AEARO CORP
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>9
<FILENAME>ex1033.txt
<TEXT>
                          PLEDGE AND SECURITY AGREEMENT

     PLEDGE AND SECURITY AGREEMENT dated as of _________ (the "Agreement"), made
by and between the person signing this instrument below as debtor (the "Debtor")
and Aearo Corporation, a Delaware corporation,  as secured party ("Aearo" and in
its capacity as secured party, the '"Secured Party").


                              W I T N E S S E T H:

     WHEREAS,  the Secured Party is agreeing to extend credit to the Debtor on a
recourse basis, as described in the Investor Note (defined below);

     WHEREAS,  the Debtor has  executed  and  delivered a  promissory  note (the
"Investor  Note") of even date  herewith to the Secured  Party to evidence  such
extension of credit,  which may be made on the date hereof and from time to time
hereafter; and

     WHEREAS,  the parties  hereto wish to provide for the assignment and pledge
by the Debtor to the Secured  Party of,  among other  things,  all the  Debtor's
right, title and interest in and to all the Collateral (as defined below);

     NOW,  THEREFORE,  in consideration of the promises and of the acceptance of
the  Investor  Note by the Secured  Party,  the parties  hereto  hereby agree as
follows:

     SECTION 1.  Definitions.  For all purposes hereof,  capitalized  terms used
herein  which are not defined  herein  shall have the  meanings set forth in the
Stockholders'   Agreement  (as  defined  below)  unless  the  context  otherwise
requires,  and the  following  capitalized  terms  used  herein  shall  have the
respective following meanings:

     "Collateral" shall have the meaning specified in Section 2.

     "Common  Stock"  shall mean the common  stock of Aearo,  par value $.01 per
share.

     "Common Stock Equivalents" shall mean any warrants,  rights, calls, options
or other  securities  exchangeable or exercisable for or convertible into Common
Stock.

     "Net Proceeds"  shall mean the amount realized from the sale or disposition
of shares of Common  Stock net of any  underwriting  fees or  brokerage  fees or
other similar  out-of-pocket  expenses paid to third parties in connections with
such sale or disposition.

     "Obligations"  shall mean the unpaid  principal amount of the Investor Note
and all other  obligations  and  liabilities of the Debtor to the Secured Party,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred,  which may arise under, out of, or in connection
with, (i) this Agreement, or (ii) the Investor Note.

<PAGE>

     "Stockholders'Agreement"  shall mean that certain Stockholders'  Agreement,
dated as of  ----------------------  July 11,  1995 by and among  Vestar  Equity
Partners,  L.P., Cabot CSC Corporation,  Cabot Safety Holdings  Corporation (now
Aearo  Corporation),  Cabot Safety  Acquisition  Corporation  and the Management
Investors parties thereto.

     SECTION 2. Grant of  Security  Interest.  As  collateral  security  for the
prompt and --------------------------  complete payment and performance when due
(whether at the stated maturity, by acceleration, at a mandatory prepayment date
or otherwise) of the Obligations,  now existing or hereafter arising, the Debtor
hereby  pledges,  assigns and  transfers to the Secured  Party and grants to the
Secured Party a continuing first priority  security  interest in, any and all of
the following  property at any time hereafter acquired by the Debtor or in which
the  Debtor  may  acquire  any  right,  title  or  interest  (collectively,  the
"Collateral"):

     (a) all estate,  right, title and interest now held by the Debtor in and to
Common Stock purchased by the Debtor pursuant to that certain Executive Security
Purchase Agreement dated as of the date hereof between the Debtor and Aearo;

     (b) all  certificates  and other  instruments  evidencing  any  interest or
interests  referred  to in clause  (a) above or the  Debtor's  ownership  of any
thereof;

     (c) any right of the Debtor to receive  distributions  of money or property
(including  capital  stock and  warrants,  options  and other  rights to acquire
capital  stock),  or both  (including  property  of the  type  described  in the
preceding clauses (a) and (b)), for any reason whatsoever with respect to any of
his interests or any other interest referred to in clauses (a) or (b) above;

     (d) all other  property  required to be pledged as  Collateral  pursuant to
Section 4; and

     (e) the proceeds of all such interests and of any of the foregoing.

