United States
               Securities and Exchange Commission
                     Washington, D.C.  20549

                           Form 10-K

         Annual Report Pursuant to Section 13 or 15(d) of 
               the Securities Exchange Act of 1934

For the year ended December 31, 1998

Commission file number 0-23628 

                 Fusion Systems Corporation  
---------------------------------------------------------------       
(Exact name of registrant as specified in its charter)

         Delaware                      52-0915080 
-------------------------   -----------------------------------  
(State of incorporation)   (I.R.S. Employer Identification No.)  

 7600 Standish Place, Rockville, Maryland           20855  
---------------------------------------------------------------      
(Address of principal executive offices)         (Zip code)

                       (301) 251-0300        
---------------------------------------------------------------            
(Registrant's telephone number, including area code)       


Securities registered pursuant to Section 12(g) of the Act:
 
                     Title of each class    
                  -------------------------           
                  Contingent Payment Rights 

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 twelve months 
and (2) has been subject to such filing requirements for the past 
ninety days.   Yes  X 
                   --- 
Indicate by check mark if disclosure of delinquent filers pursuant 
to Item 405 of Regulation S-K is not contained herein, and will not 
be contained, to the best of 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.  X
                                                          --- 
The registrant meets the conditions set forth in General 
Instruction I(1)(a) and (b) for Form 10-K and is therefore filing 
this form with the reduced disclosure format.

As of January 31, 1999, there were 10 Common Shares outstanding 
which were held by Eaton Corporation.
<PAGE>


                              Page 2

                              Part I

Item 1.  Business

Background

Fusion Systems Corporation and Subsidiaries (the "Company" or 
"Fusion"), wholly-owned subsidiaries of Eaton Corporation ("Eaton"), 
is a worldwide supplier of single-wafer ashers and photostabilizers 
used in the fabrication of advanced semiconductor devices. The 
Company was founded in 1971 to develop microwave-powered 
electrodeless ultraviolet ("UV") lamps originally used to cure 
coatings, adhesives and inks on a variety of end-use products. The 
Company began commercial shipments in 1975 and introduced its first 
product for the semiconductor industry in 1983.  On September 6, 
1996, Fusion sold its UV curing business to Fairey Group, plc of 
Egham, United Kingdom. 

The Company has made major investments in its business to expand its 
product lines and increase its worldwide sales and service 
capabilities. The Company has continued to add to its semiconductor 
equipment product families through internal development and 
technology sourcing. The Company has also made investments to 
strengthen its direct sales and service operations in Europe and 
South Korea and expand its presence in Japan and Taiwan. 

The Company derives most of its revenues from the sale of 
free-standing semiconductor fabrication systems. In addition, it 
obtains revenues from royalties and the sale of consumables and 
services.

Acquisition by Eaton Corporation

On June 30, 1997, Fusion and Eaton, an Ohio corporation, entered 
into a definitive merger agreement under which Eaton agreed to 
acquire the Company. Under the terms of the agreement, on July 7, 
1997, Eaton initiated a cash tender offer for all outstanding shares 
of the Company at $39 per share. The tender offer was subject to a 
majority of the outstanding shares of the Company, on a fully 
diluted basis, being tendered, and other customary conditions. Eaton 
agreed to acquire any remaining Company shares not acquired in the 
tender offer in a merger at the same $39 per share price.

On July 25, 1997, the Company declared a dividend of one Contingent 
Payment Right ("Right") on each share outstanding. Each Right 
entitled holders to receive on March 31, 1999 an additional cash 
payment if the Company's 1998 revenues had exceeded $122 million, 
with a maximum $5.00 per Right if the Company's 1998 revenues had 
reached $149 million or more.  The Company's 1998 revenues were
$41.1 million; therefore, no payment will be made to the holders of 
these Rights.

On August 4, 1997, Eaton's wholly-owned subsidiary, ETN Acquisition 
Corporation, completed the tender offer for all of the outstanding 
<PAGE>


                              Page 3

shares and the associated preferred share purchase rights of the 
Company (the Rights were not acquired by Eaton).  On August 5, 1997,
ETN Acquisition Corporation merged into the Company, resulting in
each share of the Company not acquired in the tender offer being
canceled and converted into the right to receive $39 cash.

Technology and Products

Fusion's growth is driven by products based on distinctive core 
competencies. Starting with the core microwave lamp technology, 
Fusion has steadily built and integrated additional core 
competencies in such areas of technology as optics, thermal control, 
microwave power supplies and applicators, software, robotics, and 
barrier discharge ozone generation.

Fusion has used these core competencies to develop its three product 
families: the downstream Plasma Asher, the Ozone Asher and the 
Photostabilizer. Each of these products is available on the 
single-chamber Fusion 200(TM) platform and the high-throughput, 
dual-chamber Gemini(TM) platform. These standardized platforms 
include advanced robotic unicassette wafer-handling systems, low 
particulate design and materials, and in situ diagnostics, and are 
compatible with important industry standards including SMIF 
(Standard Mechanical InterFace), SECS (Semiconductor Equipment 
Communications Standard) and GEM (Generic Equipment Model).

Ashers

The function of the photoresist pattern in semiconductor device 
fabrication is to provide a highly precise stencil that allows 
certain areas of the substrate to be processed, while others are 
blocked by the photoresist. After processing at each photoresist 
masking level, the photoresist stencil must be removed to start the 
next level.

Fusion developed its first asher product, a proprietary ozone asher, 
as an alternative method of ashing for those process steps in which 
plasma might damage sensitive electronic structures. Fusion's Ozone 
Asher is protected by process and equipment patents, and by trade 
secrets which make possible superior barrier discharge ozone 
generators. The Fusion Ozone Asher is priced competitively with 
downstream plasma ashers and provides competitively low cost of 
ownership, high throughputs and extremely low device damage. In 
addition to its original ashing application, the Fusion Ozone Asher 
has found use in surface cleaning and metal passivation. A number of 
Fusion's key accounts use the Ozone Asher in mass production of 
advanced devices on 200mm wafers. 

For many process levels, downstream plasma ashing is regarded as 
preferable to ozone ashing because of its adaptability in a variety 
<PAGE>


                              Page 4

of processes, including residue removal, and because of its 
similarity to widely-used plasma-based etching processes. Fusion's 
second ashing product is an advanced downstream microwave plasma 
asher. Physical separation of the region in which microwave energy 
creates a plasma from the region near the wafer provides shielding 
of the wafer from charged particles in the plasma that can cause 
damage. In December 1992, Fusion entered into an agreement with 
Texas Instruments (the "TI Agreement"), whereby Fusion licensed the 
rights to the design, drawings and applications data for a microwave 
downstream plasma asher which Texas Instruments ("TI") had developed 
and used extensively in its own 150mm MOS device production lines. 
The TI Agreement grants to the Company a worldwide, non-exclusive 
right to use certain plasma asher technology and to develop, 
manufacture and sell products based on such technology.

Fusion enhanced the TI design, implemented it on the Fusion 200(TM) 
platform, and improved the microwave plasma generation and heating 
subsystems. Initial shipments of this product were made during the 
fourth quarter of 1993.  

In 1996, Fusion introduced a new tool called Enhanced Strip (ES), an 
advanced version of Fusion's Plasma Asher, designed with residue 
removal capability. The ES process uses fluorine-based gas 
chemistries to provide dry in situ removal of residues created after 
processes such as etch and ion implant, effectively eliminating the 
need for wet process steps which normally follow ashing. A distinct 
competitive advantage of the ES tool is the capability to ash and to 
remove residues in the same chamber. This enables the Fusion ES 
system to use high productivity parallel processing in Gemini(TM) 
systems, whereas competitors' systems must use slower, sequential 
processing. The development of the ES process meets market needs 
resulting from industry's desire to eliminate wet process steps. 
These typically use hazardous and difficult-to-handle substances and 
are reaching their physical limitations as advanced semiconductor 
device geometries continue to shrink.  

Photostabilizers

Fusion's Photostabilizers use proprietary electrodeless UV lamp 
technology, together with a carefully controlled temperature ramp, 
to harden or "stabilize" photoresist patterns in seconds. Fusion's 
photostabilization process improves yields by hardening the resist 
structure through cross-linking of the photoresist material, 
avoiding pattern distortion and the resulting loss of critical 
dimensional control that can otherwise take place when the resist is 
exposed to subsequent processes such as etching or ion implantation. 
Fusion invented the process that currently dominates the 
photostabilization market, although thermal ovens and hot plates are 
used for slower or less critical stabilization steps. 

Fusion's Photostabilizers process 200mm wafers automatically from 
cassettes using advanced robotics and software compatible with full 
factory automation. The Company believes such features reduce 
operating expenses for the user by improving wafer handling and 
control system reliability.
<PAGE>


                              Page 5

Marketing, Sales and Service 

Fusion's product development and marketing strategy requires close 
working relationships with customers. Relationships built by the 
Company with its key accounts have led to partnering activities on 
major new product developments. In addition, the Company works with 
its key accounts to define quality performance indicators which 
measure the Company's progress toward continuous improvement goals. 
A major goal of Fusion's global strategy is to ensure that key 
accounts receive the same high level of support at all fabrication 
facility locations worldwide.

In Japan, Tokyo Electron Limited (TEL) had been Fusion's distributor 
since 1983. On March 16, 1999, Sumitomo Heavy Industries, Ltd. was
appointed the exclusive distributor in Japan for Fusion photo-
stabilizers and ashers and Eaton rapid thermal processors and
furnaces. The agreeement with TEL is in the process of being
terminated.

