  are  used  for  a  variety  of  commercial  and
         institutional furniture applications,  including hospital furniture and
         school bus seats.

                  The segment is one of the few  manufacturers  that can produce
         coated  fabrics  through   composite,   continuous  cast  and  calender
         manufacturing  processes.  These  processes  allow it to produce coated
         fabrics  and  laminated  composites  with  different   characteristics:
         composite  manufacturing  produces a material  which is light in weight
         with sharply  defined  borders;  the continuous  cast method produces a
         material with a soft finish,  deep grain pattern and a wide temperature
         range and high  malleability  factors for  thermoforming;  and calender
         manufacturing  produces a material with less of a soft finish but which
         can  be  manufactured   economically  in  high  volume.  The  composite
         manufacturing  process was sold in Fiscal 1998 in  connection  with the
         sale of the automotive operations of the segment.

                  The segment had two  state-of-the-art  production  lines which
         produce coated fabrics and laminated composites in more than 600 colors
         and 45 textures and patterns - one of which was sold in connection with
         the sale of the automotive operations of the segment.

                  The  segment's  automotive  products were marketed to domestic
         automobile manufacturers as well as to foreign automobile manufacturers
         producing vehicles in the United States  ("transplant  manufacturers").
         The coated fabrics and laminated  composites  which comprised this line
         were designed to meet the performance  specifications set by automobile
         manufacturers  such  as  crisp  lines  or  soft  finishes  of  interior
         components  or the ability to  thermoform  the products  into  specific
         applications.

                  Pursuant to a technical  collaboration  agreement with Okamoto
         Industries, Inc. ("Okamoto"), a Japanese manufacturer of coated fabrics
         products,  the  segment  held an  exclusive  license  to use  Okamoto's
         advanced  technology  for the  manufacture of certain coated fabrics in
         the United States and Canada until 2003. This arrangement  provided the
         segment  with  the  capability  to  manufacture   materials  using  the
         composite  production  process  and  allowed  it to supply  product  to
         transplant manufacturers such as Honda. The Company was required to pay
         Okamoto a royalty  on net sales of  certain  products  using  Okamoto's
         technology.  The license was transferred to the purchaser in connection
         with  the  Fiscal  1998  sale  of the  Port  Clinton,  Ohio  automotive
         operations.

                  Competition

                  The  Coated  Fabrics  segment  competes  with  respect  to its
         Naugahyde(R)  products  primarily  on the  basis of  style,  color  and
         quality,  as well as  price  and  customer  service  through  technical
         support and performance characteristics which meet customer needs.

                  The segment competed in the domestic and transplant automotive
         markets for coated  fabrics and laminated  composites  primarily on the
         basis of price.  In the case of unique  product lines  developed by the
         segment,   the  segment  competed  on  the  basis  of  the  performance
         characteristics  of  its  products.  In  the  domestic  and  transplant
         automotive  markets,  the segment generally sold its coated fabrics and
         laminated composites directly to automobile manufacturers and to custom
         fabricators,  who used  the  segment's  coated  fabrics  and  laminated
         composites  to make finished  products,  such as seats and door panels,
         which were then sold to automobile manufacturers.

                  The  segment's  principal  competitors  with  respect  to  its
         Naugahyde(R)  products are C.G.  Spradling & Company,  GenCorp Inc. and
         Morbern  Inc.  The  segment's  principal  competitors  in the  domestic
         automotive  markets  were  Canadian  General-Tower,  Ltd.  and Sandusky
         Plastics,  Inc.,  and  its  principal  competitors  in  the  transplant
         automotive markets were O'Sullivan Corporation and foreign importers.

                  Marketing

                  The segment's  coated fabrics  products were introduced by one
         of its predecessors more than 45 years ago and today are marketed under
         several  nationally  recognized  brand names,  including  NAUGAHYDE(R),
         NAUGAFORM(R)  and DURAN(R).  BEAUTYGARD(R)  is the name under which the
         segment markets its cleaning  agent-resistant  coated fabrics,  and its
         flame and smoke  retardant  coated fabrics are marketed under the brand
         name FLAME BLOCKER(TM).


                  The segment  markets and sells its coated fabrics and sold its
         laminated    composites    primarily    through   12   national   sales
         representatives,  who are  employees  of the Company,  and  independent
         sales  representatives.  In  the  furniture  manufacturing  market,  it
         generally  sells its coated fabrics  through its sales  representatives
         and to distributors which sell to furniture manufacturers, upholsterers
         and  fabric  distributors.   Approximately  35  percent  (35%)  of  the
         segment's   non-automotive   market   sales  in  Fiscal  1998  were  to
         distributors.

                  Representative customers and end users of the segment's coated
         fabrics and laminated  composites include  Bombardier,  Inc., Club Car,
         Inc., GM,  Harley-Davidson,  Inc.,  Honda,  Kawasaki Heavy  Industries,
         Inc.,  Mazda Motors of America,  Inc.,  Michigan Seat Co., Okamoto USA,
         Inc., Polaris Industries,  Inc., Shelby Williams  Industries,  Inc., TS
         Trim, Inc. and United Technologies Automotive Division.

                  Manufacturing Facilities

                  The segment  manufactures  its coated  fabrics at its facility
         located in  Stoughton,  Wisconsin and  manufactured  at its facility in
         Port Clinton,  Ohio through November 11, 1998. Both of these facilities
         are owned by the Company. See "Item 2. Properties."

                  Raw Materials

                  The principal raw materials for the segment's  coated  fabrics
         are casting paper, knit fabric, polyolefin foam, PVC plastic resins and
         plasticizers.  The segment  generally has multiple  sources for casting
         paper, knit fabric, PVC plastic resins, and plasticizers and subsequent
         to the sale of the automotive  operations no longer requires polyolefin
         foam.

                  Specialty Adhesives Segment

                  The  Company's   Specialty  Adhesives  Segment  accounted  for
         approximately  $24.1 million  (approximately  11 percent  (11%)) of the
         Company's total net sales for Fiscal 1998.

                  General

                  The Specialty Adhesives Segment (formerly,  the Specialty Foam
         and Adhesives Segment)  comprises three general product lines:  roofing
         adhesives  and sealants,  industrial  adhesives and sealants and mirror
         mastics and sealants.  The segment is one of the leading  manufacturers
         of  adhesives  for  fully-bonded,  EPDM  commercial  roofs.  Supporting
         Firestone     Building    Products     Company,     a    division    of
         Bridgestone/Firestone,  Inc.  ("Firestone"),  an industry leader in the
         supply of Rubber Gard(R) EPDM single ply membrane, the segment supplies
         a  full  line  of  bonding,   splice,   primer  and  sealer   products.
         Approximately  67 percent (67%) of the segment's Fiscal 1998 sales were
         roofing  product  shipments to  Firestone.  The  fully-bonded  adhesive
         products  sold to  Firestone  pass through a rigorous  development  and
         production qualification process,  resulting in an applied roof capable
         of withstanding  exposure to environmental  extremes.  The segment also
         produces  and sells  more than 200  industrial  and  commercial  mirror
         adhesives  and  sealants   under  the  brand  names  of   Silaprene(R),
         Hydra-Fast-En(R), UltraBond(R) and  ExtraBuild(R).  These products are
         marketed  to  the  transportation  (non-automotive),   furniture,  foam
         fabrication and commercial mirror installation industries.

                  The  segment  has  doubled  the size of its  industrial  sales
         force,  introduced new Silaprene(R) products and packaging that feature
         the well-recognized  brand name, and expanded its water-based  adhesive
         line to position itself for changing government  legislation  regarding
         health and safety  requirements.  The segment  also secured a four-year
         supply  agreement with Henkel  Adhesives,  an operating  group within a
         large international conglomerate.

                  In addition,  the Company acquired,  on March 31, 1997, the C.
         Gunther Company ("Gunther"),  a major marketer of mirror mastics to the
         residential  and  commercial  construction  industry  located  in Cary,
         Illinois.  All  Gunther  operations  were  subsequently  moved  to  the
         Company's South Bend facility.

                  The segment  sells splice and bonding  adhesives  for the EPDM
         rubber roofing market  exclusively to Firestone pursuant to a five-year
         contract  which was entered into in Fiscal 1995 and extended on June 9,
         1998,  by an  additional  34 months to expire on December 31, 2002 (the
         "Firestone  Agreement").  Under the terms of the  Firestone  Agreement,
         Firestone  is  obligated  to purchase  from the segment a minimum of 80
         percent (80%) of its annual volume  requirements  of splice and bonding
         adhesives for the EPDM rubber roofing market.  In Fiscal 1998, 1997 and
         1996,  Firestone  purchased 67 percent  (67%),  79 percent (79%) and 83
         percent  (83%),  respectively,  of the  Company's  total  net  sales of
         adhesives and sealants for such periods.  Sales to Firestone during the
         fiscal year ended September 27, 1998  represented 7 percent (7%) of the
         Company's  net sales for such fiscal  year.  The loss of Firestone as a
         customer  would  have an  adverse  effect  on the  Company's  Specialty
         Adhesives  Segment.  Firestone  will acquire the  Company's  patent for
         splice adhesive on February 22, 2000.

                  Competition

                  Pursuant to the exclusivity terms of the Firestone  Agreement,
         the Company does not compete with respect to its roofing  adhesives and
         sealants.  As to its  industrial  adhesives and  sealants,  the Company
         competes  principally  on  the  basis  of  price  and  the  performance
         characteristics of its products.

                  The  segment's  principal  competitors  in the  adhesives  and
         sealants  market  for  EPDM  rubber  roofing   applications   are  Adco
         Technologies,  Inc.,  Ashland Chemical  Company and TACC  International
         Corp. In addition,  Carlisle  Syntec Systems  supplies these  adhesives
         primarily  for its  own  single-ply  roofing  system  and  consequently
         competes indirectly with the segment.  In the industrial  adhesives and
         sealants markets,  the segment's primary  competitors  include Imperial
         Adhesives, Inc., Manus Corporation,  Minnesota Mining and Manufacturing
         Company, Palmer Products Corp. and Sika Corporation.

                  Marketing

                  The segment's  industrial  adhesives and sealants are marketed
         under the brand name Silaprene(R).  Its water-based  adhesives are also
         marketed  under  the  brand  name  Hydra   Fast-En(R).   The  segment's
         Silaprene(R)  products have  established  name  recognition  in and are
         important in the recreational  vehicle and truck trailer  manufacturing
         markets.  Hydra Fast-En(R)  adhesives are beginning to establish market
         share  in  the  foam  and  plastic  fabrication   markets.   Recognized
         trademarks in the mirror and glass  industry,  purchased as part of the
         C.   Gunther    acquisition,    are   Ultra/Bond(R),    Extra/Build(R),
         Prime-N-Seal(TM),   Premier(TM),   Mirror   &  More   Cleaner(TM)   and
         Seal-Kwik(TM).

                  The  segment's  roofing  adhesives  and  sealants are marketed
         under  Firestone's  brand  names.  The  Company   indirectly  holds  an
         important position in the splice adhesives and bonding adhesives market
         through Firestone,  which continues to control significant market share
         of the EPDM rubber roofing market.

                  The segment  markets its  industrial  adhesives  and  sealants
         primarily  to  manufacturers   through  a  network  of  200  authorized
         distributors,   19   independent   representatives   and   five   sales
         representatives  who are employees of the segment,  located  throughout
         the United  States and  Canada.  Pursuant to its  obligation  under the
         Firestone Agreement, the segment does not market its splice and bonding
         adhesives for the EPDM rubber roofing market.

                  The  segment's   roofing   adhesives   business  is  seasonal,
         increasing  in the  warmer  months  of the year due to an  increase  in
         roofing  and  other  construction  activities  in such  months,  and is
         sensitive to adverse weather conditions.

                  Manufacturing Facilities

                  On  July  17,  1996,  the  Company  acquired  a  manufacturing
         facility in South Bend,  Indiana  consisting of  approximately  240,000
         square feet for $1.8 million and spent an  additional  $6.7 million for
         building renovations,  new equipment and moving expenses.  The move was
         completed on February 18, 1997 and now provides a modern and  efficient
         manufacturing plant with significant  additional capacity, an excellent
         research center and office space for the Royalite segment  headquarters
         and certain other corporate operations. See "Item 2. Properties."

                  The efficiencies the Company realized as a result of the move,
         from an old multi-story  factory to their current facility are many and
         far-reaching.  Areas of improvement  include lower utility costs, lower
         property taxes,  elimination of elevator maintenance,  reduced material
         handling time and lower building maintenance.

                  Raw Materials

                  The  division's  adhesives  and  sealants use a variety of raw
         materials  such as rubber,  resins and  solvents,  which are  generally
         available from multiple sources.  The division's principal suppliers of
         such raw materials and containers  include  Cleveland  Steel  Container
         Corp., Citgo Petroleum Corporation, DuPont Dow Elastomers,  Schenectady
         International,  Shell  Chemical  and Sun  Chemical  Company,  Inc.  The
         Company has long-term supply agreements with Elf Atochem,  Sun Chemical
         Company,  Inc.,  Cleveland  Steel  Container  Corporation  and  Federal
         Packaging. The Company believes that adequate supplies of raw materials
         for its  adhesives  and sealants will be available to the division from
         alternate  suppliers.  However,  if the  division  is  required  to use
         alternate  suppliers,  production  could  be  affected  while  the  raw
         materials  produced by such  alternate  suppliers  are qualified by the
         division to meet the product specifications of its customers.

                  Over the last  eighteen  months the Company has had success in
         driving down the cost of raw materials by consolidating  purchases. The
         Company  has also  benefited  from soft  pricing  in the  petrochemical
         industry.

         Employees

                  The  Company  has  approximately  1,160  employees,  including
         approximately 800 hourly wage employees and 360 salaried employees. The
         Company  believes that at the present time its workforce is adequate to
         conduct  its  business  and  that  its  relations  with  employees  are
         generally satisfactory.

                  The  Company is a party to a number of  collective  bargaining
         agreements.  Approximately  130 hourly wage  employees of the Company's
         acrylic sheet manufacturing  facility located in Stamford,  Connecticut
         are covered by an agreement  expiring on March 31, 2000 with  Teamsters
         Local 191, which is affiliated  with the  International  Brotherhood of
         Teamsters,  Chauffeurs,   Warehousemen  and  Helpers  of  America  (the
         "Teamsters").  Approximately 35 employees at the Company's  Hackensack,
         New Jersey  acrylic  sheet  manufacturing  and  warehouse  facility are
         covered by an  agreement  expiring on February 3, 2002 with UNITE,  New
         York/New  Jersey  Regional Joint Board  ALF-CIO,  CLC. At the Company's
         coated fabrics manufacturing facility located in Stoughton,  Wisconsin,
         another  approximately  130 hourly employees of the Company are covered
         by an agreement  expiring on September  17, 2001 with Local 1207 of the
         United Paperworkers  International Union.  Separate agreements expiring
         on April 20,  1999 with the United  Steel  Workers of  America,  United
         Rubber Workers Division (the "USWA") cover approximately 40 hourly wage
         employees  at  the  Company's  adhesives  and  sealants   manufacturing
         facility located in South Bend, Indiana, and approximately 85 employees
         at the coated fabrics and laminated composites  manufacturing  facility
         located in Port Clinton,  Ohio. In connection with the Fiscal 1998 sale
         of the  automotive  operations  at Port  Clinton,  Ohio  (see  "Item 1.
         Corporate Developments - Sale of the Automotive Operation of the Coated
         Fabrics  Segment") the Company  terminated the 85 hourly wage employees
         at the Port Clinton, Ohio facility in Fiscal 1999.

                  On July 20, 1995 the National Labor  Relations Board certified
         the United Paperworkers International Union as the exclusive collective
         bargaining   representative  for  the  approximately  150  hourly  wage
         employees  at the  Company's  thermoplastic  products  plant in Warsaw,
         Indiana.  The  Company  challenged  the  election  which  led  to  such
         certification and, accordingly, did not recognize the union. On October
         24, 1996,  the United  States Court of Appeals for the Seventh  Circuit
         denied the Company's appeal. The Company has since recognized the union
         and is in the process of negotiating a collective  bargaining agreement
         with it.

                  Richard  D.  Kimbel,  the  former  President  of USWA Local 65
         (Mishawaka), is a director of the Company.

         Trademarks and Patents

                  The  Company  owns  and  controls   patents,   trade  secrets,
         trademarks, trade names, copyrights and confidential information, which
         in the  aggregate  are  material  to its  business.  The Company is not
         materially dependent, however, upon any single patent or trademark. The
         Company  has  several  trademarks  that have wide  recognition  and are
         valuable to its  business.  Among the  trademarks  that are of material
         importance  to the Company are  NAUGAHYDE(R),  NAUGAFORM(R),  DURAN(R),
         ROYALITE(R),  PILOTS'  CHOICE(TM),  POLYCAST(R),   SILAPRENE(R),  HYDRA
         FAST-EN(R),  GUNTHER  ULTRA/BOND(R)  and  GUNTHER  EXTRA/BUILD(R).  The
         Company's  trademarks  are  registered  in the  United  States and in a
         number of foreign  jurisdictions  with terms of  registration  expiring
         generally between 1999 and 2004. No trademark  registration of material
         importance  to the Company  expired  during  Fiscal  1998.  The Company
         intends  to renew in a timely  manner  all  those  trademarks  that are
         required for the conduct of its  business.  The Company also holds more
         than 20 patents and pending patents worldwide.

                  The  Company  uses the  trade  name and  trademark  "Uniroyal"
         pursuant to a license from Uniroyal Goodrich Licensing Services, Inc.

         Research and Development

                  The Company is actively  engaged in research  and  development
         programs  designed to develop new  products,  manufacturing  processes,
         systems and  technologies  and to enhance  its  existing  products  and
         processes.  Research and development is conducted  within each business
         segment of the Company. Investment in research and development has been
         an important  factor in  establishing  and  maintaining  the  Company's
         competitive  position in many of the specialized niche markets in which
         its products are  marketed.  For example,  the  Company's  research and
         development   efforts  have  led  to  the  development  of  water-based
         adhesives  (see  "-Business  Segments - Specialty  Adhesives"),  bullet
         resistant  acrylic  sheet  and  acrylic  sheet  for  use in  commercial
         aquariums  (see "-  Business  Segments  - High  Performance  Plastics -
         Polycast  Acrylic  Products").  The Company  spent  approximately  $2.7
         million for research and  development  during  Fiscal 1998  compared to
         approximately  $3.7 million during Fiscal 1997. The decline in research
         and development expenditures is primarily attributable to the exit from
         the automotive operations of the Coated Fabrics Segment.

                  The  Company  currently  employs a staff of  approximately  34
         individuals in connection  with its research and  development  efforts.
         The individuals  include chemists,  process  development  engineers and
         laboratory  technicians and are responsible for new product development
         and improvement of production processes. The allocation of research and
         development staff among the Company's  business segments is as follows:
         14 at High  Performance  Plastics,  13 at Coated  Fabrics  and seven at
         Specialty Adhesives.

         Backlog

                  At  September  27,  1998,   the  Company  had  backlog  orders
         aggregating  approximately  $25.1 million, as compared to approximately
         $26.0   million  as  of  September  28,  1997.   Management   presently
         anticipates  that all backlog  orders will be filled within the next 12
         months. Backlog orders for each of the Company's business segments were
         as follows as of the indicated dates:

                                       September 27, 1998     September 28, 1997
                                       ------------------     ------------------
                                                     (in thousands)
         High Performance Plastics       $   14,994             $   16,321
         Coated Fabrics                       5,368                  5,923
         Specialty Adhesives                  4,747                  3,805
                                         ----------             ----------
         Total                           $   25,109             $   26,049
                                         ==========             ==========
<PAGE>


         Working Capital Items

                  Many of the markets in which the Company  competes,  including
         the  aerospace  acrylic sheet market,  are  characterized  by long lead
         times for new products requiring significant working capital investment
         by the Company and extensive testing, qualification and approval by the
         Company's customers and end users of its products.  The Company faces a
         significant  risk that  customers and end users in such markets may not
         select the  Company's  new products  after it has incurred  significant
         costs for, among other things, research and development,  manufacturing
         equipment,  training and facility-related  overhead expenses to develop
         such products.

                  Moreover,  even  if  the  Company's  products  are  eventually
         approved and purchased by customers and end users in such markets,  the
         working  capital  investment made by the Company could fail to generate
         revenues for several years while the Company develops such products and
         its customers and end users conduct their  testing,  qualification  and
         approval  procedures for such products.  Although the Company  believes
         that cash  from its  operations  and its  ability  to borrow  under its
         revolving  credit agreement (see "Item 7.  Management's  Discussion and
         Analysis of Financial Condition and Results of Operations Liquidity and
         Capital Resources") will provide it sufficient liquidity to finance its
         efforts to develop new  products,  there can be no  assurance  that the
         Company's   operations   together  with  amounts  available  under  its
         revolving  credit   agreements  will  be  sufficient  to  finance  such
         development efforts and to meet the Company's other obligations.

         Environmental Matters

                  The  Company is subject to  federal,  state and local laws and
         regulations  designed to protect the  environment and worker health and
         safety. The Company's management  emphasizes  compliance with such laws
         and regulations and has instituted  programs  throughout the Company to
         provide  education  and training in  compliance  at and auditing of all
         Company facilities. Whenever required under applicable law, the Company
         has  implemented  product or process  changes or invested in  pollution
         control systems to ensure compliance with such laws and regulations.

                  In  Fiscal  1998,   1997  and  1996,  the  amount  of  capital
         expenditures  related to  environmental  matters was immaterial and the
         amount of such  expenditures  is  expected to be  immaterial  in Fiscal
         1999. In the future,  as the requirements of applicable law impose more
         stringent  controls  at  Company  facilities,  expenditures  related to
         environmental  and worker  health and safety are  expected to increase.
         While the  Company  does not  currently  anticipate  having to make any
         material  capital  expenditures  in order to comply with these laws and
         regulations,  if the Company is  required  to do so, such  expenditures
         could have a material impact on its earnings or competitive position in
         the future.

                  In connection with its acquisition of a manufacturing facility
         in South Bend,  Indiana on July 17, 1996, the Company assumed the costs
         of remediation of soil and groundwater contamination resulting from the
         leaking of solvents  used in the  operation  of the plant by its former
         owner. The Company is conducting the remediation  voluntarily  pursuant
         to  an  agreement   with  the  Indiana   Department  of   Environmental
         Management.  The  Company  estimates  that such  remediation  will cost
         approximately  $1.0  million  over  a  five-to-seven-year   period.  In
         connection with its acquisition of the facility,  the Company placed in
         escrow,  in accordance with the terms of the purchase  agreement,  $1.0
         million  of the  $1.8  million  purchase  price to be  applied  to such
         remediation costs.  Through Fiscal 1998, the Company has incurred costs
         of approximately $566,000 in connection with such remediation.

                  Pursuant to a 1992 settlement agreement with the United States
         Environmental   Protection  Agency  (the  "EPA"),   the  United  States
         Department of the Interior and the States of Wisconsin and Indiana (the
         "EPA Settlement Agreement") entered into in connection with the Plan of
         Reorganization of the Predecessor  Companies (see "- History of Company
         - Predecessor  Companies"),  the Predecessor  Companies compromised and
         settled (in exchange for Common Stock of the Company) substantially all
         of their pre-petition liabilities relating to disposal activities under
         Sections  106  and  107 of the  Comprehensive  Environmental  Response,
         Compensation & Liability Act  ("CERCLA"),  Section 3008 of the Resource
         Conservation  & Recovery Act  ("RCRA")  and similar  state laws for the
         cleanup  of 20  designated  sites not  owned by any of the  Predecessor
         Companies (the "Known Sites") and for natural resource damages at 15 of
         the 20 Known  Sites.  Pursuant  to the EPA  Settlement  Agreement,  the
         United States and the States of Indiana and Wisconsin agreed not to sue
         for response costs and, with the exception of five Known Sites, natural
         resource  damages at each of the Known Sites. In addition,  pursuant to
         Section  113(f)(2)  of CERCLA,  and as  provided  under the  Settlement
         Agreement,  the Predecessor Companies and the Company will be protected
         against contribution claims filed by private parties for any Known Site
         for matters covered by the EPA Settlement Agreement. The EPA Settlement
         Agreement  established  a  mechanism  for the  Company to  resolve  its
         liability for any other sites (the  "Additional  Sites"),  except those
         owned by the Company,  arising from pre-petition disposal activity. The
         Company  also  agreed  to share  with  such  governmental  parties  the
         proceeds of claims  relating to the Known  Sites made  against  certain
         insurers of the Predecessor Companies and their affiliates.

                  In the event  that the  United  States,  Wisconsin  or Indiana
         asserts a claim  against the  Predecessor  Companies or the Company for
         response costs associated with pre-petition  disposal activities at any
         Additional Site, the governmental  party will be entitled to pursue its
         claim in the  ordinary  course,  and the  Company  and the  Predecessor
         Companies will be entitled to assert all of their defenses. However, if
         and  when  the  Company  or any of the  Predecessor  Companies  is held
         liable,  and if the liability is determined to arise from  pre-petition
         disposal  activities,  the Company or such Predecessor  Company may pay
         the  liability in discounted  "plan  dollars"  (i.e.,  the value of the
         consideration  that the party  asserting such claim would have received
         if the liability  were treated as a general  unsecured  claim under the
         Plan of  Reorganization).  Such  payment  may be made in cash or in the
         Company's  stock,  or a combination  thereof,  at the Company's or such
         Predecessor  Company's option.  Claims arising from real property owned
         by the Company are not affected by the EPA Settlement Agreement.