     SECTION 3.  Representations and Warranties of Debtor. The Debtor represents
and ---------------------------------------- warrants as follows:

     3.1 Rights to Collateral.

     (a) The Debtor  either  owns the  Collateral  or has the right to grant the
security interest provided for herein,  and none of the Collateral is subject to
any lien, pledge, charge, encumbrance or security interest or right or option on
the part of any third person to purchase or otherwise  acquire the Collateral or
any part thereof (other than as provided in the Stockholders'  Agreement and the
Executive  Security  Purchase   Agreement  (the  "Executive   Security  Purchase
Agreement")  executed  by the Debtor  with the  Company in  connection  with the
purchase  by the Debtor of Common  Stock and except  for the  security  interest
established hereunder in favor of the Secured Party).

<PAGE>

     (b) No security agreement,  financing statement or other public notice with
respect  to all or any part of the  Collateral  is on file or of  record  in any
public office,  except such as may have been filed in favor of the Secured Party
pursuant to this Agreement.

     3.2 Authority to Pledge.

     (a) The execution, delivery and performance by the Debtor of this Agreement
will not  constitute or result in a breach or default under or conflict with any
order,  ruling  or  regulation  of  any  court  or  other  tribunal  or  of  any
governmental  commission or agency,  or any agreement or other  undertaking,  to
which the Debtor is a party or by which the Debtor is bound.

     (b) The Debtor's  signatures  on the Investor  Note and this  Agreement are
genuine  and the Debtor has the legal  competence  and  capacity  to execute the
same.

     (c) This Agreement  constitutes the legal, valid and binding obligations of
the Debtor, enforceable in accordance with its terms.

     3.3 Pledge of Collateral.

     (a) The Common Stock is certificated.

     (b) The Debtor has delivered all such certificates of ownership received by
the Debtor on or prior to the date hereof to the Secured Party.

     (c) The Debtor has taken, and will take at the Secured Party's request, all
such actions to enable the Secured  Party to obtain a perfected  first  priority
security interest in the Collateral,  including without  limitation  cooperating
with the Lender in the filing of UCC-1 Financing  Statements with respect to the
Collateral  and  assisting  the Secured  Party in  registering  the Common Stock
Equivalents as uncertificated securities.

     3.4 Debtor's Address.

     (a) The address set forth on Schedule 1 hereto is the principal  address of
the Debtor.

     (b) The Debtor will  notify the  Secured  Party in writing of any change in
the principal address of the Debtor at least 30 days prior to the effective date
thereof.

     SECTION 4. Covenants.
                ---------

     4.1 Obtaining and Preserving the Security Interest.  The Debtor agrees that
he  will  ----------------------------------------------  execute,  acknowledge,
and, if necessary, deliver and cause to be recorded or filed, from time to time,
such financing statements, continuation statements, documents or instruments, or
take any other  action  requested  by the Secured  Party,  deemed  necessary  or
appropriate  by the Secured  Party to create,  preserve,  perfect  and  continue
perfected the security interest granted hereby or to enable the Secured Party to
exercise and enforce its rights hereunder and will cause

<PAGE>

to be promptly and duly taken, executed, acknowledged or delivered all such
further acts,  conveyances,  documents  and  assurances as the Secured Party may
from time to time reasonably  request in order more effectively to carry out the
intent and purposes of this  Agreement.  The Debtor also hereby  authorizes  the
Secured Party to file any such financing or continuation  statement  without the
signature of the Debtor to the extent  permitted by  applicable  law. The Debtor
and the Secured Party agree that a carbon, photographic or other reproduction of
this Agreement or a financing statement is sufficient as a financing  statement.
If any amount payable under or in connection with any of the Collateral shall be
or become  evidenced by any promissory  note, other instrument or chattel paper,
such note,  instrument  or chattel paper shall be  immediately  delivered to the
Secured Party,  duly endorsed in a manner  satisfactory to the Secured Party, to
be held as Collateral pursuant to this Agreement.

     4.2  Preservation of Collateral.  The Debtor covenants to the Secured Party
that it  will,  at all  times  and at its own  cost and  expense,  maintain  and
preserve the lien of this Agreement against the claims of all persons so long as
this Agreement shall be in effect.  The Debtor will not create,  incur or permit
to exist, will defend the Collateral against, and will take such other action as
is  necessary  to  remove,  any lien,  security  interest  or claim on or to the
Collateral, other than the liens and security interests created hereby, and will
defend the right,  title and interest of the Secured  Party in and to any of the
Collateral against the claims and demands of all persons whomsoever.