Customers 

Sales to Texas Instruments represented 13% of net sales in 1998.  
Sales to five other customers together represented 32% of net sales 
in 1998 and 1997; however, no single customer represented 10% or 
more of net sales in 1997.  Sales to IBM, Micron Technology, and 
Atmel represented 15%, 11%, and 11% of net sales in 1996, 
respectively.  The semiconductor capital equipment industry is 
typically characterized by small unit sales but high value sales to 
a well-defined customer base. The cancellation or delay of orders 
from any one of the Company's key accounts due to business 
conditions or industry-wide slowdowns, pricing pressures and the 
impact of competitive products could materially adversely affect the 
Company's financial performance and business in general, and 
contribute to marked fluctuations in quarterly operating results. 
See "Forward Looking Statements" on pages 14 through 17 of this
report.

Research, Development and Engineering 

The market for semiconductor manufacturing equipment is generally 
characterized by rapid technological development and product 
innovation.  The Company believes that continued and timely
development of new processes and products and enhancements to
existing processes and products are necessary to maintain its
competitive position and to continue its expansion into additional
<PAGE>


                              Page 6

niche markets. Accordingly, the Company intends to continue to
devote significant resources to research and development programs
and to maintain close relationships with customers to remain
responsive to their process and product needs.

Fusion's total research and development and product engineering 
expenses (in millions) were $19 in 1998 and 1997 and $16 in 1996.

Competition 

Fusion has competed in the past primarily with firms that are 
significantly smaller than those which typically supply the 
high-priced semiconductor fabrication equipment for major process 
steps, such as etch and deposition equipment.

The asher market is segmented by region and technology. Fusion 
competes against United States-based suppliers of single-wafer 
plasma ashers: GaSonics International Corporation, Mattson 
Technology, Inc. and Matrix Semiconductor Systems, Inc. In the 
Pacific Region market, Fusion also competes against Japan-based 
suppliers: Plasma Systems Corporation, Canon, Inc. and M.C. 
Electronics Co., Ltd. The Pacific Region market is marked by a 
higher concentration of batch systems, although single-wafer systems 
are rapidly increasing market share. Large suppliers of 
semiconductor equipment, such as Lam Research Corporation and 
Applied Materials Incorporated, have added process modules to their 
equipment which perform a similar function to that performed by the 
Company's asher products. These companies have significantly greater 
service, support and technical resources than the Company. The 
Company will continue to face competition from single-wafer dry 
ashers made by competing manufacturers as well as by barrel ashers 
and wet chemistry suppliers. Competitive factors could lead to the 
loss of business for the Company, materially affecting financial 
performance and business in general, and could contribute to marked 
fluctuations in quarterly operating results.

In photostabilization, the Company primarily competes against 
thermal bake ovens and hot plates in all markets, and faces 
additional competition from a Japanese manufacturer of 
photostabilizers, Ushio Electric Ltd. ("Ushio"), in Japan and the 
Pacific Region. In those markets, the Company believes that it will 
increasingly benefit from patents issued to the Company, primarily 
covering Fusion's UV/Bake(TM) process. In 1996, Fusion announced 
that it had reached a technology accord with Ushio regarding a 
long-standing dispute between the Company and Ushio. Under the terms 
of this agreement, the customers of Fusion and Ushio will have the 
right to royalty-free use of patents of both companies in the field 
of UV hardening of photoresists for the production of semiconductor 
devices.

Manufacturing and Suppliers 

The Company's manufacturing operations are located at its Rockville, 
Maryland headquarters and consist primarily of component 
<PAGE>
 

                              Page 7

procurement, final assembly, testing and quality control. Most of 
the components used in Fusion's products are fabricated by outside 
suppliers to the Company's engineering specifications. 

One component used in two of the Company's three product groups has 
been continuously obtained by the Company for over twenty years from 
a single source. The supplier is a leading, worldwide electronics 
manufacturer which historically has provided timely delivery without 
any significant delay or interruptions. In the unanticipated event 
of a phase-out of the manufacture of this component, the supplier 
has previously confirmed that it will provide Fusion with enough 
supply to meet the Company's requirements for five years from the 
date of any notification of discontinuance. The Company believes it 
would have sufficient time following such a notice to alter its 
designs to accept substitute components, or to engage an alternative 
supplier to build the component to specification. The Company 
currently maintains inventories of this component as a safeguard 
against the possibility of short-term supply interruptions. If the 
Company were to experience a prolonged inability to obtain such 
component, it would have a material adverse effect on the Company's 
results of operations. See "Forward Looking Statements" on pages 14 
through 17 of this report.

Backlog 

Fusion's backlog at December 31, 1998, 1997 and 1996 (in millions) 
was $9, $18 and $39, respectively. Backlog consists of orders for 
which a written customer purchase order has been received or a 
customer purchase order number has been communicated to the Company. 
All orders are subject to cancellation or rescheduling by the 
customer with limited or no penalties. The Company's backlog at any 
particular date may not necessarily be indicative of actual sales 
for any succeeding period.

Employees 

At December 31, 1998, the Company had approximately 240 full-time 
employees. The success of the Company's future operations depends in 
large part on the Company's ability to recruit and retain engineers, 
technicians and other professionals who are in considerable demand. 
There can be no assurance that the Company will be successful in 
retaining or recruiting key personnel. None of the Company's 
employees are represented by a labor union and the Company has never 
experienced a work stoppage, slowdown or strike. The Company 
considers its employee relations to be good.

Item 2.  Properties

The Company's headquarters, principal manufacturing and research and 
development facilities are located in Rockville, Maryland. The 
Company leases these facilities under four separate leases. 

The Company also leases warehouse space located in Rockville, 
Maryland under a lease that expires December 31, 1999. In addition, 
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                              Page 8

the Company leases space for sales offices in Boise, Idaho and 
Carrollton, Texas. The terms of these leases expire in 1999. 

The Company leases space for its international operations in Alton, 
England; Milan, Italy; Tokyo, Japan; and Seoul, South Korea with 
terms expiring between 1999 and 2002.

Item 3.  Legal Proceedings

None required to be reported.

                              Part II

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

The Company's Common Shares were previously traded on the Nasdaq 
National Market tier of The Nasdaq Stock Market prior to the 
acquisition of Fusion by Eaton on August 4, 1997.  Eaton currently 
holds all the outstanding Common Shares of Fusion, for which there 
is no active trading market.

The high and low market prices for the Contingent Payment Rights 
were $13/16 and $1/64 in 1998 and were traded on the Nasdaq Stock 
Market.  The Rights were delisted on December 22, 1998.  

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

Overview 

Fusion is a worldwide supplier of single-wafer ashers and 
photostabilizers used in the fabrication of advanced semiconductor 
devices. The Company was founded in 1971 and introduced its first 
product for the semiconductor industry in 1983.

On June 30, 1997, the Company and Eaton Corporation ("Eaton") 
entered into a definitive merger agreement under which Eaton agreed 
to acquire the Company. 

On August 4, 1997, Eaton's wholly-owned subsidiary, ETN Acquisition 
Corporation, completed a tender offer for all of the outstanding 
shares of common stock and the associated preferred share purchase 
rights of the Company.  See pages 29 and 30 of the financial review 
in this report.
	
The semiconductor capital equipment industry is dependent on the 
performance and capacity of the semiconductor device ("chip") 
industry which historically has been a cyclical industry which could 
materially affect the results of operations.  See "Forward Looking 
Statements" on pages 14 through 17 of this report.
<PAGE>


                              Page 9

Results of Operations

The Company's net sales are derived from system sales, spare parts, 
service and royalty revenues. Net sales decreased to approximately 
$41.1 million in 1998, a 51% decrease from 1997 results. 1998 proved 
to be a very difficult year for the semiconductor capital equipment 
industry as the industry began to collapse in the first half of the 
year. Late in 1998, the semiconductor equipment industry appeared to 
have reached the bottom of the current cycle.

The unprecedented severity of conditions in the semiconductor 
equipment industry caused the Company to take drastic steps to 
ensure capacity is appropriately sized for current market 
conditions.  In 1998, restructuring charges of $5.0 million were 
recorded. The overall restructuring efforts included workforce 
reductions and inventory and asset write-downs.  The charge for 
workforce reductions included the termination of approximately 90 
employees, primarily manufacturing personnel.  As of year-end, the 
majority of the employees were terminated. The charge for asset 
write-downs primarily related to inventory, which was written down 
to estimated market value, and is included in cost of products sold.  

The Company's gross profit as a percentage of net sales was 14% and 
47% in 1998 and 1997, respectively.  The decrease in gross profit 
for 1998 was primarily due to $9.3 million of amortization expense 
related to the excess cost over net assets of business acquired and 
intangible asset, resulting from Eaton's acquisition of Fusion in 
1997.  Amortization expense in 1997 was $4.0 million.  Restructuring 
charges of $3.7 million were also included in costs of products sold 
in 1998.  Excluding amortization expense and restructuring charges, 
gross profit as a percentage of net sales was 46% in 1998 and 51% in 
1997. The remaining 5% decrease was a result of higher per unit
overhead costs due to declining sales volumes.

Selling, general and administrative expenses primarily consist of 
salaries, sales commissions, marketing and related expenses, and 
expenses associated with the general management of the business.  
Selling, general and administrative expenses decreased to $19.5 
million in 1998, an 8% decrease from 1997.  The decrease in 1998 was 
due to lower product shipment levels, which resulted in lower 
commission costs, and to the implementation of significant cost 
control measures in response to the general industry slowdown.  This 
decrease was offset by the $1.7 million administrative charge from 
Eaton ($.5 million in 1997) and $2.7 million of compensation expense
related to the Special Bonus Plan. See "Stock Options" in the Notes
to the Consolidated Financial Statements on page 34 of this report
for details of the Special Bonus Plan.