                  The Company received a letter dated October 30, 1997, from the
         EPA,  Region 5,  informing  the  Company  that it might be  financially
         responsible for a pollution  incident at the plant formerly occupied by
         the Company at 312 North Hill Street, Mishawaka, Indiana. The EPA later
         notified  the Company  that it expected  the Company to pay for part or
         all of the  approximately  $1.7  million of costs  associated  with the
         cleanup  of a  portion  of such  plant.  The  Company  and the EPA have
         negotiated a settlement in principle,  whereby the EPA will be given an
         allowed   unsecured   claim  of  $1.7   million   under   the  Plan  of
         Reorganization of the Predecessor Companies and the Company will make a
         payment of $525,000 to the EPA.

                  In October 1996, the EPA sent the Company a General Notice and
         Special  Notice of Liability  concerning the Refuse  Hideaway  Landfill
         Superfund Site at Middleton,  Wisconsin. While a unit of Uniroyal, Inc.
         is believed to have sent  non-hazardous  waste to the site between 1978
         and 1984,  the Company is not aware that the  Uniroyal,  Inc. unit sent
         any  hazardous  materials to the site.  The Company has entered into an
         Administrative  Order  on  Consent  with  the  EPA  and  a  Potentially
         Responsible   Parties   Agreement   with  certain   other   potentially
         responsible  parties.  The Company does not  presently  anticipate  any
         material  liability in connection  with the site, and in any event,  if
         the Company is found to have  liability  in  connection  with the site,
         such  liability  will be  subject  to the  terms of the EPA  Settlement
         Agreement. See "- History of Company - Predecessor Companies."

                  The Company's  acquisition of the assets of Townsend  Plastics
         in September 1997 included the building in which the business  operates
         in  Pleasant  Hill,  Iowa.  The seller  retained  the  underlying  real
         property,  which is leased to the Company for a term of ten years.  The
         Company  also  has an  option  to  acquire  such  real  property  until
         September  30, 2007.  The real  property is subject to a RCRA  Facility
         Investigation/Corrective  Measures Study with Interim  Measures ordered
         by the EPA  pursuant to RCRA.  Two former  lessees of the  property are
         performing  corrective  measures on the real property to remediate soil
         and ground water  contamination.  The Company does not anticipate  that
         such  corrective  measures will interfere with the Company's use of the
         property.  The Company does not anticipate any liability to the Company
         in connection with such contamination or corrective measures as long as
         the Company remains a lessee of the property.

                  Based upon information available as of September 27, 1998, the
         Company believes that the costs of environmental  remediation for which
         it may be  liable  have  either  been  adequately  reserved  for or are
         otherwise  unlikely to have a material  adverse effect on the Company's
         operations, cash flows or financial position.

         History of Company

                  Predecessor Companies

                  The  Company's  businesses  trace their origins to a number of
         predecessor companies which eventually were reorganized pursuant to the
         Third  Amended Plan of  Reorganization  under the  Bankruptcy  Code for
         Polycast   Technology   Corporation  and  Its  Affiliated  Debtors  (as
         subsequently modified, the "Plan of Reorganization"). See "- History of
         the Company - Reorganization."

                  The Company's acrylic sheet business  originated in the 1960's
         in a  company  known  as  Polycast  Technology  Corporation  ("Polycast
         Technology"),  which subsequently  changed its name to The Jesup Group,
         Inc.  ("Jesup").  In 1984, Polycast Technology acquired the business of
         Shenandoah Plastics ("Shenandoah"), a company engaged since 1967 in the
         manufacture   of   thermoplastic   sheet,   and  Glasflex   Corporation
         ("Glasflex"),  a  manufacturer  since 1954 of acrylic  sheet,  rods and
         tubes.  These businesses  eventually became part of what is known today
         as the Company's High Performance Plastics Segment.

                  A substantial  portion of the thermoplastic  sheet business of
         the High  Performance  Plastics  Segment (other than that acquired from
         Shenandoah ), as well as the businesses of the Coated  Fabrics  Segment
         and the Specialty  Adhesives  Segment (formerly the Specialty Foams and
         Adhesives Segment),  originated in the chemical and plastics operations
         of  the  U.S.   Rubber   Company   (later  known  as   Uniroyal,   Inc.
         ("Uniroyal")).  These operations were conducted by segments of Uniroyal
         until 1985, when Uniroyal Plastics Company,  Inc. ("UPC") was formed by
         Uniroyal as a  wholly-owned  subsidiary  to hold these  operations.  In
         October 1986, Jesup,  indirectly,  through its wholly-owned subsidiary,
         Uniroyal  Plastics  Acquisition  Corp.  ("UPAC"),   acquired  UPC  from
         Uniroyal.   Following  its  acquisition  of  UPC,  Jesup  combined  the
         thermoplastic  sheet  operations  acquired  from UPC with its  existing
         thermoplastic  sheet and acrylic  sheet,  rod and tube  businesses in a
         subsidiary known as Polycast  Technology  Corporation ("Old Polycast").
         Jesup also  transferred  what is now the Coated Fabrics  Segment of the
         Company's business into Uniroyal Engineered Products,  Inc. ("Old UEP")
         and the  adhesives  and sealants  business of what is now its Specialty
         Adhesives Segment into Uniroyal  Adhesives and Sealants  Company,  Inc.
         ("Old UAS"). The assets of the specialty foam business were transferred
         from UPC to Ensolite, Inc. ("Old Ensolite"). Old Polycast, Old UEP, Old
         Ensolite  and  Old UAS  are  referred  to  herein  as the  "Predecessor
         Companies."  UPC is  currently  in  bankruptcy  liquidation  and was an
         affiliate of the Predecessor  Companies.  UPAC's plan of reorganization
         was substantially implemented in November 1993.

                  In October and November  1991, the  Predecessor  Companies and
         one other subsidiary of Jesup filed voluntary bankruptcy petitions with
         the  United  States  Bankruptcy  Court  for the  Northern  District  of
         Indiana,  South Bend Division (the "Bankruptcy Court") for relief under
         Chapter  11 of Title 11 of the United  States  Code,  as  amended  (the
         "Bankruptcy Code").

                  Reorganization

                  The  Predecessor   Companies   sought   protection  under  the
         Bankruptcy  Code  primarily  as a  result  of their  inability  to meet
         significant obligations for retiree medical expenses,  unfunded pension
         obligations  and interest on  indebtedness  incurred in connection with
         the  acquisition of UPC. Prior to the  commencement  of the Predecessor
         Companies'  bankruptcy  proceedings (the  "Bankruptcy  Proceedings") in
         Fiscal 1991, these  non-operating  expenses,  combined with the loss of
         sales in  certain  economically  depressed  markets  (particularly  the
         automobile  markets),  caused a significant and increasing drain on the
         Predecessor  Companies'  working capital and resulted in certain of the
         Predecessor   Companies'   significantly   reducing  their   operations
         (including profitable, but working  capital-intensive,  operations such
         as the  application of coatings to fabric for  automotive  airbags) and
         certain  capital  expenditure  programs.  The segments  most  adversely
         affected by the decreased  working  capital  condition  were the Coated
         Fabrics and Specialty Adhesives Segments.

                  The plan of  reorganization  of the Predecessor  Companies was
         substantially  consummated on September 27, 1992.  Pursuant to the Plan
         of  Reorganization,  each  of  the  Predecessor  Companies  transferred
         substantially all of its assets to a newly organized  subsidiary of the
         Company with a name that was substantially identical to the name of its
         corresponding  Predecessor  Company.  In  exchange,  each of these  new
         subsidiaries,  including Polycast Technology Corporation  ("Polycast"),
         Uniroyal  Engineered  Products,  Inc. ("UEP"),  Uniroyal  Adhesives and
         Sealants Company, Inc. ("UAS") and Ensolite, Inc. ("Ensolite"),  agreed
         to assume certain of the liabilities of its  corresponding  Predecessor
         Company.  In addition,  the Company issued, or authorized for issuance,
         9,575,000  shares of its Common  Stock to holders of allowed  unsecured
         claims  against  the  Predecessor  Companies  and 50 shares of Series A
         Preferred  Stock  and 50  shares  of  Series B  Preferred  Stock to the
         Pension Benefit Guaranty  Corporation (the "PBGC"). On June 7, 1993, in
         conjunction  with the public  offering of the  Company's  11.75% Senior
         Secured Notes,  the Company  merged each of its operating  subsidiaries
         into the Company.  In May 1993 the Company called and repurchased  from
         the PBGC all of the outstanding  shares of Series A Preferred Stock and
         15 shares of the  outstanding  shares of Series B Preferred  stock.  On
         December 16, 1996,  the Company  repurchased an additional 15 shares of
         such  stock,  and on  February 4, 1997,  the  Company  repurchased  the
         remaining 20 shares of  preferred  stock.  On November  13,  1997,  the
         Company,  certain  officers  and  directors  of the Company and certain
         other persons purchased all of the common stock held by the PBGC.

                  On November 8, 1993,  the Plan of  Liquidation  of UPAC became
         effective and was substantially consummated.  Pursuant to the UPAC Plan
         of   Liquidation,   the  Company   received  a  cash   distribution  of
         approximately  $6.8 million  following the liquidation of the assets of
         the UPAC estate and  accordingly  recorded income from the UPAC Plan of
         Liquidation in the amount of approximately $6.8 million.

                  In connection with matters  relating to UPAC's  acquisition of
         UPC, on May 6, 1993 the Company  entered  into a  settlement  agreement
         (the "Company Settlement") with Uniroyal, Inc., CDU Holding Liquidating
         Trust and Uniroyal Holding, Inc. (collectively, the "Uniroyal Parties")
         pursuant to which the Company and the Uniroyal Parties resolved certain
         existing and potential  disputes arising from the acquisition of UPC by
         UPAC from Uniroyal, Inc. Uniroyal, Inc. was dissolved in December 1986.
         CDU  Holding   Liquidating  Trust  and  Uniroyal  Holding,   Inc.  were
         affiliates of Uniroyal,  Inc. In connection  with the resolution of the
         matters covered by the Company  Settlement,  the Uniroyal  Parties paid
         $2.25 million in cash to the Company.  In exchange,  the Company agreed
         to certain  matters  involving the prosecution and settlement of claims
         under  insurance  policies,  including  certain  claims of the Uniroyal
         Parties that covered environmental  liabilities at certain of the Known
         Sites. See " Environmental  Matters." As a result of this agreement and
         related agreements reached with insurance  companies during Fiscal 1994
         as to  amounts  with  respect  to  environmental  claims,  the  Company
         recorded as income in Fiscal  1994  approximately  $1.2  million and in
         Fiscal 1995 approximately $70,000, net of certain professional fees and
         other expenses.

                  The Company  Settlement  also  provides  that the Company will
         indemnify and hold  harmless the Uniroyal  Parties with respect to: (i)
         environmental  liabilities  associated  with  sites  that were owned or
         operated by the Company or the  Predecessor  Companies on or before May
         6, 1993;  and (ii) future  environmental  expenditures  by the Uniroyal
         Parties with respect to the  businesses of UPC, net of recoveries  from
         third parties (including insurance proceeds),  but only with respect to
         the portion of such expenditures,  if any, that exceeds $30 million and
         is less than $45 million. See " - Environmental Matters."

                  Pursuant  to the  Company  Settlement,  the  Company  and  the
         Uniroyal  Parties  also  agreed  to  share on a 35  percent  (35%) - 65
         percent  (65%) basis,  respectively,  the costs of  providing  medical,
         prescription drug and life insurance benefits to certain retired former
         salaried  employees  of UPC or  Uniroyal  who are  class  members  in a
         federal class action lawsuit against  certain of the Uniroyal  Parties.
         The Company's  cost for providing such medical,  prescription  drug and
         life insurance benefits in Fiscal 1998 was approximately  $744,000. The
         Company and the Uniroyal Parties also mutually released each other from
         all  claims  and  causes of  action,  if any,  related to or arising in
         connection with the acquisition of UPC from Uniroyal in 1986 and all of
         the agreements entered into in connection therewith.

                  In a separate settlement agreement entered into on May 6, 1993
         (the "UPAC Settlement"), UPAC and Jesup (each of which was an affiliate
         of the Predecessor Companies) settled their claims against the Uniroyal
         Parties and certain of their  insiders  and  affiliates.  The  Uniroyal
         Parties and such insiders and affiliates are  collectively  referred to
         as the "Uniroyal Affiliated Parties".  Pursuant to the UPAC Settlement,
         the Uniroyal  Affiliated  Parties  paid $16.0  million in cash to UPAC.
         Such cash  constituted  the major portion of the  bankruptcy  estate of
         UPAC.



<PAGE>


Item 2. Properties

                  The  following  table sets forth the location,  size,  general
         character and nature of the Company's facilities:

<TABLE>
<CAPTION>
                                       SQUARE FEET         GENERAL  CHARACTER
LOCATION AND ENTITY                    OF FACILITY            OF PROPERTY                        LEASED OR OWNED
<S>                                     <C>         <C>                                            <C>    
Corporate
---------
Sarasota, Florida                        11,000      Corporate offices                             Leased
Stirling, New Jersey                     50,000      Manufacture of acrylic  sheet, rods & tubes   Owned (Leased  
                                                                                                      to HPPI)    
High Performance  Plastics Segment
----------------------------------
South Bend, Indiana                      12,000      Offices                                       Owned
Stamford, Connecticut                     5,500      Offices                                       Leased
Stamford, Connecticut                    81,000      Manufacture of cell cast acrylics             Owned
Hackensack, New Jersey                   46,000      Manufacture of cell cast acrylics             Owned
Rome, Georgia                            45,000      Manufacture of thermoplastic products         Owned
Redlands, California                     60,000      Manufacture of thermoplastic products         Owned
Stirling, New Jersey                     50,000      Manufacture of acrylic sheet, rods & tubes    Leased (From
                                                                                                     Corporate)    
Warsaw, Indiana                         225,000      Manufacture of thermoplastic products,        Owned
                                                       custom compounding and warehouse
Newport, Delaware                        14,000      Manufacture of acrylics                       Leased
Pleasant Hill, Iowa                      49,000      Manufacture of acrylic rods & tubes           Owned (Ground Lease
                                                                                                     On Real Estate)
Melbourne, Florida                       52,000      Fabrication of acrylic sheet                  Leased

Coated Fabrics Segment
----------------------
Stoughton, Wisconsin                    198,275      Manufacture of coated fabrics products        Owned
Port Clinton, Ohio                      240,000      Manufacture of coated fabrics products        Owned

Specialty Adhesives Segment
---------------------------
South Bend, Indiana                     240,000      Manufacture of adhesives and sealants         Owned

Optoelectronics Segment
-----------------------
Tampa, Florida                           69,000      Manufacture of epitaxial wafers and
                                                        package ready die                          Leased
</TABLE>

                  All of the properties owned by the High  Performance  Plastics
         Segment are subject to the liens of mortgages  securing  HPPI's  credit
         agreement  with  Fleet  National  Bank.  See  "Note  9 to  Consolidated
         Financial Statements."

                  In  conjunction  with  plant  consolidations  at the  Polycast
         division,  see "Note 2 to the Consolidated  Financial  Statements," the
         Company plans to sell the Stirling,  New Jersey facility which is owned
         by the Company and leased to HPPI.

                  In conjunction  with the sale of the  automotive  operation of
         the Coated Fabrics Segment, the Company plans to sell the Port Clinton,
         Ohio facility. See "Item 1. Business - Corporate Developments - Sale of
         the Automotive Operation of the Coated Fabrics Segment."

Item  3. Legal Proceedings

                  By letter dated January 30, 1998, the Denver  Regional  Office
         of the U.S. Federal Trade Commission  ("FTC") notified the Company that
         it  was  conducting  a  non-public  investigation  into  the  Company's
         acquisition of the Townsend Plastics Division of Townsend Industries in
         September  1997.  The  purpose of the  investigation  was to  determine
         whether  the  transaction  violated  Section 7 of the  Clayton  Act, 15
         U.S.C.  Section 18, Section 5 of the Federal Trade  Commission  Act, 15
         U.S.C.  Section 45, or any other law  enforced by the FTC.  The Company
         has been cooperating with the FTC in its investigation. The Company has
         been in discussions with the staff of the Denver Regional Office of the
         FTC  seeking  to meet the  concerns  of both the  Company  and the FTC.
         Management does not expect the cost of compliance with the FTC requests
         to have a  material  adverse  effect  upon  the  Company's  results  of
         operations,  cash flows or financial position. The Company is currently
         seeking to sell  certain  assets to another  entity that could  compete
         with  Townsend/Glasflex in order to increase competition in the markets
         served by Townsend/Glasflex.

                  The Company is involved in certain proceedings in the ordinary
         course of its business  which,  if determined  adversely to the Company
         would, in the opinion of management, not have a material adverse effect
         on the Company or its operations.



<PAGE>


                  In connection  with its  reorganization,  the Company  entered
         into a number of settlement  agreements,  including certain  agreements
         relating to environmental  matters.  See "Item 1. Business - History of
         the Company - Reorganization."

Item 4. Submission of Matters to a Vote of Security Holders

                  No matter was  submitted  during the fourth  quarter of Fiscal
         1998 to a vote of security holders, through the solicitation of proxies
         or otherwise.

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

                  Prior to the  effective  date of the  Plan of  Reorganization,
         none of the  Company's  common  stock,  par value  $.01 per share  (the
         "Common  Stock"),  was  issued,  and  consequently  there was no public
         market for the Common  Stock.  The Common Stock was admitted to trading
         on the NASDAQ National  Market System  ("NASDAQ") on September 28, 1992
         and trades under the symbol "UTCI." At the close of trading on November
         30, 1998,  the price per share of Common Stock was $10.00.  The Plan of
         Reorganization  provides  for the  issuance of a maximum of  10,000,000
         shares of Common  Stock in  settlement  of claims and other  matters in
         connection  with the Bankruptcy  Proceedings.  As of November 30, 1998,
         approximately  9,666,000 of such shares of Common Stock had been issued
         pursuant to the Plan of Reorganization (including shares transferred to
         the  Company's  treasury as a result of the  election by certain  claim
         holders, as provided under the Plan of Reorganization,  to receive cash
         in lieu of Common Stock).  The remaining  shares are being held pending
         resolution of certain retiree medical claims.

                  As of November 30,  1998,  there were 840 holders of record of
         shares of Common Stock.  In addition,  there were  approximately  1,700
         holders of Common Stock in street name.

                  The  following  table sets forth the high and low sales  price
         per share of the  Company's  Common Stock as reported by NASDAQ for the
         indicated dates:
<TABLE>
<CAPTION>
 
                                             Fiscal Year Ended                        Fiscal Year Ended
                                            September 27, 1998                        September 28, 1997
                                     --------------------------------        ---------------------------------      
                  Quarter                High                 Low                 High                 Low
                  -------              -------              -------             -------              -------           
                  <S>                 <C>                  <C>                 <C>                  <C>   
                  First                 $6.625               $3.938              $3.250               $2.688
                  Second                $9.000               $5.313              $3.188               $2.500
                  Third                 $10.250              $7.750              $4.000               $2.125
                  Fourth                $10.875              $9.000              $4.750               $3.125
</TABLE>
                  
                  The holders of record of shares of Common  Stock are  entitled
         to receive  dividends when and as declared by the Board of Directors of
         the Company,  provided that the Company has funds legally available for
         the  payment  of  such  dividends  and is not  otherwise  contractually
         restricted  from making payment  thereof.  The Company has not paid any
         cash dividends on the common stock in the last three fiscal years.  The
         Company's  ability to pay cash dividends on Common Stock was previously
         restricted  by the indenture in  connection  with the Company's  Senior
         Secured Notes. See "Note 9 to Consolidated Financial Statements."



<PAGE>


Item 6. Selected Financial Data

                  The following  historical  financial  data as of September 27,
         1998 and  September  28,  1997 and for each of the  three  years in the
         period ended  September  27, 1998 have been  derived from  consolidated
         financial  statements  of the Company  audited by Deloitte & Touche LLP
         and  contained  elsewhere in this Form 10-K.  The  selected  historical
         financial  data  presented  below as of September 29, 1996,  October 1,
         1995 and October 2, 1994 and for the fiscal years ended October 1, 1995
         and October 2, 1994 have been derived from audited financial statements
         of the  Company.  All of the  financial  data set forth below should be
         read in  conjunction  with the  Consolidated  Financial  Statements and
         related notes and other  financial  information  contained in this Form
         10-K.
<TABLE>
<CAPTION>
                                                                          SELECTED FINANCIAL DATA
                                 ----------------- ------------------ ----------------- ----------------- -----------------
                                  September 27,      September 28,     September 29,       October 1,         October 2, 
                                       1998              1997               1996              1995             1994 (1)
                                 ----------------- ------------------ ----------------- ----------------- -----------------
                                                        (in thousands, except share and per share data)
Operating Data:
<S>                                <C>               <C>                <C>                <C>              <C>         
Net Sales                          $   220,616       $   208,524        $   209,348        $   214,951      $   197,536
Depreciation and other                   
  amortization (2)                       8,720             8,304              9,848              9,521            8,356    
Income (loss) before interest,
  income taxes and   
  extraordinary item                    23,016            10,594            (12,749)             9,549           15,414
Interest expense                        (9,382)           (9,384)            (9,773)           (10,029)         (10,109)
Income tax (expense) benefit            (5,607)             (831)             8,121                189           (2,217)
Income (loss) before
  extraordinary item                     8,027               379            (14,401)              (291)           3,088
Extraordinary (loss) gain               (5,637)                -                  -                363              727
Net income (loss)                  $     2,390       $       379        $   (14,401)       $        72      $     3,815
Income (loss) per common share-
  basic:
  Income (loss) before
    extraordinary item             $      0.61       $      0.03        $     (1.09)       $     (0.02)     $      0.24
  Extraordinary (loss) gain              (0.43)                -                  -               0.03             0.06
                                   -----------       -----------        -----------        -----------      -----------      
  Net income (loss) per share      $      0.18       $      0.03        $     (1.09)       $      0.01      $      0.30
                                   ===========       ===========        ===========        ===========      =========== 
Average number of shares used
  in computation (3)                13,231,542        13,316,965         13,167,466         13,014,910       12,867,624
                                    ==========        ==========         ==========         ==========       ========== 
Income (loss) per common share-
  assuming dilution:
  Income (loss) before
    extraordinary item             $      0.55       $      0.03        $    (1.09)        $     (0.02)     $      0.22
  Extraordinary (loss) gain              (0.39)                -                 -                0.03             0.05
                                   -----------       -----------        ----------         -----------      -----------      
  Net income (loss) per share      $      0.16       $      0.03        $    (1.09)        $      0.01      $      0.27
                                   ===========       ===========        ==========         ===========      ===========
Average number of shares used
  in computation (3)                14,631,068        13,423,554         13,167,466         13,014,910       14,317,298
                                    ==========        ==========         ==========         ==========       ==========
Balance Sheet Data:
Cash and cash equivalents          $     5,585       $       244        $     2,023        $       291      $     4,249
Working capital                         36,146            33,358             29,148             31,292           34,454
Total assets                           186,351           181,491            170,786            180,483          179,274
Long-term debt (including
  current portion)                     105,658            89,647             72,775             76,763           79,371
Stockholders' equity                    32,311            40,032             43,499             57,669           57,533

<FN>
                  (1) All fiscal years  presented are 52-week periods except for
         the fiscal year ended October 2, 1994 which was a 53-week fiscal year.

                  (2) Excludes amortization of reorganization value in excess of
         amounts  allocable  to  identifiable  assets  of  $377,000,   $754,000,
         $765,000,  $769,000 and $1,003,000 for the fiscal years ended September
         27, 1998,  September 28, 1997,  September 29, 1996, October 1, 1995 and
         October 2, 1994, respectively.

                  (3) See "Note 16 to Consolidated Financial Statements."
</FN>
</TABLE>

<PAGE>


Item 7. Management's  Discussion  and  Analysis of  Financial
           Condition and Results of Operations

                  The  following   discussion  and  analysis  by  the  Company's
         management  should  be read  in  conjunction  with  "Item  6.  Selected
         Financial  Data" and "Item 8.  Consolidated  Financial  Statements  and
         Supplementary Data" appearing elsewhere in this Form 10-K.

         Results Of Operations

                  Comparison of Fiscal 1998 with Fiscal 1997

                  Net Sales.  The Company's  net sales  increased in Fiscal 1998
         six percent (6%) to $220.6 million from $208.5 million in Fiscal 1997.