     4.3 After Acquired Collateral.  The Debtor hereby agrees,  immediately upon
the  -------------------------  acquisition thereof, to pledge, assign, transfer
and  deliver to the Secured  Party any and all  additional  items of  Collateral
hereafter  acquired by it,  directly or  indirectly.  The Debtor agrees that any
such additional  Collateral  (and the proceeds  therefrom)  shall  thereafter be
included in the definition of Collateral for all purposes hereunder and shall be
subject to the security interest granted herein, and the Debtor shall deliver to
the Secured  Party  immediately  upon receipt any  certificates  evidencing  the
ownership of such additional item of Collateral received by it, duly endorsed in
blank or  accompanied  by proper  instruments  of  assignment or take such other
action as may be necessary for the Secured  Party to obtain a security  interest
in such Collateral.  Without limitation of the foregoing if the Debtor shall, as
a result of its ownership of any Collateral, become entitled to receive or shall
receive any stock  certificate  (including any certificate  representing a stock
dividend or a distribution in connection with any reclassification,  increase or
reduction  of  capital  or  any  certificate   issued  in  connection  with  any
reorganization),  option or rights,  whether in addition to, in substitution of,
as a  conversion  of,  or in  exchange  for any  shares  of the  Collateral,  or
otherwise in respect  thereof,  the Debtor shall accept the same as the agent of
the Secured Party,  hold the same in trust for the Secured Party and deliver the
same forthwith to the Secured Party in the exact form received, duly endorsed by
the Debtor to the Secured  Party,  if required,  together  with an undated stock
power covering such  certificate,  option or right duly executed in blank by the
Debtor and with, if the Secured Party so requires,  signature guaranteed,  to be
held by the Secured Party, subject the terms hereof, as additional Collateral.

     4.4 Transfer of Collateral.  The Debtor hereby agrees not to sell,  assign,
----------------------  transfer,  dispose of, grant any option with respect to,
mortgage,  pledge  (except  pursuant  to  this  Agreement,  as  required  by the
provisions  of the  Stockholders'  Agreement  or as  provided  in the

<PAGE>

Executive  Security Purchase  Agreement) or otherwise  encumber any part of
the Collateral without the prior written consent of the Secured Party.

     4.5 Payment of Obligations. The Debtor hereby covenants and agrees to pay o
perform, as the case may be, each of the Obligations as and when due.

     SECTION  5.  Power of  Attorney.  The  Debtor  hereby  unconditionally  and
irrevocably  appoints  and  constitutes  the  Secured  Party  (and  each  person
designated  by the Secured  Party,  including  Cabot Safety) the true and lawful
agent and  attorney-in-fact  of the Debtor,  with full power (in the name of the
Debtor or otherwise):

     (a) to ask, require, demand, receive, compound and give acquittance for any
and all  moneys and claims for moneys due and to become due that are part of the
Collateral,

     (b) to endorse  any cheeks or other  instruments  or orders  related to the
Collateral,

     (c) to execute and file on behalf of the Debtor one or more UCC-1 financing
statements or any other document or instrument  deemed by the Secured Party from
time to time  necessary or advisable to create,  preserve,  perfect and continue
perfected the Secured Party's security interest granted hereunder,

     (d) to  direct  Aearo  to  deliver  any  certificate  or  other  instrument
evidencing  the Debtor's  ownership of the  Collateral  to the Secured  Party as
pledgee of the Debtor,

     (e) to transfer to the Secured Party,  upon the occurrence and  continuance
of an Event of  Default  (as  defined  in  Section  7  below),  the  Collateral,
including,  without  limitation,  to endorse any certificate or other instrument
evidencing  ownership  of the  Debtor's  Collateral  to stand in the name of the
Secured Party or its nominee,

     (f) to instruct  Aearo to record such  transfer  upon the official  records
(including the transfer register) of Aearo,

     (g) to commence and prosecute any suits,  actions or  proceedings at law or
in equity in any court of competent  jurisdiction  to collect the  Collateral or
any part thereof and to enforce any other right in respect of the Collateral,

     (h) to defend any suit,  action or  proceeding  brought  against the Debtor
with respect to the Collateral,

     (i)  generally,  to sell,  transfer,  pledge  and make any  agreement  with
respect to or otherwise  deal with any of the Collateral as fully and completely
as though the Secured  Party were the absolute  owner  thereof for all purposes,
and to do at the Secured Party's option and the Debtor's  expense,  at any time,
or from  time to  time,  all acts and  things  which  the  Secured  Party  deems
necessary to protect,  preserve or realize upon the  Collateral  and the Secured
Party's liens thereon and to effect the intent of this  Agreement,  all as fully
and  effectively as the Debtor might do (it being  understood that so long as no
Event of Default has  occurred  and is  continuing,  any

<PAGE>

such actions taken by Secured Party shall be consistent with the applicable
obligations  of the Secured  Party  under the  Stockholders'  Agreement  and the
Executive Security Purchase Agreement and the debtor).