Research, development and engineering expenses increased to $19.2
million in 1998, a 1% increase from 1997.  The increase in 1998
was primarily due to an increase in the level of effort needed to
develop advanced products, and to support and improve existing
products.
<PAGE>


                              Page 10

During the third quarter of 1997, Eaton acquired Fusion.  The 
purchase price allocation included $85 million for purchased in-
process research and development, which was determined through an 
independent valuation based on the income method using a risk 
adjusted discount rate of 31% applied to project cash flows.  Three 
groups of projects comprised over 95% of the total value of 
purchased in-process research and development, and are described in 
more detail below.  All of the purchased in-process research and 
development was expensed at the date of acquisition because 
technological feasibility had not been established and no 
alternative commercial use had been identified.  The nature of the 
efforts required to develop the purchased in-process technology into 
commercially viable products principally relate to the completion of 
all planning, designing and testing activities that are necessary to 
establish that these products can be produced to meet their design 
requirements, including functions, features and technical 
performance requirements.

Gemini Photostablizer (GPS) - This project involved the development 
of a 300 mm photostabilizer and was valued at $22.4 million. This 
product will be scaled for 300 mm wafers and will include functions 
new to photostabilizing.  In order to realize this new technology, 
product designs will have to be configured and scaled for the 
larger wafers.  At the acquisition date, the greatest risk of 
potential failure associated with this project was that it could 
not be accomplished given technical and economic constraints.  
Product completion was originally expected in late 1998.  
Development was ultimately completed in the first quarter of 1999, 
resulting in the sale of the first prototype.  This small delay had 
a nominal impact upon 1998 consolidated results of operations, and 
will not have a significant impact upon the Company's financial 
condition or ultimate expected investment return.

Gemini Enhanced Strip (GES) - These projects involve the 
development of the next generation Enhanced Strip products for both 
200 mm and 300 mm wafers and together were valued at $37.4 million.  
These new products will incorporate various new functions, 
including targeting applications for 0.25 micron and 0.18 micron 
geometries.  Areas requiring design are the same as those in the 
GPS project, with corresponding risks of failure.  Product 
completion was originally planned for mid-1999, and is still 
scheduled for completion in that time frame.

Gemini Microwave Plasma Asher (GPL) - These projects involved the 
development of the next generation of plasma ashers for 200 mm and 
300 mm wafers and together were valued at $22.8 million.  These new 
products will incorporate substantial changes in an attempt to 
enable targeting applications for 0.25 micron and 0.18 micron 
geometries.  The primary risk related to these projects involved the 
achievement of tightly controlled process parameters, which is 
considered difficult due to the smaller linewidths targeted with 
these projects.  Product completion was originally planned for mid-
1998, and was completed by the fourth quarter of 1998.  This small 
delay had a nominal impact upon 1998 consolidated results of 
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                              Page 11

operations, and no significant impact upon the Company's financial 
condition or ultimate expected investment return.

Other income, net of expenses, was $3.7 million in 1998, a 25% 
decrease from 1997 results. Other income consists primarily of 
interest income and foreign exchange gains and losses. 

The Company's effective tax rate was a benefit of 31% in 1998 and 2% 
in 1997.  The change in the rate, when compared to 1997, was 
primarily due to the non-deductible write-off of purchased in-
process research and development in 1997. 

Liquidity and Capital Resources

The Company's operating cash needs are primarily for working capital 
and to fund its capital expenditure program. The Company's capital 
requirements typically consist of manufacturing equipment, research 
and development equipment, office equipment, and leasehold 
improvements. 

Subsequent to the acquisition by Eaton, Fusion began participating 
in Eaton's centralized cash management system.  Under this system, 
cash receipts are transferred to Eaton and cash disbursements are 
funded by Eaton. Accordingly, the cash balances presented in the 
accompanying consolidated balance sheet at December 31, 1998 do not 
represent cash balances required or generated by operations.

Year 2000 

Like most companies, Fusion is impacted by computer software that 
relies on two digits in the date fields in order to function 
properly.  Software that uses two digits rather than four to 
identify the applicable year may be unable to interpret 
appropriately the calendar Year 2000, and thus could cause 
disruption of normal business activities.  The Company relies on 
software in various aspects of the business including manufacturing, 
product development, many administrative functions and certain 
products.  Much of this software may be unable to interpret the 
calendar Year 2000 appropriately without some form of remediation. 

The Company is addressing the Year 2000 issue through Eaton's 
corporate-wide initiative led by Eaton's Vice President-Information 
Technologies and involving program managers from each Eaton and 
Fusion business unit.  The activities associated with this 
initiative include reviewing critical information technology (IT) 
and non-IT systems, as well as those which interface with major 
customers, suppliers, other third parties, and date-sensitive 
products.
 
Eaton's Year 2000 compliance efforts, which include Fusion, 
encompass the following focus areas:

Business Management Systems:  This area includes information systems 
and applications relating to manufacturing, marketing, sales 
(including EDI-Electronic Data Interchange and an integrated order 
<PAGE>


                              Page 12

processing and management system), purchasing, product development 
and computer aided design systems.  These systems have been 
identified as very important to the support of Eaton's and Fusion's 
operations and have been given the highest priority toward becoming 
Year 2000 compliant.

Enterprise Network Infrastructure (including personal computers): 
One enterprise network is utilized throughout Eaton which will be 
upgraded by the end of the second quarter of 1999 to become Year 
2000 compliant.  All personal/desktop computers and related software 
will also be made compliant.  

Administrative Systems:  This area includes systems associated with 
human resources, cash management and financial accounting and 
reporting. In North America and Europe, Eaton operates a highly 
centralized systems environment which is expected to be fully 
compliant by mid-year 1999.  To ensure compliance, testing of these 
systems will continue through the third quarter of 1999.

Shop Floor Equipment and Facilities Infrastructure:  Eaton is 
auditing the machinery and equipment used both in manufacturing and 
in support operations at each location including Fusion.  This audit 
determines Year 2000 readiness, measures the risk of non-compliance 
and determines the best remediation plan to be followed in avoiding 
potential disruptions in production.  This focus area has been 
substantially completed.

Software in Products:  All of Eaton's products which are currently 
marketed, and the vast majority of the products which have been 
marketed in the past, are either not date-sensitive or do not 
require remediation.  With respect to certain previously marketed 
products of Eaton's Semiconductor Equipment business segment (which 
includes Fusion), Eaton is offering product upgrades or other
remediation programs, including programs covered by product
warranties.

Supplier Assurance:  To determine Year 2000 readiness, Eaton 
undertook a supplier assurance program in 1997, which included 
surveying suppliers and evaluating their responses.  Based on this 
evaluation and the criticality of the items or services provided by 
the suppliers, Eaton is auditing their compliance and working with 
them toward assuring compliance or, if needed, the development of 
contingency plans (e.g., the selection of alternative suppliers).

Customer Assurance:  Eaton is working with the Automotive Industry 
Action Group, various other trade organizations and customers to 
ensure that a common Year 2000 compliance approach is applied across 
those respective industries.  Continuous interaction with these 
trade organizations is helping to identify the issues requiring 
attention and to develop appropriate solutions.  

Eaton's Year 2000 program activities include the identification of 
affected hardware and software, the development of a plan for 
remediating those systems in the most effective manner, the 
execution of that plan, which includes continuous testing, and the 
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                              Page 13

monitoring of the program's success.  Although various Eaton 
locations are at differing stages of readiness with respect to the 
various focus areas, the identification and plan development phases 
of the project are substantially completed.  Eaton is well underway 
in the execution phase and anticipates completing the majority of 
the program by mid-year 1999 although certain applications at 
certain Eaton businesses will be completed throughout the second 
half of 1999.  Continuous review and testing is being conducted 
throughout all phases of the program to help ensure that compliance 
is achieved and maintained as the Year 2000 approaches. 

The program, as it relates to IT, involves a combination of hardware 
and software modifications, upgrades and replacements. In many 
instances, Eaton will replace or has replaced non-compliant systems 
with newer systems, which will significantly improve functionality 
as well as appropriately interpret the calendar year 2000 and 
beyond.  Although the timing of these actions may have been 
influenced by the Year 2000 issue, in virtually all instances they 
will involve capital expenditures that would have occurred in the 
normal course of business. As part of reengineering and other 
initiatives, Eaton is also currently upgrading and replacing other 
systems to provide significantly enhanced functionality.  These 
upgrades and replacements are unrelated to the Year 2000 
remediation. 

As part of the Year 2000 program, detailed contingency plans are 
being formalized as the target date for completion approaches.  
Business disruption scenarios are currently being identified and 
appropriate strategies and detailed plans are being evaluated and 
tested in the development of these various plans.

The current estimate of total Year 2000 program costs for Fusion is 
approximately $1.9 million. Included in this estimate are 
compensation and benefit costs of employees who are fully dedicated 
to the Year 2000 compliance effort.  Costs of employees not fully 
dedicated to that effort are not tracked and are excluded from the 
estimate. As of year end, approximately $1 million of the estimated
costs have been incurred and the remaining costs are expected to be
incurred in the first half of 1999.  The total estimated cost
primarily represents purchased hardware and newly developed or
purchased software, which is capitalized in accordance with normal
Company policy while other remediation costs associated with existing
systems are expensed as incurred.  Cash flow related to these costs
will be satisfied with funds from operations that are normally
budgeted for procurement and maintenance of information systems and
production and facilities equipment. Regular project status reporting
is required, and cost estimates are updated as more refined estimates
become available.

The Company believes that it has an effective program in place to 
resolve the Year 2000 issue in a timely manner.  However, 
satisfactory completion of the program may not prevent business 
disruptions resulting from actions of the Company's critical
suppliers and customers. Such disruptions would impair the Company's
ability to obtain necessary materials for production or sell products
to customers.  If such a disruption occurred, the Company may 
experience lost or delayed sales and profits depending on the 
duration of the disruption.  Key aspects of the program are 
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                              Page 14

addressing this uncertainty but the Company's ability to be fully 
confident of conditions related to third parties is limited.  
Currently, the Company cannot reasonably estimate the amount of 
potential lost or delayed sales and profits.