                  Net sales in the High Performance  Plastics Segment  increased
         in Fiscal 1998 by  approximately  eight percent (8%) to $128.6  million
         from  $118.8  million in Fiscal  1997.  The  increase is due to the net
         effect of an increase in unit  volume at  Royalite  which was  slightly
         offset by a small  decline  in  overall  average  unit  selling  prices
         combined  with the net  effect of a slight  decline  in unit  volume at
         Polycast  which was more than  offset by an  increase  in average  unit
         selling prices.  The High  Performance  Plastics segment also benefited
         from the  acquisitions  of the  Lucite(R)  S-A-R  business and Townsend
         Plastics which were acquired  during the fourth quarter of Fiscal 1997,
         and the  current  year  acquisition  of ViPlex  Corporation,  which was
         acquired on May 22, 1998.

                  The Coated Fabrics Segment's net sales decreased approximately
         one percent (1%) in Fiscal 1998 to $67.9  million from $68.8 million in
         Fiscal  1997.  The  decrease  resulted  primarily  from  a  decline  in
         automotive  sales  due  to the  gradual  phase-out  of  its  automotive
         operations.  See "Item 1. Business Corporate Developments - Sale of the
         Automotive  Operation  of  the  Coated  Fabrics  Segment  and  Business
         Segments - Coated  Fabrics."  The  decline was  partially  offset by an
         increase in selling prices for the Segment's  Naugahyde(R) vinyl coated
         fabrics.

                  Net sales in the  Specialty  Adhesives  Segment  increased  in
         Fiscal 1998 by  approximately  15 percent  (15%) to $24.1  million from
         $20.9  million in Fiscal  1997.  This  increase  in sales is  primarily
         attributable  to the  acquisition  of C.  Gunther  Company on March 31,
         1997, increased sales of Hydra Fast-En(R) products,  increased sales of
         Silaprene(R)  primarily  in the  truck  body and  trailer  markets  and
         increased  sales  as a  result  of a  tolling  agreement  with a  major
         adhesives company.

                  Income (Loss) Before Interest,  Income Taxes and Extraordinary
         Item. In Fiscal 1998,  the Company had income before  interest,  income
         taxes and  extraordinary  item of $23.0  million as  compared to income
         before interest,  income taxes and extraordinary  item of $10.6 million
         for Fiscal 1997. All of the Company's major business  segments recorded
         significant increases in Fiscal 1998.

                  Income before interest,  income taxes and  extraordinary  item
         for the High Performance  Plastics Segment  increased in Fiscal 1998 by
         approximately  54 percent  (54%) to $16.2 million from $10.5 million in
         Fiscal 1997.  The increase was a result of a more  favorable  sales mix
         leading to higher margins for both the Royalite and Polycast divisions,
         incremental  earnings from prior year and current year acquisitions and
         a change  in  methodology  for the  allocation  of  corporate  overhead
         expenses.

                  The Coated Fabrics  Segment's income before  interest,  income
         taxes and  extraordinary  item in Fiscal  1998 was  approximately  $8.9
         million   compared  to  income  before   interest,   income  taxes  and
         extraordinary item of $2.1 million in Fiscal 1997. The increase of $6.8
         million was  principally  due to the net result of lower  manufacturing
         costs  for the  Segment's  automotive  operations  as a  result  of the
         gradual phase-out,  the reversal of rebate accruals  applicable to such
         business  and a  change  in  the  methodology  for  the  allocation  of
         corporate  overhead  expenses.  Also,  increased  production costs were
         incurred  in  Fiscal  1997 as a result  of a raw  materials  supplier's
         decision  to exit  its  business.  As a  result, the  Segment  incurred
         additional   costs  in  Fiscal  1997  to  qualify  its  products  using
         comparable raw materials available from other supply sources.

                  Income before interest,  income taxes and  extraordinary  item
         for the Specialty  Adhesives Segment was $1.9 million in Fiscal 1998 as
         compared to a loss before interest, income taxes and extraordinary item
         of $346,000 in Fiscal 1997.  The income before  interest,  income taxes
         and  extraordinary  item  in  Fiscal  1998  was  due  to  significantly
         increased  sales,  the incremental  earnings from the acquisition of C.
         Gunther Company,  operating  efficiencies as a result of the relocation
         to the new South  Bend  facility  and a change in  methodology  for the
         allocation of corporate overhead expenses.

                  Loss before interest,  income taxes and extraordinary item for
         the  Optoelectronics  Segment was $406,000  before  consideration  of a
         minority  interest of $199,000 in Fiscal 1998. The loss is attributable
         to start-up expenses incurred by the Optoelectronics  Segment.  Planned
         principal  operations  have not yet  commenced.  The Segment was not in
         existence during Fiscal 1997.

                  Amortization  of  reorganization  value in excess  of  amounts
         allocable to  identifiable  assets in Fiscal 1998 decreased to $377,000
         from $754,000 in Fiscal 1997. The decrease  resulted from the write-off
         of the remaining reorganization value in excess of amounts allocable to
         identifiable  assets in the third quarter of Fiscal 1998. The write-off
         was in  conjunction  with the  reduction of the deferred tax  valuation
         allowance relating to the acquired tax loss carryforward benefits.

                  Approximately $3.4 million of miscellaneous  expense in Fiscal
         1998  was  not  allocated  to any  segment  of the  Company's  business
         compared  to $958,000 in Fiscal  1997.  During  Fiscal 1998 the Company
         changed  its  methodology  for the  allocation  of  corporate  overhead
         expenses from an allocation  of 100% of certain  corporate  costs to an
         allocation  of costs  based  upon 3.0% - 3.5% of segment  sales.  Prior
         fiscal year amounts were not restated.

                  Interest  Expense.  Interest expense in Fiscal 1998 and Fiscal
         1997 approximated $9.4 million.  Overall, the effect of the increase in
         debt was  offset by a  decrease  in  overall  interest  rates  obtained
         through the  refinancing.  See "Item 1.  Business  Developments  - High
         Performance Plastics, Inc."

                  Income Tax  (Expense)  Benefit.  Income tax  expense in Fiscal
         1998 was  approximately  $5.6  million  as  compared  to an  expense of
         $831,000 in Fiscal  1997.  The  provisions  for income tax benefit were
         calculated by the Company through use of the effective income tax rates
         based upon its actual income.

                  Extraordinary   Loss  on  the   Extinguishment  of  Debt.  The
         extraordinary loss on the extinguishment of debt during Fiscal 1998 was
         $5.6  million.  This amount  represents  the loss  recognized  when the
         Company early retired the remaining  $72.3 million of its 11.75% Senior
         Secured Notes,  including a call premium payment of 4.41% and write-off
         of applicable debt issuance cost and unamortized debt discount,  net of
         income  tax  benefit  of  approximately  $2.8  million.  See "Note 9 to
         Consolidated Financial Statements."

                  Comparison of Fiscal 1997 with Fiscal 1996

                  Net Sales.  The Company's  net sales  decreased in Fiscal 1997
         less than one percent  (1%) to $208.5  million  from $209.3  million in
         Fiscal 1996. During Fiscal 1996 the Company sold its Ensolite specialty
         foams  division.  Included  in Fiscal 1996 are net sales of Ensolite of
         approximately $17.2 million. Excluding such sales from the prior period
         amounts, net sales of the Company's continuing  businesses increased by
         approximately  nine percent  (9%).  This  increase is  attributable  to
         increased net sales in all three business segments of the Company.

                  Net sales in the High Performance  Plastics Segment  increased
         in Fiscal 1997 by  approximately  three percent (3%) to $118.8  million
         from $115.1 million in Fiscal 1996. Royalite had sales increases in its
         niche businesses including flame retardancy products principally in the
         mass transit market; weatherability products in the construction market
         and soft feel laminate  products sold in conjunction with the Company's
         Coated  Fabrics  Segment  into the truck  market.  These  increases  at
         Royalite  were  partially  offset by lower  sales in its  lower  margin
         general purpose products which was consistent with  management's  focus
         on higher margin specialty sheet.  Polycast experienced increased sales
         in its specialty  markets as well as increases from its acquisitions in
         Fiscal 1997.

                  The Coated  Fabrics  Segment's  net sales  increased in Fiscal
         1997 approximately 17 percent (17%) to $68.8 million from $58.7 million
         in Fiscal 1996.  This increase  resulted  primarily from increased unit
         volume of  products  sold to the  automotive  industry.  This  increase
         resulted from car volume  increases in the transplant  industry and the
         Company's  introduction  of a new product line qualified for use in the
         manufacture  of  several   automobile  models  by  General  Motors.  In
         addition,  the Company  experienced  sales  increases  of  Naugahyde(R)
         coated vinyl  products  primarily in the mass transit,  electronic  and
         athletic equipment markets.

                  Net sales in the  Specialty  Adhesives  Segment  decreased  in
         Fiscal 1997 by  approximately  41 percent  (41%) to $20.9  million from
         $35.5 million in Fiscal 1996. This decrease  resulted  principally from
         the Ensolite Sale. In Fiscal 1996,  net sales of  Ensolite(R)  products
         for the 8 month period  preceding  consummation of the Ensolite Sale on
         June 10, 1996, were approximately  $17.2 million.  Excluding such sales
         from the  prior  period  amounts,  net sales of  liquid  adhesives  and
         sealants  increased  approximately 14 percent (14%) from Fiscal 1996 to
         Fiscal 1997.  This increase in sales is primarily  attributable  to the
         acquisition of C. Gunther Company on March 31, 1997, increased sales of
         Hydra  Fast-En(R)  products,  primarily  in the truck body and  trailer
         markets,  increased  bonding  sales to Firestone,  reflecting  stronger
         commercial roofing business and increased customer market share.

                  Income (Loss) Before Interest,  Income Taxes and Extraordinary
         Item. In Fiscal 1997,  the Company had income before  interest,  income
         taxes and  extraordinary  item of $10.6  million as  compared to a loss
         before interest,  income taxes and extraordinary  item of $12.7 million
         for Fiscal 1996.

                  Income before interest,  income taxes and  extraordinary  item
         for the High Performance  Plastics Segment  increased in Fiscal 1997 by
         approximately  50 percent  (50%) to $10.5  million from $7.0 million in
         Fiscal  1996  primarily  as a result of lower MMA costs on average  and
         lower operating costs for Polycast.  In Fiscal 1996,  Polycast incurred
         an  $808,000  charge for  estimated  back pay and  retraining  costs in
         connection  with the settlement of a strike at the Polycast  Division's
         Stamford, Connecticut facility and a temporary decline in manufacturing
         efficiency  at such facility in Fiscal 1996 as a result of the required
         retraining  of employees  returning  from the strike.  In addition,  in
         Fiscal  1996,  the Royalite  Division  incurred  certain  non-recurring
         professional and development costs.

                  The Coated Fabrics  Segment's income before  interest,  income
         taxes and  extraordinary  item in Fiscal  1997 was  approximately  $2.1
         million  compared to a loss of  approximately  $19.0  million in Fiscal
         1996.  In  Fiscal  1996  the  Company  established   reserves  totaling
         approximately  $12.5  million  related to its decision to exit the Port
         Clinton, Ohio automotive operation. Excluding this reserve, the Segment
         lost  approximately  $6.5 million from  operations  in Fiscal 1996.  In
         Fiscal  1996,  the  Company  suffered  a loss  of  sales  and  incurred
         additional  costs on  instrument  panels  for a  transplant  automotive
         company as a result of defective  adhesion materials provided by one of
         the  Company's  suppliers.   The  problems  caused  by  such  defective
         materials  were  resolved.  The  improvement  in earnings is  primarily
         related  to  the  increased  volume,   lower  scrap  costs  and  higher
         productivity from the increased volume.

                  Loss before interest,  income taxes and extraordinary item for
         the Specialty Adhesives Segment was $346,000 in Fiscal 1997 as compared
         to income of $70,000 in Fiscal 1996.  Excluding the gain on the sale of
         the Ensolite  Division in Fiscal 1996,  the Segment lost $2.0  million.
         The   reduction  in  the  loss  before   interest,   income  taxes  and
         extraordinary item was due to the incremental  earnings from C. Gunther
         Company and operating efficiencies as a result of the relocation to the
         new South Bend  facility.  Energy  represented  a  significant  cost of
         operating the Mishawaka,  Indiana  facility;  due to configuration  and
         applicable fire and safety  regulations,  the entire facility had to be
         heated and lighted even though the Company's  operations  occupied less
         than 50% of the facility.

                  Amortization  of  reorganization  value in excess  of  amounts
         allocable to  identifiable  assets in Fiscal 1997 decreased to $754,000
         from $765,000 in Fiscal 1996. This decrease resulted from the write-off
         of the assets transferred in connection with the Ensolite Sale.

                  Approximately $958,000 of miscellaneous expense in Fiscal 1997
         was not allocated to any segment of the Company's business.  There were
         no such unallocated amounts in Fiscal 1996.

                  Interest Expense. Interest expense in Fiscal 1997 decreased to
         approximately  $9.4  million  from $9.8  million in Fiscal  1996 due to
         interest  income  earned  by the  Company  on the $5.0  million,  11.75
         percent (11.75%) note issued to the Company by RBX Group,  Inc. as part
         of the purchase price of the Ensolite Sale. See "Note 5 to Consolidated
         Financial Statements."

                  Income Tax  (Expense)  Benefit.  Income tax  expense in Fiscal
         1997 was  approximately  $831,000  as  compared  to a  benefit  of $8.1
         million in Fiscal  1996.  The  provisions  for income tax benefit  were
         calculated by the Company through use of the effective income tax rates
         based upon its actual income.

                  Liquidity and Capital Resources

                  For   Fiscal   1998,   the   Company's   operations   provided
         approximately  $12.8 million of cash as compared to approximately  $3.4
         million of cash  provided  during  Fiscal 1997.  This  increase in cash
         provided  by  operations  for  Fiscal  1998  resulted   primarily  from
         increased net income, an increase in deferred taxes payable, a decrease
         in receivables  and was partially  offset by an increase in inventories
         and other assets.

                  Net cash used in investing activities of the Company in Fiscal
         1998 was approximately $3.8 million as compared to approximately  $15.5
         million used during Fiscal 1997.  The primary use of cash during Fiscal
         1998 and Fiscal 1997 was to purchase property, plant and equipment. The
         Company  also used $1.8  million  in Fiscal  1998 and $8.0  million  in
         Fiscal  1997 for  business  acquisitions.  The  Company  plans to spend
         approximately  $20 million on  property,  plant and  equipment  for the
         Optoelectronics  Segment  and $7  million on the  modernization  of its
         Stamford,  Connecticut  facility  during  Fiscal  1999.  Funds  for the
         Optoelectronics  project are  expected to be provided  through  outside
         financing  as well as  capital  contributions  from the  joint  venture
         partners.  Funds for the  Stamford  modernization  are  expected  to be
         provided by  operations  and the ability to borrow under the  Company's
         revolving credit agreement with Fleet National Bank.

                  Net cash used in financing  activities was $3.8 million during
         Fiscal  1998  as  compared  to  $10.3  million  provided  by  financing
         activities  during  Fiscal 1997.  Cash used in financing  activities in
         Fiscal 1998 is the net result of cash provided  through the refinancing
         (see  "Item  1.  Business  Corporate  Developments  - High  Performance
         Plastics,  Inc.")  offset  by the  purchases  of  1,352,000  shares  of
         treasury stock for $7.3 million (which  excludes a note payable for the
         purchase  of  treasury  stock of $2.5  million)  and the  purchases  of
         216,850 outstanding warrants for $1.3 million.

                  The Company at September  27,  1998,  had  approximately  $5.6
         million  in cash and cash  equivalents  as  compared  to  approximately
         $244,000 at September 28, 1997.  Working  capital at September 27, 1998
         was approximately $36.1 million compared to approximately $33.4 million
         at September  28, 1997.  The Company had  borrowings  of  approximately
         $11.3 million under its $20 million  revolving  credit  agreement  with
         Fleet National Bank and $4,000 under its $10.0 million revolving credit
         agreement with CIT at September 27, 1998.  See "Note 9 to  Consolidated
         Financial Statements."

                  The Company  believes  that cash from its  operations  and its
         ability to borrow under the revolving credit facilities mentioned above
         provide it  sufficient  liquidity  to  finance  its  existing  level of
         operations and meet its debt service obligations. However, there can be
         no  assurance  that the  Company's  operations  together  with  amounts
         available  under its revolving  credit  facilities  will continue to be
         sufficient  to finance its existing  level of  operations  and meet its
         debt  service  obligations.  The  Company's  ability  to meet  its debt
         service and other obligations depends on its future performance,  which
         in turn, is subject to general  economic  conditions  and to financial,
         business and other  factors,  including  factors  beyond the  Company's
         control. If the Company is unable to generate sufficient cash flow from
         operations,  it may be  required to  refinance  all or a portion of its
         existing debt or obtain additional financing. There can be no assurance
         that the Company will be able to obtain such  refinancing or additional
         financing.

                  Effects of Inflation

                  The  markets  in  which  the  Company   sells   products   are
         competitive.  In particular,  the Company has encountered in connection
         with its sales of coated  fabrics to the  automotive  industry  and its
         sales of acrylics to the aerospace  industry,  effective  resistance to
         price increases  generally.  Thus, in an  inflationary  environment the
         Company might not in all instances be able to pass through to consumers
         general price increases, in which event the Company's operations may be
         materially  impacted if such conditions were to occur.  The Company has
         not in the past been adversely impacted by general price inflation.

                  Year 2000

                  Many software applications and operational programs written in
         the past were not designed to recognize calendar dates beginning in the
         Year 2000.  The  failure of such  applications  or systems to  properly
         recognize  the  dates  beginning  in the  Year  2000  could  result  in
         miscalculations  or system  failures  which could  result in an adverse
         impact on the Company's operations.

                  The Company has instituted a Year 2000 task force that reports
         to the Audit Committee of the Board of Directors.  The Company has also
         initiated a  comprehensive  project,  overseen  by the task  force,  to
         prepare   its    computer    systems,    communication    systems   and
         manufacturing/testing   equipment  for  the  Year  2000.   The  project
         primarily  includes  three  phases  which are:  1)  identification  and
         assessment  of  all  software,   hardware  and  equipment   that  could
         potentially  be  affected by the Year 2000  issue,  2) remedial  action
         necessary to bring such systems into compliance and 3) further testing,
         if necessary.  The Company has generally  completed the  identification
         and  assessment  phase  of its  project  and is at  various  stages  of
         remediation  and  testing  the  noted  systems.  The  Company  plans to
         complete  this project by June 1, 1999.  The Company  believes that the
         majority of its major  systems are  currently  Year 2000  compliant and
         costs to transition the remaining  systems to Year 2000  compliance are
         not  anticipated  to exceed  approximately  $500,000.  The  Company has
         primarily used internal resources in its Year 2000 project thus far and
         has incurred costs of less than $300,000.

                  The Company is also contacting  critical suppliers of products
         and services and customers to determine the extent to which the Company
         might be vulnerable to such parties'  failure to resolve their own Year
         2000 issues. Where practicable,  the Company will access and attempt to
         mitigate its risks with respect to the failure of these  entities to be
         Year  2000  ready.  The  Company  does  not  have  a  concentration  of
         dependence  on these  parties.  The effect,  if any,  on the  Company's
         results of operations  from the failure of such parties to be Year 2000
         ready is not reasonably estimable.

                  Currently   the   Company   does  not  expect  to   experience
         significant  disruptions of its operations as a result of the change to
         the new millenium and therefore has not  formulated a contingency  plan
         for such occurrence.

                  Forward Looking Information

                  Statements  made  herein  that are  forward-looking  in nature
         within the meaning of the Private  Securities  Litigation Reform Act of
         1995 are subject to risks and  uncertainties  that could  cause  actual
         results to differ materially. Such risks and uncertainties include, but
         are not  limited  to,  those  related to  business  conditions  and the
         financial  strength of the various  markets served by the Company,  the
         level of  spending  for such  products,  the  ability of the Company to
         successfully manufacture and market its products and the ability of the
         Company's  suppliers and customers to adequately resolve their own Year
         2000 issues.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

                  The  Company is exposed to  various  market  risks,  including
         changes in interest  rates.  The Company's  earnings and cash flows are
         subject  to  fluctuations  due to  changes  in  interest  rates  on its
         floating  rate  long-term  debt  and  revolving  credit  advances.  The
         Company's  risk  management  policy  includes  the  use  of  derivative
         financial instruments (interest rate swaps) to manage its interest rate
         exposure.  The counter  parties are major financial  institutions.  The
         Company does not enter into derivatives or other financial  instruments
         for trading or speculative purposes.

                  The  Company's  interest  rate swaps  involve the  exchange of
         fixed and  variable  interest  rate  payments  without  exchanging  the
         notional  principal amount.  Payments or receipts on the agreements are
         recorded as adjustments to interest expense. At September 27, 1998, the
         Company had  outstanding  swap  agreements,  maturing at various  dates
         through 2003, with an aggregate notional amount of $80.0 million. Under
         these  agreements  the  Company  receives  a  floating  rate  based  on
         USD-LIBOR-BBA and pays a fixed weighted average interest rate of 5.80%.
         These swaps  effectively  change the  Company's  payment of interest on
         $80.0 million of its $101.3 million variable rate debt at September 27,
         1998 to fixed rate debt.

                  The  fair  value  of  these  interest  rate  swap   agreements
         represents  the  estimated  receipts or payments  that would be made to
         terminate the agreements. At September 27, 1998, the Company would have
         paid approximately $2.7 million to terminate the agreements. A decrease
         of 100 basis points in the yield curve would  increase the amounts paid
         by  approximately  $2.5  million.  The fair  value  is based on  dealer
         quotes, considering current interest rates.

                  At September  27,  1998,  approximately  $21.3  million of the
         Company's  floating rate long-term debt and revolving  credit  advances
         was not covered  under an interest  swap  agreement.  For floating rate
         debt,  interest  changes  generally do not affect the fair market value
         but do impact future earnings and cash flows assuming other factors are
         held constant.  Based upon this balance, a change of one percent in the
         interest rate would cause a change in interest expense of approximately
         $213,000 on an annual basis.

Item 8.  Consolidated Financial Statements and Supplementary Data

         See Index to Consolidated Financial Statements on Page F-1.

Item 9.  Changes  in and  Disagreements  with  Accountants  on
           Accounting and Financial Disclosure

         None.

Part III

Item 10. Directors and Executive Officers of the Registrant

                  Information  with  respect  to  the  directors  and  executive
         officers  of the Company is  incorporated  herein by  reference  to the
         Company's  definitive proxy statement pursuant to Regulation 14A, which
         statement  will be filed not later  than 120 days  after the end of the
         fiscal year covered by this Report.

Item 11. Executive Compensation

                  Information   with  respect  to  executive   compensation   is
         incorporated  herein by reference  to the  Company's  definitive  proxy
         statement pursuant to Regulation 14A, which statement will be filed not
         later than 120 days after the end of the  fiscal  year  covered by this
         Report.
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

                  Information   with  respect  to  the  security   ownership  of
         directors and executive  officers and  substantial  stockholders of the
         Company is incorporated herein by reference to the Company's definitive
         proxy  statement  pursuant to Regulation  14A, which  statement will be
         filed not later than 120 days after the end of the fiscal year  covered
         by this Report.

Item 13. Certain Relationships and Related Transactions

                  Information   with  respect  to  certain   relationships   and
         transactions  between  directors,  executive  officers and  substantial
         stockholders of the Company with the Company is incorporated  herein by
         reference  to the  Company's  definitive  proxy  statement  pursuant to
         Regulation  14A, which  statement will be filed not later than 120 days
         after the end of the fiscal year covered by this Report.