     SECTION 6. No Duty on Secured  Party's  Part.  The powers  conferred on the
Secured Party hereunder are solely to protect the Secured  Party's  interests in
the  Collateral  and shall not  impose  any duty  upon it to  exercise  any such
powers. The Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such  powers,  and neither it nor any of
its officers, directors,  employees or agents shall be responsible to the Debtor
for  any  act or  failure  to act  hereunder,  except  for  its or  their  gross
negligence or willful misconduct.

     SECTION  7.  Events  of  Default.  If one or more of the  following  events
(individually,  an "Event of Default,"  and  collectively,  "Events of Default")
shall occur and be  continuing  whether such  occurrences  shall be voluntary or
involuntary,  or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body:

     (a) default shall be made,  which default shall  continue  unremedied for a
period of 30 days, in the due and punctual payment of the principal of the Loans
made  pursuant  to the  Investor  Note  after the same  shall  have been due and
payable  (whether at maturity or on a date on which any payment or prepayment is
due or by acceleration, declaration, demand or otherwise);

     (b) the Debtor shall default in the due performance and observance by it of
any other Obligation and any such default shall continue for more than 30 days;

     (c) the  Secured  Party  determines  that  the  representation,  statement,
certificate  or warranty  contained  in Section 3.1 or 3.2 hereof was false when
made or furnished;

     (d) (i) this Agreement shall cease, for any reason, to be in full force and
effect, in any material  respect,  or (ii) the security interest created by this
Agreement shall cease, for any reason other than a release by the Secured Party,
to be  enforceable  and of the same effect and priority  purported to be created
hereby;

     (e) the Debtor  breaches any covenant  contained in Section 4 hereof (other
than as described in (a) above), and such breach shall continue unremedied for a
period of 30 days; or

     (f) (i) the Debtor shall commence any case,  proceeding or other action (A)
under any  existing  or future law of any  jurisdiction,  domestic  or  foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization,  arrangement, adjustment,
winding-up, liquidation,  dissolution,  composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or  other  similar  official  for it or for all or any  substantial  part of his
assets,  or the Debtor  shall make a general  assignment  for the benefit of his
creditors;  or (ii)  there  shall be  commenced  against  the  Debtor  any case,
proceeding or other action of a nature referred to in clause (i) above which (A)

<PAGE>

results  in the  entry of an  order  for  relief  or any  such  adjudication  or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days;  or (iii)  there  shall be  commenced  against  the  Debtor  any  case,
proceeding  or  other  action  seeking  issuance  of a  warrant  of  attachment,
execution,  distraint or similar process against all or any substantial  part of
its  assets  which  results in the entry of an order for any such  relief  which
shall not have been  vacated,  discharged,  or stayed or bonded  pending  appeal
within 60 days from the entry thereof;  or (iv) the Debtor shall take any action
in furtherance  of, or indicating his consent to,  approval of, or  acquiescence
in, any of the acts set forth in clause (i),  (ii),  or  (iii)above;  or (v) the
Debtor shall generally not, or shall be unable to, or shall admit in writing his
inability to, pay his debts as they become due; then,  and in any such event.(A)
if such  event  is an  Event  of  Default  specified  in  clause  (i) or (ii) of
paragraph (f) above with respect to the Debtor,  automatically the Loans made to
the Debtor then outstanding (with accrued interest thereon) and all other unpaid
Obligations shall immediately  become due and payable,  and (B) if such event is
any other Event of Default, the Secured Party may, at any time thereafter at its
option, declare the Obligations to be due and payable,  whereupon the same shall
forthwith become due and payable,  together with interest (including  additional
interest,  if any) accrued  thereon,  without  presentment,  demand,  protest or
notice of any kind  whatsoever,  all of which  are  hereby  expressly  waived by
Debtor.