Euro 

On January 1, 1999, eleven of the fifteen member countries of the 
European Monetary Union (EMU) began a three-year transition phase 
during which a common currency called the Euro was adopted as their 
legal currency.  The Euro began trading on currency exchanges and is 
available for non-cash transactions.  During the transition period, 
public and private parties may pay for goods and services using 
either the Euro or the participating country's legacy currency on a 
"no compulsion, no prohibition" basis.  The conversion rates between 
the existing legacy currencies and the Euro were fixed on January 1, 
1999.  The legacy currencies will remain legal tender for cash 
transactions between January 1, 1999 and December 31, 2001, at which 
time all legacy currencies will be withdrawn from circulation and 
the new Euro denominated bills and coins will be used for cash 
transactions.  

The Company conducts business transactions with customers and 
suppliers within the participating countries that will be utilizing 
the Euro as their local currency in 1999 and in other parts of the 
world.  Eaton has established Euro-denominated bank accounts to 
accommodate Euro transactions. The Company's exposure to changes in 
foreign exchange rates may also be reduced as a result of the Euro 
conversion. 

The Company is addressing the Euro through Eaton's steering 
committee which was established to review strategic and tactical 
areas arising from the Euro conversion. Immediate efforts have 
focused on aspects of the Euro conversion that required adjustment 
or compliance by January 1, 1999 and for conducting Euro-denominated 
business during 1999.  These aspects included transacting business 
in the Euro, the competitive impact on product pricing and 
adjustments to billing systems to handle parallel currencies.  Eaton 
has determined that these systems have the capability to handle Euro 
transactions and is currently in a position to transact business in 
Euro's. Continuing analysis and development efforts by the steering 
committee and project teams at the business units will help ensure 
that the implementation of the Euro meets the timetable and 
regulations established by the EMU.

Based on current estimates, the Company does not expect that the 
costs incurred to address the Euro will have a material impact on 
financial condition or results of operations.


FORWARD-LOOKING STATEMENTS
--------------------------
The Company has included in this Annual Report certain expectations 
for 1999.  Actual results could differ materially from these 
<PAGE>


                              Page 15

forward-looking statements since they inherently are subject to 
risks and uncertainties.  Important factors which could cause such a 
difference include continuity of business relationships with and 
purchases by major customers, product mix, competitive pressure on 
sales and pricing, increases in material and other production costs 
which cannot be recouped in product pricing, costs and disruptions 
associated with the Year 2000 issue, difficulties in introducing new 
products as well as global economic and market conditions, and the 
impact of the conversion to the Euro currency.

Dependence on Key Customers - Because of the relative concentration 
of semiconductor device manufacturing, the Company typically sells a 
significant percentage of its systems to a limited number of 
customers. The loss of business or the delay of orders from any of 
these customers or from other key accounts of the Company due to 
business conditions affecting a particular customer, industry-wide 
slowdowns impacting multiple customers, pricing pressures or the 
impact of competitive products, could materially adversely affect 
the Company's business and financial results. As is typical in the 
semiconductor industry, none of the Company's customers has entered 
into a long-term agreement requiring it to purchase the Company's 
products, and all orders are subject to cancellation or rescheduling 
by the customer.

Cyclicality of the Semiconductor Industry - The Company's business 
depends in large part upon the capital equipment expenditures of 
semiconductor manufacturers, which in turn depend on the current and 
anticipated market demand for integrated circuits and products 
utilizing integrated circuits. The semiconductor industry is highly 
cyclical and has historically experienced periodic downturns, which 
often have had a severe adverse effect on capital equipment 
expenditures by semiconductor manufacturers. Semiconductor industry 
downturns have adversely affected the sales, gross profit, and 
operating results of semiconductor equipment suppliers, including 
the Company. The Company anticipates that a significant portion of 
new orders will depend upon demand from semiconductor manufacturers 
building or expanding large fabrication facilities, and there can be 
<PAGE>


                              Page 16

no assurance that such demand will exist in any given period of 
time. 

Risks Associated with International Operations - Any decrease in 
sales outside North America may have a material adverse effect on 
the Company's operating results. The Company's international sales 
and operations are subject to customary risks of international 
operations including risks associated with fluctuations in interest 
and currency exchange rates, changes in foreign economic conditions, 
trade restrictions, and potentially adverse tax consequences. The 
Company's international business and financial performance may be 
adversely affected by such factors.

Rapid Technological Change; Competition - Equipment and processes 
used in semiconductor manufacturing are subject to rapid 
technological development and product innovation. The Company, to 
remain successful, must be responsive to new developments in 
photostabilization and asher technology and enhanced process 
capabilities. The Company will continue to face competition from its 
competitors who will continue to develop new products or 
enhancements that may offer improved performance. The Company's 
financial results may be negatively impacted by the failure of new 
or existing products to be favorably received by customers due to 
price, availability, features, other product choices or the level 
and quality of support for the Company's products.

Sole or Limited Sources of Supply - The Company relies to a 
substantial extent on outside suppliers to manufacture many of its 
components. Certain of these are obtained from a sole supplier or a 
limited group of suppliers. One component used in two of the 
Company's three product groups has been continuously obtained by the 
Company for over 20 years from a single source. The supplier is a 
leading, worldwide electronics manufacturer which historically has 
provided timely delivery without any significant delay or 
interruptions. The Company's reliance on outside suppliers involves 
several risks, including a potential inability to obtain an adequate 
supply of required components and reduced control over pricing and 
timely delivery of components. Because the manufacture of certain of 
these components is a complex process and requires long lead times, 
there can be no assurance that delays or shortages caused by 
suppliers will not occur. Any inability to obtain adequate 
deliveries or any other circumstance that would require the Company 
to seek alternative sources of supply or to manufacture such 
components internally could delay the Company's ability to ship its 
systems and could have a material adverse effect on the Company.

Intellectual Property Rights - Although the Company seeks to protect 
its proprietary technology, proprietary rights relating to the 
Company's technology will be protected from unauthorized use by 
others only to the extent that they are covered by enforceable 
patents or are maintained in confidence as trade secrets. There can 
be no assurance that patents will be issued from current patent 
applications or that any patent issued to the Company will not be 
challenged, invalidated or circumvented or that the rights granted 
thereunder will provide adequate protection or competitive advantage 
<PAGE>


                              Page 17

to the Company. Moreover, even with patent protection, the Company's 
business may be adversely affected by competitors that independently 
develop functionally equivalent technology. Although there are no 
pending lawsuits against the Company regarding infringement of any 
existing patents, there can be no assurance that third parties will 
not assert infringement claims in the future. If any such claims are 
asserted against the Company, the Company could seek to obtain a 
license from third parties or challenge the claim in litigation. 
Failure to obtain licenses or adverse determinations in any 
litigation could materially adversely affect the Company's business, 
financial condition and results of operations.

Reliance on Attracting and Retaining Key Employees - The Company's 
continued success will depend in large part on its ability to 
attract and retain highly-qualified technical, managerial, sales and 
marketing, and other personnel. Competition for such personnel in 
the Company's industry is intense.  There can be no assurance that
the Company will be able to continue to attract or retain such
personnel.

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

Not applicable.

Item 8.  Financial Statements and Supplementary Data

The consolidated financial statements, financial review, and reports 
of independent auditors are presented on pages 22 through 40 of this 
report.

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

None required to be reported.	

                              Part IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on 
Form 8-K  

(a) (1)	Index to Consolidated Financial Statements 

The following consolidated financial statements and financial 
review, included in Item 8, are filed as a separate section of this 
report: 

     Reports of Independent Auditors - pages 22 and 23

     Consolidated Balance Sheets as of December 31, 1998 
     and 1997 - pages 24 and 25
	
     Statements of Consolidated Operations for the Years
     Ended December 31, 1998, 1997 and 1996 - page 26
<PAGE> 


                              Page 18

     Statements of Consolidated Shareholder's Equity for
     the Years Ended December 31, 1998, 1997 and 1996 -
     page 27
	
     Statements of Consolidated Cash Flows for the Years
     Ended December 31, 1998, 1997 and 1996 - page 28
	
     Financial Review - pages 29 through 40  

(2)  All schedules for which provision is made in Regulation S-X 
     of the Securities and Exchange Commission are not required 
     under the related instructions or are inapplicable and, 
     therefore, have been omitted.