Part IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
<TABLE>
           <S>                                                                     <C>

           (a)  Consolidated  Financial  Statements as of September 27, 1998 and
           September  28,  1997 and for the  Years  Ended  September  27,  1998,
           September 28, 1997 and September 29, 1996:

           Independent Auditors' Report                                            F-2

           Consolidated  Balance  Sheets as of September  27, 1998 
             September 28, 1997                                                    F-3

           Consolidated  Statements of Operations for the Years Ended  
             September 27, 1998, September 28, 1997 and September 29, 1996         F-5

           Consolidated  Statements of Changes in  Stockholders'  Equity 
              for the Years Ended September 27, 1998, September 28, 1997 and          
              September 29, 1996                                                   F-6

           Consolidated  Statements of Cash Flows for the Years Ended
             September 27, 1998, September 28, 1997 and September 29, 1996         F-7

           Notes to Consolidated Financial Statements                              F-9

           (b) Consolidated Financial Statement Schedule:

           Independent Auditors' Report                                            S-1

           Schedule II - Valuation and Qualifying Accounts                         S-2
</TABLE>

<PAGE>

<TABLE>
           <S>    <C>      
 

           (c)    Exhibits:

           2.1    Certificate of Ownership and Merger, dated June 7, 1993, of Polycast Technology
                  Corporation, Uniroyal Engineered Products, Inc., Uniroyal Adhesives and Sealants, Inc.
                  and Ensolite, Inc. with the Company. (6)

           3.1    Amended and Restated Certificate of Incorporation of the Company as corrected by a
                  Certificate of Correction of the Amended and Restated Certificate of Incorporation of
                  the Company. (1)

           3.2    By-Laws of the Company, as amended to November 14, 1996. (13)

           4.1    Indenture, dated as of June 1, 1993, between the Company and The Bank of New York, as trustee. (6)

           4.2    Warrant Agreement, dated as of June 1, 1993, between the Company and The Bank of
                  New York, as warrant agent. (6)

           10.1   Asset Acquisition Agreement, dated as of September 27, 1992, among Old Polycast,
                  Polycast and the Company. (2)

           10.2   Asset Acquisition Agreement, dated as of September 27, 1992, among Old UEP, UEP
                  and the Company. (2)

           10.3   Asset Acquisition Agreement, dated as of September 27, 1992, among Old Ensolite,
                  Ensolite and the Company. (2)

           10.4   Asset Acquisition Agreement, dated as of September 27, 1992, among Old UAS, UAS
                  and the Company. (2)

           10.5   Asset Acquisition Agreement, dated as of September 27, 1992, between Plastics
                  Support Corp. ("PSC") and the Company. (2)

           10.6   Asset Acquisition Agreement, dated as of September 27, 1992, among U.E. Systems,
                  Inc., Ensolite and the Company. (2)

           10.7   Amended and Restated Employment Agreement, dated as of April 25, 1995, between
                  Howard R. Curd and the Company. (7)

           10.8   Amended and Restated Employment Agreement, dated as of April 25, 1995, between
                  Oliver J. Janney and the Company. (7)

           10.9   Amended and Restated Employment Agreement, dated as of April 25, 1995, between
                  Robert L. Soran and the Company. (7)

           10.10  Amended and Restated Employment Agreement, dated as of April 25, 1995, between
                  George J. Zulanas, Jr. and the Company. (7)

           10.11  Joint Stipulation Between the Debtors and the United States of America on Behalf
                  of Its Agency, The Internal Revenue Service, Regarding Treatment of Tax Claims. (3)

           10.15  Uniroyal Technology Corporation Employee Stock Ownership Plan. (4)

           10.16  Amended and Restated Uniroyal Technology Corporation 1992 Stock Option Plan. (13)

           10.21  Settlement Agreement among Old Polycast, Old UAS, Old UEP, Old Ensolite and the
                  Official Retirees' Committee. (3)

           10.22  Settlement Agreement and Stipulated Order among Old Polycast, Old UAS, Old UEP,
                  Old Ensolite, the United States of America, the State of Indiana and the State of
                  Wisconsin. (3)

           10.23  Plan Disbursing Agent Agreement, dated September 27, 1992, among Old Polycast,
                  Old UAS, Old UEP, Old Ensolite and the Company (2)

           10.28  Amended and Restated Uniroyal Technology Corporation 1992 Non-Qualified Stock
                  Option Plan. (13)
                                                       
           10.29  Agreement dated August 20, 1993 among the Company, UPAC and the Official
                  Committee of Unsecured Creditors of UPAC. (5)

           10.30  Settlement Agreement dated December 6, 1993 among the Company, UPAC, Jesup and
                  the PBGC. (5)

           10.34  Uniroyal Technology Corporation Deferred Compensation Plan Effective as of August
                  1, 1995. (8)

           10.35  Split-Dollar Insurance Agreement dated as of August 15, 1995 by and between
                  Uniroyal Technology Corporation and Howard R. Curd. (9)

           10.39  Financing Agreement dated as of June 5, 1996 by and between The CIT
                  Group/Business Credit, Inc. and Uniroyal Technology Corporation. (10)

           10.40  Amended and Restated Uniroyal Technology Corporation 1994 Stock Option Plan. (13)

           10.41  Amended and Restated Uniroyal Technology Corporation 1995 Non-Qualified Stock
                  Option Plan. (13)

           10.42  Asset Purchase Agreement between Rubatex Corporation and Uniroyal Technology
                  Corporation, dated June 5, 1996. (11)

           10.44  Shareholder Rights Agreement, dated as of December 18, 1996, between Uniroyal
                  Technology Corporation and The Bank of New York, as rights agent. (12)

           10.45  First Amendment to Financing Agreement dated September 5, 1997 by and between The
                  CIT Group/Business Credit, Inc. and Uniroyal Technology Corporation. (14)

           10.46  Credit Agreement between High Performance Plastics, Inc., as Borrower, Uniroyal
                  Technology Corporation, Uniroyal HPP Holdings, Inc., the banks, financial institutions
                  and other institutional lenders named therein, Fleet National Bank (as Initial Issuing
                  Bank, Swing Line Bank and Administrative Agent) and DLJ Capital Funding, Inc., as
                  Document Agent dated April 14, 1998. (15)

           10.47  Amendment and Consent Agreement dated April 14, 1998 by and between the CIT
                  Group/Business Credit, Inc. and Uniroyal Technology Corporation. (15)

           11.1   Statement Regarding Computation of Per Share Earnings

           21.1   Subsidiaries of the Company

           23.1   Independent Auditors' Consent

           27.1   Financial Data Schedule
<FN>
(1)      Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form 10,
         dated September 25, 1992.
(2)      Incorporated by reference to Amendment No. 4 to the Company's Registration Statement on Form 10,
         dated October 1, 1992.
(3)      Incorporated by reference to the Company's Amendment No. 1 to the Company's Registration
         Statement on Form 10, dated September 17, 1992.
(4)      Incorporated by reference to the Company's Form 10-K for the year ended September 27, 1992,
         dated December 24, 1992.
(5)      Incorporated by reference to the Company's Form 10-K for the year ended September 26, 1993,
         dated December 17, 1993.
(6)      Incorporated by reference to the Company's Form 8-K, dated June 9, 1993.
(7)      Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly
         period ended April 2, 1995 filed on May 12, 1995.
(8)      Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly
         period ended July 2, 1995 filed on August 14, 1995.
(9)      Incorporated by reference to the Company's Form 10-Q for the quarterly period ended July 2, 1995
         filed August 14, 1995. Virtually identical agreements were entered into between the Company and
         each of Robert L. Soran, George J. Zulanas, Jr., Oliver J. Janney and Martin J. Gutfreund.
(10)     Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly
         period ended June 30, 1996 filed August 13, 1996.
(11)     Incorporated by reference to the Company's Form 8-K, dated June 10, 1996.
(12)     Incorporated by reference to the Company's Registration Statement on Form 8-A, dated December
         20, 1996.
(13)     Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
         September 29, 1996 filed on December 27, 1996.
(14)     Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
         September 28, 1997 filed on December 22, 1997.
(15)     Incorporated by reference to the Company's Annual Report on Form 8-K/A dated April 22, 1998.
</FN>
   
              (d) Reports on Form 8-K:

                  No  reports  on Form 8-K were  filed  during  the last  
                   quarter of Fiscal 1998.
</TABLE>


<PAGE>


Item 8.  Consolidated Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
         Index to Consolidated Financial Statements

         Consolidated Financial Statements as of September 27, 1998 and September 28, 1997 and
         for the Years Ended September 27, 1998, September 28, 1997 and September 29, 1996:
         <S>                                                                                         <C>

         Independent Auditors' Report                                                                F-2

         Consolidated Balance Sheets as of September 27, 1998 and September 28, 1997                 F-3

         Consolidated Statements of Operations for the Years Ended September 27, 1998,
          September 28, 1997 and September 29, 1996                                                  F-5

         Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
           September 27, 1998, September 28, 1997 and September 29, 1996                             F-6

         Consolidated Statements of Cash Flows for the Years Ended September 27, 1998,
           September 28, 1997 and September 29, 1996                                                 F-7

         Notes to Consolidated Financial Statements                                                  F-9

         Consolidated Financial Statement Schedule:

         Independent Auditors' Report                                                                S-1

         Schedule II - Valuation and Qualifying Accounts                                             S-2

         Schedules Omitted - Certain other schedules have been omitted because they are not
         required or because the information required therein has been included in Notes to
         Consolidated Financial Statements.

</TABLE>

<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Uniroyal Technology Corporation
Sarasota, Florida


We have  audited  the  accompanying  consolidated  balance  sheets  of  Uniroyal
Technology Corporation and subsidiaries (the "Company") as of September 27, 1998
and September 28, 1997, and the related  consolidated  statements of operations,
changes in  stockholders'  equity and cash flows for each of the three  years in
the period ended September 27, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
September 27, 1998 and September 28, 1997 and the results of its  operations and
its cash flows for each of the three  years in the period  ended  September  27,
1998, in conformity with generally accepted accounting principles.



/s/ DELOITTE & TOUCHE LLP
-------------------------
Deloitte & Touche LLP
Tampa, Florida
December 16, 1998


<PAGE>
<TABLE>
<CAPTION>


                                     UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
                                               CONSOLIDATED BALANCE SHEETS
                                                    (In thousands)


                                                        ASSETS

                                                                                September 27,         September 28,
                                                                                    1998                  1997
                                                                                ------------          ------------  
Current assets:
<S>                                                                               <C>                   <C>       
   Cash and cash equivalents (Note 2)                                             $    5,585            $      244
   Trade accounts receivable (less estimated reserve for
     doubtful accounts of $246 and $257, respectively)  (Notes 2 and 9)               26,320                28,784
   Inventories (Notes 2, 3 and 9)                                                     38,139                34,528
   Deferred income taxes (Notes 2 and 10)                                              5,837                 6,944
   Prepaid expenses and other current assets                                           1,008                 1,192
                                                                                  ----------            ---------- 
     Total current assets                                                             76,889                71,692

Property, plant and equipment - net (Notes 2, 4 and 9)                                65,551                68,314
Property, plant and equipment held for sale - net (Note 2)                             5,924                 9,346
Note receivable (Note 5)                                                               5,000                 5,000
Goodwill - net (Notes 2 and 6)                                                         8,951                 7,350
Reorganization value in excess of amounts allocable to identifiable
   assets - net (Notes 2 and 10)                                                           -                 7,534
Deferred income taxes (Notes 2 and 10)                                                 7,759                 1,402
Other assets (Notes 2, 7 and 9)                                                       16,277                10,853
                                                                                  ----------            ----------
TOTAL ASSETS                                                                      $  186,351            $  181,491
                                                                                  ==========            ==========
</TABLE>

  
<PAGE>

<TABLE>
<CAPTION>

                                      UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS (Continued)
                                              (In thousands, except share data)

                                            LIABILITIES AND STOCKHOLDERS' EQUITY
   

                                                                                September 27,        September 28,
                                                                                    1998                 1997
                                                                                -------------        -------------
Current liabilities:
<S>                                                                               <C>                  <C>        
   Current portion of long-term debt (Note 9)                                     $     7,713          $     1,277
   Trade accounts payable                                                              15,302               15,551
   Accrued expenses:
     Compensation and benefits                                                          9,743               10,573
     Interest                                                                             149                3,019
     Taxes, other than income                                                           1,258                1,666
     Accrued income taxes                                                                 921                  402
     Other                                                                              5,657                5,846
                                                                                  -----------          -----------
       Total current liabilities                                                       40,743               38,334

Long-term debt (Note 9)                                                                97,945               88,370
Other liabilities (Notes 8 and 15)                                                     15,352               14,755
                                                                                  -----------          -----------
     Total liabilities                                                                154,040              141,459
                                                                                  -----------          -----------
Commitments and contingencies (Note 13)
Stockholders' equity (Note 11):
   Preferred stock:
     Series C - 0 shares issued and outstanding; par value $0.01; 450
     shares authorized                                                                      -                    -
   Common stock:
     14,182,956 and 13,707,360 shares issued or to be issued,
     respectively; par value $0.01; 35,000,000 shares authorized                          142                  138
   Additional paid-in capital                                                          54,613               54,037
   Deficit                                                                            (11,632)             (14,022)
                                                                                  -----------          -----------
                                                                                       43,123               40,153

Less treasury stock at cost - 1,499,868 and 85,843 shares, respectively               (10,812)                (121)
                                                                                  -----------          -----------
   Total stockholders' equity                                                          32,311               40,032
                                                                                  -----------          -----------   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                        $   186,351          $   181,491
                                                                                  ===========          ===========

                 See notes to consolidated financial statements.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                 UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                       (In thousands, except per share data)

                                                                                            Fiscal Years Ended
                                                                           -----------------------------------------------------   
                                                                           September 27,       September 28,       September 29,
                                                                                1998                1997                1996
                                                                           -------------       -------------       -------------
<S>                                                                         <C>                 <C>                 <C>      
Net sales                                                                   $ 220,616           $ 208,524           $ 209,348
Costs, expenses and (other income):
   Costs of goods sold                                                        160,506             161,122             170,088
   Selling and administrative                                                  27,872              27,596              29,550
   Amortization of reorganization value in excess of amounts
     allocable to identifiable assets                                             377                 754                 765
   Depreciation and other amortization                                          8,720               8,304               9,848
   Reorganization professional fees subsequent to effective date                    4                 154                 640
   Gain on sales of divisions (Notes 5 and 14)                                   (512)                  -              (2,102)
   Loss on assets to be disposed of (Notes 2 and 14)                              633                   -               8,900
   Curtailment loss (Note 14)                                                       -                   -               3,600
   Strike settlement and training expense                                           -                   -                 808
                                                                            ---------           ---------           ---------

Income (loss) before interest, income taxes and extraordinary item             23,016              10,594             (12,749)

Interest expense - net                                                         (9,382)             (9,384)             (9,773)
                                                                            ---------           ---------           ---------
Income (loss) before income taxes and extraordinary item                       13,634               1,210             (22,522)

Income tax (expense) benefit (Notes 2 and 10)                                  (5,607)               (831)              8,121
                                                                            ---------           ---------           ---------
Income (loss) before extraordinary item                                         8,027                 379             (14,401)

Extraordinary loss on the extinguishment of debt - net (Note 9)                (5,637)                  -                   -
                                                                            ---------           ---------           ---------
Net income (loss)                                                           $   2,390           $     379           $ (14,401)
                                                                            =========           =========           =========
Net income (loss) per common share - basic (Note 16)
   Income (loss) before extraordinary item                                  $    0.61           $    0.03           $   (1.09)
   Extraordinary loss                                                           (0.43)                  -                   -
                                                                            ---------           ---------           ---------      
   Net income (loss)                                                        $    0.18           $    0.03           $   (1.09)
                                                                            =========           =========           =========
Net income (loss) per common share - assuming dilution (Note 16)
   Income (loss) before extraordinary item                                  $    0.55           $    0.03           $   (1.09)
   Extraordinary loss                                                           (0.39)                  -                   -
                                                                            ---------           ---------           ---------
   Net income (loss)                                                        $    0.16           $    0.03           $   (1.09)
                                                                            =========           =========           =========

                 See notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                            UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
                                                        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                                              (In thousands)

                                                      Preferred               Additional
                                                        Stock       Common      Paid-In                  Treasury      Stockholders'
                                                       Series B     Stock       Capital      Deficit       Stock         Equity
                                                      ---------    -------    ---------    ---------     ---------      -------- 
<S>                                                   <C>          <C>        <C>          <C>           <C>            <C>       
Balance at October 1, 1995                            $  5,250     $  131     $ 52,331     $      -      $    (43)      $ 57,669
Common stock issued under stock option plans                 -          1           20            -             -             21
Common stock issued to employee benefit plan                 -          1          166            -            43            210
Stock dividends paid (Note 11)                               -          -            -            -             -              -
Net loss                                                     -          -            -      (14,401)            -        (14,401)
                                                      --------     ------     --------     --------      --------       -------- 
Balance at September 29, 1996                            5,250        133       52,517      (14,401)            -         43,499
Common stock issued for acquisitions                         -          4        1,483            -             -          1,487
Stock dividends paid (Note 11)                               -          1            -            -             -              1
Redemption of Series B preferred stock                  (5,250)         -            -            -             -         (5,250)
Amounts received pursuant to Directors' stock
  option plan                                                -          -           37            -             -             37
Purchase of treasury stock                                   -          -            -            -          (121)          (121)
Net income                                                   -          -            -          379             -            379
                                                      --------     ------     --------     --------      --------       --------  
Balance at September 28, 1997                                -        138       54,037      (14,022)         (121)        40,032
Common stock issued under stock option plans                 -          4        1,509            -          (894)           619
Common stock issued to employee benefit plan                 -          -          191            -             -            191
Amounts received pursuant to Directors' stock
  option plan                                                -          -           73            -             -             73
Purchase of treasury stock                                   -          -            -            -        (9,797)        (9,797)
Tax benefit from exercise of stock options                   -          -          117            -             -            117
Purchase of warrants                                         -          -       (1,314)           -             -         (1,314)  
Net income                                                   -          -            -        2,390             -          2,390
                                                      --------     ------     --------     --------      --------       --------
Balance at September 27, 1998                         $      -     $  142     $ 54,613     $(11,632)     $(10,812)      $ 32,311
                                                      ========     ======     ========     ========      ========       ========
</TABLE>

                 See notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>
                                  UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (In thousands)

                                                                                 Fiscal Years Ended
                                                              -------------------------------------------------------   
                                                                 September 27,       September 28,      September 29,
                                                                     1998                1997               1996
                                                                 -------------       -------------      ------------
OPERATING ACTIVITIES:
<S>                                                              <C>                 <C>                <C>        
   Net income (loss)                                             $    2,390          $      379         $  (14,401)
   Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
       Depreciation and other amortization                            8,720               8,304              9,848
       Deferred tax expense (benefit)                                 1,908                 547             (8,904)
       Provision for (recovery of) doubtful accounts                     87                   -                 (6)
       Amortization of reorganization value in excess of
         amounts allocable to identifiable assets                       377                 754                765
       Amortization of Senior Secured Notes discount                     63                 114                100
       Amortization of debt issuance costs                              513                 431                457
       Gain on sales of divisions                                      (512)                  -             (2,102)
       Loss on assets to be disposed of                                 633                   -              8,900
       Curtailment loss                                                   -                   -              3,600
       Extraordinary loss on the extinguishment of debt               5,637                   -                  -
       Other                                                            118                 351                106
       Changes in assets and liabilities:
         Decrease (increase) in trade accounts receivable             2,834              (2,845)            (1,858)
         Increase in inventories                                     (3,110)               (398)            (2,456)
         (Increase) decrease in prepaid expenses and other
           assets                                                    (6,131)                567               (359)
         (Decrease) increase in trade accounts payable                 (435)             (1,080)               757
         (Decrease) increase in accrued expenses                       (841)             (2,804)             1,130
         Increase (decrease) in other liabilities                       597                (884)               609
                                                                 ----------          ----------         ----------   
   Net cash provided by (used in) operating activities               12,848               3,436             (3,814)
                                                                 ----------          ----------         ----------       
INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                        (7,288)            (12,200)            (9,181)
   Proceeds from sale of assets                                       5,306               4,657             19,641
   Business acquisitions, net of cash acquired                       (1,768)             (7,986)                 -
                                                                 ----------          ----------         ----------
   Net cash (used in) provided by investing activities               (3,750)            (15,529)            10,460
                                                                 ----------          ----------         ----------
 FINANCING ACTIVITIES:
   Repurchase of Senior Secured Notes                               (72,253)               (243)                 -
   Redemption costs for Senior Secured Notes                         (3,718)                  -                  -
   Proceeds from refinancing                                         90,000                   -                  -
   Refinancing costs                                                 (3,545)                  -                  -
   Net (decrease) increase in revolving loan balances                (3,827)             15,169             (3,762)
   Repayment of term loans                                           (2,372)               (741)            (1,173)
   Proceeds from term loan                                                -               1,500                  -
   Redemption of Series B preferred stock                                 -              (5,250)                 -
   Stock options exercised                                              619                   -                 21
   Purchases of treasury stock                                       (7,347)               (121)                 -
   Purchases of warrants                                             (1,314)                  -                  -
                                                                 ----------          ----------         ----------
   Net cash (used in) provided by financing activities               (3,757)             10,314             (4,914)
                                                                 ----------          ----------         ----------
Net increase (decrease) in cash and cash equivalents                  5,341              (1,779)             1,732
Cash and cash equivalents at beginning of year                          244               2,023                291
                                                                 ----------          ----------         ----------
Cash and cash equivalents at end of year                         $    5,585          $      244         $    2,023
                                                                 ==========          ==========         ==========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                        UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (Continued)

Supplemental Disclosures:

Payments for income taxes and interest expense were as follows (in thousands):

                                                                             Fiscal Years Ended
                                                       ---------------------------------------------------------------
                                                         September 27,          September 28,         September 29,
                                                               1998                   1997                 1996
                                                       -------------------    ------------------    ------------------
<S>                                                          <C>                    <C>                   <C>    
Income tax payments                                          $     392              $    82               $   570
Interest payments                                               12,722                9,664                 9,549

</TABLE>
<TABLE>
<CAPTION>

Non-cash investing activities were as follows (in thousands):

                                                                             Fiscal Years Ended
                                                       ---------------------------------------------------------------
                                                         September 27,          September 28,         September 29,
                                                               1998                   1997                 1996
                                                       -------------------    ------------------    ------------------
<S>                                                          <C>                   <C>                   <C>    
Business acquisitions purchased with
   Company common stock                                      $       -             $  1,488              $      -
Business acquisitions purchased with notes payable               1,000                1,000              $      -

</TABLE>

The proceeds  from term loan for the fiscal year ended  September  27, 1998 does
not include a $2,450,000  note payable issued for the purchase of 300,000 shares
of treasury stock (Notes 9 and 11).

The  purchases of property,  plant and equipment and the proceeds from term loan
for the fiscal  years ended  September  28, 1997 and  September  29, 1996 do not
include $77,000 and $846,000 related to property held under  capitalized  leases
(Note 13). The Company did not enter into any capital  lease  agreements  during
the fiscal year ended September 27, 1998.

Net cash used in financing  activities for the fiscal years ended  September 28,
1997 and  September  29,  1996 does not include  the  dividends  declared on the
Series B Preferred  Stock  since they were paid with the  issuance of 73,448 and
115,657  shares,  respectively,  of the  Company's  common  stock  (Note 11). No
dividends were paid during the fiscal year ended September 27, 1998.

During the fiscal years ended  September 27, 1998 and  September  29, 1996,  the
Company  made  matching  contributions  to its 401(k)  Savings  Plan through the
re-issuance   of  30,260   shares  and  52,369   shares  of  its  common  stock,
respectively,  from  treasury.  An additional  8,279 shares of common stock were
issued during the fiscal year ended September 29, 1996 for the remaining portion
of the match. No such  contribution was made during the year ended September 28,
1997.

                 See notes to consolidated financial statements.



<PAGE>


                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        For the Fiscal Years Ended September 27, 1998, September 28, 1997
                             and September 29, 1996


1.       THE COMPANY

         The accompanying  consolidated  financial statements relate to Uniroyal
         Technology  Corporation,  its operating divisions,  Uniroyal Engineered
         Products  ("UEP") and Uniroyal  Adhesives and Sealants  ("UAS") and its
         wholly-owned  subsidiaries,   Uniroyal  HPP  Holdings,  Inc.,  Uniroyal
         Optoelectronics,  Inc.  and ULC Corp.  (collectively,  the  "Company").
         Uniroyal HPP Holdings, Inc. includes its wholly-owned subsidiary,  High
         Performance Plastics,  Inc. ("HPPI"),  HPPI's wholly-owned  subsidiary,
         ViPlex Corporation ("ViPlex") and HPPI's operating divisions,  Royalite
         Thermoplastics  ("Royalite"),   Polycast  Technology  ("Polycast")  and
         Townsend/Glasflex.   Uniroyal   Optoelectronics,   Inc.   includes  its
         majority-owned joint venture, Uniroyal Optoelectronics, LLC.

         On April 14, 1998, the Company transferred all of the net assets of its
         High  Performance  Plastics  Segment  to a newly  created  wholly-owned
         subsidiary,  Uniroyal HPP Holdings,  Inc.,  which  transferred  the net
         assets to its newly created wholly-owned subsidiary, HPPI.

         The Company is principally  engaged in the manufacture and sale of high
         performance  plastics,  coated  fabrics  and  specialty  adhesives.  In
         addition,  the Company has a majority  ownership of a joint  venture in
         the  development  stage  that  will  ultimately  manufacture  and  sell
         epitaxial wafers, dies and package-ready devices.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
         Company,  its  subsidiaries  and its majority owned joint venture.  All
         significant   intercompany   transactions   and   balances   have  been
         eliminated.

         Fiscal Year End

         The Company's  fiscal year ends on the Sunday following the last Friday
         in  September.  The dates on which the  fiscal  year ended for the past
         three fiscal years were September 27, 1998 ("Fiscal  1998"),  September
         28, 1997 ("Fiscal 1997") and September 29, 1996 ("Fiscal 1996").

         Use of Estimates

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

         Cash and Cash Equivalents

         Cash  and cash  equivalents  includes  all  highly  liquid  investments
         purchased with an original maturity of three months or less.

         Financial Instruments

         Interest  rate  swap  agreements  are  used  to  manage  interest  rate
         exposures. The interest rate differentials to be paid or received under
         such  swaps  are  recognized   over  the  life  of  the  agreements  as
         adjustments to interest expense.