     SECTION 8. Remedies.
                --------

     8.1 Rights Upon Default.

     (a) If an Event of Default shall occur and be continuing, the Secured Party
may exercise, in addition to all other rights and remedies granted to it in this
Agreement  and in any other  instrument  or agreement  securing,  evidencing  or
relating to the  Obligations,  all rights and remedies of a secured  party under
the Uniform  Commercial  Code (the "Code") as in effect from time to time in the
applicable  jurisdiction.  Without limiting the generality of the foregoing, the
Secured  Party,  without  demand of  performance  or other demand,  presentment,
protest,  advertisement or notice of any kind (except the notice specified below
of time and place of public or private  sale) to or upon the Debtor or any other
person (all and each of which demands, presentment,  protest, advertisements and
notices  are  hereby  waived),  may in  such  circumstances  forthwith  collect,
receive, appropriate and realize upon the Collateral or any part thereof, and/or
may  forthwith  sell,  lease,  assign,  give  option or options to  purchase  or
otherwise  dispose  of and  deliver  said  Collateral  or any part  thereof  (or
contract  to do any of the  foregoing),  in one or more  parcels  at  public  or
private sale or sales, at any exchange,  broker's board or office of the Secured
Party or elsewhere  upon such terms and  conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without  assumption  of any credit risk.  The Secured Party shall have the right
upon any such public sale or sales,  and, to the extent  permitted by law,  upon
any such  private  sale or  sales,  to  purchase  the  whole or any part of said
Collateral  so sold,  free of any right or equity of  redemption  in the Debtor,
which right or equity is hereby waived or released.  The Debtor further  agrees,
at the Secured Party's request, to assemble the Collateral and make it available
to the Secured Party at places which the Secured Party shall reasonably  select,
whether at the Debtor's premises or elsewhere. The Secured Party shall apply the
net  proceeds  of  any  such  collection,   recovery,  receipt,   appropriation,
realization

<PAGE>

or sale,  after  deducting all reasonable  costs and expenses of every kind
incurred  therein  or  incidental  to  the  care  or  safekeeping  of any of the
Collateral or in any way relating to the Collateral or the rights of the Secured
Party   hereunder,   including,   without   limitation,   attorneys'   fees  and
disbursements,  to the payment in whole or in part of the  Obligations,  in such
order as the  Secured  Party may  elect,  and only after  such  application  and
payment in full of the Obligations and after the payment by the Secured Party of
any other amount required by any provision of law, including, without limitation
Section 9-504(l)(c) of the Code, need the Secured Party account for the surplus,
if any to the Debtor.  To the extent  permitted  by  applicable  law, the Debtor
waives all claims, damages, and demands against the Secured Party arising out of
the  repossession,  retention  or sale of the  Collateral.  If any  notice  of a
proposed sale or disposition of Collateral shall be required by law, such notice
shall be deemed reasonably and properly given if given (effective upon dispatch)
in any manner  provided in this  Agreement at least ten days before such sale or
disposition.

     (b) If an Event of Default or an event  specified  in Section 7 shall occur
and be  continuing,  the  Secured  Party may (but need not),  upon notice to the
Debtor,  exercise  all voting and other  rights of the Debtor as a  shareholder,
option  holder or equity holder of Aearo and the Secured Party shall receive all
permitted  dividends  and  distributions,  if any,  made for the  account of the
Debtor as a shareholder of Aearo.

     8.2 No Waiver,  Cumulative Remedies. The Secured Party shall not by any act
(except pursuant to the execution of a written instrument pursuant to Section 12
hereof), delay,  indulgence,  omission or otherwise be deemed to have waived any
right or remedy  hereunder or to have  acquiesced  in any Event of Default or in
any breach of any of the terms and  conditions  hereof.  No failure to exercise,
nor any delay in exercising,  on the part of the Secured Party, any right, power
or  privilege  hereunder or under the  Investor  Note shall  operate as a waiver
thereof.  No  single  or  partial  exercise  of any  right,  power or  privilege
hereunder  or under the  Investor  Note  shall  preclude  any  other or  further
exercise thereof or the exercise of any right,  power or privilege.  A waiver by
the Secured Party of any right or remedy hereunder or under the Investor Note on
any one  occasion  shall not be  construed as a bar to any right or remedy which
the Secured Party would otherwise have on any future occasion. Each right, power
and remedy of the Secured Party  provided  herein or in the Investor Note or now
or hereafter  existing at law or in equity or by statute or  otherwise  shall be
cumulative and  concurrent and shall be in addition to every other right,  power
or remedy  provided  for  herein  or in the  Investor  Note or now or  hereafter
existing  at law or in equity or by statute or  otherwise.  In  addition  to all
other rights, powers and remedies of a secured party under the Code.