(3)  Exhibits

     2 (a) Stock Purchase Agreement date December 30, 1993 
           between GEO International Corporation and Fusion UV 
           Curing Systems  Corporation (incorporated by reference 
           to the Form S-1, Registration No. 33-76258)

     3 (a) Amended and Restated Certificate of Incorporation
           (incorporated by reference to the Form S-1, 
           Registration No. 33-81494)

     3 (b) Amended and Restated By-Laws (incorporated by 
           reference to the Form S-1, Registration No. 33-81494)

     4 (a) Specimen Stock Certificate (incorporated by reference 
           to the Form S-1, Registration No. 33-76258)

     4 (b) Stock Purchase Agreement dated December 29, 1982 by 
           and among American Research Development Division of 
           Textron Inc., Fusion Systems Corporation and those 
           Purchasers listed on Schedule A thereto (incorporated 
           by reference to the Form S-1,Registration No. 33-76258)
	
     10    Material contracts

           10 (a) Form of Severance Agreement (incorporated by
                  reference to the Form S-1, Registration 
                  No. 33-76258)

           10 (c) Lease-Rockville (incorporated by reference to the 
                  Form S-1, Registration No. 33-76258)

           10 (d) Ninth Amendment of Lease Agreement dated May 26, 
                  1994 between Rockville Office/Industrial Associates 
                  and the Registrant(incorporated by reference to the 
                  Form S-1, Registration No. 33-81494)

           10 (e) Tenth Amendment of Lease Agreement dated September
                  29, 1994 between Rockville Office/Industrial 
                  Associates and the Registrant (incorporated by 
                  reference to the Form S-1, Registration 
                  No. 33-81494)
<PAGE>


                              Page 19

           10 (g) License Agreement between Texas Instruments 
                  Incorporated and Fusion Semiconductor Systems 
                  Corporation (incorporated by reference to the Form 
                  S-1, Registration No. 33-76258)

           10 (h) Agreement dated April 27, 1990 between Fusion
                  Semiconductor Systems Corporation and Ushio, Inc. 
                  (incorporated by reference to the Form S-1, 
                  Registration No. 33-76258)

           10 (i) Letter dated August 14, 1985 from sole source 
                  supplier (incorporated by reference to the Form S-1,
                  Registration No. 33-76258)

           10 (j) Severance Agreement of Leslie S. Levine 
                  (incorporated by reference to the Form S-1, 
                  Registration No. 33-76258)

           10 (k) Lease Agreement dated December 7, 1994 between CM 
                  Partners #3, L.P. and the Registrant (incorporated 
                  by reference to the Form 10-K for fiscal year ended 
                  December 31, 1994, Commission File No. 0-23628)

           10 (m) Sublease Agreement dated November 21, 1995 between 
                  American National Red Cross and the Registrant
                  (incorporated by reference to the Form 10-K for
                  fiscal year ended December 31, 1996)

           10 (n) Eleventh Amendment of Lease Agreement dated December
                  4, 1995 between Rockville Office/Industrial 
                  Associates and the Registrant (incorporated by
                  reference to the Form 10-K for fiscal year ended
                  December 31, 1996)

           10 (o) Asset Purchase Agreement dated October 1, 1995 
                  between Fusion Lighting, Inc. and the Registrant
                  (incorporated by reference to the Form 10-K for
                  fiscal year ended December 31, 1996)

           10 (p) Purchase Agreement dated as of August 14, 1996 by 
                  and among Fairey Investments, Inc., Fusion UV 
                  Systems, Inc., Fairey Overseas Development Limited 
                  and Fusion UV Systems Limited, on the one hand and 
                  Fusion Systems Corporation, Fusion UV Curing Systems 
                  Corporation, Fusion Technology International, Inc., 
                  and Fusion Europe Limited, on the other hand
                  (incorporated by reference to the Form 8-K, dated 
                  September 6, 1996)

           24    Power of Attorney

(b)  Reports on Form 8-K
           There were no reports on Form 8-K filed during the 
           fourth quarter of 1998.

(c) Exhibits
           Certain exhibits required by this portion of Item 14 
           are filed as a separate section of this report.

(d) Financial Statement Schedules
           None required to be filed.
<PAGE>


                              Page 20

                            Signatures

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

                                    Fusion Systems Corporation
                                    --------------------------
                                    Registrant


Date:  March 31, 1999               /s/ Billie K. Rawot
                                    ------------------------------
                                    Billie K. Rawot
                                    Vice President and Controller;
                                    Principal Accounting Officer
                                    Eaton Corporation



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 date indicated.

DATE:  March 31, 1999


       Signature                           Title                 
-----------------------   ----------------------------------------

          *
-----------------------
Alexander M. Cutler       Chairman of the Board

          *
-----------------------
Stephen R. Hardis         Director

          *
-----------------------
Gerald L. Gherlein        Director

          *
-----------------------
John C. Matthews          President and Chief Executive Officer
<PAGE>


                              Page 21

          *
-----------------------   
Adrian T. Dillon          Vice President, Chief Financial Officer,
                          and Chief Accounting Officer



*By    /s/ Billie K. Rawot 
       --------------------------------------               
       Billie K. Rawot, Attorney-in-Fact
       for the officers and directors signing
       in the capacities indicated 
<PAGE>


                              Page 22

REPORT OF INDEPENDENT AUDITORS
------------------------------

To the Shareholder
Fusion Systems Corporation and Subsidiaries


We have audited the accompanying consolidated balance sheets of 
Fusion Systems Corporation and Subsidiaries (wholly-owned 
subsidiaries of Eaton Corporation) as of December 31, 1998 and 
1997, and the related statements of consolidated operations, 
shareholder's equity, and cash flows for the years then 
ended.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present 
fairly, in all material respects, the consolidated financial 
position of Fusion Systems Corporation and Subsidiaries (wholly-
owned subsidiaries of Eaton Corporation) at December 31, 1998 and
1997, and the consolidated results of their operations and their cash 
flows for the years then ended in conformity with generally accepted
accounting principles.
                                               
                                           /s/ Ernst & Young LLP

Cleveland, Ohio
March 22, 1999
<PAGE>


                              Page 23

REPORT OF INDEPENDENT AUDITORS
------------------------------

To Fusion Systems Corporation:

We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows of Fusion Systems Corporation
(a Delaware corporation) and subsidiaries for the year ended
December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted 
auditing standards. Those standards require that we plan and 
perform an 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 audit 
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements of Fusion
Systems Corporation and subsidiaries referred to above present
fairly, in all material respects, the results of their operations
and their cash flows for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
	
								
                                        /s/ Arthur Andersen LLP

Washington, D.C.
February 6, 1997
<PAGE>


                              Page 24

Fusion Systems Corporation and Subsidiaries
(wholly-owned subsidiaries of Eaton Corporation)
<TABLE>
Consolidated Balance Sheets
<CAPTION>
                                                  December 31
                                              --------------------
(Thousands)                                       1998        1997
                                                  ----        ----
<S>                                          <C>          <C>
ASSETS
Current assets
  Cash & cash equivalents                     $  1,595
  Short-term investments                           124    $ 16,329
  Accounts receivable                           10,644      17,296
  Notes receivable from Eaton Corporation       86,211      72,784
  Due from Eaton Corporation                     6,170       4,269
  Inventories                                    8,271      16,012
  Deferred income taxes                          3,219       2,442
  Other current assets                             928         949
                                              --------    --------
                                               117,162     130,081

Property, plant & equipment
  Land & leasehold improvements                  6,686       6,262
  Machinery & equipment                          9,666       9,242
                                              --------    --------
                                                16,352      15,504
  Accumulated depreciation                      (4,514)       (506)
                                              --------    --------
                                                11,838      14,998

Intangible assets                               31,905      37,619

Excess cost over net assets of business
  acquired                                      49,283      51,351

Other assets                                     5,515       3,750
                                              --------    --------
                                              $215,703    $237,799
                                              ========    ========
</TABLE>
The Financial Review on pages 29 to 40 is an integral part of the
consolidated financial statements.
<PAGE>


                              Page 25

Fusion Systems Corporation and Subsidiaries
(wholly-owned subsidiaries of Eaton Corporation)
<TABLE>
Consolidated Balance Sheets
<CAPTION>
                                                   December 31
                                              --------------------
(Thousands)                                       1998        1997
                                                  ----        ----
<S>                                          <C>         <C>
LIABILITIES & SHAREHOLDER'S EQUITY
Current liabilities
  Accounts payable                            $    997    $  2,727
  Other current liabilities                      7,900       7,216
                                              --------    --------
                                                 8,897       9,943

Deferred income taxes                           12,015      13,166

Shareholder's equity
  Common shares                                     --          --
  Capital in excess of par value               194,671     194,671
  Retained earnings                                397      20,606
  Accumulated other comprehensive
    income (loss)                                 (277)       (587)
                                              --------    --------
                                               194,791     214,690
                                              --------    --------
                                              $215,703    $237,799
                                              ========    ========
</TABLE>
The Financial Review on pages 29 to 40 is an integral part of the
consolidated financial statements.
<PAGE>


                              Page 26

Fusion Systems Corporation and Subsidiaries
(wholly-owned subsidiaries of Eaton Corporation)
<TABLE>
Statements of Consolidated Operations
<CAPTION>
                                          Year ended December 31
                                      ------------------------------
(Thousands)                               1998       1997       1996
                                          ----       ----       ----
<S>                                   <C>        <C>        <C>
Net sales                             $ 41,084   $ 84,422   $ 84,594

Costs & expenses
  Cost of products sold                 35,150     45,106     40,271
  Selling, general & administrative     19,496     21,306     18,246
  Research, development & engineering   19,207     18,984     15,756
  Liquidation of stock options                     13,748
  Purchased in-process research &
    development                                    85,000
                                      --------   --------   --------
                                        73,853    184,144     74,273
                                      --------   --------   --------
(Loss) income from operations          (32,769)   (99,722)    10,321

Other income (expense)
  Interest income--net                   4,454      5,648      3,493
  Other--net                              (756)      (744)      (126)
                                      --------   --------   --------
                                         3,698      4,904      3,367
                                      --------   --------   --------
(Loss) income from continuing 
  operations before income taxes       (29,071)   (94,818)    13,688
Income taxes (benefit)                  (8,862)    (1,942)     4,959
                                      --------   --------   --------
(Loss) income from continuing
  operations                           (20,209)   (92,876)     8,729
Discontinued operations
  Operations, net of income tax                                3,709
  Gain on sale, net of income tax                             54,965
                                      --------   --------   --------
Net (loss) income                     $(20,209)  $(92,876)  $ 67,403
                                      ========   ========   ========
</TABLE>
The Financial Review on pages 29 to 40 is an integral part of the
consolidated financial statements.
<PAGE>


                              Page 27

Fusion Systems Corporation and Subsidiaries
(wholly-owned subsidiaries of Eaton Corporation)
<TABLE>
Statements of Consolidated Shareholder's Equity
<CAPTION>