         The  estimated  fair  value of  amounts  reported  in the  consolidated
         financial  statements  have  been  determined  using  available  market
         information and valuation  methodologies,  as applicable.  The carrying
         value of all current assets and liabilities approximates the fair value
         because of their  short-term  nature.  The fair  values of  non-current
         assets and liabilities approximate their carrying value.

         Trade Accounts Receivable

         The Company  grants  credit to its  customers  generally in the form of
         short-term trade accounts receivable. The creditworthiness of customers
         is evaluated  prior to the sale of inventory.  There are no significant
         concentrations of credit risk to the Company.

         Inventories

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
         determined  using a monthly  average  basis or  standard  costs  (which
         approximates  actual  costs) for raw  materials  and  supplies  and the
         first-in,  first-out  ("FIFO")  basis of accounting  or standard  costs
         (which  approximates  actual  costs) for work in process  and  finished
         goods.

         Property, Plant and Equipment

         Property, plant and equipment are stated at cost. The cost of property,
         plant and equipment  held under capital leases is equal to the lower of
         the net present value of the minimum  lease  payments or the fair value
         of the leased  asset at the  inception  of the lease.  Depreciation  is
         computed under the straight-line method based on the cost and estimated
         useful lives of the related assets  including assets held under capital
         leases.

         Statement  of  Financial   Accounting   Standards   ("SFAS")  No.  121,
         Accounting for the  Impairment of Long-Lived  Assets and for Long-Lived
         Assets to be  Disposed  Of, establishes  accounting  standards  for the
         impairment of long-lived assets,  certain identifiable  intangibles and
         goodwill related to those assets to be held and used and for long-lived
         assets and  certain  identifiable  intangibles  to be  disposed  of. In
         accordance  with SFAS No. 121,  during the fiscal year ended  September
         29,  1996,  the  Company   established  a  valuation  reserve  totaling
         approximately  $8,900,000  related  to its  decision  to exit  the Port
         Clinton,  Ohio automotive operation of the Coated Fabrics Segment (Note
         14).

         During Fiscal 1998, in  conjunction  with plant  consolidations  at the
         Polycast division, the Company decided to sell its Stirling, New Jersey
         facility and certain assets used in the manufacture of acrylic rods and
         tubes.  In  accordance  with SFAS No. 121,  the Company  established  a
         valuation  reserve  totaling  approximately  $633,000,  in Fiscal 1998,
         related to this  decision.  As of  September  27,  1998,  approximately
         $1,394,000 of such assets are included in property, plant and equipment
         held for sale.

         Property, Plant and Equipment Held for Sale

         Property,  plant and equipment  held for sale is stated at the lower of
         cost or fair value less cost to sell.

         Amortization

         Debt issuance  costs are amortized  using the interest  method over the
         life of the  related  debt.  Debt  discount  was  amortized  using  the
         interest  method over the life of the  related  debt until the debt was
         repaid  (Note  9).  Patents  and  trademarks  are  amortized  using the
         straight-line   method  over  periods  ranging  from  7  to  20  years.
         Reorganization  value in excess of amounts  allocable  to  identifiable
         assets was amortized on a  straight-line  basis over 15 years until the
         remaining  reorganization  value was reduced to zero in connection with
         the  reduction  of the  deferred  tax  valuation  allowance  related to
         acquired tax loss carryforward benefits (Note 10). Reorganization value
         in excess of amounts allocable to identifiable  assets was reported net
         of  accumulated  amortization  of  $3,947,000  at  September  28, 1997.
         Goodwill is amortized on a straight-line basis over 25 years.  Goodwill
         is reported net of accumulated  amortization of $372,000 and $48,000 at
         September 27, 1998 and September 28, 1997, respectively.

         Research and Development Expenses

         Research  and  development   expenditures  are  expensed  as  incurred.
         Research and development  expenditures were $2,657,000,  $3,674,000 and
         $4,918,000 for the fiscal years ended September 27, 1998, September 28,
         1997 and September 29, 1996, respectively.

         Employee Compensation

         The cost of post-retirement benefits other than pensions are recognized
         in the  consolidated  financial  statements  over an employee's term of
         service with the Company.

         Income Taxes

         The Company  utilizes the asset and liability  method of accounting for
         income taxes.  Under the asset and liability  method,  deferred  income
         taxes  are   recognized   for  the  tax   consequences   of  "temporary
         differences"  by applying  enacted  statutory  tax rates  applicable to
         future years to differences  between the financial  statement  carrying
         amounts  and the tax basis of  existing  assets  and  liabilities.  The
         effect on  deferred  taxes of a change in tax  rates is  recognized  in
         income in the period that includes the enactment date.

         The  Company  has  recorded  a  deferred  tax  asset  of  approximately
         $13,596,000.  Realization is dependent on generating sufficient taxable
         income  prior to  expiration  of loss  carryforwards  available  to the
         Company. Although realization is not assured, management believes it is
         more  likely  than not  that  all of the  deferred  tax  asset  will be
         realized.  The amount of the deferred tax asset considered  realizable,
         however,  could be  reduced  in the near  term if  estimates  of future
         taxable income during the carryforward period are reduced.
<PAGE>

         Stock-Based Compensation

         In October 1995,  the Financial  Accounting  Standards  Board  ("FASB")
         issued SFAS No. 123, Accounting for Stock-Based Compensation,  which is
         effective for fiscal years  beginning  after  December 15, 1995.  Under
         SFAS  No.  123,  the  Company  may  elect  to   recognize   stock-based
         compensation  expense based on the fair value of the awards or continue
         to account for stock-based  compensation  under  Accounting  Principles
         Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees,
         and disclose in the  consolidated  financial  statements the effects of
         SFAS No. 123 as if the recognition provisions were adopted. The Company
         has not adopted the recognition provisions of SFAS No. 123.

         Net Income (Loss) Per Common Share

         The Company has adopted and  retroactively  applied the requirements of
         SFAS No. 128, Earnings Per Share, to all periods presented. This change
         did not have a material  impact on the  computation of the earnings per
         share data (Note 16).

         New Accounting Pronouncements

         In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income.
         SFAS No.  130  establishes  standards  for  reporting  and  display  of
         comprehensive   income   and   its   components   in  a  full   set  of
         general-purpose  financial statements.  Comprehensive income is defined
         as the change in equity of a business during a period from transactions
         and circumstances related to non-owner sources and includes all changes
         in equity during a period except those  resulting  from  investments by
         owners and  distributions  to owners.  SFAS No.  130 is  effective  for
         fiscal years  beginning  after  December 15, 1997. The adoption of SFAS
         No.  130 is not  expected  to have a material  effect on the  Company's
         consolidated financial statements.

         In June 1997, FASB issued SFAS No. 131,  Disclosures  about Segments of
         an Enterprise  and Related  Information.  SFAS No. 131 requires  public
         entities to report certain information about operating segments,  their
         products and services,  the geographic  areas in which they operate and
         their  major  customers,   in  complete  financial  statements  and  in
         condensed interim financial statements issued to shareholders. SFAS No.
         131 is effective for fiscal years  beginning  after  December 15, 1997.
         The adoption of SFAS No. 131 is not expected to have a material  effect
         on the Company's consolidated financial statements.

         In February  1998,  FASB issued  SFAS No. 132,  Employers'  Disclosures
         about  Pensions  and  Other  Post-retirement  Benefits.  SFAS  No.  132
         supercedes  the  disclosure  requirements  in SFAS  No.  87,  Employers
         Accounting  for  Pensions,   SFAS  No.  88,  Employers  Accounting  for
         Settlements  and  Curtailments of Defined Benefit Pension Plans and for
         Termination  Benefits,  and  SFAS No.  106,  Employers  Accounting  for
         Post-retirement  Plans Other Than  Pensions.  SFAS No. 132 is effective
         for fiscal years  beginning  after December 15, 1997.  Adoption of SFAS
         No.  131 is not  expected  to have a material  effect on the  Company's
         consolidated financial statements.

         In June 1998,  FASB  issued  SFAS No. 133,  Accounting  for  Derivative
         Instruments and Hedging Activities. SFAS No. 133 establishes accounting
         and  reporting   standards  for  derivative   instruments  and  hedging
         activities.  It requires that an entity  recognize all  derivatives  as
         either assets or liabilities in the statement of financial position and
         measure those  instruments at fair value. The accounting for changes in
         the fair value of a derivative (that is, gains and losses) depends upon
         the intended use of the derivative and resulting designation.  SFAS No.
         133 is  effective  for all fiscal  quarters of fiscal  years  beginning
         after June 15,  1999.  The  adoption of SFAS No. 133 is not expected to
         have  a  material  effect  on  the  Company's   consolidated  financial
         statements.

         Reclassifications

         Certain prior years' amounts have been reclassified to conform with the
         current year's presentation.

3.       INVENTORIES

         Inventories consisted of the following (in thousands):
<TABLE>
                                                                             September 27,        September 28,
                                                                                 1998                  1997
                                                                            --------------        -------------

           <S>                                                                  <C>                  <C>      
           Raw materials, work in process and supplies                          $ 22,844             $  21,851
           Finished goods                                                         15,295                12,677
                                                                                --------             ---------     
           Total                                                                $ 38,139             $  34,528
                                                                                ========             =========
</TABLE>
<PAGE>

4.       PROPERTY, PLANT AND EQUIPMENT

         Property,   plant  and   equipment   consisted  of  the  following  (in
         thousands):
<TABLE>
<CAPTION>
                                                          Estimated
                                                           Useful            September 27,         September 28,
                                                            Lives                1998                  1997
                                                       ----------------    ------------------    ------------------

          <S>                                            <C>                    <C>                   <C>
          Land and improvements                                    -            $  5,465              $  5,442 
          Buildings and improvements                     5-40 years               21,969                21,958
          Machinery, equipment and office 
             furnishings                                 3-20 years               70,259                67,122
          Construction in progress                                 -               3,645                 2,941
                                                                                --------              --------     
                                                                                 101,338                97,463
          Accumulated depreciation                                               (35,787)              (29,149)
                                                                                --------              --------
          Total                                                                 $ 65,551              $ 68,314
                                                                                ========              ========
</TABLE>

5.       SALE OF ENSOLITE DIVISION

         Pursuant to an asset purchase  agreement,  the Company sold on June 10,
         1996  substantially  all the assets net of certain  liabilities  of its
         Ensolite  closed-cell foam division to Rubatex Corporation  ("Rubatex")
         for  $25,000,000  consisting of cash in the amount of $20,000,000 and a
         promissory note of the parent of Rubatex,  RBX Group, Inc. ("RBX"),  in
         the  amount  of  $5,000,000  (the  "Ensolite  Sale").  Interest  on the
         promissory  note is payable  semi-annually  at 11.75%  per  annum.  The
         promissory  note matures on May 1, 2006.  Cash  proceeds  from the sale
         were  used to pay off the  Company's  borrowings  under  its  revolving
         credit agreement. The remaining cash proceeds, net of amounts placed in
         escrow in  accordance  with the Company's  indenture  agreement for the
         Senior  Secured  Notes (Note 9), were  invested  in  short-term  highly
         liquid  investments.  The Company recognized a pre-tax gain on the sale
         of approximately $2,102,000 net of transaction costs, the write-down of
         certain fixed assets not acquired by Rubatex and after consideration of
         reserves for severance and incentive  packages for Ensolite  employees,
         facility  clean-up  costs and the  recognition  of Ensolite's  pro rata
         share of the Company's transition  obligation net of a curtailment gain
         of approximately  $664,000 in accordance with SFAS No. 106,  Employer's
         Accounting  for  Post-retirement   Benefits  Other  Than  Pensions.  In
         connection  with the  Ensolite  sale,  Rubatex  received  an  option to
         purchase   certain   additional   equipment  housed  at  the  Company's
         Mishawaka,  Indiana  manufacturing  facility  for  $250,000,  which  it
         exercised  in  November,  1996.  The  purchase  price was  adjusted for
         changes in working capital, as defined in the asset purchase agreement,
         between  October  1, 1995 and June 10,  1996.  The  change  in  working
         capital  resulted in additional  proceeds and select assets paid to the
         Company by  Rubatex of  approximately  $700,000.  Such  amount has been
         included in the  pre-tax  gain on sale.  The  Company and Rubatex  also
         entered  into an earn-out  agreement  whereby  the  Company  could earn
         between $.15 and $.20 per board foot of Ensolite  products  produced by
         Rubatex  in excess  of the base  volume as  defined  in such  agreement
         during each of the four one-year  periods  following the closing of the
         Ensolite  Sale. In no event will the total amount earned by the Company
         under the  earn-out  agreement  during  the  forty-eight  month  period
         following the closing of the sale exceed $3,000,000. The Company earned
         approximately  $353,000, net of expenses,  under the earn-out agreement
         during Fiscal 1997. No amounts were earned under the earn-out agreement
         during Fiscal 1998.

         In conjunction  with the Ensolite Sale, the Company entered into a toll
         manufacturing  agreement with Rubatex.  The Company  produced  Ensolite
         products  for  the  benefit  of  Rubatex  at  its  Mishawaka,   Indiana
         manufacturing   facility  through  March  17,  1997.  The  Company  was
         reimbursed by Rubatex for the variable costs incurred in the production
         of  Ensolite  products  and was paid a fixed  amount for  manufacturing
         period  costs based on actual  costs  incurred  by the  Company  during
         Fiscal  1995 and  adjusted  for  inflation.  In  addition  the  Company
         provided  certain  support  services to Rubatex and was  reimbursed  by
         Rubatex for the costs of such services.

         In January  1998,  the Company  brought suit to compel RBX to honor its
         mandatory early redemption obligation under the terms of the $5,000,000
         promissory   note  (the   "Note").   In  March  1998  Rubatex  filed  a
         counterclaim  asserting  that the Ensolite  machinery  purchased was in
         breach of the Company's  warranties  when Rubatex  purchased it in June
         1996.  The Company  believes  that the Rubatex  counterclaim  is wholly
         without merit. RBX did not make the semi-annual interest payment on the
         Note of $293,750 on May 1, 1998. The Company stopped accruing  interest
         on the Note as of June 29, 1998. As of September 27, 1998,  the Company
         has accrued  interest  receivable  related to the Note of approximately
         $387,000.
<PAGE>

6.       BUSINESS ACQUISITIONS

         On May 22,  1998,  HPPI  acquired  100% of the  common  stock of ViPlex
         Corporation,  an acrylic sheet fabricator for the marine industry,  for
         $2,700,000  consisting of  $1,700,000 in cash and unsecured  promissory
         notes aggregating  $1,000,000  bearing an interest rate of 6% (Note 9).
         The purchase price was adjusted for changes in working  capital between
         September  30, 1997 and May 22, 1998.  This  resulted in an increase in
         the purchase price of $114,000, which was paid in cash.

         On September 5, 1997,  the Company  acquired  substantially  all of the
         assets of the Townsend Plastics Division of Townsend Industries,  Inc.,
         a  manufacturer  of acrylic rods and tubes,  for $4,485,000 in cash and
         300,000 shares of common stock of the Company.  In connection with this
         purchase,  the Company  amended its  financing  agreement  with The CIT
         Group/Business  Credit, Inc. to include a term note of $1,500,000 (Note
         9).  This note was  subsequently  repaid in  connection  with the Fleet
         Financing  (Note 9). The purchase price was  subsequently  adjusted for
         working  capital  changes as defined in the  purchase  agreement.  This
         resulted  in a decrease  in the  purchase  price of  $62,500  which was
         received in cash. See Note 13 regarding the United States Federal Trade
         Commission ("FTC")  investigation of this acquisition.  See Notes 9 and
         11 regarding  the  Company's  repurchase  of the 300,000  shares of its
         common stock.

         On August 29, 1997, the Company  acquired the Lucite(R)  Super Abrasion
         Resistant  ("S-A-R")  acrylic coating business of the Lucite(R) Acrylic
         Division of ICI Acrylics, Inc. for $3,000,000, consisting of $2,000,000
         in cash and an  unsecured  promissory  note for  $1,000,000  bearing an
         interest  rate of 8% (Note 9).  The  purchase  price was  adjusted  for
         inventory  changes and the pro-ration of prepaid expenses as defined in
         the purchase  agreement.  This  resulted in an increase in the purchase
         price of $122,000, which was paid in cash.

         On March 31, 1997, the Company  acquired 100% of the common stock of C.
         Gunther  Company,  a  manufacturer  of  mirror  mastic  adhesives,  for
         $1,650,000  in cash and 100,000  shares of common stock of the Company.
         The purchase price was adjusted for changes in working  capital between
         January  31,  1997 and March  31,  1997,  as  defined  in the  purchase
         agreement.  This  resulted  in an  increase  in the  purchase  price of
         $86,500,  which was paid in cash. C. Gunther  Company was  subsequently
         merged into the Company on September  17,  1997.  See Note 11 regarding
         the  Company's   repurchase  of  50,000  shares  of  its  common  stock
         originally issued in connection with this transaction.

         The above  business  combinations  were  accounted  for by the purchase
         method in accordance with APB Opinion No. 16. The results of operations
         of  the  above  named  businesses  are  included  in  the  consolidated
         financial  statements  from their  respective  purchase dates in Fiscal
         1998 and Fiscal 1997.

         In Fiscal 1998 and Fiscal  1997,  the Company  acquired  the  following
         assets and  liabilities  (net of cash  received of $46,000 and $58,000,
         respectively) in the above transactions (in thousands):
<TABLE>
<CAPTION>

                                                          September 27,                  September 28,
                                                               1998                           1997
                                                          -------------                  -------------     

          <S>                                                <C>                            <C>      
          Accounts receivable                                $      457                    $      845
          Inventory                                                 501                           960
          Prepaids and other assets                                  32                             -
          Property, plant and equipment                             188                         2,555
          Goodwill                                                1,841                         7,398
          Note payable                                           (1,000)                       (1,000)
          Other liabilities                                        (251)                       (1,284)
                                                             ----------                    ----------
          Net value of purchased assets                           1,768                         9,474
          Value of common stock issued                                -                        (1,488)
                                                             ----------                    ----------
          Cash paid for acquisitions                         $    1,768                    $    7,986
                                                             ==========                    ==========
</TABLE>


         The acquired  goodwill will be amortized over its estimated useful life
         of 25 years.

         The pro forma effect of these  acquisitions on the Company's net sales,
         income before  extraordinary  item,  net income and earnings per share,
         had the acquisitions  occurred on September 29, 1997, and September 30,
         1996 and, respectively, is not considered material.


<PAGE>

7.        OTHER ASSETS

         Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                            September 27,         September 28,
                                                                                1998                  1997
                                                                            -------------         -------------
<S>                                                                           <C>                   <C>      
          Patents and trademarks                                              $   4,871             $   5,220
          Technology license                                                      4,500                     -
          Debt issuance costs                                                     3,268                 3,675
          Deposits                                                                2,802                   811
          Other                                                                     836                 1,147
                                                                              ---------             ---------  
          Total                                                               $  16,277             $  10,853
                                                                              =========             =========  

</TABLE>

         Patents and trademarks are reported net of accumulated  amortization of
         $2,841,000 and $2,492,000 at September 27, 1998 and September 28, 1997,
         respectively.

         During the fiscal year ended  September  27,  1998,  the  Company  paid
         $4,500,000  to  Emcore  Corporation  ("Emcore")  in  connection  with a
         technology  license dated  September 29, 1997,  for certain  technology
         relating to the manufacture of epitaxial wafers used in high brightness
         light emitting diodes ("LEDs") for lamps and display devices (Note 15).
         The technology license will be amortized over the estimated life of the
         technology once sales have commenced.

         During  the  fiscal  year  ended   September  27,  1998,   the  Company
         capitalized approximately $3,545,000 of debt issuance costs incurred in
         connection  with  the  Fleet  Financing  (Notes  9 and  17).  Also,  in
         connection   with  the  Fleet   Financing,   the   Company   wrote  off
         approximately  $3,439,000 of debt issuance  costs  associated  with its
         Senior  Secured  Notes  which  is  included  in the  loss on the  early
         extinguishment  of debt during the fiscal year ended September 27, 1998
         (Note 9).  During the fiscal year ended  September 28, 1997 the Company
         wrote  off  $13,000  of debt  issuance  costs  in  connection  with the
         $250,000  acquisition  of face value of the  Company's  Senior  Secured
         Notes  (Note 9).  Debt  issuance  costs  are  shown net of  accumulated
         amortization  of $513,000  and  $1,933,000  at  September  27, 1998 and
         September 28, 1997, respectively.

         Deposits  include  $1,797,000  paid to Emcore in Fiscal  1998 as a down
         payment for machinery ordered from Emcore by Uniroyal  Optoelectronics,
         LLC.

8.       OTHER LIABILITIES

         Other liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                                            September 27,        September 28,
                                                                                1998                  1997
                                                                            -------------        -------------
          <S>                                                                 <C>                   <C>     
          Accrued retirement benefits                                          $ 13,969              $ 13,420
          Taxes, other than income                                                1,092                 1,335
          Minority interest                                                         291                     -
                                                                               --------              --------
          Total                                                                $ 15,352              $ 14,755
                                                                               ========              ========
                                                                                
</TABLE>

<PAGE>

9.       LONG-TERM DEBT

         Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                                           September 27,         September 28,
                                                                                1998                  1997
                                                                          -----------------     -----------------
          <S>                                                                 <C>                   <C>      
          Term A Advance                                                      $  30,000             $       -
          Term B Advance                                                         60,000                     -
          11.75% Senior Secured Notes, principal due June 1, 2003,
            interest due semi-annually on December 1 and June 1                       -                72,253
          Revolving credit agreements                                            11,342                15,169
          Secured term loan                                                           -                 1,500
          Unsecured promissory notes                                              4,117                 1,000
          Unamortized debt discount on the Senior Secured Notes                       -                (1,012)
                                                                              ---------             ---------
                                                                                105,459                88,910
          Other obligations                                                         199                   737
                                                                              ---------             ---------  
                                                                                105,658                89,647
          Less current portion                                                   (7,713)               (1,277)
                                                                              ---------             ---------  
          Long-term debt                                                      $  97,945             $  88,370
                                                                              =========             =========
</TABLE>

         Debt  amounts  become  due during  subsequent  fiscal  years  ending in
         September as follows (in thousands):
<TABLE>
                             <S>                                              <C>       
                             1999                                             $   7,713
                             2000                                                 9,646
                             2001                                                 6,762
                             2002                                                 4,950
                             2003                                                 6,600
                             Subsequent years                                    69,987
                                                                              ---------   
                             Total debt                                       $ 105,658
                                                                              =========
</TABLE>


         On April 14,  1998,  the Company  transferred  all of the assets of its
         High  Performance  Plastics  Segment  to a newly  created  wholly-owned
         subsidiary,  HPPI. On that same day HPPI,  as borrower,  entered into a
         credit  agreement with Uniroyal HPP Holdings,  Inc. (the parent of HPPI
         and a wholly-owned  subsidiary of the Company), the Company, the banks,
         financial  institutions and other institutional  lenders named therein,
         Fleet  National  Bank (as  Initial  Issuing  Bank,  Swing Line Bank and
         Administrative  Agent)  ("Fleet")  and DLJ  Capital  Funding,  Inc.  as
         Documentation  Agent (the "Credit  Agreement"),  providing  among other
         things,  for the borrowing by HPPI of an aggregate  principal amount of
         up to $110,000,000 (the "Fleet Financing"). The $110,000,000 line under
         the Credit  Agreement is composed of a  $30,000,000  Term A Advance,  a
         $60,000,000 Term B Advance and a $20,000,000 Revolving Credit Advance.

         The Term A  Advance  is  payable  in equal  quarterly  installments  of
         $1,500,000  beginning on December 31, 1998 and ending on September  30,
         2003.  Interest on the Term A Advance is initially  payable  monthly at
         the Prime  Rate (as  defined in the  Credit  Agreement)  plus 1.25% for
         Prime  Rate  advances  or not  later  than the end of each  three-month
         period at the Eurodollar Rate (as defined in the Credit Agreement) plus
         2.25% for Eurodollar  Rate advances  during the first six months of the
         Credit Agreement. After the first six months, the applicable margin for
         each  Prime Rate  advance  and each  Eurodollar  Rate  advance  will be
         determined  quarterly by reference to HPPI's ratio of Consolidated Debt
         to EBITDA (as defined in the Credit Agreement).  The applicable margins
         on the Term A Advance  range  from  0.50% - 1.25%  for the  Prime  Rate
         advances and 1.50% - 2.25% for Eurodollar  Rate advances.  The interest
         rate on the Term A Advance was 7.84% at September 27, 1998.

         The Term B Advance is payable in  quarterly  installments  of  $150,000
         beginning on December 31, 1998 through  September 30, 2003,  semiannual
         installments of $5,000,000 on March 31, 2004 and September 30, 2004 and
         a final payment of $47,000,000 on March 31, 2005.  Interest on the Term
         B Advance  is  initially  payable  monthly at Prime Rate plus 1.50% for
         Prime  Rate  advances  or not  later  than the end of each  three-month
         period at the Eurodollar  Rate plus 2.50% for Eurodollar  Rate advances
         during the first six months of the  Credit  Agreement.  After the first
         six  months,  the  applicable  margin for each Prime Rate  advance  and
         Eurodollar  Rate advance will be  determined  quarterly by reference to
         HPPI's ratio of  Consolidated  Debt to EBITDA (as defined in the Credit
         Agreement).  The applicable margins on Term B Advances range from 1.00%
         - 1.50% for Prime Rate advances and 2.00% - 2.50% for  Eurodollar  Rate
         advances.  The  interest  rate  on the  Term B  Advance  was  8.09%  on
         September 27, 1998.