     SECTION 9. Powers Coupled with an Interest. All authorizations and agencies
herein  contained  with respect to the  Collateral  are  irrevocable  and powers
coupled with an interest.

     SECTION 10. Notices. All notices and other  communications  hereunder shall
be in writing  and  delivered,  telecopied,  or mailed  (certified  mail  return
receipt requested, postage prepaid) to:

     (a) if to the Debtor, at the address set forth on Schedule I hereto;

     (b) if to the Secured Party,  at:
<PAGE>

        Aearo  Corporation
        5457 West 79th Street
        Indianapolis, IN 46268
        Attention: General Counsel

Notices and other communications  hereunder may also be given to the Debtor
at his or her  address  set forth  therefor in the books and records of Aearo or
the Secured  Party or such other  address as the Debtor shall notify the Secured
Party from time to time.

     SECTION  11.  Modifications.  No  amendment,   modification,   termination,
discharge or waiver of any provision of this Agreement shall be effective unless
the same shall be set forth in writing and signed by the Secured Party, and then
only to the extent specifically set forth therein.

     SECTION 12. Severability.  If any of the provisions of this Agreement shall
otherwise  contravene  or be  invalid  under  the  laws of any  state  or  other
jurisdiction where it is applicable,  such contravention or invalidity shall not
invalidate  all of the  provisions of this  Agreement,  but rather the Agreement
shall  be  reformed  and  construed,  insofar  as the  laws  of  that  state  or
jurisdiction are concerned, but only to the extent that they are contravening or
are  invalid  under the laws of that state or  jurisdiction,  and the rights and
obligations  created  hereby  shall  be  reformed  and  construed  and  enforced
accordingly.

     SECTION 13. Governing Law. The rights and liabilities of the parties hereto
shall  be  determined  in  accordance  with  the  laws  of the  Commonwealth  of
Massachusetts,  without regard to conflict of law principles.  The Debtor hereby
waives and agrees not to assert in any such  proceeding  a claim that the Debtor
is not personally  subject to the  jurisdiction  of the court referred to above,
that the suit or action was brought in an  inconvenient  forum or that the venue
of the suit or action is improper.

     SECTION 14. Term of Agreement: Release. This Agreement shall remain in full
force  and  effect  until  all of the  Obligations  are paid in full.  Until the
Investor Note and all other  Obligations have been indefeasibly paid in full (i)
this  Agreement  shall be deemed to impose a claim against the  Collateral  with
full force and effect as set forth  herein,  and ii) the Secured  Party shall be
entitled  to hold,  and shall  hold,  all  certificates  and  other  instruments
evidencing the Debtor's  ownership of the Collateral (or other right or interest
subject  hereto) and the Debtor hereby  authorizes  and directs Aearo to deliver
any such  certificate  or instrument  to the Secured Party for such purpose.  At
such  time as the  Debtor  has  indefeasibly  made all  payments  in full of the
Obligations  as and when due,  the Secured  Party shall  release the Debtor from
this  Agreement  and shall  execute and deliver all  documents  and  instruments
required for such release.

     SECTION 15.  Successors  and Assigns.  If a successor to the Secured  Party
shall be designated by the Secured Party, such successor shall  automatically be
substituted  for the  Secured  Party  hereunder  and  shall  take  free from any
defenses the Debtor may have against the Secured Party,  the  Partnership or any
other person  whatsoever.  This  Agreement  shall be binding on the Debtor,  his
heirs, executors, administrators,  successors and assigns and shall inure to the
benefit of the Secured Party and its successors and assigns.  This Agreement may
not be assigned

<PAGE>

by the Debtor  without the prior  written  consent of the Secured Party and
may be assigned by the Secured Party without the consent of the Debtor.

     SECTION 16.  Recourse.  The  obligations of the Debtor under this Agreement
and the Investor  Note are personal  obligations  of the Debtor,  and the Lender
shall have recourse to the Debtor or his property for payment,  satisfaction, or
discharge of this Agreement or the Investor Note.

     SECTION 17.  Construction.  Captions and headings are for convenience only,
are not a part of, and shall not be used to  construe  any  provision  of,  this
Agreement.  For purposes of this  Agreement,  the  masculine  shall be deemed to
include the  feminine  and the  singular  shall be deemed to include the plural,
where the context indicates.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

DEBTOR:


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



SECURED PARTY:
AEARO CORPORATION


By:____________________________
         Name:
         Title:


<PAGE>


Schedule 1


Address of Debtor:


</TEXT>
</DOCUMENT>