                                                                                                Accumulated
                                       Common shares      Capital in                                  other           Total
                                      ---------------      excess of   Treasury    Retained   comprehensive   shareholder's
                                      Shares   Amount      par value      stock    earnings   income (loss)          equity
                                      ------   ------     ----------   --------    --------   -------------   -------------
(Thousands except share amounts)
<S>                                <C>         <C>          <C>         <C>        <C>              <C>            <C>            
Balance at January 1, 1996         7,758,000   $   78       $ 38,899               $ 46,079         $   677        $ 85,733
Net income                                                                           67,403                          67,403
Other comprehensive income (loss)                                                                      (718)           (718)
                                                                                                                   --------
Total comprehensive income                                                                                           66,685
Exercise of stock options            152,000        1          1,665    $    53                                       1,719
Income tax benefit from exercise of
  stock options                                                  409                                                    409
Employee stock purchase plan          25,000                     513                                                    513
Treasury stock purchases            (472,000)                            (8,285)                                     (8,285)
                                   ---------   ------       --------    -------    --------         -------        --------
Balance at December 31, 1996       7,463,000       79         41,486     (8,232)    113,482             (41)        146,774
Net loss                                                                            (92,876)                        (92,876)
Other comprehensive income (loss)                                                                      (546)           (546)
                                                                                                                   --------
Total comprehensive income (loss)                                                                                   (93,422)

Exercise of stock options             31,000                    (155)       548                                         393
Income tax benefit from exercise of
  stock options                                                  128                                                    128
Employee stock purchase plan           9,000                     158                                                    158
Recapitalization in connection 
   with purchase by Eaton         (7,502,990)     (79)        (7,605)     7,684
Parent company investment in 
   connection with purchase by
   Eaton                                                     160,659
                                   ---------   ------       --------    -------    --------         -------        --------
Balance at December 31, 1997              10       --        194,671          0      20,606            (587)        214,690
Net loss                                                                            (20,209)                        (20,209)
Other comprehensive income                                                                              310             310
                                                                                                                   --------
Total comprehensive income (loss)                                                                                   (19,899)
                                   ---------   ------       --------    -------    --------         -------        --------
Balance at December 31, 1998              10   $   --       $194,671    $     0    $    397         $  (277)       $194,791
                                   =========   ======       ========    =======    ========         =======        ========
</TABLE>

The Financial Review on pages 29 to 40 is an integral part of the
consolidated financial statements.
<PAGE>


                              Page 28

Fusion Systems Corporation and Subsidiaries
(wholly-owned subsidiaries of Eaton Corporation)
<TABLE>
Statements of Consolidated Cash Flows
<CAPTION>
                                                           Year ended December 31
                                                      --------------------------------
(Thousands)                                               1998        1997        1996
                                                          ----        ----        ----
<S>                                                   <C>        <C>          <C>
Net cash (used in) provided by operating activities
Net (loss) income                                     $(20,209)   $(92,876)   $ 67,403
  Adjustments to reconcile to net cash (used in)
    provided by operating activities
      Write-off of purchased in-process research
        and development                                             85,000
      Gain on disposal of discontinued operations                              (54,965)
      Depreciation and amortization                     13,326       7,521       3,282
      Deferred income taxes                             (1,490)        131      (1,004)
      Changes in operating assets and liabilities       
          Accounts receivable                            6,652      (2,809)     (1,362)
          Due from Eaton Corporation                    (1,901)     (7,443)
          Inventories                                    7,741      (1,292)     (4,232)
          Other assets                                  (1,790)       (767)          4
          Accounts payable                              (1,730)       (247)     (1,067)
          Other current liabilities                     (1,244)       (883)      2,513
          Accrued income taxes                                      (3,391)        588
      Other--net                                                       208          27
                                                      --------    --------    --------
                                                          (645)    (16,848)     11,187

Net cash provided by (used in) investing activities
  Payment of expenses related to sale of discontinued
    operations                                                      (1,249)
  Expenditures for property, plant and equipment          (848)     (5,835)    (10,396)
  Net sales (purchases) of marketable securities        16,205      58,138     (48,601)
  Foreign currency translation adjustments                 310        (546)       (718)
  Notes receivable from Eaton Corporation              (13,427)    (72,784)
  Proceeds from sale of discontinued operations                                117,568
  Income taxes paid on sale of discontinued operations                         (35,875)
  Other--net                                                                        99
                                                      --------    --------    --------
                                                         2,240     (22,276)     22,077

Net cash provided by (used in) financing activities
  Proceeds from exercise of stock options and stock
     sale, net                                                           3       2,179
  Purchase of common shares                                                     (8,232)
  Income tax benefit from exercise of stock options                    128         409
  Treasury stock issued                                                548
                                                      --------    --------    --------
                                                             0         679      (5,644)
                                                      --------    --------    --------
Total increase (decrease) in cash and cash equivalents   1,595     (38,445)     27,620
Cash and cash equivalents at beginning of year               0      38,445      10,825
                                                      --------    --------    --------
Cash and cash equivalents at end of year              $  1,595    $      0    $ 38,445
                                                      ========    ========    ========
</TABLE>
The Financial Review on pages 29 to 40 is an integral part of the
consolidated financial statements.
<PAGE>


                              Page 29

Fusion Systems Corporation
(wholly-owned subsidiaries of Eaton Corporation)

FINANCIAL REVIEW
(amounts in thousands except shares and per share data)

BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------

Business Description
--------------------
Fusion Systems Corporation and Subsidiaries, (the "Company" or 
"Fusion"), wholly-owned subsidiaries of Eaton Corporation, 
design, manufacture, market and service single-wafer ashers and 
photostabilizers which are used for manufacturing of integrated 
circuits in the semiconductor industry. The Company has its 
headquarters in Rockville, Maryland, as well as subsidiaries 
and facilities in Europe and the Pacific Region. In addition,
the Company maintains sales and service offices in various
locations in the United States, Europe and the Pacific Region.

Acquisition by Eaton Corporation
---------------------------------
On June 30, 1997, Fusion and Eaton Corporation ("Eaton"), 
entered into a definitive merger agreement under which Eaton 
agreed to acquire the Company. Under the terms of the 
agreement, on July 7, 1997, Eaton initiated a cash tender offer 
for all outstanding shares of the Company at $39 per share. The 
tender offer was subject to a majority of the outstanding 
shares of the Company, on a fully diluted basis, being 
tendered, and other customary conditions. Eaton agreed to 
acquire any remaining Company shares not acquired in the tender 
offer at the same $39 per share price.

On July 25, 1997, the Company declared a dividend of one 
Contingent Payment Right ("Right") on each share outstanding. 
Each Right entitled the holders to receive on March 31, 1999 an 
additional cash payment if the Company's 1998 revenues had 
exceeded $122,000, with a maximum $5.00 per right payment made 
if the Company's 1998 revenues had reached $149,000 or more.  
The Company's 1998 revenues were $41,084; therefore, no 
payment will be made to the holders of these Rights.

On August 4, 1997, Eaton's wholly-owned subsidiary, ETN 
Acquisition Corporation, completed the tender offer for all of 
the outstanding shares and the associated preferred share 
purchase rights of the Company (the Rights were not acquired by 
Eaton). On August 5, 1997, ETN Acquisition Corporation merged
into the Company, resulting in each share of the Company not
<PAGE>


                              Page 30

acquired in the tender offer being canceled and converted into
the right to receive $39 cash.

Subsequent to the acquisition, all Fusion Common Shares were 
canceled; the resulting recapitalization of shares is displayed 
in the accompanying Statement of Consolidated Shareholder's 
Equity.  As a result of the recapitalization, the Company has 
10 Common Shares outstanding with a par value of $.01 per 
share, which are owned by Eaton.

The acquisition of Fusion by Eaton was accounted for by the 
purchase method of accounting. The acquisition price paid by 
Eaton exceeded the Fusion net assets acquired by $160,659, 
summarized as follows:

In-process research & development                   $ 85,000
Intangible assets                                     40,000
Excess cost over net assets of business acquired      54,464
Other, principally deferred taxes                    (18,805)
                                                    --------
                                                    $160,659
                                                    ========

The excess cost of Eaton's investment in Fusion over the net 
assets acquired of $54,464 is being amortized by the straight-
line method for financial statement purposes over a useful life 
of fifteen years.  Amortization expense was $3,604 and $1,577 
in 1998 and 1997, respectively.  The intangible assets of 
$40,000 consist of developed technology which is being 
amortized by the straight-line method for financial statement 
purposes over a useful life of seven years.  Amortization 
expense was $5,714 and $2,381 in 1998 and 1997, respectively.

The purchase price allocation included $85,000 for purchased 
in-process research and development which was determined 
through an independent valuation.  This amount was expensed at 
the date of acquisition because technological feasibility had 
not been established and no alternative commercial use had been 
identified.  Therefore, 1997 results include the write-off of 
$85,000 for purchased in-process research and development, with 
no income tax benefit.  

A special charge of $13,748 ($8,936 net of income tax benefit) 
for the liquidation of Fusion's vested stock options and other 
charges related to the acquisition of the Company by Eaton were 
recorded in operations in 1997.

Principles of Consolidation
---------------------------
The consolidated financial statements include accounts of the 
Company and all of its subsidiaries. All significant 
intercompany transactions and balances have been eliminated.

Foreign Currency Translation
----------------------------
The functional currency for all subsidiaries outside the United 
States is the local currency.  Financial statements for these 
subsidiaries are translated into United States dollars at year-
<PAGE>


                              Page 31

end exchange rates as to assets and liabilities and weighted- 
average exchange rates as to revenues and expenses.  The 
resulting translation adjustments are recorded in shareholder's 
equity and included in comprehensive income.  