         Under the  Revolving  Credit  Advance,  HPPI may  borrow  the lesser of
         $20,000,000 or the sum of 85% of Eligible  Receivables  plus 50% of the
         value  of  Eligible  Inventory  as  defined  in the  Credit  Agreement.
         Interest  is payable  under the same  terms as the Term A Advance.  The
         Revolving  Credit  Advance  matures on September 30, 2003. At September
         27, 1998,  the Company had  approximately  $11,338,000  of  outstanding
         borrowings  under  the  Revolving  Credit  Advance  and   approximately
         $8,662,000 of availability.  The weighted-average  interest rate on the
         Revolving Credit Advance was 8.20% at September 27, 1998.

         The advances under the Credit Agreement are collateralized by a lien on
         substantially  all of the non-cash assets of HPPI. The Credit Agreement
         contains  certain  covenants  which limit,  among other things,  HPPI's
         ability to incur additional debt, sell its assets,  pay cash dividends,
         make certain other  payments and redeem its capital  stock.  The Credit
         Agreement  also contains  covenants  which require the  maintenance  of
         certain  ratios.  HPPI  was  in  compliance  with  these  covenants  at
         September 27, 1998. The Credit Agreement also contains annual mandatory
         pre-payments  of principal  equal to 50% of HPPI's  annual  Excess Cash
         Flow (as defined in the Credit Agreement) beginning September 26, 1999.

         Under the terms of the Credit Agreement, HPPI is required to obtain and
         keep in effect  one or more  interest  rate Bank Hedge  Agreements  (as
         defined in the Credit  Agreement)  covering  at least 50% of the Term A
         and Term B  Advances,  for an  aggregate  period of not less than three
         years.  On May 14, 1998,  HPPI entered  into three  interest  rate swap
         agreements with two banks.  The first agreement is a fixed rate swap on
         $30,000,000  notional amount that expires on May 14, 2003. HPPI's fixed
         LIBOR rate of  interest  on this swap is 5.985%.  HPPI pays or receives
         interest  based upon the  differential  between HPPI's fixed LIBOR rate
         and the bank's  floating LIBOR rate. The bank's  floating LIBOR rate is
         adjusted  monthly.  The second agreement is a cancelable  interest rate
         swap on  $30,000,000  notional  amount  that  expires on May 14,  2003.
         HPPI's fixed LIBOR rate of interest on this swap is 5.7375%.  HPPI pays
         or receives  interest based upon the differential  between HPPI's fixed
         LIBOR rate and the bank's  floating  LIBOR  rate.  The bank's  floating
         LIBOR  rate is  adjusted  quarterly.  The bank has the option to cancel
         this swap on May 14, 2001. The third agreement is a cancelable interest
         rate swap on $20,000,000  notional amount that expires on May 14, 2000.
         HPPI's fixed LIBOR rate of interest on this swap is 5.6725%.  HPPI pays
         or receives  interest based upon the rate  differential  between HPPI's
         fixed  LIBOR  rate and the  bank's  floating  LIBOR  rate.  The  bank's
         floating LIBOR rate is adjusted  quarterly.  The bank has the option to
         cancel this swap on May 14, 1999.  The  differential  on interest  rate
         swaps is accrued as  interest  rates  change  and is  recognized  as an
         adjustment  to interest  expense over the life of the  agreements.  The
         fair  value of these  interest  rate  swap  agreements  represents  the
         estimated  receipts or  payments  that would be made to  terminate  the
         agreements.  At  September  27,  1998,  the  Company  would  have  paid
         approximately $2,700,000 to terminate the agreements.

         On April 14, 1998,  HPPI paid  $94,944,000 to the Company which in turn
         used such amount to defease the outstanding 11.75% Senior Secured Notes
         due June 1, 2003 ("Senior  Secured  Notes")  including the call premium
         and  interest  accrued  through  the  call  date  and to pay  down  its
         revolving   line  of  credit  and  secured   term  loan  with  the  CIT
         Group/Business  Credit,  Inc.  ("CIT").  The  redemption  of the Senior
         Secured Notes was completed on June 1, 1998 at a call premium of 4.41%.
         In connection with the June 1, 1998 redemption, the Company incurred an
         extraordinary  loss on the  extinguishment  of  debt  of  approximately
         $5,637,000   (net  of   applicable   income   taxes  of   approximately
         $2,787,000).

         On April 14, 1998 the Company  entered  into an  Amendment  and Consent
         Agreement  with CIT whereby the  Company's  existing  revolving  credit
         arrangement  was  amended to permit the Company to borrow the lesser of
         $10,000,000  or the  sum of 85% of  Eligible  Receivables  plus  55% of
         Eligible  Inventories  as  defined  in the  agreement.  The  collateral
         securing  the credit  line does not  include  any  assets of HPPI.  The
         original  revolving  credit agreement with CIT was entered into on June
         5, 1996 and allowed the Company to borrow the lesser of  $25,000,000 or
         85% of Eligible  Accounts  Receivable (as defined in the agreement) not
         to exceed 75% of the Company's  accounts,  as defined in the agreement,
         determined in accordance with generally accepted accounting principles.
         Interest on the CIT revolving  credit  agreement is payable  monthly at
         Prime  plus .5% per annum or at the LIBOR  rate plus 2.75% per annum if
         the Company elects to borrow funds under a LIBOR loan as defined in the
         agreement. The loan matures on June 5, 2001. All of the Company's trade
         accounts  receivables  and  inventories  (excluding  those  of HPPI and
         Uniroyal  Optoelectronics,  Inc.) are  pledged as  collateral  for this
         loan.  The  agreement  restricts  the  creation  of certain  additional
         indebtedness.  The Company was in compliance  with the covenants  under
         this  agreement at  September  27, 1998.  At  September  27, 1998,  the
         Company had  approximately  $4,000 of outstanding  borrowings under the
         revolving credit agreement and $9,996,000 of availability.  The Company
         had  $15,169,000  of  outstanding  borrowings  under this  agreement at
         September  28, 1997.  The  weighted-average  interest  rates on the CIT
         revolving credit agreement was 9.00% at September 27, 1998 and 8.60% at
         September 28, 1997.

         In  connection  with  the  Fleet   Financing,   the  Company   incurred
         approximately  $3,545,000  in  debt  issuance  costs.  The  costs  were
         capitalized  and are being amortized using the interest method over the
         lives of the agreements (Notes 7 and 17).

         On September 8, 1998,  in  connection  with the  repurchase  of 300,000
         shares  of  stock  for  treasury,   the  Company  issued  an  unsecured
         promissory  note in the principal  amount of $2,450,000  (Note 11). The
         note is payable in equal  installments  on the six-month,  twelve-month
         and eighteen-month anniversary dates of the note, plus accrued interest
         at the rate of 5.5% per annum.

         On May 22, 1998, in connection with the purchase of ViPlex  Corporation
         (Note 6), HPPI  issued  unsecured  promissory  notes for  $527,000  and
         $473,000.  The $527,000  note is payable in equal  installments  on the
         eight-month  and  twelve-month  anniversary  dates  of the  note,  plus
         accrued  interest  at the rate of 6% per annum.  The  $473,000  note is
         payable in three  equal  installments  on the  first,  second and third
         anniversary  dates of the note, plus accrued interest at the rate of 6%
         per annum.

         On  September  5, 1997,  in  connection  with the  purchase of Townsend
         Plastics (Note 6), the Company amended its financing agreement with CIT
         to include a term note of $1,500,000  ("Term Note").  The Term Note was
         payable in twelve equal quarterly  installments  beginning December 31,
         1997.  Interest on the Term Note was payable monthly at prime plus .25%
         per annum or at the LIBOR  rate plus  2.75% if the  Company  elected to
         borrow  funds  under  a LIBOR  loan as  defined  in the  agreement.  In
         connection with the April 14, 1998 Fleet Financing,  this note was paid
         in full.

         In  connection  with the purchase of the  Lucite(R)  S-A-R  business on
         August 29, 1997 (Note 6), the Company  issued an  unsecured  promissory
         note in the  principal  amount of  $1,000,000  payable to ICI Acrylics,
         Inc. The principal  amount of the note, plus interest at the rate of 8%
         per annum, is payable in three  installments  on the first,  second and
         third anniversary dates of the note.

         On June 7, 1993,  the Company  consummated a public  offering of 80,000
         units,  consisting of  $80,000,000  aggregate  principal  amount of its
         Senior  Secured  Notes and warrants to purchase an aggregate of 800,000
         shares of its common stock. The warrants issued with the Senior Secured
         Notes are  detachable  and  therefore  were  allocated a portion of the
         proceeds  in  the  amount  of  approximately  $1,566,000  which  was an
         estimate  of their  market  value at the time  they  were  issued.  The
         proceeds  allocated  to  the  notes  were   approximately   $78,434,000
         resulting  in a note  discount of  $1,566,000,  which was  amortized to
         interest  expense  using the interest  method.  The  effective  rate of
         interest on the notes based on the allocated proceeds was calculated to
         be approximately 12.09%. The notes originally were to mature on June 1,
         2003.  Interest  was  payable on June 1 and  December 1 of each year at
         11.75%. The notes were collateralized by a lien on substantially all of
         the  non-cash   assets  of  the  Company  (other  than  trade  accounts
         receivable) and net cash proceeds of the sale of collateral.  The notes
         were  redeemable at the option of the Company,  in whole or in part, on
         or after June 1, 1998, at 104.41 % of the principal  amount,  declining
         to par on and after  June 1,  2001.  The  indenture  contained  certain
         covenants which limited,  among other things,  the Company's ability to
         incur additional debt, pay cash dividends, make certain other payments,
         sell its assets and redeem its capital stock.  The Senior Secured Notes
         were repaid in connection  with the Fleet  Financing.  The call premium
         paid of  approximately  $3,264,000 and the write-off of the unamortized
         debt  discount of  approximately  $950,000  are included in the loss on
         early extinguishment of debt during the fiscal year ended September 27,
         1998.

         The Company leases certain machinery and equipment under non-cancelable
         capital  leases which extend for varying  periods up to 5 years.  Other
         obligations  represent the remaining  capitalized  lease obligations at
         September 27, 1998 and September 28, 1997.
<PAGE>
10.      INCOME TAXES

         The effective tax rate differs from the  statutory  federal  income tax
         rate for the following reasons (in thousands):
<TABLE>
<CAPTION>
                                                                               Fiscal Years Ended
                                                              --------------------------------------------------------  
                                                              September 27,         September 28,        September 29, 
                                                                  1998                  1997                 1996
                                                              -------------         -------------        -------------  
          <S>                                                <C>                   <C>                   <C>
          Income tax calculated at the statutory
            rate applied to income (loss) before
            income tax and extraordinary item                $     4,636           $       408           $    (7,657)

          Increase (decrease) resulting from:

            Exclusion of extraordinary loss on the
              extinguishment of debt                              (2,787)                    -                     -

            Amortization of reorganization value 
               in excess of amounts allocable to
               identifiable assets                                   101                   155                   145

            State income tax                                         515                   354                  (593)

            Other                                                    355                   (86)                  (16)
                                                              ----------           -----------           -----------      
          Income tax expense (benefit)                        $    2,820           $       831           $    (8,121)
                                                              ==========           ===========           ===========  
</TABLE>
         Income tax expense (benefit) consisted of the following  components (in
         thousands):
<TABLE>
<CAPTION>
                                                                              Fiscal Years Ended
                                                          ----------------------------------------------------------    
                                                           September 27,         September 28,         September 29,
                                                               1998                  1997                   1996
                                                          --------------        --------------        --------------     
          <S>                                              <C>                  <C>                      <C>  
          Current
            Federal                                        $       397           $         -             $       119
            State                                                  515                   284                     532
                                                           -----------           -----------             -----------
               Total                                       $       912           $       284             $       651
                                                           ===========           ===========             ===========
          Net deferred tax expense (benefit)
            Federal                                        $     1,908           $       477             $    (7,647)
            State                                                    -                    70                  (1,125)
                                                           -----------           -----------             -----------
               Total                                       $     1,908           $       547             $    (8,772)
                                                           ===========           ===========             ===========
          Total
            Federal                                        $     2,305           $       477             $    (7,528)
            State                                                  515                   354                    (593)
                                                           -----------           -----------             -----------
               Total                                       $     2,820           $       831             $    (8,121)
                                                           ===========           ===========             =========== 
</TABLE>
         The components of the deferred tax assets and liabilities  consisted of
         the following (in thousands):
<TABLE>
<CAPTION>
                                                                             September 27, 1998
                                                            ---------------------------------------------------      
                                                              Assets            Liabilities             Total
                                                            ----------          -----------          ----------  
          <S>                                               <C>                 <C>                  <C>
          Current
          Accrued expenses deductible in future
            period                                          $    5,837          $        -           $    5,837
                                                            ==========          ==========           ==========
          Non-Current
            Acquired tax loss carryforward benefits         $    3,078          $        -           $    3,078
            Net operating loss carryforward                      5,731                   -                5,731
            Book basis in excess of tax basis of
              assets                                                 -              (8,115)              (8,115)
            Long-term accrual of expenses
              deductible in future periods                       7,065                   -                7,065
                                                            ----------          ----------           ----------
               Total                                        $   15,874          $   (8,115)          $    7,759
                                                            ==========          ==========           ==========

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                                             September 28, 1997
                                                            ---------------------------------------------------     
                                                               Assets           Liabilities             Total
                                                            -------------       -----------          ---------- 
          <S>                                               <C>                 <C>                  <C>
          Current
          Accrued expenses deductible in future
            period                                          $    6,944          $        -           $    6,944
                                                            ==========          ==========           ==========
          Non-Current
            Acquired tax loss carryforward
              benefits                                      $    7,872          $        -           $    7,872
            Net operating loss carryforward                      4,553                   -                4,553
            Book basis in excess of tax basis of
              assets                                                 -              (8,123)              (8,123)
            Long-term accrual of expenses
              deductible in future periods                       4,972                   -                4,972
            Valuation allowance                                 (7,872)                  -               (7,872)
                                                            ----------          ----------           ----------
               Total                                        $    9,525          $   (8,123)          $    1,402
                                                            ==========          ==========           ==========
</TABLE>
         The net operating and acquired tax loss carryforward benefits expire in
         various  years  ending  in 2010.  The  acquired  tax loss  carryforward
         benefits  consist of tax net operating loss  carryforwards  and pension
         contribution deductions.  The acquired net operating loss carryforwards
         are subject to an annual limitation arising from the September 27, 1992
         bankruptcy  reorganization  of the Company's  predecessors.  The annual
         limitation  on   utilization   of  the  acquired  net  operating   loss
         carryforward for tax purposes is approximately $1,600,000 per year.

         During the fiscal year ended  September 27, 1998,  the Company  reduced
         the  deferred  tax  valuation  allowance  relating to acquired tax loss
         carryforward  benefits. In accordance with SFAS No. 109, Accounting for
         Income Taxes, the reduction was applied to reduce  reorganization value
         in excess of amounts allocable to identifiable assets which resulted in
         such asset being  reduced to zero during the year ended  September  27,
         1998.

11.      STOCKHOLDERS' EQUITY

         The Company's certificate of incorporation provides that the authorized
         capital stock of the Company  consists of  35,000,000  shares of common
         stock and 1,000 shares of preferred  stock,  each having a par value of
         $0.01 per share. At September 27, 1998, approximately 13,849,000 shares
         of common stock were  issued.  Approximately  334,000  shares of common
         stock are reserved for issuance  pending  resolution of disputed claims
         in the bankruptcy proceedings (Note 13).

         The holder of the Series B  Preferred  Stock was  entitled to vote as a
         separate  class of  shareholders  for the purpose of  electing  certain
         directors  to the Board of  Directors  of the  Company.  The  holder of
         Series B Preferred  Stock had no preemptive or  preferential  rights to
         purchase or subscribe to any additional  shares of capital stock except
         for the conversion rights described below.

         The  Company had the right to redeem all or any portion of the Series B
         Preferred  Stock at any time following 30 days' notice to the holder of
         such Preferred Stock by (a) paying $150,000 per share for each share of
         Series B  Preferred  Stock that the  Company,  in its sole  discretion,
         elected to redeem;  and (b) issuing  all common  stock  dividends  then
         accrued but unpaid on the Preferred  Stock to be redeemed.  The Company
         had the right, but no obligation,  to redeem, at its option, any or all
         whole or  fractional  shares  of  Preferred  Stock.  In the  event of a
         liquidation of the Company,  the holder of the Preferred Stock would be
         entitled to receive,  following all  distributions  to creditors of the
         Company required under Delaware law, a liquidation  payment of $150,000
         per  share  plus  all  accrued  but  unpaid   dividends  prior  to  any
         distributions to common stockholders.

         On  December  16,  1996 the  Company  redeemed  15  shares  of Series B
         Preferred  Stock  for  $2,250,000.  On  February  4,  1997 the  Company
         redeemed  the  remaining  20  shares of  Series B  Preferred  Stock for
         $3,000,000.

         From  September  1, 1992,  the  holder of shares of Series B  Preferred
         Stock was  entitled  to receive an annual  dividend  equal to 8% of the
         redemption price for outstanding shares of Series B Preferred Stock, as
         applicable,  payable  only in shares of common  stock  which  number of
         shares is based on the average of the last  reported bid prices for the
         30 calendar days preceding the declaration  date. The Company  declared
         such dividends,  on a quarterly basis through February 1997. During the
         fiscal years ended  September  28, 1997 and  September  29,  1996,  the
         Company   declared   stock   dividends   of  $220,000   and   $420,000,
         respectively, resulting in the issuance of 73,448 and 115,657 shares of
         common  stock,  respectively,  at an average  price per common share of
         $3.00 and $3.63,  respectively.  The $220,000 and $420,000 of dividends
         declared during the fiscal years ended September 28, 1997 and September
         29, 1996 were charged to additional paid-in capital.

         On December  18, 1996,  the Board  designated a new series of preferred
         stock of the Company  termed  Series C Junior  Participating  Preferred
         Stock, $.01 par value ("Series C Preferred") and reserved 450 shares of
         the  Series C  Preferred  for  issuance.  At the same  time,  the Board
         declared  a  dividend  of a right to  acquire  1/100,000  of a share of
         Series C  Preferred  to the holder of each  share of common  stock (the
         "Rights")  under a Shareholder  Rights Plan. The Rights will trade with
         the  common  stock  and  be  detachable   from  the  common  stock  and
         exercisable  only in the  event  of an  acquisition  of or grant of the
         right to acquire 15% or more of the common stock by one party or common
         group or a tender offer to acquire 15% or more of the common stock.

         The holders of record of shares of common stock are entitled to receive
         dividends  when  and as  declared  by the  Board  of  Directors  of the
         Company,  provided that the Company has funds legally available for the
         payment of dividends and is not otherwise contractually restricted from
         the payment of dividends. The Company declared no such dividends during
         Fiscal 1998, Fiscal 1997 or Fiscal 1996.

         On November 13, 1997,  the Company  repurchased  500,000  shares of its
         common stock for $2,187,500 in connection  with the sale by the Pension
         Benefit  Guaranty  Corporation  ("PBGC") of all of its  holdings of the
         Company's common stock.

         During the year ended  September 27, 1998,  the Company  repurchased an
         additional  502,000  shares of its common  stock in the open market for
         $4,479,000,  repurchased 300,000 shares previously issued in connection
         with  the  purchase  of  Townsend  Plastics  for  $250,000  cash and an
         unsecured  promissory  note for  $2,450,000  (Note  9) and  repurchased
         50,000 shares  previously  issued in connection with the purchase of C.
         Gunther  Company for $431,250.  No shares were  repurchased  during the
         fiscal year ended September 28, 1997.

         During the fiscal year ended  September 27, 1998, the Company  received
         92,285  shares of its common  stock in lieu of cash for the exercise of
         stock options from officers and employees of the Company.  These shares
         were  valued at  $894,000  (which was  calculated  based on the closing
         market value of the stock on the day prior to the  exercise  dates) and
         are included as treasury shares as of September 27, 1998.

         Subsequent  to the  fiscal  year  ended  September  27,  1998 and as of
         December 11, 1998, the Company repurchased approximately 476,000 shares
         of its common stock in the open market for approximately $4,632,000.

         Warrants

         The Company has 583,150  warrants  outstanding to purchase an aggregate
         of 583,150  shares of its Common  Stock at a price  equal to $4.375 per
         share,  subject  to  adjustments  under  certain   circumstances.   All
         outstanding warrants are exercisable at any time on or prior to June 1,
         2003, at which time they will  terminate  and become void.  The Company
         originally  issued 800,000 warrants to purchase an aggregate of 800,000
         shares of its  Common  Stock in  connection  with the  issuance  of its
         Senior  Secured  Notes.  The warrants were  detachable  from the Senior
         Secured Notes and, therefore,  were allocated a portion of the proceeds
         in the amount of approximately $1,566,000, which was their market value
         at the time they  were  issued.  This  amount  was added to  additional
         paid-in  capital.  During the fiscal year ended September 27, 1998, the
         Company   repurchased   216,850  of  its   outstanding   warrants   for
         approximately  $1,314,000.  No warrants were repurchased for the fiscal
         year ended September 28, 1997. As of September 27,1998, no warrants had
         been exercised.

         Stock Compensation Plans

         At September 27, 1998,  the Company has four  stock-based  compensation
         plans,  which are described  below. The Company applies APB Opinion No.
         25  and  related   interpretations   in   accounting   for  its  plans.
         Accordingly,  no compensation cost has been recognized for these plans.
         Had  compensation  cost been determined  based on the fair value at the
         grant dates for awards under those plans  consistent with the method of
         FASB  Statement  No. 123, the  Company's net income (loss) and earnings
         per share would have been  reduced to the pro forma  amounts  indicated
         below (in thousands, except earnings per share information):
<PAGE>
<TABLE>
<CAPTION>

                                                                              Fiscal Years Ended
                                                        --------------------------------------------------------------
                                                         September 27,          September 28,            September 29,
                                                             1998                   1997                     1996
                                                        --------------         --------------           --------------
          <S>                                           <C>                    <C>                      <C> 
          Net income (loss)
            As reported                                 $       2,390          $          379           $    (14,401)
            Pro forma                                   $       2,175          $          308           $    (14,434)
          Earnings per share - basic
            As reported                                 $        0.18          $         0.03           $      (1.09)
            Pro forma                                   $        0.16          $         0.02           $      (1.10)
          Earnings per share - assuming dilution
            As reported                                 $        0.16          $         0.03           $      (1.09)
            Pro forma                                   $        0.15          $         0.02           $      (1.10)
</TABLE>


         The fair value of each  option  grant is  estimated  on the date of the
         grant using the Black-Scholes  option-pricing  model with the following
         weighted-average assumptions used for grants for the fiscal years ended
         September  27,  1998,  September  28,  1997  and  September  29,  1996,
         respectively:   expected  volatility  of  45.46%,  45.89%  and  45.89%,
         dividend yield of 0% for all years, risk-free interest rates of 4.523%,
         6.042% and 5.656% and expected lives of 3 to 10 years. 

         The Company has reserved  1,363,636 shares of common stock to be issued
         and sold pursuant to the 1992 Stock Option Plan that was adopted by the
         Company on September  27, 1992.  Generally,  of the options  under this
         plan  granted,  60% vested on May 1, 1994 and the  remainder  vested on
         November 1, 1995. Vesting provisions for any additional options will be
         determined  by the Board of Directors of the Company at the time of the
         grant of such options.  The stock options are exercisable over a period
         determined by the Board of Directors or its Compensation Committee, but
         no longer than ten years after the date granted.

         During the fiscal year ended  September 26, 1993,  the Company  adopted
         the 1992  Non-Qualified  Stock Option Plan  available  for  non-officer
         directors.  This plan provides  that  directors who are not officers of
         the Company are entitled to forego up to 100% of their annual  retainer
         in exchange  for options to purchase the  Company's  common stock at an
         option price of 50% of the market price of the underlying  common stock
         at the date of grant.  The options are  exercisable  for a period of 10
         years from the date of the grant of each option.

         During the fiscal year ended October 2, 1994,  the Company  adopted the
         1994 Stock  Option Plan  available  for certain  key  employees  of the
         Company.  The  Company has  reserved  approximately  812,000  shares of
         common stock to be issued under this plan,  provided that the aggregate
         number of options that may be granted  under the 1994 Stock Option Plan
         and all other stock option plans of the Company for  employees  may not
         at  any  time  exceed  in the  aggregate  15%  of  the  then  currently
         authorized common stock  outstanding,  on a fully diluted basis.  Stock
         options  granted under this plan are  exercisable  until not later than
         January 1, 2004.