Cash Equivalents and Short-Term Investments
-------------------------------------------
The Company considers cash equivalents to include all 
investments purchased with original maturity dates of 90 days 
or less. The investments are held to maturity. Short-term 
investments, which consist principally of U.S. Government 
securities and are held-to-maturity, are carried at amortized 
cost and include investments with original maturities of 
greater than three months having a remaining maturity of less 
than 12 months. The amounts reflected in the accompanying 
balance sheets do not differ materially from their fair values.

Subsequent to the acquisition by Eaton, Fusion began 
participating in Eaton's centralized cash management system.  
Under this system, cash receipts are transferred to Eaton and 
cash disbursements are funded by Eaton.  Accordingly, the cash 
balances presented in the accompanying consolidated balance 
sheet at December 31, 1998 and 1997 do not represent cash 
balances required or generated by operations.

Concentrations of Credit Risk
-----------------------------
The Company's assets that are exposed to credit risk consist 
primarily of trade receivables and marketable securities.  
Accounts receivable include large dollar balances due from 
reputable and geographically dispersed customers, and the 
Company has not experienced significant losses related to 
uncollectible accounts.

Property, Plant, and Equipment
------------------------------
Property, plant, and equipment are recorded at cost and are 
depreciated using the straight-line method over the estimated 
useful lives of the assets, generally three to ten years. 
Leasehold improvements are amortized over the shorter of the 
life of the asset or the duration of the lease. 

Long-lived Assets
-----------------
Long-lived assets are reviewed for impairment whenever events 
or changes in circumstances indicate that the carrying amount 
may not be recovered through future net cash flows generated by 
the assets. 

Revenue Recognition
-------------------
Revenue from product sales is generally recognized when 
equipment is shipped.
<PAGE>


                              Page 32

Research and Development
------------------------
Research and development costs are expensed as incurred and are 
included in research, development and engineering expenses in 
the statements of consolidated operations.

Warranty
--------
The Company generally warrants its products, excluding certain 
consumables, for a one to two-year period. The Company warrants 
its consumables for up to 1,000 hours of operation. Estimated 
warranty costs are accrued in the period in which revenue from 
the related product sales is recognized.

Interest Expense
----------------
The statements of consolidated operations do not include an 
allocation of Eaton's interest expense related to its debt 
obligations as none of Eaton's debt obligations specifically 
relate to Fusion.

Recently Issued Accounting Pronouncements
-----------------------------------------
In June 1998, SFAS No. 133, "Accounting for Derivative 
Instruments and Hedging Activities", was issued.  The Company 
must adopt the standard by the beginning of the first quarter 
of the year 2000.  Because of the Company's minimal use of 
derivatives, the adoption of SFAS No. 133 is not expected to 
have a significant effect on earnings or financial position.

Estimates
---------
Preparation of financial statements in conformity with 
generally accepted accounting principles requires management to 
make estimates and assumptions in certain circumstances that 
affect amounts reported in the accompanying consolidated 
financial statements and notes.  Actual results could differ 
from these estimates.


UNUSUAL CHARGES
---------------
During 1998, the unprecedented severity of conditions in the 
semiconductor equipment industry caused the Company to take 
drastic steps to restructure the business.  As a result of 
these actions, unusual pretax charges of $5,003 ($3,252 
aftertax) were recorded in 1998. Components of the 1998 
restructuring charges, included in income from operations, are 
as follows:
<PAGE> 


                              Page 33
   
                                                           Balance    
                         Original                     remaining at
                          charges    Utilized    December 31, 1998 
                         --------    --------    -----------------
Workforce reductions       $  981     $  (377)       $  604
Inventory & other 
  asset write-downs         4,022      (4,022)              
                           ------     -------        ------
                           $5,003     $(4,399)       $  604
                           ======     =======        ======

The charge for workforce reductions primarily represents 
severance and other related benefit payments for the expected 
termination of approximately 90 employees, primarily 
manufacturing personnel although certain administrative 
functions will also be affected.  As of December 31, 1998, the 
majority of the employees have been terminated.  The balance 
remaining at the end of 1998 will be utilized in 1999.

The charge for asset write-downs primarily relates to 
inventory, which was written down to estimated market value and 
is included in cost of products sold.


ACCOUNTS RECEIVABLE
-------------------
Accounts receivable are net of an allowance for doubtful accounts 
of $604 and $206 at December 31, 1998 and 1997, respectively.


INVENTORIES
-----------
Inventories are valued at the lower of cost or market using the 
first-in, first-out ("FIFO") method. Inventories consist of the 
following at December 31:

                                       1998      1997
                                       ----      ----
 Raw materials and purchased parts  $ 4,825   $ 5,528
	Work in process and finished 
      subassemblies                   1,198    10,093
 Finished goods                       2,248       391
                                    -------   -------
      Total                         $ 8,271   $16,012
                                    =======   =======
<PAGE>


                              Page 34

OTHER CURRENT LIABILITIES
-------------------------
Other current liabilities consist of the following at December 31:

                                       1998      1997
                                       ----      ----
  Salaries, severance, payroll
    taxes and employee health
    benefits                         $1,548    $1,743
  Warranty                            1,823     3,275
  Special Bonus Plan                  2,306 
  Vacation                              539       652
  Profit sharing                                  609
  Restructuring                         604
  Other                               1,080       937
                                     ------    ------
                                     $7,900    $7,216
                                     ======    ======


STOCK OPTIONS
-------------
A Special Bonus Plan was established for those individuals holding 
unvested options at the date of acquisition.  The Special Bonus 
Plan will provide a cash payment on the second anniversary of the 
acquisition date to each employee who continues to be an employee 
of the Company.  The cash payment will total the number of Common 
Shares subject to such unvested options times the excess of the 
$39 per share purchase price of the acquisition over the exercise 
price per Common Share of such unvested options plus interest on the
amount at a rate of 6% per annum from the date of acquisition.
Based on the probable nature of this liability as of December 31,
1998, the estimated expense of $2,710 was recorded in selling,
general, and administrative expense in the Statement of Consolidated
Operations.

At the date of acquisition by Eaton, the Company had three 
stock option plans.  Pursuant to the acquisition by Eaton, all 
outstanding stock options under these plans were canceled.  
Those individuals holding vested stock options at the time of 
the acquisition were paid out the value of the options which 
totaled the number of Common Shares subject to such vested 
option times the excess of the $39 per share purchase price of 
the acquisition over the exercise price per Common Share 
of such vested options.  The total payout was $13,748 which was
recorded in operations in 1997.


COMPREHENSIVE INCOME
--------------------
In the first quarter of 1998, the Company adopted Statement of 
Financial Accounting Standard (SFAS) No. 130, "Reporting 
Comprehensive Income".  SFAS No. 130 establishes new standards 
for reporting comprehensive income and its components. The 
adoption of SFAS No. 130 has no impact on the Company's net 
income or shareholder's equity.  For the Company, the 
difference between net income (loss) as historically reported 
in the statements of consolidated operations and comprehensive 
<PAGE>


                              Page 35

income is foreign currency translation adjustments recorded in 
shareholder's equity. 


COMMITMENTS AND CONTINGENCIES
-----------------------------

Lease Commitments and Rental Expense
------------------------------------
Minimum rental commitments for 1999 under noncancelable 
operating leases, which expire at various dates and in some 
cases contain renewal options, are $1,800 and decline 
substantially thereafter.

Under the terms of the facility lease agreements, the Company 
may be assessed additional amounts for maintenance and taxes. 
Rental expense was approximately $1,553, $1,272 and $1,621 in 
1998, 1997 and 1996, respectively.

Claims and Contingencies
------------------------
Incidental to the normal course of business, certain claims, 
suits and complaints have been filed or are pending against the 
Company. In the opinion of management, resolution of these 
matters will not have a material adverse effect upon the 
financial position or future operating results of the Company, 
and adequate provision for any potential losses has been made 
in the accompanying consolidated financial statements.


EMPLOYEE BENEFITS
-----------------
Prior to the acquisition by Eaton, the Company maintained a 401(k)
profit-sharing plan which was terminated in 1998 in connection with
the acquisition. The Company's contributions were discretionary and
amounted to approximately $480 in 1997 and 1996. As a result of the
plan termination, all eligible employees had the option of
participating in the Eaton Share Purchase and Investment Plan (SPIP)
beginning January 1, 1998. Eaton sponsors a SPIP for its
United States operations under which eligible participating 
employees may choose to contribute up to 17% of their eligible 
compensation to the SPIP.  Eaton matches employee contributions 
up to 6% of the participant's eligible compensation as limited by 
United States income tax regulations.  The matching contribution 
percentage, which is determined each quarter based on net income 
per Eaton Common Share-basic, ranges from 25% to 100% of a 
participant's contribution and is invested in Eaton Common 
Shares.  The Company's expense related to the SPIP match was $510 
in 1998. 

Beginning in 1998, the majority of the Company's United States
employees are covered by a non-contributory defined benefit pension
plan sponsored by Eaton.  The plan provides a benefit that is based
on employees' accumulated pay, as defined in the plan document.
Eaton's policy is to fund at least the minimum required by applicable 
regulations.  The Company is allocated a cost for participation in
the pension plan, which was $703 in 1998.
<PAGE>


                              Page 36

The Company has no obligation to provide health care benefits to 
employees who retire and, therefore, no liabilities for these 
items are recorded in the consolidated financial statements.


INCOME TAXES
------------
Since Eaton's acquisition of Fusion, Fusion's taxable income 
related to its United States operations is included in Eaton's 
consolidated income tax returns.  Eaton accounts and pays for all 
related income taxes.  Fusion's consolidated statements of 
operations for the years ended December 31, 1998 and 1997 include 
an allocation of Eaton's United States income tax expense in 
amounts generally equivalent to the provisions which would have 
resulted had Fusion filed separate income tax returns.  The 
Company's foreign operations account and pay for income taxes 
related to their operations.  