         During the fiscal year ended  September 29, 1996,  the Company  adopted
         the 1995 Non-Qualified Stock Option Plan available for directors.  Each
         director  is  granted  an  option  to  purchase  10,000  shares  of the
         Company's  common  stock in the case of the  initial  grant  and  5,000
         shares for any  subsequent  grant.  The initial grant occurred upon the
         adoption of this plan or, in the case of new  directors,  30 days after
         becoming an eligible  director of the Company.  Options  granted  under
         this plan have a term of three years and may be  exercised  nine months
         after the date of the grant. This plan terminates on February 14, 2006.
         No director who is not an officer of the Company may receive options to
         purchase more than an aggregate of 10,000 shares of Common Stock in any
         calendar  year  under all of the  Company's  Stock  Option  Plans.  The
         Company  intends to seek  stockholder  approval to increase  the 10,000
         annual limit to 30,000 at the 1999 annual meeting of stockholders.
<PAGE>

         The following table  summarizes all stock option  transactions  for the
         fiscal years ended September 27, 1998 and September 28, 1997:
<TABLE>
<CAPTION>
                                                                         Fiscal Years Ended
                                    ---------------------------------------------------------------------------------------
                                              September 27, 1998                              September 28, 1997
                                    --------------------------------------         ----------------------------------------  
                                                          Weighted-Average                                 Weighted-Average
                                        Shares              Exercise Price              Shares               Exercise Price
                                    ---------------     ------------------         ---------------       ------------------
         <S>                           <C>                     <C>                       <C>                    <C>     
         Outstanding at      
           Beginning of Year           1,895,250               $    3.36                 1,707,973              $    3.45
         Grants                          762,658               $    8.09                   296,570              $    2.89
         Exercised                      (475,595)              $    3.19                         -                      -
         Forfeited                        (5,920)              $    3.57                  (109,293)             $    3.48
                                      ----------                                        ----------
         Outstanding at End of Year    2,176,393               $    5.05                 1,895,250              $    3.36
                                      ==========                                        ==========                           
         Exercisable at End of Year    1,295,815                                         1,603,676
                                      ==========                                        ==========  
         Weighted-average fair
           value of options granted   $     3.38                                        $     1.75
           during the year
</TABLE>
<TABLE>
<CAPTION>

The following table summarizes  information about stock options at September 27, 1998:

                             Options Outstanding                                                  Options Exercisable
-------------------------------------------------------------------------------------    --------------------------------------- 

Range of Exercise     Number Outstanding at     Weighted-Average     Weighted-Average
     Prices                  9/27/98                Remaining         Exercise Price      Number Exercisable    Weighted-Average
                                                Contractual Life                              at 9/27/98          Exercise Price
-----------------     ---------------------     ----------------     ----------------    -------------------    ----------------
<S>                        <C>                   <C>                     <C>                    <C>                  <C>
$1.470 -$2.063                67,386             6.22 Years              $  1.67                   67,386            $   1.67
$2.625 -$3.156               656,742             5.88 Years              $  2.80                  403,812            $   2.74
$3.250 -$4.000               361,141             3.57 Years              $  3.45                  357,141            $   3.45
$4.125 -$4.688               474,276             4.97 Years              $  4.14                  466,156            $   4.13
$5.063 -$7.000                39,000             2.42 Years              $  6.88                    1,320            $   5.78
$9.250 -$9.625               577,848             9.82 Years              $  9.62                        -                   -
                           ---------                                                            ---------         
                           2,176,393             6.29 Years              $  5.05                1,295,815            $   3.39
                           =========                                                            =========     
</TABLE>

         Employee Stock Ownership Plan

         The Company  established the Uniroyal Technology  Corporation  Employee
         Stock  Ownership  Plan (the "ESOP") in 1992.  The ESOP is a stock bonus
         plan  intended  to  encourage  eligible  employees  to save  for  their
         retirement and to increase their proprietary interest in the Company by
         accumulating  the Company's  common stock.  Employees  eligible for the
         initial  distribution  generally  were all  employees  employed  by the
         Company on or after January 1, 1993,  excluding  executive  officers of
         the Company.

         The Company made an initial  contribution to the ESOP of 425,000 shares
         of common stock. Future contributions by the Company are discretionary.
         The initial  contribution  has been allocated to eligible  employees of
         the Company  ratably based upon the respective  compensation  levels of
         the eligible  employees.  Shares allocated to each participant  account
         under the ESOP became vested upon the participant's completion of three
         years of cumulative service with the Company.  The Company did not make
         any  contributions  to the ESOP during the fiscal years ended September
         27, 1998,  September 28, 1997 and  September 29, 1996.  The Company did
         not have any ESOP expense  during the fiscal years ended  September 27,
         1998, September 28, 1997 and September 29, 1996. The Company intends to
         merge the ESOP into the three existing employee savings plans effective
         October 1, 1998. No further  contributions  are to be made to the Plan,
         no further benefits will accrue to any participants in the Plan and the
         accounts  of all  participants  in the Plan as of  October  1, 1998 are
         vested.

12.      EMPLOYEE COMPENSATION

         Post-retirement Health Care and Life Insurance Benefits

         Certain retired employees are currently  provided with specified health
         care and life  insurance  benefits.  Generally,  the plan  provides for
         reimbursement of approved medical and prescription drug costs not fully
         covered by Medicare. The plan also provides for certain deductibles and
         co-payments. The life insurance benefits provide for amounts based upon
         the retirees' compensation at the time of their retirement. Eligibility
         requirements for such benefits vary by division,  but generally provide
         that benefits are available to employees who retire after a certain age
         with specified years of service or a combined total of age and years of
         service.  The Company has the right to modify or  terminate  certain of
         these  benefits.  The  Company's  policy is to pay the actual  expenses
         incurred  by the  retirees;  the  Company  does not  intend to fund any
         amounts in excess of those  obligations.  The Company is also obligated
         to provide benefits to certain salaried  retirees of Uniroyal  Plastics
         Company,  Inc. ("UPC"),  which is currently in liquidation  proceedings
         under Chapter 7 of the U.S.  Bankruptcy Code and is an affiliate of the
         Predecessor  Companies (Note 13), and Uniroyal,  Inc. ("Uniroyal") (not
         affiliated  with the  Company)  who are class  members  under a federal
         district  court order.  The Company and  Uniroyal  agreed to share on a
         35%-65%   basis,   respectively,   the  costs  of  providing   medical,
         prescription  drug and life insurance  benefits to these retirees.  The
         Company is further  obligated to make payments to a Voluntary  Employee
         Benefits  Association  ("VEBA")  established  to  provide  benefits  to
         certain  retirees of the  Predecessor  Companies  and UPC. 

         The  Company  adopted  SFAS No. 106 as of  September  27,  1992,  which
         requires that the cost of the  foregoing  benefits be recognized in the
         Company's  consolidated financial statements over an employee's service
         period with the Company.  The Company  determined  that the accumulated
         post-retirement benefit obligation  ("Transition  Obligation") of these
         plans  upon  adoption  of SFAS No.  106 was  $28,085,000.  The  Company
         elected  to defer the  recognition  of the  Transition  Obligation  and
         amortize it over the greater of the average remaining service period or
         life expectancy  period of the  participants,  which was expected to be
         approximately  16 years.  In connection with the Ensolite Sale (Note 5)
         in Fiscal 1996, the Company recognized  approximately $4,500,000 of the
         Transition  Obligation  relating to this employee group as reduction to
         the gain on the sale.  In  connection  with the sale of the  automotive
         division  of  the  Coated  Fabrics   Segment  (Note  14),  the  Company
         recognized  approximately  $3,600,000 in Fiscal 1996 of the  Transition
         Obligation and other expenses relating to this employee group.

         The following  table  summarizes the  accumulated  post-retirement  and
         benefit  obligation  included  in  the  Company's  balance  sheets  (in
         thousands):
<TABLE>
<CAPTION>
                                                                               September 27,         September 28,
                                                                                   1998                  1997
                                                                               ------------          ------------
          <S>                                                                 <C>                     <C>
          Accumulated post-retirement benefit obligation:
            Retirees                                                          $   26,485              $   25,925
            Fully eligible active plan participants                                6,355                   5,939
            Other active plan participants                                         1,322                   2,357
            Unrecognized prior service cost                                          261                     276
            Unamortized transition obligation                                    (11,136)                (12,250)
            Unrecognized net loss                                                 (7,701)                 (7,562)
                                                                              ----------              ----------
            Accrued post-retirement benefit obligation                        $   15,586              $   14,685
                                                                              ==========              ==========  
</TABLE>
                                             
         The net periodic  post-retirement  benefit cost  contains the following
         components (in thousands):
<TABLE>
<CAPTION>
                                                                             Fiscal Years Ended
                                                       -----------------------------------------------------      
                                                       September 27,       September 28,       September 29,     
                                                            1998               1997                1996
                                                       -------------       -------------       -------------
          <S>                                              <C>                 <C>                 <C>
          Service cost                                     $     52            $     67            $    205
          Interest cost on projected benefit
            obligation                                        2,212               2,315               2,366
          Amortization of unrecognized transition
            obligation                                        1,114               1,134               1,651
          Other - net                                           276                 191                 362
                                                           --------            --------            --------
          Net periodic post-retirement benefit cost        $  3,654            $  3,707            $  4,584
                                                           ========            ========            ========  
</TABLE>
                    
         All post-retirement  benefits are based on actual costs incurred except
         for a certain  group of retirees  which is covered  under an  agreement
         providing   payments  based  on  the  number  of   beneficiaries.   For
         measurement  purposes,  an approximate  6.1% annual rate of increase in
         the cost of covered  health  care  benefits  was  assumed for years one
         through  two,  approximately  5.9% for  years  three  through  five and
         approximately  4.9%  thereafter.   The  health  care  cost  trend  rate
         assumption  has a  significant  effect  on the  amounts  reported.  For
         example,  increasing the health care trend rate by one percentage point
         in each year would  increase the  accumulated  post-retirement  benefit
         obligation as of September 27, 1998 by $3,221,000  and the net periodic
         post-retirement benefit cost by $199,000.

         The weighted  average discount rate used in determining the accumulated
         post-retirement benefit obligation for the fiscal years ended September
         27, 1998 and September 28, 1997 was 6.25% and 7.0%,  respectively.  The
         weighted  average  discount rate used in  determining  the net periodic
         post-retirement  benefit cost for the fiscal years ended  September 27,
         1998,  September 28, 1997 and  September  29, 1996 was 7.0%,  7.75% and
         7.0%, respectively.

         Other Benefit Plans

         The  Royalite,  UEP and UAS  divisions  provide  additional  retirement
         benefits  to  substantially  all of their  employees  and the  Polycast
         division provides such benefits to certain of its employees through two
         defined  contribution  savings  plans.  The plans  provide for employee
         contributions and employer matching  contributions to employee savings.
         Employer  contributions are generally either 2% of salaried and certain
         non-union hourly participants' gross earnings or rates per hour ranging
         generally  from $.05 to $.66 based on years of  service.  The  expenses
         pertaining to these plans amounted to approximately $618,000,  $649,000
         and  $699,000  for the  fiscal  years  ended  in 1998,  1997 and  1996,
         respectively.

         In addition,  the Company  provides a savings plan under Section 401(k)
         of the  Internal  Revenue  Code.  The savings  plan covers all eligible
         salaried and non-union wage employees of the Company.  The savings plan
         allows all  eligible  employees to defer up to 15% of their income on a
         pre-tax basis  through  contributions  to the savings  plan.  For every
         dollar an employee  contributes,  the Company may  contribute an amount
         equal to 25% of each  participant's  before-tax  obligation up to 6% of
         the participant's compensation.  Such employer contribution may be made
         in cash or in Company  common  stock.  The expenses  pertaining to this
         savings plan were approximately $168,000, $141,000 and $228,000 for the
         fiscal years ended 1998,  1997 and 1996.  During Fiscal 1998 and Fiscal
         1996 the  Company  contributed  30,260 and 60,648  shares of its common
         stock  with a market  value of  approximately  $191,000  and  $212,000,
         respectively,  to the savings  plan.  The Company did not make any such
         contributions during the fiscal year ended 1997.

13.      COMMITMENTS AND CONTINGENCIES

         Bankruptcy Proceedings

         On September  27, 1992 the Company  acquired the  businesses of certain
         direct and indirect subsidiaries of The Jesup Group, Inc. ("Jesup") for
         $54,400,000  of  the  Company's  common  and  preferred  stocks.  These
         subsidiaries  (collectively,   the  "Predecessor  Companies")  are  the
         current operating divisions of the Company.  The Predecessor  Companies
         previously filed petitions with the United States  Bankruptcy Court for
         the Northern District of Indiana,  South Bend Division (the "Bankruptcy
         Court") seeking protection from their creditors under Chapter 11 of the
         United States  Bankruptcy Code. On August 20, 1992 the Bankruptcy Court
         approved the Third Amended Plan of  Reorganization  under Chapter 11 of
         the  Bankruptcy  Code  for  Polycast  Technology  Corporation  and  its
         Affiliated Debtors (the "Plan"). The Plan was substantially consummated
         at the close of business on September 27, 1992 (the "Effective Date").

         As a  result  of the  bankruptcy  and the  consummation  of the Plan at
         September 27 1992, the Company recorded certain  adjustments to present
         its  consolidated   financial  statements  at  September  27,  1992  in
         conformity  with  Statement of Position  90-7  "Financial  Reporting by
         Entities in Reorganization  Under the Bankruptcy Code" ("SOP 90-7"), of
         the  American  Institute  of Certified  Public  Accountants.  Under the
         provisions  of SOP 90-7,  the Company was required to adopt fresh start
         reporting as of September 27, 1992 because (i) the reorganization value
         of the Company  (approximate fair value on the Effective Date) was less
         than  the  total  of all  post-petition  liabilities  and  pre-petition
         allowed claims and (ii) holders of the voting shares of the Predecessor
         Companies before the Effective Date received less than 50 percent (50%)
         of the voting shares of the Company.

         Notwithstanding  the confirmation and  effectiveness of the Predecessor
         Companies'  Plan, the Bankruptcy  Court continues to have  jurisdiction
         to, among other things,  resolve  disputed  pre-petition  claims and to
         resolve other  matters that may arise in  connection  with or relate to
         the  Predecessor  Companies'  Plan.  The Company has resolved,  through
         negotiation or through dismissal by the Bankruptcy Court, approximately
         $38,000,000 in disputed  claims.  Approximately  9,666,000  shares have
         been issued to the holders of unsecured  claims against the Predecessor
         Companies in settlement  of the allowed  unsecured  claims  against the
         estates of the  Predecessor  Companies and to the Company's  ESOP.  The
         Company retained  approximately 138,000 shares of common stock of which
         approximately  56,000 are  included in treasury  stock.  The  remaining
         approximate  334,000 shares of the original 10,000,000 shares allocated
         for the  disposition  of  bankruptcy  claims  are  being  held  pending
         resolution of certain miscellaneous claims.

         Townsend Acquisition

         By letter dated January 30, 1998, the Denver Regional Office of the FTC
         notified the Company that it was conducting a non-public  investigation
         into the Company's  acquisition  of the Townsend  Plastics  Division of
         Townsend  Industries,  Inc.  in  September  1997.  The  purpose  of the
         investigation was to determine whether the transaction violated Section
         7 of the Clayton Act, 15 USC Section 18, Section 5 of the Federal Trade
         Commission  Act, 15 USC  Section  45, or any other law  enforced by the
         FTC.   The   Company  has  been   cooperating   with  the  FTC  in  its
         investigation.  The Company has been in  discussions  with the staff of
         the Denver  Regional  Office of the FTC seeking to meet the concerns of
         both the Company and the FTC. The Company is currently  seeking to sell
         certain   assets  to   another   entity   that   could   compete   with
         Townsend/Glasflex  in  order to  increase  competition  in the  markets
         served by Townsend/Glasflex. 

         Litigation

         Approximately  130 hourly  employees  at the  Company's  acrylic  sheet
         manufacturing  facility in Stamford,  Connecticut  are  represented  by
         Teamsters  Local  191,  which  is  affiliated  with  the  International
         Brotherhood  of  Teamsters,  Chauffeurs,  Warehousemen  and  Helpers of
         America (the "Teamsters").  The Teamsters declared a strike on July 11,
         1994 and called off the strike  December  10,  1994.  The  Company  and
         Teamsters  settled  their dispute in June 1996.  The Company  agreed to
         settle the claim of the striking  employees  for back pay following the
         receipt of release of claims from such  employees.  The Company settled
         its  obligation  to the  employees  in August  1996  with a payment  of
         approximately $808,000, inclusive of employment taxes of $58,000.

         The Company is also  engaged in  litigation  arising  from the ordinary
         course of business.  Management  believes the ultimate  outcome of such
         litigation  will not have a material  adverse effect upon the Company's
         results of operations, cash flows or financial position.

         Environmental Factors

         The Company is subject to a wide range of federal, state and local laws
         and  regulations  designed to protect the environment and worker health
         and safety. The Company's management  emphasizes  compliance with these
         laws and  regulations.  The Company has instituted  programs to provide
         guidance and training and to audit compliance with  environmental  laws
         and  regulations at Company owned or leased  facilities.  The Company's
         policy  is to  accrue  environmental  and  cleanup-related  costs  of a
         non-capital  nature when it is probable  both that a liability has been
         incurred and that the amount can be reasonably estimated.

         The  Company  may  become   subject  to  claims   relating  to  certain
         environmental  matters. The operations of the Predecessor Companies and
         certain of their  affiliates  produced waste materials  that,  prior to
         1980, were disposed of at some 36 known  unregulated  sites  throughout
         the United  States.  After 1980,  waste  disposal  was limited to sites
         permitted under federal and state  environmental  laws and regulations.
         If any of the disposal sites (unregulated or regulated) are found to be
         releasing  hazardous  substances  into the  environment,  under current
         federal and state  environmental laws, the appropriate company might be
         subject to liability for cleanup and containment costs.

         Prior to the Effective Date of the Predecessor Companies' Plan, several
         sites were  identified  where there were potential  liabilities for the
         cost of  environmental  cleanup.  In  most  instances,  this  potential
         liability  resulted  from  the  alleged  arrangement  for the  off-site
         disposal of hazardous substances by Uniroyal, Inc.

         Pursuant to a settlement agreement with the United States Environmental
         Protection Agency ("EPA"), the United States Department of the Interior
         and  the  States  of  Wisconsin   and  Indiana  (the  "EPA   Settlement
         Agreement"),  entered into in connection with the Plan, the Predecessor
         Companies  compromised and settled (in exchange for common stock of the
         Company)  substantially  all of  the  pre-petition  liabilities  of the
         Predecessor  Companies and the Company relating to disposal  activities
         under Sections 106 and 107 of the Comprehensive  Environmental Response
         Compensation and Liability Act ("CERCLA"), Section 3008 of the Resource
         Conservation  and  Recovery  Act  ("RCRA")  and similar  state laws for
         cleanup of the remaining unsettled 20 designated sites not owned by any
         of the  Predecessor  Companies  (the  "Known  Sites")  and for  natural
         resource  damages  at 15 of the 20  Known  Sites.  Pursuant  to the EPA
         Settlement  Agreement,   the  Predecessor  Companies  and  the  Company
         received from the United States and the States of Indiana and Wisconsin
         a covenant not to sue for  response  costs and,  with the  exception of
         five Known Sites,  natural resource damages at each of the Known Sites.
         In addition,  pursuant to Section 113(f)(2) of CERCLA,  and as provided
         under the EPA Settlement  Agreement,  the Predecessor Companies and the
         Company will be protected against  contribution claims filed by private
         parties  for any Known Site for matters  covered by the EPA  Settlement
         Agreement. The EPA Settlement Agreement established a mechanism for the
         Company to resolve its liability for any other sites,  except for those
         owned  by  the  Company   (the   "Additional   Sites"),   arising  from
         pre-petition  disposal activity.  The Company also agreed to share with
         such  parties the  proceeds of claims  relating to the known sites made
         against  certain  insurers  of  the  Predecessor  Companies  and  their
         affiliates.

         In the event that the United  States,  or the State of Wisconsin or the
         State  of  Indiana  asserts  a  claim  against  any of the  Predecessor
         Companies  or  the  Company  for   response   costs   associated   with
         pre-petition   disposal   activities  at  any   Additional   Site,  the
         governmental party will be entitled to pursue its claim in the ordinary
         course, and the Company and the Predecessor  Companies will be entitled
         to assert all of their  defenses.  However,  if and when the Company or
         any of the Predecessor  Companies is held liable,  and if the liability
         is  determined  to arise from  pre-petition  disposal  activities,  the
         Company or such  Predecessor  Company may pay the claims in  discounted
         "plan dollars"  (i.e.,  the value of the  consideration  that the party
         asserting  such claim would have received if the liability were treated
         as a general  unsecured claim under the Plan). Such payment may be made
         in cash or securities,  or a combination  thereof,  at the Company's or
         such Predecessor Company's option.

         The Company  received a letter dated  October 30,  1997,  from the EPA,
         Region  5,   informing  the  Company  that  it  might  be   financially
         responsible for a pollution  incident at the plant formally occupied by
         the  Company  at 312 North Hill  Street,  Mishawaka,  Indiana.  The EPA
         notified  the Company  that it expected  the Company to pay for part or
         all of the  approximately  $1,700,000  of  costs  associated  with  the
         clean-up of a portion of such plant. The Company and the EPA negotiated
         a  settlement  in  principle  whereby  the EPA will be given an allowed
         unsecured claim of $1,700,000 under the Plan, and the Company will make
         a  payment  of  $525,000  to  the  EPA.   An  accrued   liability   for
         environmental  clean-up  of  $525,000  is  included  in  other  accrued
         expenses as of September 27, 1998.

         In October 1996,  the EPA sent the Company a General Notice and Special
         Notice of Liability  concerning the Refuse Hideaway landfill  Superfund
         Site  at  Middleton,  Wisconsin.  While  a unit of  Uniroyal,  Inc.  is
         believed to have sent non-hazardous  waste to the site between 1978 and
         1984,  the Company is not aware that the  Uniroyal,  Inc. unit sent any
         hazardous  materials  to the site.  The  Company  has  entered  into an
         Administrative  Order  on  Consent  with  the  EPA  and  a  Potentially
         Responsible   Parties   Agreement   with  certain   other   potentially
         responsible  parties.  The Company does not  presently  anticipate  any
         material  liability in connection  with the site, and in any event,  if
         the Company is found to have  liability  in  connection  with the site,
         such  liability  will be  subject  to the  terms of the EPA  Settlement
         Agreement. 

         Claims arising from real property owned by the Company are not affected
         by the EPA Settlement Agreement.  In connection with the acquisition of
         a manufacturing  facility in South Bend,  Indiana,  the Company assumed
         costs of remediation of soil and ground water  contamination  which the
         Company   estimates  will  cost  not  more  than   $1,000,000   over  a
         five-to-seven  year  period.  The Company had placed  $1,000,000  in an
         escrow  account to be used for such  clean-up  in  accordance  with the
         terms  of  the  agreement  for  the  purchase  of the  facility.  As of
         September 27, 1998, the Company had incurred  approximately $566,000 of
         related remediation costs.

         The Company's  acquisition of assets of Townsend  Plastics in September
         1997 (Note 6) included the  building in which the business  operates in
         Pleasant Hill,  Iowa. The seller retained the underlying real property,
         which is leased to the  Company  for a term of ten years.  The  Company
         also has an option to acquire such real  property  until  September 30,
         2007.   The   real   property   is   subject   to   a   RCRA   Facility
         Investigation/Corrective  Measures Study with Interim  Measures ordered
         by the EPA  pursuant to RCRA.  Two former  lessees of the  property are
         performing  corrective  measures on the real property to remediate soil
         and ground water  contamination.  The Company does not anticipate  that
         such  corrective  measures will interfere with the Company's use of the
         property.  The Company does not anticipate any liability to the Company
         in connection with such contamination or corrective measures as long as
         the Company remains a lessee of the property.

         Based on  information  available as of September 27, 1998,  the Company
         believes that the costs of known environmental matters either have been
         adequately  provided  for or are  unlikely  to have a material  adverse
         effect on the Company's operations, cash flows or financial position.

         Leases

         The Company is a party to  non-cancelable  lease  agreements  involving
         equipment.  The  leases  extend for  varying  periods up to 5 years and
         generally  provide for the payment of taxes,  insurance and maintenance
         by the  lessee.  Generally  these  leases  have  options to purchase at
         varying dates.

         The  Company's  property  held under  capitalized  leases,  included in
         property,  plant and  equipment  (Note 4) consists of the following (in
         thousands):
<TABLE>
<CAPTION>
                                                                        September 27,          September 28,
                                                                            1998                   1997
                                                                        -------------          -------------
          <S>                                                             <C>                    <C>
          Machinery, equipment and office furnishings                     $    1,153             $    2,397
          Less accumulated  amortization                                        (351)                  (568)
                                                                          ----------             ----------
                                                                          $      802             $    1,829
                                                                          ==========             ==========
</TABLE>
<PAGE>

         The   approximate   minimum  future  lease   obligations  on  long-term
         non-cancelable  capital lease  obligations  included in long-term  debt
         (Note 9) during  subsequent  fiscal years  ending in  September  are as
         follows (in thousands):
<TABLE>
<CAPTION>

                            Fiscal Year
                              <S>                                         <C>                        
                              1999                                        $      125
                              2000                                                92
                                                                          ----------      
                                                                                 217
                            Less imputed interest                                (18)
                                                                          ---------- 
                              Total                                       $      199
                                                                          ==========
</TABLE>
 
         Interest is imputed  using the rate that would equate the present value
         of  the  minimum  lease  payments  to the  fair  value  of  the  leased
         equipment.

         The Company leases  equipment,  vehicles and warehouse and office space
         under  various  lease  agreements,  certain  of which  are  subject  to
         escalations  based upon  increases in specified  operating  expenses or
         increases in the Consumer Price Index.  The approximate  future minimum
         rentals under non-cancelable  operating leases during subsequent fiscal
         years ending in September are as follows (in thousands):
<TABLE>
<CAPTION>
                            Fiscal Year
                                <S>                                       <C>
                                1999                                      $    1,429
                                2000                                           1,382
                                2001                                             675
                                2002                                             599
                                2003                                             493
                                Subsequent years                               1,965
                                                                          ---------- 
                                Total                                     $    6,543
                                                                          ========== 
</TABLE>


         Rent expense was  approximately  $1,463,000,  $1,264,000 and $1,592,000
         for the  years  ended  September  27,  1998,  September  28,  1997  and
         September 29, 1996, respectively.

         Officers' Compensation

         On August 1, 1995 the Company implemented a Deferred  Compensation Plan
         providing  certain key employees the  opportunity  to participate in an
         unfunded deferred compensation program. Under the program, participants
         may defer a portion of their base  compensation and bonuses earned each
         year. Amounts deferred will earn interest at 12% per annum. The program
         is not  qualified  under  Section 401 of the Internal  Revenue Code. At
         September 27, 1998 and September 28, 1997  participant  deferrals which
         are  included  in  accrued  liabilities  were  $519,000  and  $334,000,
         respectively.  The expense  during the fiscal year ended  September 27,
         1998, September 28, 1997 and September 29, 1996 was $184,000,  $161,000
         and $156,000, respectively.

         Also during the fiscal year ended  October 1, 1995,  split  dollar life
         insurance  contracts  were purchased on the lives of the five executive
         officers. Annual insurance premiums of $186,000 are paid by the Company
         with respect to these policies.  As of September 27, 1998 and September
         28, 1997, $717,000 and $531,000,  respectively, has been capitalized to
         reflect  the  cash  surrender  value  of  these  contracts  net of loan
         balances.

         As of September 27, 1998,  the Company had  employment  contracts  with
         four officers of the Company,  providing  for total annual  payments of
         approximately $1,471,000 plus bonuses through September 1, 1999.

14.      SALE OF THE AUTOMOTIVE DIVISION OF THE COATED FABRICS SEGMENT

         During the fourth  quarter of Fiscal  1996,  management  of the Company
         concluded  that,  based not only on its  decision to sell,  but also on
         discussions with interested buyers, a sale of the automotive  operation
         of the Coated Fabrics  Segment was probable.  Further,  on December 11,
         1996, the Board of Directors  approved the closure of the Port Clinton,
         Ohio operation  ("Port  Clinton") of the Coated Fabrics  Segment during
         the fiscal year ending  September  28, 1997 in the event a sale did not
         occur.   Port  Clinton  incurred   operating  losses  of  approximately
         $7,640,000 and $5,540,000  during the fiscal years ended  September 29,
         1996 and October 1, 1995.

         In accordance  with SFAS No. 121, the Company  recorded a write-down of
         long-lived  assets of the facility  totaling  approximately  $8,900,000
         during the fiscal year ended  September 29, 1996. The carrying value of
         the long-lived  assets to be disposed of was $4,530,000 as of September
         27, 1998, and $9,346,000 as of September 28, 1997.

         In connection with the probable sale of the automotive operation of the
         Coated  Fabrics  Segment in Fiscal  1996,  management  believed  that a
         curtailment would result from the associated  expected reduction in the
         plan  participants.  In  accordance  with  SFAS No.  106,  the  Company
         recognized approximately $3,600,000 of a curtailment loss in connection
         with the  probable  sale of the  Coated  Fabrics  Segment's  automotive
         operation during the fiscal year ended September 29, 1996.

         On May 15,  1997 the  Company  agreed  to sell  certain  assets  of the
         automotive  division  of the  Coated  Fabrics  Segment  located  at the
         Company's Stoughton,  Wisconsin, facility ("Stoughton") to Textileather
         Corporation,  a subsidiary of Canadian  General-Tower,  Limited ("CGT")
         for $6,657,500.  The Company received $4,657,500 in cash and a holdback
         of  $2,000,000  which was to be paid  pursuant to the terms of a supply
         agreement and to bear  interest at the rate of 9% per annum.  Under the
         terms of the  supply  agreement,  the  Company  agreed to  continue  to
         manufacture and supply Stoughton  automotive  products to its customers
         until  Textileather   Corporation  could  transfer  production  of  the
         Stoughton automotive products to its own facility.  The $2,000,000 plus
         accrued  interest  was  payable  in  stages  and  contingent  upon  the
         successful  transfer of certain  automotive  programs  to  Textileather
         Corporation.  The first  installment  was due September  30, 1997.  The
         Company requested payment and was denied payment by CGT. On October 10,
         1997, the Company filed suit against CGT and  Textileather  Corporation
         in the Dane County, Wisconsin Circuit Court. The Company sought damages
         for non-payment of the holdback and declaratory and injunctive  relief.
         On October 30,  1997,  the  defendants  filed their  answer,  basically
         denying  the  claims.   Textileather  Corporation  later  commenced  an
         arbitration  in  Madison,   Wisconsin  in  connection  with  claims  by
         Textileather  Corporation under the asset purchase  agreement.  The two
         cases were  settled on July 17,  1998.  As part of the  settlement  the
         Company  retained  in  perpetuity  certain  automotive  programs it had
         previously  sold,  and two programs  were retained  until  February 28,
         1999. In addition,  Textileather  made a cash payment to the Company of
         approximately $379,000 which was recorded by the Company as a gain, and
         also  transferred  ownership back to the Company of an asset located at
         the Company's  Port  Clinton,  Ohio  facility.  The Company may earn an
         additional $175,000 plus accrued interest under the terms of the supply
         agreement.

         On October 17, 1997 the Company  further  agreed to sell certain assets
         at Port  Clinton  to CGT for  $5,325,000  plus the  value of  purchased
         inventories and plus or minus adjustments  contingent upon the transfer
         of certain automotive  programs to CGT as defined in the agreement.  On
         July 10,  1998,  the Company  received  $4,930,000  from CGT under this
         agreement  relative  to assets  related  to the  Company's  door  panel
         program.  Under the terms of a supply agreement,  the Company agreed to
         continue to manufacture and supply customers of the door panel programs
         until CGT could  transfer the  production of the door panels to its own
         facility.  The  Company  stopped  producing  door  panels  at its  Port
         Clinton,  Ohio facility in November,  1998.  The Company may receive an
         additional  amount of up to $800,000 if CGT secures purchase orders for
         the  twelve  months  following  the door  panel  closing  from  certain
         customers  as  identified  in the  agreement.  The Company  should also
         receive an additional  $1,055,000 on or before June 1999 upon obtaining
         certain customer  approvals and resulting  transfer to CGT of purchased
         assets that relate to the Company's  instrument panel programs.  During
         the fiscal year ended September 27, 1998, the Company recognized a gain
         of $133,000 in connection with this  transaction.

         Management  believes  that the  write-down to  long-lived  assets,  the
         curtailment loss and other reserves recorded relating to the agreements
         for sale remain  appropriate  at September 27, 1998,  the net effect of
         which  resulted in no  additional  significant  gain or loss during the
         fiscal  year  ended  September  27,  1998.  Other  than  the  potential
         contingent  payments that the Company may receive,  Management believes
         that the  Company  will not have any further  significant  gain or loss
         upon the ultimate completion of the sales.

15.      JOINT VENTURE

         As of  September  29,  1997,  the  Company  entered  into a  technology
         agreement with Emcore to acquire certain technology for the manufacture
         of epitaxial  wafers used in high brightness LEDs for lamps and display
         devices.  Included in other  assets at  September  27, 1998 are license
         fees relating to the technology  agreement of $4,500,000 paid to Emcore
         during the fiscal year ended  September  27, 1998 (Note 7). On the date
         of the  transaction,  Thomas J.  Russell,  the Chairman of the Board of
         Directors  of  Emcore,  was a  director  and major  stockholder  of the
         Company and Howard R. Curd,  the Chairman of the Board of Directors and
         Chief Executive Officer of the Company,  was a director and stockholder
         of Emcore.  Subsequent to the  transaction,  Thomas J. Russell resigned
         from the Board of Directors of the Company and Howard R. Curd  resigned
         from the Board of Directors of Emcore.

         Uniroyal  Optoelectronics,  Inc.,  a  wholly-owned  subsidiary  of  the
         Company,  has  entered  into a  joint  venture  with  Emcore  (Uniroyal
         Optoelectronics, LLC), which Uniroyal Optoelectronics, Inc. manages and
         of which it is a 51% owner. Emcore is the 49% owner. In July 1998, both
         owners  capitalized  the joint venture  through cash  contributions  of
         $510,000 by the Company and $490,000 by Emcore.

         Included in other  liabilities  at September  27, 1998,  is $291,000 of
         minority  interest  relating to the joint venture.  Included in selling
         and  administrative  expenses for the fiscal year ended  September  27,
         1998 is the minority  interest in the joint venture losses of $199,000.

         In July 1998,  the joint venture  entered into a lease  agreement for a
         facility in Tampa,  Florida and has subsequently  begun construction of
         leasehold  improvements.  It is anticipated that the joint venture will
         begin production in such facility in mid-1999.

16.      INCOME (LOSS) PER COMMON SHARE

         FASB has issued SFAS No. 128, Earnings Per Share, which was required to
         be adopted for financial  statement  periods  ending after December 15,
         1997. SFAS No. 128 requires that the primary and fully diluted earnings
         per share be  replaced  by "basic" and  "diluted"  earnings  per share,
         respectively.  The basic calculation  computes earnings per share based
         only on the weighted  average number of shares  outstanding as compared
         to primary earnings per share which included common stock  equivalents.
         The diluted  earnings per share  calculation  is computed  similarly to
         fully diluted  earnings per share. The Company has adopted SFAS No. 128
         for the fiscal years ended  September 27, 1998,  September 28, 1997 and
         September  29,  1996.   The   reconciliation   of  the  numerators  and
         denominators of the basic and diluted earnings per share computation is
         as follows:
<TABLE>
<CAPTION>
                                                                 For the Fiscal Year Ended September 27, 1998
                                                     ---------------------------------------------------------------           
                                                       Income                        Shares               Per Share
                                                     (Numerator)                  (Denominator)             Amount
                                                     ------------                 -------------          -----------    
           <S>                                       <C>                            <C>                     <C>                
           Income before extraordinary item          $  8,027,000

           Basic EPS
           ---------
             Income available to
               common stockholders                      8,027,000                   13,231,542              $  0.61

           Effect of Dilutive Securities
           -----------------------------
             Stock options                                                           1,070,122
             Warrants                                                                  329,404
                                                                                    ---------- 
           Diluted EPS
           -----------
             Income available to
               common stockholders                   $  8,027,000                   14,631,068              $  0.55
                                                     ============                   ==========              =======
</TABLE>
<TABLE>
<CAPTION>
                                                                 For the Fiscal Year Ended September 28, 1997
                                                     ----------------------------------------------------------------             
                                                       Income                        Shares                 Per Share
                                                     (Numerator)                  (Denominator)               Amount
                                                     -----------                  -------------             ---------              
           <S>                                       <C>                            <C>                     <C>
           Income before extraordinary item          $  379,000

           Basic EPS
           ---------    
             Income available to common
               stockholders                             379,000                     13,316,965              $  0.03

           Effect of Dilutive Securities
           -----------------------------
             Stock options                                                             106,589
                                                                                    ----------      
           Diluted EPS
           -----------
             Income available to
               common stockholders                   $  379,000                     13,423,554              $  0.03
                                                     ==========                     ==========              =======
</TABLE>

         Warrants to purchase 800,000 shares of common stock at $4.375 per share
         and  additional  stock options to purchase  1,224,478  shares of common
         stock at various prices were  outstanding  during the fiscal year ended
         September 28, 1997 but were not included in the  computation of diluted
         earnings  per share  because the  exercise  price was greater  than the
         average  market price of the common  shares. 

         For the fiscal year ended  September  29, 1996,  the  weighted  average
         number of common shares  outstanding  for the  calculation of basic and
         diluted earnings per share was 13,167,466. Inclusion of shares issuable
         upon the exercise of stock  options,  warrants and the preferred  stock
         conversion  (then  outstanding) in the calculation of diluted  earnings
         per share would have been antidilutive.

17.      RELATED PARTY TRANSACTIONS

         The Company  has an  agreement  with an  investment  banking  firm that
         employs  relatives  of one of the  Company's  executive  officers.  The
         agreement  retains the  investment  banking  firm to provide  financial
         advisory services to the Company for the period January 1, 1997 through
         December  31,  2000.  The  Company  incurred  expenses  related to this
         agreement of  approximately  $732,000  and  $274,000  during the fiscal
         years ended  September 27, 1998 and  September 28, 1997,  respectively,
         and  $258,000  related to a similar  agreement  during the fiscal  year
         ended September 29, 1996. Of the $732,000  incurred during Fiscal 1998,
         $650,000 was incurred in  connection  with the Fleet  Financing  and is
         included in capitalized debt issuance costs as of September 27, 1998.

         During the fiscal year ended  September 27, 1998, the Company  incurred
         legal fees of  approximately  $326,000  with a law firm of which one of
         the Company's directors is a senior partner.  Approximately $231,000 of
         such legal fees were  incurred in connection  with the Fleet  Financing
         and are included in capitalized debt issuance costs as of September 27,
         1998.  No legal fees were paid to this firm  during  the  fiscal  years
         ended September 28, 1997 or September 29, 1996.

18.      SEGMENT INFORMATION

         Identifiable assets by segment are those assets that are used solely in
         the Company's  operations  in each segment.  The Company did not derive
         10% or more of its sales  from any  single  customer  during the fiscal
         years ended  September  27, 1998,  September 28, 1997 and September 29,
         1996.  Segment  data for the fiscal  years ended  September  27,  1998,
         September 28, 1997 and September 29, 1996 are as follows (in millions):
<TABLE>
<CAPTION>
                                                                            Fiscal Years Ended
                                                         -----------------------------------------------------------   
                                                         September 27,           September 28,         September 29,
                                                             1998                    1997                  1996
                                                         -------------           -----------           ------------
          <S>                                             <C>                     <C>                   <C>        
          Net sales:
            High Performance Plastics                     $   128.6               $   118.8             $   115.1
            Coated Fabrics                                     67.9                    68.8                  58.7
            Specialty Adhesives                                24.1                    20.9                  35.5
                                                          ---------               ---------             ---------            
              Total                                       $   220.6               $   208.5             $   209.3
                                                          =========               =========             =========   
          Operating income (loss):
            High Performance Plastics                     $    16.2               $    10.5             $     7.0
            Coated Fabrics                                      8.9                     2.1                 (19.0)
            Specialty Adhesives                                 1.9                    (0.3)                  0.1
            Optoelectronics                                    (0.4)                       -                    -
            Unallocated                                        (3.6)                   (1.7)                 (0.8)
                                                          ---------               ---------             --------- 
              Total                                       $    23.0               $    10.6             $   (12.7)
                                                          =========               =========             =========   
          Identifiable assets:
            High Performance Plastics                     $    99.8               $    92.0             $    80.9
            Coated Fabrics                                     35.1                    43.7                  46.4
            Specialty Adhesives                                15.7                    15.0                   9.3
            Optoelectronics                                     2.7                        -                    -
            Corporate                                          33.1                    30.8                  34.2
                                                          ---------               ---------             ---------  
              Total                                       $   186.4               $   181.5             $   170.8
                                                          =========               =========             =========   
          Depreciation and amortization:
            High Performance Plastics                     $     5.5               $     4.9             $     4.4
            Coated Fabrics                                      1.7                     1.9                   3.7
            Specialty Adhesives                                 0.8                     0.9                   1.6
            Unallocated                                         1.1                     1.4                   0.9
                                                          ---------               ---------             --------- 
              Total                                       $     9.1               $     9.1             $    10.6
                                                          =========               =========             ========= 
          Capital expenditures:
            High Performance Plastics                     $     5.4               $     3.0             $     3.9
            Coated Fabrics                                      0.5                     1.2                   2.4
            Specialty Adhesives                                 0.9                     7.3                   1.8
            Optoelectronics                                     0.3                        -                    -
            Corporate                                           0.2                     0.8                   2.0
                                                          ---------               ---------             ---------   
              Total                                       $     7.3               $    12.3             $    10.1
                                                          =========               =========             =========
</TABLE>
         During the fiscal year ended  September 27, 1998,  the Company  changed
         its  methodology  for the  allocation  of  corporate  overhead  from an
         allocation of 100% of certain corporate costs to an allocation of costs
         based upon 3.0% - 3.5% of segment sales.  Prior quarter and fiscal year
         allocations  were not  restated.  Had the current  year  allocation  of
         corporate  overhead expenses remained  consistent with the prior years'
         methodology,  this would have  resulted in  additional  allocations  of
         expense to the High Performance Plastics Segment of $2.1 million and to
         the  Specialty  Adhesives  Segment of $0.4 million in Fiscal 1998.  The
         Coated  Fabrics  Segment  would  have had  $0.3  million  less  expense
         allocated in Fiscal 1998.

         During  the  Fiscal  year  ended  September  29,  1996,  the  Specialty
         Adhesives Segment included the Ensolite  specialty foams division prior
         to its sale on June 10, 1996 (Note 5).

19.       SUBSEQUENT EVENT

         On November  30,  1998,  the Company  purchased  642,857  shares of the
         Series I Redeemable  Convertible Preferred Stock ("Preferred Stock") of
         Emcore for approximately $9,000,000 ($14.00 per share). The shares were
         offered pursuant to a private placement by Emcore.

         Dividends on the Preferred Stock are cumulative and will be payable, at
         Emcore's  option,  in cash or additional  shares of Preferred  Stock on
         March 31, June 30,  September 30 and December 31,  commencing  December
         31, 1998 at the annual rate of 2% per share of  Preferred  Stock on the
         liquidation preference thereof (equivalent to $0.28 per annum per share
         of Preferred Stock).

         Shares of the  Preferred  Stock  are  convertible  at any time,  at the
         option of the holders thereof, into shares of common stock of Emcore on
         a one for one basis,  subject to  adjustment  for  certain  events.  On
         November 30, 1998, the closing sales price of Emcore's  common stock on
         the Nasdaq National Market was $12.875.

         The Preferred  Stock is redeemable,  in whole or in part, at the option
         of  Emcore at any time  Emcore's  common  stock has  traded at or above
         $28.00 per share for 30 consecutive  trading days, at a price of $14.00
         per share plus accrued and unpaid dividends,  if any, to the redemption
         date.  Emcore is  required  to provide no less than 30 days and no more
         than 60 days notice of the  redemption.  The shares of Preferred  Stock
         are subject to mandatory redemption by Emcore on November 17, 2003.

         On  November  30,  1998,  Emcore  also made a capital  contribution  to
         Uniroyal Optoelectronics,  LLC of $5,000,000. The Company will fund its
         equivalent  capital  contribution to the joint venture of approximately
         $5,200,000 as cash is required by the joint venture.
<PAGE>



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Uniroyal Technology Corporation
Sarasota, Florida

We  have  audited  the  consolidated   balance  sheets  of  Uniroyal  Technology
Corporation  and  subsidiaries  (the  "Company")  as of  September  27, 1998 and
September  28, 1997,  and the related  consolidated  statements  of  operations,
changes in stockholders' equity and cash flows for the years ended September 27,
1998,  September  28, 1997,  and  September  29, 1996 and have issued our report
thereon dated  December 16, 1998  (included in this Form 10-K).  Our audits also
included the accompanying  consolidated  financial  statement schedule listed in
Item 14 of this Form 10-K. This consolidated financial statement schedule is the
responsibility of the Company's management.  Our responsibility is to express an
opinion  based  on our  audits.  In our  opinion,  such  consolidated  financial
statement  schedule,  when  considered  in  relation  to the basic  consolidated
financial statements taken as a whole,  presents fairly in all material respects
the information set forth therein.





/s/ DELOITTE & TOUCHE LLP
-------------------------
Deloitte & Touche LLP
Tampa, Florida
December 16, 1998


<PAGE>
<TABLE>
<CAPTION>

                                                                                                        SCHEDULE II


                                           UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                                                 VALUATION AND QUALIFYING ACCOUNTS
                                                           (in thousands)




                                          COLUMN A         COLUMN B          COLUMN C        COLUMN D      COLUMN E
                                          --------         --------          --------        --------      --------   
                                                                             ADDITIONS
                                         BALANCE AT    CHARGED (CREDITED)     CHARGED                        
                                        BEGINNING OF     TO COSTS AND        TO OTHER                      BALANCE AT
                                           PERIOD         EXPENSES             ACCTS.       DEDUCTION    END OF PERIOD
              DESCRIPTION
                                                                                (a)            (b)
  <S>                                     <C>             <C>               <C>            <C>             <C>               
  Year ended September 27, 1998
    Estimated reserve for
    doubtful accounts                     $   257         $    87           $    27        $  (125)        $   246
  Year ended September 28, 1997
    Estimated reserve for
    doubtful accounts                     $   369         $     -           $    53        $  (165)        $   257

  Year ended September 29, 1996
    Estimated reserve for
    doubtful accounts                     $   437         $    (6)          $    27        $   (89)        $   369
<FN>

(a)       Amount represents recovery of amounts previously written-off.
(b)       Amount includes write-off of uncollectible accounts.
</FN>
</TABLE>
<PAGE>


                                   SIGNATURES

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

                         UNIROYAL TECHNOLOGY CORPORATION


                                                  /S/ Howard R. Curd    
Date:  December 17, 1998                      By: ---------------------
                                                  Howard R. Curd, Chief
                                                    Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.




/S/ Robert L. Soran                              /S/ Richard D. Kimbel
--------------------------                       ---------------------------
Robert L. Soran, Director, President             Richard D. Kimbel, Director
  and Chief Operating Officer                    Date:  December 17, 1998
Date:  December 17, 1998



/S/ George J. Zulanas, Jr.                       /S/ Curtis L. Mack
---------------------------                      ---------------------------
George J. Zulanas, Jr., Vice President,          Curtis L. Mack, Director
  Chief Financial Officer and Treasurer          Date:  December 17, 1998
Date:  December 17, 1998



/S/ Howard R. Curd                               /S/ Roland H. Meyer
---------------------------                      ---------------------------
Howard R. Curd, Director, Chairman               Roland H. Meyer, Director
  of the Board and Chief Executive               Date:  December 17, 1998
  Officer 
Date:  December 17, 1998



/S/ Peter C. B. Bynoe                            /S/ John A. Porter
---------------------------                      ---------------------------
Peter C. B. Bynoe, Director                      John A. Porter, Director
Date:  December 17, 1998                         Date:  December 17, 1998



/S/ Thomas E. Constance
---------------------------
Thomas E. Constance, Director
Date:  December 17, 1998

<PAGE>

                                POWER OF ATTORNEY

Each person whose  signature to this report appears below hereby appoints Howard
R. Curd, Robert L. Soran and Oliver J. Janney, and each individually, any one of
whom  may  act  without   the   joinder  of  the   others,   as  his  agent  and
attorney-in-fact  to sign on his behalf  individually and in the capacity stated
below and to file all  amendments  to this report,  which  amendments  make such
changes and additions to this report as such agent and attorney-in-fact may deem
necessary and appropriate.




/S/ Howard R. Curd                              /S/ Peter C. B. Bynoe  
-----------------------                         --------------------------
Howard R. Curd, Director, Chairman              Peter C.B. Bynoe, Director
  of the Board and Chief                        Date:  December 17, 1998
  Executive Officer
Date:  December 17, 1998



/S/ Robert L. Soran                             /S/ Thomas E. Constance
-----------------------                         ---------------------------    
Robert L. Soran, Director, President and        Thomas E. Constance, Director
  Chief Operating Officer                       Date:  December 17, 1998
Date:  December 17, 1998



                                                /S/ Richard D. Kimbel
                                                ---------------------------
                                                Richard D. Kimbel, Director
                                                Date: December 17, 1998



                                                /S/ Curtis L. Mack
                                                ---------------------------
                                                Curtis L. Mack, Director
                                                Date: December 17, 1998


                         
                                                /S/ Roland H. Meyer       
                                                ---------------------------
                                                Roland H. Meyer, Director
                                                Date: December 17, 1998



                                                /S/ John A. Porter  
                                                ---------------------------
                                                John A. Porter, Director
                                                Date: December 17, 1998