The (benefit) provision for income taxes from continuing 
operations for the years ended December 31 consists of the 
following:

                    1998       1997       1996
                    ----       ----       ----
Current:                                  
 U.S. Federal     $(6,502)  $(1,979)   $ 5,681
 State               (951)     (211)     1,032
 Foreign               81       117        306
                  -------    ------    -------
                   (7,372)   (2,073)     7,019
Deferred:
 U.S. Federal      (1,490)      131     (2,060) 
                  -------   -------    -------
                  $(8,862)  $(1,942)   $ 4,959
                  =======   =======    =======

Foreign pretax (losses) income totaled $(1,675), $(1,032), and 
$2,312 in 1998, 1997 and 1996, respectively.
<PAGE>


                              Page 37

A reconciliation of the tax provision from the U.S. Federal 
statutory tax rate to the Company's effective tax rate is as 
follows:

                                    1998          1997      1996
	                               Amount  Rate	     Rate	     Rate	
                                ------  ----      ----      ----

Taxes at the statutory 
  Federal rate                $(10,175)  (35%)     (35%)      35%  
State income taxes, net of
  Federal tax benefit             (618)   (2%)                 3% 
Foreign Sales Corporation
  Credit                                                      (3%)  
Write-off of purchased in-
  process research and 
  development                                       31% 
Amortization of excess cost
  over net assets of business
  acquired                       1,261     4%        1%
Other                              670     2%        1%        1%
                              --------   ----     ----      ----
Tax provision at effective
  Rates                       $ (8,862)  (31%)      (2%)      36%
                              ========   ====     ====      ====

The components of deferred taxes are as follows at December 31:		

                                    Current   Long-term     Long-term
                                     assets      assets   liabilities
                                    -------   ---------   -----------
1998
Intangible assets                                            $(11,167)
Inventory valuation                  $  940
Accrued employee benefit costs          581
Warranty reserves                       638
Special Bonus Plan                      807
Other                                   253                      (848)
                                     ------       	          	--------
                                     $3,219          		       $(12,015)
                                     ======       		          ========

1997
Intangible assets                                             $(13,166)
Inventory valuation                  $  792
Accrued employee benefit costs          228
Warranty reserves                     1,146
Other                                   276          46
                                     ------      ------       --------
                                     $2,442      $   46       $(13,166)
                                     ======      ======       ========
<PAGE>


                              Page 38

Income tax payments in 1998, 1997, and 1996 were $0, $2,718, and 
$41,468, respectively.


RELATED PARTY TRANSACTIONS
--------------------------
The note receivable from Eaton Corporation at December 31, 1998 
bears interest at an annual rate of 5.28% and was due on March 2, 
1999.  Subsequent to December 31, 1998, the maturity date on the 
note receivable was extended to August 2, 1999 at an interest rate 
of 5.12%.  Interest income on the note was $4,747 in 1998.

The notes receivable from Eaton Corporation at December 31, 1997 
had an annual interest rate of 5.88% as to $33,507 and 5.78% as to 
$39,277 and were due on March 2, 1998 and January 30, 1998, 
respectively.  Subsequent to December 31, 1997, the maturity dates 
on the notes receivable were extended to September 2, 1998 at an 
interest rate of 5.69%.  Interest income on the notes was $1,327 
in 1997.

Since Eaton's acquisition of Fusion, an allocation of corporate 
general and administrative expenses which includes legal, 
treasury, and accounting services provided to Fusion by Eaton, has 
been recorded in operations and amounted to $1,664 in 1998 and 
$504 in 1997.

During 1996, the Company paid an affiliate of one of the Company's 
directors $1,047 for services rendered in connection with the sale 
of the UV Curing business and with the Company's initial public 
offering in 1994, respectively. 

At the time of the Company's sale of the UV curing business to 
Fairey Group, plc in September of 1996, in a separate transaction, 
Fusion Lighting, Inc. received $5,000 from Fairey Group, plc, in 
consideration for a mutual non-compete agreement, a cross license 
of technology, a change of corporate name of Fusion Lighting and a 
right of first opportunity to serve as Fusion Lighting's exclusive 
distributor for certain of its products which have application to 
UV curing.


DISCONTINUED OPERATIONS
-----------------------
On September 6, 1996, the Company sold the operations constituting 
its ultraviolet ("UV")curing business for $121,000 in cash, plus 
the assumption of certain liabilities, to the Fairey Group, plc, a 
United Kingdom- based company. The assets sold included all of the 
assets relating to the UV curing business of Fusion UV Curing 
Systems Corporation and Fusion Europe Limited and all of the 
capital stock of three of the Company's subsidiaries -- Fusion 
Aetek UV Systems, Inc., Fusion Japan KK, and Fusion VuS GmbH.

The gain on the sale, recorded in the third quarter of 1996, was 
approximately $55,000, net of transaction costs and income taxes. 
The results of the UV curing business have been classified as 
discontinued operations in the accompanying financial statements. 
<PAGE>


                              Page 39

During 1996, net sales for the UV curing business were $40,000 through
the date of sale.


INFORMATION CONCERNING GEOGRAPHIC REGIONS
-----------------------------------------
The Company operates in a single business segment and manufactures 
its products in the United States. The Company's foreign 
operations consist primarily of sales and service activities. A 
significant portion of the Company's net sales from its facilities 
in Europe and the Pacific Region represent equipment sales shipped 
directly from U.S. facilities.  Net sales are categorized by the 
location of the office from which the sales were generated rather 
than by the customer's geographic location.  A summary of net 
sales and long-lived assets by operating location for the years 
ended and as of December 31 are as follows:

                                   1998     1997     1996
                                   ----     ----     ----
Net sales
 North America                  $25,509  $66,617  $57,714
 Europe                          14,853   16,458   23,840
 Pacific Region                     722    1,347    3,040
                                -------  -------  -------
      Total net sales           $41,084  $84,422  $84,594
                                =======  =======  =======

Long-lived assets*
 North America                  $11,061  $14,017 
 Europe                             272      557 
 Pacific Region                     505      424 
                                -------  ------- 
      Total long-lived assets   $11,838  $14,998  
                                =======  ======= 

*Long-lived assets consist of property, plant and equipment.


Significant Customers

One customer represented 13% of net sales in 1998.  No single 
customer represented 10% or more of net sales in 1997.  Sales to 
three customers represented 15%, 11%, and 11% of net sales in 
1996, respectively.	
<PAGE>


                              Page 40

QUARTERLY CONSOLIDATED RESULTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------------
                                     Fiscal Quarter
                           First     Second      Third     Fourth
                           -----     ------      -----     ------
1998:
 Net sales              $ 13,168   $ 12,351   $  8,728   $  6,837  
 Gross profit              3,674      3,568       (895)      (413)
 Net income (loss)      $ (2,775)  $ (3,330)  $ (5,966)  $ (8,138) 


1997:
 Net sales              $ 19,429   $ 21,660   $ 23,670   $ 19,663 
 Gross profit             10,012     11,267     10,286      7,751
 Net income (loss)      $  2,384   $  2,566   $(97,031)  $   (795)  

 
The third and fourth quarter of 1998 includes restructuring 
charges of $3,400 and $1,603, respectively.  These charges relate 
to workforce reductions and inventory and other asset write-downs.

Gross profit in 1998 includes amortization of the excess cost over 
net assets acquired and intangible asset of $2,203, $2,465, 
$2,199, and $2,451 in the first, second, third, and fourth 
quarters, respectively.

Gross profit in the third and fourth quarter of 1997 includes 
amortization of the excess cost over net assets of business 
acquired and intangible asset of $1,583 and $2,375, respectively.

The third quarter 1997 includes the write-off of $85,000 for 
purchased in-process research and development, with no income tax 
benefit.  

A special charge of $13,748 ($8,936 net of income tax benefit) for 
the liquidation of Fusion's vested stock options, and other 
charges related to the acquisition of the Company by Eaton were 
recorded in operations in the third quarter of 1997.
<PAGE>


                              Page 41

                    Fusion Systems Corporation
                  1998 Annual Report on Form 10-K
                            Item 14(c)
                            Exhibit 24
                        Power Of Attorney

KNOW ALL MEN BY THESE PRESENTS:  That each person whose 
name is signed below has made, constituted and appointed, and by 
this instrument does make, constitute and appoint David 
O'Loughlin, Billie K. Rawot, or William J. Nowak his or her true 
and lawful attorney, for him or her and in his or her name, place 
and stead to subscribe, as attorney-in-fact, his or her signature 
as Director or Officer or both, as the case may be, of Fusion 
Systems Corporation, a Delaware corporation, to its Annual Report 
on Form 10-K for the year ended December 31, 1998 pursuant to the 
Securities Exchange Act of 1934, and to any and all amendments to 
that Annual Report, hereby giving and granting unto each such 
attorney-in-fact full power and authority to do and perform every 
act and thing whatsoever necessary to be done in the premises, as 
fully as he or she might or could do if personally present, hereby 
ratifying and confirming all that each such attorney-in-fact shall 
lawfully do or cause to be done by virtue hereof.

This Power of Attorney shall not apply to any Annual Report on 
Form 10-K or amendment thereto filed after December 31, 1999.

IN WITNESS WHEREOF, this Power of Attorney has been signed as of 
this 24th day of February, 1999.


/s/ Alexander M. Cutler              /s/ Stephen R. Hardis  
-----------------------------        --------------------------- 
Alexander M. Cutler, Chairman        Stephen R. Hardis, Director


/s/ Gerald L. Gherlein               /s/ John C. Matthews       
-----------------------------        ---------------------------
Gerald L. Gherlein, Director         John C. Matthews, President
                                     And Chief Executive Officer

/s/ Adrian T. Dillon            
-----------------------------
Adrian T. Dillon, Vice President, 
Chief Financial Officer and           
Chief Accounting Officer
<PAGE>